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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): May 28, 1999
FNB FINANCIAL SERVICES CORPORATION
(Exact name of registrant as specified in its charter)
North Carolina 340-13086 56-1382275
(State or other (Commission File No.) (I.R.S. Employer
jurisdiction Identification Number)
of incorporation)
202 South Main Street, Reidsville, North Carolina 27320
(Address of principal executive offices)
(336) 342-3346
(Registrant's telephone number, including area code)
N/A
(Former name or former address, if changed since last report)
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Item 5. Other Events.
On May 28, 1999, FNB Financial Services Corporation ("FNB") entered
into an Agreement and Plan of Reorganization and Merger (the "Merger Agreement")
with Black Diamond Savings Bank, F.S.B. ("Black Diamond"), under which FNB
agreed to acquire Black Diamond in a transaction structured as a merger. A
newly-formed wholly-owned subsidiary of FNB would be merged into Black Diamond,
and Black Diamond would become a wholly-owned subsidiary of FNB (the "Merger").
All of the assets and liabilities of Black Diamond would remain with Black
Diamond since it would be the surviving corporation in the Merger.
At the time the Merger becomes effective on the closing date, each
share (except those for which dissenter's rights are exercised, if applicable)
of Black Diamond's outstanding Common Stock would be automatically converted
into the right to receive 1.3333 shares of FNB Common Stock. Since the exchange
ratio is fixed, Black Diamond's shareholders will get the same number of shares
in the Merger regardless of movements in FNB's stock price between the date of
signing and closing.
The Merger Agreement requires Black Diamond to pay FNB a termination
fee of $200,000 upon termination of the Merger Agreement under certain
circumstances where a third party has taken steps to acquire Black Diamond or
Black Diamond breaches any of its obligations under the Merger Agreement. Black
Diamond has agreed to reimburse FNB's reasonable expenses up to $300,000 if FNB
terminates the Merger Agreement because the Black Diamond board of directors has
withdrawn its recommendation of the Merger or Black Diamond is in breach of the
Merger Agreement or in certain other circumstances. FNB has agreed to reimburse
Black Diamond's reasonable expenses up to $200,000 if Black Diamond terminates
the Merger Agreement because FNB is in breach.
The Merger is structured to be tax-free to Black Diamond shareholders
and FNB intends to file a joint proxy statement/registration statement with the
SEC and the Office of Thrift Supervision to register its shares issued in the
Merger. The registration statement will have to be declared effective by the SEC
before the transaction can close. Consummation of the Merger is subject to
customary conditions, including the approval of the Merger by the shareholders
of FNB and Black Diamond and the receipt of required regulatory approval.
Pursuant to a Stock Option Agreement, dated May 28, 1999, Black Diamond
has granted to FNB an option to purchase approximately 19.9% of Black Diamond
common stock at an exercise price of $17.25 per share.
The foregoing descriptions of the Merger Agreement and the Stock Option
Agreement, and the transactions contemplated thereby, do not purport to be
complete and are qualified in their entirety by reference to the Merger
Agreement and the Stock Option Agreement, attached as exhibits hereto. A press
release issued by the Company on May 28, 1999 announcing the execution of the
Merger Agreement is also attached hereto as Exhibit 99.01 and incorporated
herein by reference.
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Item 7. Financial Statements and Exhibits.
(c) Exhibits.
Exhibit Number Description of Exhibit
-------------- ----------------------
2.01 Agreement and Plan of Reorganization and
Merger, dated May 28, 1999, by and among the
Registrant, FNB Acquisition Sub, F.S.B. and
Black Diamond Savings Bank, F.S.B.,
including Plan of Merger of FNB Acquisition
Sub, F.S.B. into Black Diamond Savings Bank,
F.S.B.
99.01 Press Release, dated May 28, 1999
99.02 Stock Option Agreement, dated May 28, 1999,
by and between the Registrant and Black
Diamond Savings Bank, F.S.B.
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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 hereunto duly authorized.
FNB FINANCIAL SERVICES CORPORATION
By: /s/ Robert F. Allbright
----------------------------------
Dated: June 7, 1999 Robert F. Albright
Executive Vice President and Chief
Financial Officer
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EXHIBIT INDEX
Exhibit Number Description of Exhibit
- -------------- ----------------------
2.01 Agreement and Plan of Reorganization and Merger,
dated May 28, 1999, by and among the Registrant, FNB
Acquisition Sub, F.S.B. and Black Diamond Savings
Bank, F.S.B., including Plan of Merger of FNB
Acquisition Sub, F.S.B. into Black Diamond Savings
Bank, F.S.B.
99.01 Press Release, dated May 28, 1999
99.02 Stock Option Agreement, dated May 28, 1999, by and
between the Registrant and Black Diamond Savings
Bank, F.S.B.
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EXHIBIT 2.01
Agreement and Plan of Reorganization and Merger
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AGREEMENT AND PLAN OF
REORGANIZATION AND MERGER
BY AND AMONG
FNB FINANCIAL SERVICES CORPORATION,
FNB ACQUISITION SUB, F.S.B.
and
BLACK DIAMOND SAVINGS BANK, F.S.B.
May 28, 1999
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AGREEMENT AND PLAN OF REORGANIZATION AND MERGER
This Agreement and Plan of Reorganization and Merger (the "Agreement")
dated as of May 28, 1999 by and among FNB FINANCIAL SERVICES CORPORATION, a
North Carolina corporation ("FNB"), FNB ACQUISITION SUB, F.S.B. (in
organization), a federal savings bank and a wholly-owned subsidiary of FNB
("Acquisition Sub") and BLACK DIAMOND SAVINGS BANK, F.S.B., a federal savings
bank ("Black Diamond"), recites and provides:
A. The boards of directors of FNB and Black Diamond deem it advisable
to merge Acquisition Sub into Black Diamond (the "Merger") pursuant to this
Agreement and the Plan of Merger attached as Exhibit A (the "Plan of Merger"),
whereby the holders of shares of Common Stock of Black Diamond ("Black Diamond
Common Stock") will receive Common Stock of FNB ("FNB Common Stock").
B. To effectuate the foregoing, the parties desire to adopt this
Agreement and the Plan of Merger, which shall represent a plan of reorganization
in accordance with the provisions of Section 368(a) of the United States
Internal Revenue Code, as amended (the "Code").
C. The parties intend that that transactions contemplated herein
qualify for treatment as a pooling of interests pursuant to APB Opinion No. 16.
D. As further inducement and as a condition to FNB's entering into this
Agreement, FNB and Black Diamond have entered into a certain Stock Option
Agreement (the "Stock Option Agreement"), dated of even date herewith, whereby
FNB has the option to acquire certain shares of Black Diamond Common Stock under
certain conditions.
NOW, THEREFORE, in consideration of the mutual benefits to be derived
from this Agreement, and of the representations, warranties, conditions and
promises herein contained, FNB, Acquisition Sub, and Black Diamond hereby adopt
this Agreement whereby at the "Effective Time of the Merger" (as defined in
Article VI hereof) Acquisition Sub shall be merged with and into Black Diamond
(which will be the Surviving Bank, as defined in Section 1.1) in accordance with
the Plan of Merger. The outstanding shares of Black Diamond Common Stock shall
be converted into shares of FNB Common Stock as provided in this Agreement on
the basis, terms and conditions contained herein and in the Plan of Merger as
set forth as Exhibit A hereto.
In connection therewith, the parties hereto agree as follows:
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ARTICLE I
General
1.1. Merger. Subject to the provisions of this Agreement and the Plan
of Merger, at the Effective Time of the Merger the separate existence of
Acquisition Sub shall cease and Acquisition Sub shall be merged with and into
Black Diamond (the "Surviving Bank").
1.2. Issuance of FNB Common Stock. FNB agrees that at the Effective
Time of the Merger it will issue FNB Common Stock to the extent set forth in,
and in accordance with, the terms of this Agreement and the Plan of Merger.
1.3. Taking of Necessary Action. In case at any time after the
Effective Time of the Merger any further action is necessary or desirable to
carry out the purposes of this Agreement, the officers and directors of the
Surviving Bank shall take all such necessary action.
ARTICLE II
Effect of Transaction on Common Stock, Assets,
Liabilities and Capitalization of FNB,
Acquisition Sub and Black Diamond
2.1. Conversion of Stock, Exchange Ratio.
A. Conversion of Stock. At the Effective Time of the Merger,
each share of Black Diamond Common Stock outstanding immediately prior to the
Effective Time of the Merger (other than shares of Black Diamond Common Stock
held by FNB, if any, which shares shall be canceled), by virtue of the Merger
and without any action on the part of the holders thereof, shall be converted
into that number of shares of FNB Common Stock, rounded to the nearest whole
share, equal to the product of one multiplied by the Exchange Ratio (as defined
herein). As used herein, "Exchange Ratio" shall mean 1.3333.
The Exchange Ratio at the Effective Time of the Merger shall be
proportionately adjusted to reflect any consolidation, split-up, stock dividend,
subdivision or combination of FNB Common Stock subsequent to the date of this
Agreement.
B. At the Effective Time of the Merger, but after the
conversion contemplated in Section 2.1A above, each share of Acquisition Sub
common stock outstanding immediately prior to the Effective Time of the Merger,
by virtue of the Merger and without any action on the part of the holders
thereof, shall be converted into one share of Black Diamond Common Stock.
C. No scrip or certificates representing fractional shares of
FNB Common Stock will be issued in connection with the Merger, and Black
Diamond's former shareholders shall have no right to vote or receive any
dividend or other payment or distribution on, or any
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other right with respect to, any fraction of a share of Black Diamond Common
Stock resulting from the Merger.
D. Prior to the Effective Time of the Merger, the Plan of
Merger shall terminate and be abandoned upon a termination of the Agreement,
notwithstanding approval of the Plan of Merger by the shareholders of Black
Diamond.
2.2. Manner of Exchange.
A. After the Effective Time of the Merger, each holder of a
certificate for theretofore outstanding shares of Black Diamond Common Stock,
upon surrender of such certificate to the agent appointed by FNB to administer
the exchange of certificates (the "Exchange Agent"), accompanied by a letter of
transmittal in the form furnished by FNB and the Exchange Agent (the "Letter of
Transmittal"), shall be entitled to receive in exchange therefor the number of
full shares of FNB Common Stock into which shares of Black Diamond Common Stock
shall be converted pursuant to Section 2.1 hereof. Until so surrendered, each
outstanding certificate which, prior to the Effective Time of the Merger,
represented Black Diamond Common Stock will be deemed to evidence the right to
receive the number of full shares of FNB Common Stock into which the shares of
Black Diamond Common Stock represented thereby may be converted in accordance
with the Exchange Ratio, and, after the Effective Time of the Merger will be
deemed for all corporate purposes of FNB to evidence ownership of the number of
full shares of FNB Common Stock into which the shares of Black Diamond Common
Stock represented thereby were converted.
B. Until outstanding certificates formerly representing Black
Diamond Common Stock are surrendered in exchange for FNB Common Stock, no
dividend payable to holders of record of FNB Common Stock for any period as of
any date subsequent to the Effective Time of the Merger shall be paid to the
holder of such outstanding certificates in respect thereof. After the Effective
Time of the Merger, there shall be no further registry of transfer on the
records of Black Diamond of shares of Black Diamond Common Stock. If a
certificate representing such shares is presented to Black Diamond or FNB, it
shall be canceled and exchanged for a certificate representing shares of FNB
Common Stock as herein provided. Upon surrender of certificates of Black Diamond
Common Stock in exchange for FNB Common Stock, there shall be paid to the
recordholder of the certificates of FNB Common Stock issued in exchange therefor
(i) the amount of dividends theretofore paid for such full shares of FNB Common
Stock as of any date subsequent to the Effective Time of the Merger which have
not yet been paid to a public official pursuant to abandoned property laws and
(ii) at the appropriate payment date, the amount of dividends with a record date
prior to surrender and a payment date subsequent to surrender. No interest shall
be payable on such dividends upon surrender of outstanding certificates.
C. At the Effective Time of the Merger, each share of Black
Diamond Common Stock held by FNB, if any, shall be canceled, retired and cease
to exist.
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D. Treatment of Black Diamond Options.
i) At the Effective Time of the Merger, each option
or other right to purchase shares of Black Diamond Common Stock
pursuant to stock options ("Black Diamond Options") granted by Black
Diamond under its 1989 Incentive Stock Option Plan (as amended,
referred to herein as the "Black Diamond Stock Plan"), which are
outstanding at the Effective Time of the Merger, whether or not
exercisable, shall be converted into and become rights with respect to
FNB Common Stock, and FNB shall assume each Black Diamond Option, in
accordance with the terms of the Black Diamond Stock Plan and stock
option agreement by which it is evidenced, except that from and after
the Effective Time of the Merger (A) FNB and its Compensation Committee
shall be substituted for Black Diamond and the Committee of Black
Diamond's Board of Directors (including, if applicable, the entire
Board of Directors of Black Diamond) administering the Black Diamond
Stock Plan, (B) each Black Diamond Option assumed by FNB may be
exercised solely for shares of FNB Common Stock, (C) the number of
shares of FNB Common Stock subject to such Black Diamond Option shall
be equal to the number of shares of Black Diamond Stock subject to such
Black Diamond Option immediately prior to the Effective Time of the
Merger multiplied by the Exchange Ratio and rounding to the nearest
whole share, and (D) the per share exercise price under each such Black
Diamond Option shall be adjusted by dividing the per share exercise
price under each such Black Diamond Option by the Exchange Ratio and
rounding to the nearest cent.
ii) As soon as practicable after the Effective Time
of the Merger, FNB shall deliver to the participants in the Black
Diamond Stock Plan an appropriate notice setting forth such
participant's rights pursuant thereto and the grants pursuant to the
Black Diamond Stock Plan shall continue in effect on the same terms and
conditions (subject to the adjustments required by Section 2.2D(i)
after giving effect to the Merger). At or prior to the Effective Time
of the Merger, FNB shall take all corporate action necessary to reserve
for issuance sufficient shares of FNB Common Stock for delivery upon
exercise of Black Diamond Options assumed by it in accordance with this
Section 2.2D. As soon as practicable after the Effective Time of the
Merger, FNB shall file a registration statement on Form S-3 or Form
S-8, as the case may be (or any successor or other appropriate forms),
with respect to the shares of FNB Common Stock subject to such options
and shall use its reasonable efforts to maintain the effectiveness of
such registration statement (and maintain the current status of the
prospectus or prospectuses contained therein) for so long as such
options remain outstanding.
iii) All restrictions or limitations on transfer with
respect to Black Diamond Common Stock awarded under the Black Diamond
Stock Plan or any other plan, program, or arrangement of Black Diamond,
to the extent that such restrictions or limitations shall not have
already lapsed, and except as otherwise expressly provided in such
plans, program, or arrangement, shall remain in full force and effect
with respect to shares of FNB Common Stock into which such stock is
converted pursuant to this Agreement.
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iv) Black Diamond agrees to cooperate with FNB to
insure the implementation of this Section 2.2D.
2.3. Dissenting Shares. Notwithstanding anything in this Agreement to
the contrary, shares of Black Diamond Common Stock which are issued and
outstanding immediately prior to the Effective Time of the Merger and which are
held by a shareholder who has the right (to the extent such right is available
by law) to demand and receive payment of the fair value of his shares of Black
Diamond Common Stock pursuant to 12 C.F.R. ss. 552.14 (the "Dissenting Shares")
shall not be converted into or be exchangeable for the right to receive the
consideration provided in Section 2.1 of this Agreement, unless and until such
holder shall fail to perfect his or her right to dissent or shall have
effectively withdrawn or lost such right under 12 C.F.R. ss. 552.14, as the case
may be. If such holder shall have so failed to perfect his right to dissent or
shall have effectively withdrawn or lost such right, each of his shares of Black
Diamond Common Stock shall thereupon be deemed to have been converted into, at
the Effective Time of the Merger, the right to receive that number of shares of
FNB Common Stock equal to the product of one multiplied by the Exchange Ratio.
2.4. Effects of Merger. The Merger shall have the effects set forth in
12 C.F.R. ss. 552.13. As of the Effective Time of the Merger, Black Diamond
shall be a wholly-owned subsidiary of FNB.
2.5. Withholding Taxes. All payments to be made pursuant to this
Agreement shall be made less all applicable withholding taxes.
2.6 Lost Certificates. Any Black Diamond shareholder whose certificate
evidencing shares of Black Diamond Common Stock has been lost, destroyed, stolen
or otherwise is missing shall be entitled to receive a certificate representing
the shares of FNB Common Stock to which he or she is entitled in accordance with
and upon compliance with conditions imposed by the Exchange Agent or FNB
pursuant to the provisions of N.C. Gen. Stat. ss. 25-8-405 and N.C. Gen. Stat.
ss. 25-8-104 (including without limitation a requirement that the shareholder
provide a lost instruments indemnity or surety bond in form, substance and
amount satisfactory to the Exchange Agent and FNB).
ARTICLE III
Representations and Warranties
3.1. Representations and Warranties of Black Diamond. Black Diamond
represents and warrants to FNB and Acquisition Sub as follows:
A. Organization, Standing and Power. Black Diamond is a
federal savings bank duly incorporated and organized, validly existing and in
good standing under the laws of the United States and has all requisite
corporate and other power and authority to own, lease and operate its properties
and to carry on its business as now being conducted and to perform this
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Agreement and the Plan of Merger and to effect the transactions contemplated
hereby and thereby. Black Diamond's deposits are insured by the Federal Deposit
Insurance Corporation (the "FDIC") to the maximum extent permitted by law. Black
Diamond has delivered to FNB complete and correct copies of (i) its Charter and
(ii) its By-laws.
B. Capital Structure. The authorized capital stock of Black
Diamond consists entirely of 2,000,000 shares of Black Diamond Common Stock, par
value $2.50. On the date hereof, 835,069 shares of Black Diamond Common Stock
were issued and outstanding. All of the outstanding shares of Black Diamond
Common Stock were duly authorized and validly issued and are fully paid and
nonassessable, and all such shares were issued pursuant to and in compliance
with the requirement of a registration statement or an applicable exemption from
the registration requirements under the Securities Act of 1933, as amended (the
"1933 Act"). Except as disclosed on Schedule A, Black Diamond knows of no person
who beneficially owns 5% or more of outstanding Black Diamond Common Stock as of
the date hereof.
C. Authority. Subject to the approval of this Agreement and
the Plan of Merger by the shareholders of Black Diamond and FNB as contemplated
by Section 4.2, the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby and by the Plan of Merger
have been duly and validly authorized by all necessary action on the part of
Black Diamond, and this Agreement is a valid and binding obligation of Black
Diamond, enforceable in accordance with its terms, except as enforceability may
be limited by laws affecting the enforcement of creditors' rights generally and
subject to any equitable principles limiting the right to obtain specific
performance. The execution and delivery of this Agreement, the consummation of
the transactions contemplated hereby and by the Plan of Merger and compliance by
Black Diamond with any of the provisions hereof or thereof will not (i) conflict
with or result in a breach of any provision of its Charter or By-laws or, except
as set forth in Schedule B, constitute a default (or give rise to any right of
termination, cancellation or acceleration) under any of the terms, conditions or
provisions of any note, bond, debenture, mortgage, indenture, license, material
agreement or other material instrument or obligation to which Black Diamond is a
party, or by which it or any of its properties or assets may be bound, or (ii)
violate any order, writ, injunction, decree, statute, rule or regulation
applicable to Black Diamond or any of its properties or assets. No consent or
approval by any governmental authority, other than compliance with applicable
federal and state securities, corporate and banking laws, and regulations of the
Board of Governors of the Federal Reserve System (the "Federal Reserve Board"),
the FDIC, the Office of Thrift Supervision ("OTS"), and the Virginia State
Corporation Commission ("VSCC") is required in connection with the execution and
delivery by Black Diamond of this Agreement or the consummation by Black Diamond
of the transactions contemplated hereby or by the Plan of Merger.
D. Investments. All securities owned by Black Diamond of
record and beneficially are free and clear of all mortgages, liens, pledges,
encumbrances or any other restriction, whether contractual or statutory, which
would materially impair the ability of Black Diamond freely to dispose of any
such security at any time, except as noted on Schedule C. Any securities owned
of record by Black Diamond in an amount equal to 5% or more of the issued and
outstanding voting securities of the issuer thereof have been noted on such
Schedule C.
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There are no voting trusts or other agreements or undertakings of which Black
Diamond is a party with respect to the voting of such securities. With respect
to all repurchase agreements to which Black Diamond is a party, Black Diamond
has a valid, perfected first lien or security interest in the government
securities or other collateral securing the repurchase agreement, and the value
of the collateral securing each such repurchase agreement equals or exceeds the
amount of the debt secured by such collateral under such agreement.
E. Financial Statements. Schedule D contains copies of the
following financial statements of Black Diamond (the "Black Diamond Financial
Statements"): a) Statements of Financial Condition as of March 31, 1999
(unaudited), and December 31, 1998 and 1997 (audited); (b) Statements of
Operations for each of the three years in the period ended December 31, 1998
(audited) and the three months ended March 31, 1999 (unaudited); (c) Statements
of Changes in Stockholders' Equity for each of the three years in the period
ended December 31, 1998 (audited) and the three months ended March 31, 1999
(unaudited); and (d) Statements of Cash Flows for each of the three years in the
period ended December 31, 1998 (audited) and the three months ended March 31,
1999 (unaudited). Such financial statements and the notes thereto have been
prepared in accordance with generally accepted accounting principles ("GAAP")
applied on a consistent basis throughout the periods indicated unless otherwise
noted in the Black Diamond Financial Statements and are consistent with the
books and records of Black Diamond. Each of such statements of financial
condition, together with the notes thereto, presents fairly as of its date the
financial condition and assets and liabilities of Black Diamond. The statements
of operations, changes in stockholders' equity and cash flows, together with the
notes thereto, present fairly the results of operations, changes in
stockholders' equity and cash flows of Black Diamond for the periods indicated.
Except as disclosed in the Black Diamond Financial Statements and as per
compliance with and subject to the requirements of 12 C.F.R. ss. 563.134, there
are no restrictions precluding Black Diamond from paying dividends when, as and
if declared by its Board of Directors.
F. Absence of Undisclosed Liabilities. At December 31, 1998
and March 31, 1999, Black Diamond had no material obligations or liabilities
(contingent or otherwise) of any nature which were not reflected in the Black
Diamond Financial Statements, except for those which are disclosed (including an
estimate of the amount of any such liability) in Schedules specifically referred
to herein. For purposes of this Section 3.1.F., obligations and liabilities
shall be "material" if they exceed, or are reasonably expected to exceed,
individually or in the aggregate, $50,000.
G. Tax Matters. Black Diamond has filed or caused to be filed
or (in the case of returns or reports not yet due) will file all tax returns and
reports required to have been filed by it before the Effective Time of the
Merger, and all information set forth in such returns or reports is or (in the
case of such returns or reports not yet due) will be accurate and complete in
all material respects. Black Diamond has paid or made adequate provision for, or
(with respect to returns or reports not yet filed) before the Effective Time of
the Merger will pay or make adequate provision for, all taxes, additions to tax,
penalties, and interest for all periods covered by those returns or reports.
There are, and at the Effective Time of the Merger will be, no unpaid taxes,
additions to tax, penalties, or interest due and payable by Black Diamond that
are or could
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become a lien on any asset, or otherwise materially adversely affect the
business, property or financial condition of Black Diamond, except for taxes and
any such related liability being contested in good faith and disclosed in
Schedule E. Black Diamond has collected or withheld, or will collect or withhold
before the Effective Time of the Merger, all amounts required to be collected or
withheld by it for any taxes, and all such amounts have been, or before the
Effective Time of the Merger will have been, paid to the appropriate
governmental agencies or set aside in appropriate accounts for future payment
when due. Black Diamond is in material compliance with, and its records contain
all information and documents (including, without limitation, properly completed
IRS Forms W-9) necessary to comply in all material respects with, all applicable
information reporting and tax withholding requirements under federal, state, and
local laws, rules, and regulations, and such records identify with specificity
all accounts subject to backup withholding under Section 3406 of the Code. The
statements of financial condition contained in the Black Diamond Financial
Statements fully and properly reflect, as of the dates thereof, the aggregate
liabilities of Black Diamond for all accrued taxes, additions to tax, penalties
and interest in accordance with GAAP. The books and records of Black Diamond
fully and properly reflect any liability for all accrued taxes, additions to
tax, penalties and interest in accordance with GAAP. Except as disclosed in
Schedule E, Black Diamond has not granted (nor is it subject to) any waiver of
the period of limitations for the assessment of tax for any currently open
taxable period, and no unpaid tax deficiency has been asserted in writing
against or with respect to Black Diamond by any taxing authority. Black Diamond
has not made or entered into, and does not hold any asset subject to, a consent
filed pursuant to Section 341(f) of the Code and the regulations thereunder or a
"safe harbor lease" subject to former Section 168(f)(8) of the Code and the
regulations thereunder. Schedule E describes all tax elections, consents and
agreements affecting Black Diamond. To the best knowledge of Black Diamond, no
Black Diamond shareholder is a "foreign person" for purposes of Section 1445 of
the Code. Black Diamond's tax returns and reports have been examined or closed
by applicable statutes of limitations through the tax year ended December 31,
1995, and Black Diamond has not received any indication of the pendency of any
audit or examination in connection with any tax return or report and has no
knowledge that any such return or report is subject to adjustment.
H. Options, Warrants and Related Matters. There are no
outstanding unexercised options, warrants, calls, rights, commitments or
agreements of any character to which Black Diamond is a party or by which it is
bound, calling for the issuance of securities of Black Diamond or any security
representing the right to purchase or otherwise receive any such security,
except as set forth on Schedule F.
I. Property. Black Diamond owns (or enjoys use of under
capital or operating leases) all property reflected on the Black Diamond
Financial Statements as of March 31, 1999 (except property sold or otherwise
disposed of in the ordinary course of business). All property shown as being
owned is owned free and clear of all mortgages, liens, pledges, charges or
encumbrances of any nature whatsoever, except those referred to in such Black
Diamond Financial Statements or the notes thereto, liens for current taxes not
yet due and payable, any unfiled mechanics' liens and such encumbrances and
imperfections of title, if any, as are not substantial in character or amount or
otherwise materially impair the use of the subject property. The leases relating
to leased property are fairly reflected in such Black Diamond Financial
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Statements. All property and assets material to the business or operations of
Black Diamond are in substantially good operating condition and repair and such
property and assets are adequate for the business and operations of Black
Diamond as currently conducted.
J. Additional Schedules Furnished to FNB. In addition to any
Schedules furnished to FNB pursuant to other provisions of this Agreement, Black
Diamond has furnished to FNB the following Schedules which are correct and
complete as of the date hereof:
i) Employees. Schedule G lists as of the date hereof
(1) the names of and current annual salary rates for all present
employees of Black Diamond who received, respectively, $50,000 or more
in aggregate compensation, whether in salary or otherwise as reported
or would be reported on Form W-2, during the year ended December 31,
1998, or are presently scheduled to receive salary in excess of $50,000
during the year ending December 31, 1999; (2) the number of shares of
Black Diamond Common Stock owned beneficially by each director and five
highest compensated officers of Black Diamond as of the date hereof,
(3) the names of and the number of shares of Black Diamond Common Stock
owned by each person known to Black Diamond who beneficially owns 5% or
more of the outstanding Black Diamond Common Stock as of the date
hereof, and (4) the names of, the number of outstanding options of, and
the exercise price of, each Black Diamond Option granted to each person
under the Black Diamond Stock Plan and the exercise price of each such
Black Diamond Option.
ii) Certain Contracts. Schedule H lists all notes,
bonds, mortgages, indentures, licenses, lease agreements and other
contracts and obligations to which Black Diamond is an indebted party
or a lessee, licensee or obligee as of the date hereof (collectively,
"Contracts") except for deposits and those Contracts entered into by
Black Diamond in the ordinary course of its business consistent with
its prior practice and that do not involve an amount remaining greater
than $50,000.
iii) Employment Contracts and Related Matters. Except
in all cases as set forth on Schedule I, Black Diamond is not a party
to any employment contract not terminable at the option of Black
Diamond without liability. Except in all cases as set forth on Schedule
I, Black Diamond is not a party to (1) any retirement, profit sharing
or pension plan or thrift plan or agreement or employee benefit plan
(as defined in Section 3 of the Employee Retirement Income Security Act
of 1974 ("ERISA")), (2) any management or consulting agreement not
terminable at the option of Black Diamond without liability or (3) any
union or labor agreement. Black Diamond has paid in full to or accrued
on behalf of all its directors, officers, and employees all wages,
salaries, commissions, bonuses, fees, sick pay, severance pay, all
other amounts promised to the extent required by law or when Black
Diamond has a policy of making such payments and other direct
compensation for all services performed by them to the date of this
Agreement.
iv) Real Estate. Schedule J describes, as of the date
hereof, all interests in real property owned, leased or otherwise
claimed by Black Diamond.
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v) Affiliates. Schedule K sets forth the names and
number of shares of Black Diamond Common Stock owned as of the date
hereof beneficially or of record by any persons Black Diamond considers
to be affiliates of Black Diamond ("Black Diamond Affiliates") as that
term is defined for purposes of Rule 145 under the 1933 Act.
K. Agreements in Force and Effect. All contracts, agreements,
plans, leases, policies and licenses of Black Diamond are valid and in full
force and effect, and, to its best knowledge, Black Diamond has not breached any
provision of, nor is in default in any respect under the terms of, any such
contract, agreement, lease, policy or license, the effect of which breach or
default would have a material adverse effect upon either the financial
condition, results of operations, or business of Black Diamond.
L. Legal Proceedings; Compliance with Laws. Schedule L
describes all legal, administrative, arbitration or other proceedings or
governmental investigations pending or threatened or, to its knowledge, probable
of assertion against Black Diamond. Except as set forth on Schedule L, no such
proceeding or investigation, if decided adversely, would have a material adverse
effect on either the financial condition, results of operations or business of
Black Diamond on a consolidated basis. Except as set forth in Schedule L, Black
Diamond has complied in all material respects with any laws, ordinances,
requirements, regulations or orders applicable to its business and properties.
Black Diamond has all licenses, permits, orders or approvals (collectively, the
"Permits") of any federal, state, local or foreign governmental or regulatory
body that are necessary for the conduct of its business; the Permits are in full
force and effect; no violations are or have been recorded in respect of any
Permits nor has Black Diamond received written notice of any violations; and no
proceeding is pending or threatened to revoke or limit any Permit. Except as set
forth in Schedule L, Black Diamond has not entered into any agreements or
written understandings with the Federal Reserve Board, the OTS, the FDIC or any
other regulatory agency having authority over it. Black Diamond is not subject
to any judgment, order, writ, injunction or decree which materially adversely
affects, or might reasonably be expected materially adversely to affect either
the financial condition, results of operations, or business of Black Diamond on
a consolidated basis.
M. Employee Benefit Plans.
i) Schedule M includes a correct and complete list
of, and FNB has been furnished a true and correct copy of (or an
accurate written description thereof in the case of oral agreements or
arrangements) (1) all qualified pension and profit-sharing plans, all
deferred compensation, consultant, severance, thrift, option, bonus and
group insurance contracts and all other incentive, welfare and employee
benefit plans, trust, annuity or other funding agreements, and all
other agreements (including oral agreements or arrangements) that are
presently in effect, or have been approved prior to the date hereof,
maintained for the benefit of employees or former employees of Black
Diamond or the dependents or beneficiaries of any employee or former
employee of Black Diamond, whether or not subject to ERISA (the
"Employee Plans"), (2) the most recent
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actuarial and financial reports prepared or required to be prepared
with respect to any Employee Plan and (3) With respect to any such
Employee Plan that is intended to be qualified under Section 401(a) of
the Code, the most recent annual reports filed with any governmental
agency, the most recent favorable determination letter issued by the
Internal Revenue Service, and any open requests for rulings or
determination letters. Schedule M identifies each Employee Plan that is
intended to be qualified under Section 401(a) of the Code and each such
plan is qualified.
ii) Neither Black Diamond nor any employee pension
benefit plan (as defined in Section 3(2) of ERISA (a "Pension Plan"))
maintained or previously maintained by it, has incurred any material
liability to the Pension Benefit Guaranty Corporation ("PBGC") or to
the Internal Revenue Service with respect to any Pension Plan. There is
not currently pending with the PBGC any filing with respect to any
reportable event under Section 4043 of ERISA nor has any reportable
event occurred as to which a filing is required and has not been made.
iii) Full payment has been made (or proper accruals
have been established) of all contributions which are required for
periods prior to the Closing Date, as defined in Section 6.1 hereof,
under the terms of each Employee Plan, ERISA, or a collective
bargaining agreement, no accumulated funding deficiency (as defined in
Section 302 of ERISA or Section 412 of the Code) whether or not waived,
exists with respect to any Pension Plan (including any Pension Plan
previously maintained by Black Diamond), and except as set forth on
Schedule M, there is no "unfunded current liability" (as defined in
Section 412 of the Code) with respect to any Pension Plan.
iv) No Employee Plan is a "multiemployer plan" (as
defined in Section 3(37) of ERISA). Black Diamond has not incurred any
liability under Section 4201 of ERISA for a complete or partial
withdrawal from a multi-employer plan (as defined in Section 3(37) of
ERISA). Black Diamond has not participated in or agreed to participate
in a multiemployer plan (as defined in Section 3(37) of ERISA).
v) All Employee Plans that are "employee benefit
plans," as defined in Section 3(3) of ERISA, that are maintained by
Black Diamond or previously maintained by Black Diamond comply and have
been administered in compliance in all material respects with ERISA and
all other applicable legal requirements, including the terms of such
plans, collective bargaining agreements and securities laws. Black
Diamond does not have any material liability under any such plan that
is not reflected in the Black Diamond Financial Statements or on
Schedule M hereto.
vi) Except as set forth on Schedule M, no prohibited
transaction has occurred with respect to any Employee Plan that is an
"employee benefit plan" (as defined in Section 3(3) of ERISA)
maintained by Black Diamond or previously maintained by Black Diamond
that would result, directly or indirectly, in material liability under
ERISA or in the imposition of a material excise tax under Section 4975
of the Code.
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vii) Schedule M identifies each Employee Plan that is
an "employee welfare benefit plan" (as defined in Section 3(1) of
ERISA) and its funding status, whether through insurance, a trust, or
from an employee's general assets. The funding under each such plan
does not exceed the limitations under Section 419A(b) or 419A(c) of the
Code. Black Diamond is not subject to taxation on the income of any
such plan or any such plan previously maintained by Black Diamond.
viii) Schedule M identifies the method of funding
(including any individual accounting) for all post-retirement medical
or life insurance benefits for the employees of Black Diamond. Schedule
M also discloses the funded status of these Employee Plans.
ix) Schedule M identifies each corporate owned life
insurance policy, including any key man insurance policy and policy
insuring the life of any director or employee of Black Diamond, and
indicates for each such policy, the face amount of coverage, cash
surrender value, if any, and annual premiums.
x) No trade or business is, or has ever been, treated
as a single employer with Black Diamond for employee benefit purposes
under ERISA and the Code.
N. Insurance. All policies or binders of fire, liability,
product liability, workmen's compensation, vehicular and other insurance held by
or on behalf of Black Diamond are described on Schedule N and are valid and
enforceable in accordance with their terms, are in full force and effect, and
insure against risks and liabilities to the extent and in the manner customary
for the industry and are deemed appropriate and sufficient by Black Diamond.
Black Diamond is not in default with respect to any provision contained in any
such policy or binder and has not failed to give any notice or present any claim
under any such policy or binder in due and timely fashion. Black Diamond has not
received notice of cancellation or non-renewal of any such policy or binder.
Black Diamond has no knowledge of any inaccuracy in any application for such
policies or binders, any failure to pay premiums when due or any similar facts
that might form the basis for termination of any such insurance. Black Diamond
has no knowledge of any facts or of the occurrence of any event that is
reasonably likely to form the basis for any material claim against it not fully
covered (except to the extent of any applicable deductible) by the policies or
binders referred to above. Black Diamond has not received notice from any of its
insurance carriers that any insurance premiums will be materially increased in
the future or that any such insurance coverage will not be available in the
future on substantially the same terms as now in effect.
O. Loan Portfolio. Each loan outstanding on the books of Black
Diamond is in all respects what it purports to be, was made in the ordinary
course of business, was not known to be uncollectible at the time it was made,
accrues interest (except for loans recorded on Black Diamond's books as
non-accrual) in accordance with the terms of the loan, and with respect to loans
originated by Black Diamond was made in accordance with Black Diamond's standard
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loan policies as in effect at the time the loan was negotiated, except for loans
to facilitate the sale of other real estate owned ("OREO") or loans with
renegotiated terms and conditions. The records of Black Diamond regarding all
loans outstanding and OREO by Black Diamond on its books are accurate in all
material respects and the risk classifications for the loans outstanding are, in
the best judgment of the management of Black Diamond, appropriate. The reserves
for possible loan losses on the outstanding loans of Black Diamond, as reflected
in the Black Diamond Financial Statements, have been established in accordance
with generally accepted accounting principles and with the requirements of the
OTS and the FDIC. In the best judgment of the management of Black Diamond, such
reserves are adequate as of the date hereof and will be adequate as of the
Effective Time of the Merger to absorb all known and anticipated loan losses in
the loan portfolio of Black Diamond. Except as identified on Schedule O, no
loans in excess of $100,000 individually or in the aggregate have been
classified by examiners (regulatory or internal) as "Special Mention,"
"Substandard," "Doubtful," or "Loss." Except as disclosed on Schedule J, the
OREO included in any nonperforming asset of Black Diamond is recorded at the
lower of cost or fair value less estimated costs to sell based on independent
appraisals that comply with the requirements of the Financial Institutions
Reform, Recovery and Enforcement Act of 1989 and Uniform Standards of
Professional Appraisal Practice. Except as identified on Schedule O, each loan
reflected as an asset on the Black Diamond Financial Statements is the legal,
valid and binding obligation of the obligor and any guarantor, subject to
bankruptcy, insolvency, fraudulent conveyance and other laws of general
applicability relating to or affecting creditors' rights and to general
principles of equity, and no defense, offset or counterclaim has been asserted
with respect to any such loan, which if successful would have a material adverse
effect on the financial condition, results of operation or business of Black
Diamond.
P. Absence of Changes. Except as identified on Schedule P,
since March 31, 1999, there has not been any material adverse change in the
aggregate assets or liabilities, earnings or business of Black Diamond, other
than changes resulting from or attributable to (i) changes since such date in
laws or regulations, generally accepted accounting principles or administrative
interpretations of any thereof that affect the banking or savings and loan
industries generally, (ii) changes since such date in the general level of
interest rates, (iii) accruals and reserves incurred or to be incurred by Black
Diamond since such date pursuant to the terms of Section 4.8 hereof, or (iv) any
other accruals, reserves or expenses incurred or to be incurred by Black Diamond
since such date with FNB's prior written consent. Since March 31, 1999, the
business of Black Diamond has been conducted only in the ordinary course.
Q. Brokers and Finders. Neither Black Diamond nor any of its
officers, directors or employees have employed any broker or finder or incurred
any liability for any brokerage fees, commissions or finders' fees in connection
with the transactions contemplated herein, except that Black Diamond has
employed Austin Financial Services, Inc. ("Austin"), and has paid or accrued
(or, prior to the Effective Time of the Merger, will pay or accrue) all amounts
due, or to be due, such advisor in connection with services rendered. True and
correct copies of all agreements between Black Diamond and Austin are attached
as Schedule Q.
R. Subsidiaries; Partnerships and Joint Ventures. Black
Diamond has no subsidiaries and does not own any interest in any partnership or
joint venture.
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S. Reports. Black Diamond has filed all material reports and
statements, together with any amendments required to be made with respect
thereto, that were required to be filed with (i) the Federal Reserve Board, (ii)
the FDIC, (iii) the OTS, and (iv) any other governmental or regulatory authority
or agency having jurisdiction over its operations. No such report or statement,
or any amendment thereto, fails to comply with the statutes, rules and
regulations enforced or promulgated by the regulatory authority with which it
was filed or contains any statement which, at the time and in light of the
circumstances under which it was made, was false or misleading with respect to
any material fact necessary in order to make the statements contained therein
not false or misleading. Except to the extent that information contained in any
such report or statement has been revised or superseded by a later filed report
or statement, none of such reports or statements (including any and all
financial statements included therein) contains any untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. Black Diamond has not
been notified by any such governmental or regulatory authority that any such
report or statement was deficient in any material respect as to form or content.
Following the date of this Agreement, Black Diamond shall deliver to FNB,
simultaneous with the filing thereof, a copy of each report, registration,
statement or other regulatory filing made by it with the Federal Reserve Board,
the FDIC, the OTS, or any other such regulatory authority. Black Diamond is not
required to file reports under Section 12(g) or 15(d) of the Securities Exchange
Act of 1934, as amended (the "1934 Act") and the regulations of the Securities
and Exchange Commission ("SEC").
T. Environmental Matters. For purposes of Article III of this
Agreement, the following terms shall have the indicated meaning: "Environmental
Law" means any federal, state or local law, statute, ordinance, rule,
regulation, code, license, permit, authorization, approval, consent, order,
judgment, decree, injunction or agreement with any governmental entity relating
to (i) the protection, preservation or restoration of the environment
(including, without limitation, air, water vapor, surface water, groundwater,
drinking water supply, surface soil, subsurface soil, plant and animal life or
any other natural resource), and/or (ii) the use, storage, recycling, treatment,
generation, transportation, processing, handling, labeling, production, release
or disposal of Hazardous Substances. The term "Environmental Law" includes
without limitation (i) the Comprehensive Environmental Response, Compensation
and Liability Act, as amended, 42 U.S.C. Section 9601, et seq; the Resource
Conservation and Recovery Act, as amended, 42 U.S.C. Section 6901, et seq; the
Clean Air Act, as amended, 42 U.S.C. Section 7401, et seq; the Federal Water
Pollution Control Act, as amended, 33 U.S.C. Section 1251, et seq; the Toxic
Substances Control Act, as amended, 15 U.S.C. Section 9601, et seq; the
Emergency Planning and Community Right to Know Act, 42 U.S.C. Section 11001, et
seq; the Safe Drinking Water Act, 42 U.S.C. Section 300f, et seq; and all
comparable state and local laws, and (ii) any common law (including without
limitation common law that may impose strict liability) that may impose
liability or obligations for injuries or damages due to, or threatened as a
result of, the presence of or exposure to any Hazardous Substance. "Hazardous
Substance" means any substance presently listed, defined, designated or
classified as hazardous, toxic, radioactive or dangerous, or otherwise regulated
under any Environmental Law, whether by type or by quantity, including any
material containing any such substance as a component. Hazardous
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Substances include without limitation petroleum, or any derivative or by-product
thereof, asbestos, radioactive material and polychlorinated biphenyls.
For purposes of this subsection, "Loan Portfolio Properties and Other
Properties Owned" means those properties owned or operated by Black Diamond or
any of its subsidiaries, including those properties serving as collateral for
any loans made and retained by Black Diamond or for which Black Diamond serves
in a trust relationship for the loans retained in portfolio. To Black Diamond's
best knowledge, except as disclosed in Schedule R:
i) Black Diamond has not been nor is in violation of
or liable under any Environmental Law;
ii) none of the Loan Portfolio Properties and Other
Properties Owned has been or is in violation of or liable under any
Environmental Law; and
iii) there are no actions, suits, demands, notices,
claims, investigations or proceedings pending or threatened relating to
the liability of the Loan Portfolio Properties and Other Properties
Owned under any Environmental Law, including without limitation any
notices, demand letters or requests for information from any federal or
state environmental agency relating to any such liabilities under or
violations of Environmental Law.
U. Disclosure. Except to the extent of any subsequent
correction or supplement with respect thereto furnished prior to the date
hereof, no written statement, certificate, schedule, list or other written
information furnished by or on behalf of Black Diamond at any time to FNB, in
connection with this Agreement, when considered as a whole, contains or will
contain any untrue statement of a material fact or omits or will omit to state a
material fact necessary in order to make the statements herein or therein, in
light of the circumstances under which they were made, not misleading. Each
document delivered or to be delivered by Black Diamond to FNB is or will be a
true and complete copy of such document, unmodified except by another document
delivered by Black Diamond.
V. Accounting; Tax; Regulatory Matters. There exists no fact
or condition (including Black Diamond's record of compliance with the Community
Reinvestment Act) relating to Black Diamond that may reasonably be expected to
(i) prevent or materially impede or delay FNB or Black Diamond from obtaining
the regulatory approvals required in order to consummate transactions described
herein, (ii) prevent the Merger from qualifying to be a reorganization under
Section 368(a) of the Code, or (iii) prevent the Merger from being treated as a
"pooling-of-interests" for accounting purposes; and, if any such fact or
condition becomes known to Black Diamond, Black Diamond shall promptly (and in
any event within three days after obtaining such knowledge) communicate such
fact or condition to FNB in writing.
W. Regulatory Approvals. Black Diamond knows of no reason why
the approvals, consents and waivers of governmental authorities referred to in
Sections 5.1F and
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5.2E hereof should not be obtained on a timely basis without the imposition of
any condition of the type referred to in Section 5.1F hereof.
X. Year 2000 Readiness. To the best knowledge of management of
Black Diamond, Black Diamond is in compliance with the OTS' and the FDIC's
guidelines on Year 2000 readiness.
Y. Insurance of Deposits. All deposits of Black Diamond are
insured by the Savings Association Insurance Fund of the FDIC to the maximum
extent permitted by law, all deposit insurance premiums due from Black Diamond
to the FDIC have been paid in full in a timely fashion, and no proceedings have
been commenced or, to the best knowledge of management of Black Diamond, are
contemplated by the FDIC or otherwise to terminate such insurance.
3.2. Representations and Warranties of FNB. FNB represents and warrants
to Black Diamond as follows:
A. Organization, Standing and Power. FNB is a corporation duly
incorporated, validly existing and in good standing under the laws of North
Carolina and has all requisite corporate power and authority to own, lease and
operate its properties and to carry on its business as now being conducted. FNB
Southeast is a wholly-owned subsidiary of FNB, and is the only subsidiary of
FNB, other than Acquisition Sub (FNB and FNB Southeast may be collectively
referred to herein as the "FNB Companies"). FNB Southeast is a commercial bank
duly incorporated, validly existing and in good standing under the laws of North
Carolina and has all requisite corporate power and authority to own, lease and
operate its properties and to carry on its business as now being conducted. FNB
has delivered to Black Diamond complete and correct copies of the Articles of
Incorporation of FNB and FNB Southeast and all amendments thereof to the date
hereof and the By-laws of FNB and FNB Southeast as amended to the date hereof.
B. Capital Structure. The authorized capital stock of FNB
consists of 40,000,000 shares of Common Stock, of which 3,377,415 shares were
issued and outstanding as of February 16, 1999 and 10,000,000 shares of
Preferred Stock, of which 0 shares were issued and outstanding as of February
16, 1999. The authorized capital stock of FNB Southeast consists of 742,500
shares of common stock, and all of the issued and outstanding shares of FNB
Southeast's capital stock are owned by FNB. All of the issued and outstanding
shares of FNB Common Stock and FNB Southeast common stock were validly issued,
fully paid and nonassessable at such date, and all such shares were issued
pursuant to and in compliance with the requirement of a registration statement
or an applicable exemption from the registration requirements under the 1933
Act.
C. Authority. Subject to the approval of this Agreement and
the Plan of Merger by the shareholders of Black Diamond and FNB as contemplated
by Section 4.2, the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly and validly
authorized by all necessary action on the part of FNB; and this Agreement is a
valid and binding obligation of FNB, enforceable in accordance
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<PAGE> 19
with its terms except as enforceability may be limited by laws affecting the
enforcement of creditors' rights generally and subject to any equitable
principles limiting the right to obtain specific performance. The execution and
delivery of this Agreement, the consummation of the transactions contemplated
hereby and compliance by FNB with any of the provisions hereof will not (i)
conflict with or result in a breach of any provision of its Articles of
Incorporation or By-laws or a default (or give rise to any right of termination,
cancellation or acceleration) under any of the terms, conditions or provisions
of any note, bond, mortgage, indenture, license, agreement or other instrument
or obligation to which any of the FNB Companies is a party, or by which any of
them or any of their respective properties or assets may be bound or (ii)
violate any order, writ, injunction, decree, statute, rule or regulation
applicable to any of the FNB Companies or any of their respective properties or
assets. No consent or approval by any governmental authority, other than
compliance with applicable federal and state securities and banking laws, the
rules of the National Association of Securities Dealers, Inc. (the "NASD") and
regulations of the Federal Reserve Board, the OTS, the FDIC, the VSCC, and the
North Carolina Banking Commission is required in connection with the execution
and delivery by FNB of this Agreement or the consummation by FNB of the
transactions contemplated hereby or by the Plan of Merger.
D. Brokers and Finders. Neither FNB nor any of its respective
officers, directors or employees has employed any broker or finder or incurred
any liability for any brokerage fees, commissions or finders' fees in connection
with the transactions contemplated herein, except that FNB has employed Equity
Research Services, Inc. and will be liable for its fees.
E. Absence of Changes. Except as identified on Schedule S,
since March 31, 1999, there has not been any material adverse change in the
consolidated assets or liabilities, earnings or business of FNB, other than
changes resulting from or attributable to (i) changes since such date in laws or
regulations, generally accepted accounting principles or administrative
interpretations of any thereof that affect the banking or savings and loan
industries generally, or (ii) changes since such date in the general level of
interest rates. Other than acquisitions and other branch or business expansions,
since March 31, 1999, the business of FNB has been conducted only in the
ordinary course. Other than as identified on Schedule S, FNB is not in material
discussions to acquire any party that would be significant under Rule
11-01(b)(1) contained in Regulation S-X of the SEC.
F. Reports. FNB and FNB Southeast have filed all material
reports and statements, together with any amendments required to be made with
respect thereto, that were required to be filed with (i) the Federal Reserve
Board, (ii) the FDIC, (iii) the North Carolina Banking Commission, (iv) the SEC
and (v) any other governmental or regulatory authority or agency having
jurisdiction over its operations. Each of such reports and documents, including
the financial statements, exhibits and schedules thereto, filed with the SEC
pursuant to the 1934 Act was in form and substance in compliance in all material
respects with the 1934 Act. No such report or statement, or any amendments
thereto, contains any statement which, at the time and in light of the
circumstances under which it was made, was false or misleading with respect to
any material fact necessary in order to make the statements contained therein
not false or misleading. Except to the extent that information contained in any
such report or statement has been revised
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or superseded by a later filed report or statement, none of such reports or
statements (including any and all financial statements included therein)
contains any untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading. Neither FNB nor FNB Southeast has been notified by any such
governmental or regulatory authority that any such report or statement was
deficient in any material respect as to form or content. Following the date of
this Agreement, FNB shall deliver to Black Diamond, simultaneous with the filing
thereof, a copy of each report, registration, statement or other regulatory
filing made by it or FNB Southeast with the SEC, Federal Reserve Board, the
FDIC, the North Carolina Banking Commission, or any other such regulatory
authority. FNB has not offered or sold any securities in violation of the 1933
Act or the securities laws of any state.
G. Absence of Undisclosed Liabilities. At December 31, 1998
and March 31, 1999, neither FNB nor FNB Southeast had any material obligations
or liabilities (contingent or otherwise) of any nature which were not reflected
in FNB's reports filed with the SEC, except for those which are disclosed
(including an estimate of the amount of any such liability) in Schedules
specifically referred to herein. For purposes of this Section 3.2.G.,
obligations and liabilities shall be "material" if they exceed, or are
reasonably expected to exceed, individually or in the aggregate, $200,000.
H. Disclosure. Except to the extent of any subsequent
correction or supplement with respect thereto furnished prior to the date
hereof, no written statement, certificate, schedule, list or other written
information furnished by or on behalf of FNB at any time to Black Diamond, in
connection with this Agreement when considered as a whole, contains or will
contain any untrue statement of a material fact or omits or will omit to state a
material fact necessary in order to make the statements herein or therein, in
light of the circumstances under which they were made, not misleading. Each
document delivered or to be delivered by FNB to Black Diamond is or will be a
true and complete copy of such document, unmodified except by another document
delivered by FNB.
I. Options, Warrants and Related Matters. There are no
outstanding unexercised options, warrants, calls, rights, commitments or
agreements of any character to which any of the FNB Companies is a party or by
which it any of them are bound, calling for the issuance of securities of any of
the FNB Companies or any security representing the right to purchase or
otherwise receive any such security, except as set forth on Schedule T.
J. Environmental Matters. For purposes of this subsection,
"Loan Portfolio Properties and Other Properties Owned" means those properties
owned or operated by FNB or any of its subsidiaries, including those properties
serving as collateral for any loans made and retained by FNB or any of its
subsidiaries or for which FNB or any of its subsidiaries serves in a trust
relationship for the loans retained in portfolio. To FNB's best knowledge,
except as disclosed in Schedule U, and except to the extent that there would be
no material adverse effect on FNB and its subsidiaries taken as a whole:
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i) Neither FNB nor FNB Southeast has been nor is in
violation of or liable under any Environmental Law;
ii) none of the Loan Portfolio Properties and Other
Properties Owned has been or is in violation of or liable under any
Environmental Law; and
iii) there are no actions, suits, demands, notices,
claims, investigations or proceedings pending or threatened relating to
the liability of the Loan Portfolio Properties and Other Properties
Owned under any Environmental Law, including without limitation any
notices, demand letters or requests for information from any federal or
state environmental agency relating to any such liabilities under or
violations of Environmental Law.
K. Accounting; Tax; Regulatory Matters. There exists no fact
or condition (including FNB's or FNB Southeast's record of compliance with the
Community Reinvestment Act) relating to FNB or FNB Southeast that may reasonably
be expected to (i) prevent or materially impede or delay FNB or Black Diamond
from obtaining the regulatory approvals required in order to consummate
transactions described herein, (ii) prevent the Merger from qualifying to be a
reorganization under Section 368(a) of the Code, or (iii) prevent the Merger
from being treated as a "pooling-of-interests" for accounting purposes; and, if
any such fact or condition becomes known to FNB, FNB shall promptly (and in any
event within three days after obtaining such knowledge) communicate such fact or
condition to Black Diamond in writing.
L. Regulatory Approvals. FNB knows of no reason why the
approvals, consents and waivers of governmental authorities referred to in
Sections 5.1F and 5.2E hereof should not be obtained on a timely basis without
the imposition of any condition of the type referred to in Section 5.1F hereof.
M. Year 2000 Readiness. To the best knowledge of management of
FNB, FNB and FNB Southeast are in compliance with the FDIC's guidelines on Year
2000 readiness.
3.3. Representations and Warranties of Acquisition Sub. Acquisition Sub
represents and warrants to Black Diamond as follows:
A. Organization Standing and Power. Upon the filing of its
charter with the OTS, Acquisition Sub will be a federal savings bank in
organization under the laws of the United States.
B. Authority. The execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby and by the Plan of
Merger have been, or will be prior to the Effective Time of the Merger, duly and
validly authorized by all necessary action on the part of Acquisition Sub, and
this Agreement is, or will be prior to the Effective Time of the Merger, a valid
and binding obligation of Acquisition Sub enforceable in accordance with its
terms except as enforceability may be limited by laws affecting the enforcement
of creditors' rights generally and subject to any equitable principles limiting
the right to obtain
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specific performance. The execution and delivery of this agreement, the
consummation of the transactions contemplated hereby and by the Plan of Merger
and compliance by Acquisition Sub with any of the provisions hereof or thereof
will not (i) conflict with or result in a breach of any provision of its Charter
or Bylaws or a default (or give rise to any right of termination, cancellation,
or acceleration) under any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, license, agreement or other instrument or obligation
to which Acquisition Sub is a party, or by which it or any of its properties or
assets may be bound (except for such conflict, breach or default as to which
requisite waivers or consents either shall have been obtained by Acquisition Sub
by the Effective Time of the Merger or the obtaining of which shall have been
waiver by Black Diamond), or (ii) violate any order, writ, injunction, decree,
statute, rule or regulation applicable to Acquisition Sub or any of its property
or assets. No consent or approval by any government authority, other than
compliance with applicable federal and state securities and banking laws,
regulations of the Federal Reserve Board, the FDIC, the OTS and the North
Carolina Banking Commission, is required in connection with the execution and
delivery by Acquisition Sub of this Agreement or the consummation by Acquisition
Sub of the transactions contemplated hereby or by the Plan of Merger.
ARTICLE IV
Conduct and Transactions Prior to
Effective Time of the Merger
4.1. Access to Records and Properties. Between the date of this
Agreement and the Effective Time of the Merger, each of Black Diamond and FNB
agrees to give to the other reasonable access to all the premises and books and
records (including tax returns filed and those in preparation) of it and its
subsidiaries and to cause its officers to furnish the other with such financial
and operating data and other information with respect to its business and
properties as either Black Diamond or FNB shall from time to time request for
the purposes of conducting its due diligence review of the other, verifying the
representations and warranties set forth herein, preparing the Registration
Statement (as defined in Section 4.2 hereof) and applicable regulatory filings
(as set forth in Section 4.6 hereof), and preparing unaudited financial
statements of Black Diamond as of a date prior to the Effective Time of the
Merger in order to facilitate FNB in performance of its post-Closing Date
financial reporting requirements. Each party shall maintain the confidentiality
of all confidential information furnished to it by the other concerning its
business, operations, and financial condition, and shall not use any such
information except in furtherance of the transactions contemplated hereby or by
the Plan of Merger. If this Agreement is terminated, each party shall promptly
return to the other all documents and copies of, and all workpapers containing,
confidential information received from the other party. The obligations of
confidentiality under this Section 4.1 shall survive any such termination of
this Agreement and shall remain in effect, except to the extent that (a) FNB
shall have directly or indirectly acquired the assets and business of Black
Diamond; (b) as to any particular confidential information, such information (i)
shall become generally available to the public other than as a result of an
unauthorized disclosure by the party receiving such information or (ii) was
available to the party receiving such information on a nonconfidential basis
prior to its disclosure by the party disclosing such information; (c) disclosure
is required by subpoena or order of a court of
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competent jurisdiction or by order of a regulatory authority of competent
jurisdiction; or (d) disclosure is required by law or by the SEC or bank or
thrift regulatory authorities in connection with the transactions contemplated
by this Agreement or otherwise, provided that the party making such a
disclosure, prior to such disclosure, advised the other party of the
circumstances necessitating such disclosure and the parties have reached
mutually agreeable arrangements relating to such disclosure.
4.2. Registration Statement, Proxy Statement, Shareholder Approval.
Black Diamond and FNB will duly call and will hold a meeting of their respective
shareholders as soon as practicable for the purpose of approving the Merger and
will comply fully with the applicable rules and regulations of bank and thrift
regulatory authorities, and the respective Charter and By-laws of Black Diamond
and FNB relating to the calling and holding of meetings of shareholders for such
purpose. The Boards of Directors of Black Diamond and FNB will recommend to and
actively encourage their respective shareholders that they vote in favor of the
Merger. FNB and Black Diamond will jointly prepare the joint proxy
statement-prospectus to be used in connection with such meetings (the "Joint
Proxy Statement-Prospectus"). FNB and Black Diamond shall cause the Joint Proxy
Statement-Prospectus to be filed with the OTS and the SEC for review; and each
party hereto will cooperate with the other in good faith and will use its
respective reasonable best efforts in good faith to respond to any comments of
the OTS or the SEC thereon. FNB will prepare and file with the SEC a
Registration Statement on Form S-4 (the "Registration Statement"), of which the
Joint Proxy Statement-Prospectus shall be a part, and use its best efforts to
have the Registration Statement declared effective. In connection with the
foregoing, FNB will comply with the requirements of the 1933 Act, the 1934 Act,
the NASD and the rules and regulations of the SEC under such acts with respect
to the offering and sale of FNB Common Stock in connection with the Merger and
with all applicable state Blue Sky and securities laws. The notices of such
meetings and the Joint Proxy Statement-Prospectus shall not be mailed to Black
Diamond or FNB shareholders until the Registration Statement shall have become
effective under the 1933 Act, but shall be mailed as soon as practicable
following such effectiveness. Black Diamond covenants that none of the
information supplied by Black Diamond and FNB covenants that none of the
information supplied by FNB in the Joint Proxy Statement-Prospectus will, at the
time of the mailing of the Joint Proxy Statement-Prospectus to Black Diamond and
FNB shareholders, contain any untrue statement of a material fact nor will any
such information omit any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
in which they were made, not misleading; and at all times subsequent to the time
of the mailing of the Joint Proxy Statement-Prospectus, up to and including the
dates of the meetings of Black Diamond and FNB shareholders to which the Joint
Proxy Statement-Prospectus relates, none of such information in the Joint Proxy
Statement-Prospectus, as amended or supplemented, will contain an untrue
statement of a material fact or omit any material fact required to be stated
therein in order to make the statements therein, in light of the circumstances
in which they were made, not misleading.
4.3. Operation of the Business of Black Diamond. Black Diamond agrees
that from March 31, 1999 to the Effective Time of the Merger, it has operated,
and it will operate, its business substantially as presently operated and only
in the ordinary course and in general
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conformity with applicable laws and regulations, and, consistent with such
operation, it will use its best efforts to preserve intact its present business
organizations and its relationships with persons having business dealings with
it. Without limiting the generality of the foregoing, Black Diamond agrees that
it will not, without the prior written consent of FNB, which shall not be
unreasonably withheld, (i) make any change in the salaries, bonuses or title of
Don M. Green, Ben Sergent or Esther W. Bolling or change the fees payable to any
director; (ii) make any change in the title, salaries, or bonuses of any other
employee, other than those permitted by current employment policies in the
ordinary course of business, any of which changes shall be reported promptly to
FNB; (iii) enter into any bonus, incentive compensation, deferred compensation,
profit sharing, thrift, retirement, pension, group insurance or other benefit
plan or any employment or consulting agreement or increase benefits under
existing plans; (iv) create or otherwise become liable with respect to any
indebtedness for money borrowed (excluding deposits, Federal Home Loan Bank
advances, secured or unsecured, and similar indebtedness) or purchase money
indebtedness, or mortgage, pledge, or subject any of its assets to, or permit
any of its assets to become or remain subject to, any lien or any other
encumbrance; (v) amend its Charter or By-laws; (vi) declare any dividend or make
any distribution, or effect any split or combination in respect of its capital
stock; (vii) issue or contract to issue any shares of Black Diamond capital
stock or securities exchangeable for or convertible into capital stock,
including without limitation pursuant to stock options, except up to 91,388
shares of Black Diamond Common Stock issuable pursuant to Black Diamond Options
outstanding as of March 31, 1999; (viii) purchase any shares of Black Diamond
capital stock; (ix) enter into, renew, extend or assume any material contract or
obligation; (x) other than as provided in subsection (A) below with respect to
the work-out of nonperforming assets, waive, release, compromise or assign any
right or claim involving $50,000 or more; (xi) propose or take any other action
which would make any representation or warranty in Section 3.1 hereof untrue;
(xii) introduce any new products or services or change the rate of interest on
any deposit instrument to above-market interest rates; (xiii) make any change in
policies respecting extensions of credit or loan charge-offs; (xiv) change
reserve requirement policies; (xv) change securities portfolio policies; (xvi)
acquire a policy or enter into any new agreement, amendment or endorsement or
make any changes relating to insurance coverage, including coverage for its
directors and officers, which would result in an additional payment obligation
of $50,000 or more; (xvii) propose or take any action with respect to the
opening, by merger, acquisition or otherwise, or closing of any branches;
(xviii) amend the terms of the Black Diamond Options; (xix) amend the terms of
the written severance or employment agreements identified in Schedule M,
including without limitation the employment agreements of Don M. Green, Ben
Sergent or Esther W. Bolling; or (xx) make any change in any tax election or
accounting method or system of internal accounting controls, except as may be
appropriate to conform to any change in regulatory accounting requirements or
generally accepted accounting principles. Black Diamond further agrees that,
between the date of this Agreement and the Effective Time of the Merger, it will
consult and cooperate with FNB regarding the following activities, provided that
such activities may be conducted by Black Diamond in the ordinary course of its
business, consistent with prior practices: (A) loan portfolio management,
including management and work-out of nonperforming assets, and credit review and
approval procedures, and (B) securities portfolio and funds management,
including management of interest rate risk.
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4.4. No Solicitation. Unless and until this Agreement shall have been
terminated pursuant to its terms, neither Black Diamond nor any of its executive
officers, directors, representatives, agents or affiliates shall, directly or
indirectly, encourage, solicit or initiate discussions or negotiations (with any
person other than FNB) concerning any merger, sale of substantial assets, tender
offer, sale of shares of stock or similar transaction involving Black Diamond
(collectively, a "Significant Transaction") or disclose, directly or indirectly,
any information not customarily disclosed to the public concerning Black
Diamond, afford to any other person access to the properties, books or records
of Black Diamond or otherwise assist any person preparing to make or who has
made such an offer, or enter into any letter of intent or any agreement with any
third party providing for a Significant Transaction. Black Diamond agrees that,
as of the date hereof, it and any affiliate entities, and the respective
directors, officers, employees, agents, and representatives of the foregoing,
shall immediately cease and cause to be terminated any existing activities,
discussions, and negotiations with any person (other than FNB and its
representatives) conducted heretofore with respect to any Significant
Transaction. Black Diamond agrees to promptly advise FNB of any inquiries or
proposals received by, any such information requested from, and any requests for
negotiations or discussions sought to be initiated or continued with, Black
Diamond or any affiliate entities, or any of the respective directors, officers,
employees, agents, or representatives of the foregoing, in each case from a
person (other than FNB or its representatives) with respect to a Significant
Transaction. In addition, Black Diamond shall promptly advise FNB of the
substance and content of any such inquiry, proposal, information request,
negotiations, or discussions.
4.5. Dividends. Black Diamond agrees that subsequent to March 31, 1999,
and until the Effective Time of the Merger, it will not declare any dividends or
distributions in respect of any class of its securities.
4.6. Regulatory Filings; Best Efforts. FNB and Black Diamond shall
jointly prepare all regulatory filings required to consummate the transactions
contemplated by the Agreement and the Plan of Merger and submit the filings for
approval with the Federal Reserve Board, the OTS, the FDIC and the North
Carolina Banking Commission as soon as practicable after the date hereof.
FNB and Black Diamond shall use their best efforts to obtain approvals of such
filings.
4.7. Public Announcements. Each party will consult with the other
before issuing any press release or otherwise making any public statements with
respect to the Merger and shall not issue any press release or make any such
public statement prior to such consultations and approval of the other party,
which approval shall not be unreasonably withheld, except as may be required by
law or the policies of the NASD. FNB and Black Diamond agree that they shall
make a joint public announcement of this Agreement and the transactions
described herein after execution of this Agreement. The timing and content of
such announcement shall be approved by FNB and Black Diamond prior to such
announcement.
4.8. Operating Synergies; Conformance to Reserve Policies, Etc. Between
the date hereof and the Effective Time of the Merger, Black Diamond's management
will work with FNB to achieve appropriate operating efficiencies following the
Closing Date. At the request of FNB and upon receipt by Black Diamond of written
confirmation from FNB that there are no
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conditions to the obligations of FNB under this Agreement set forth in Article V
hereof which they believe will not be fulfilled so as to permit them to
consummate the Merger and the other transactions contemplated hereby, not more
than three days before the Effective Time of the Merger, Black Diamond shall
establish such additional accruals, reserves and charge-offs, through
appropriate entries in its accounting books and records (provided such
adjustments are in accordance with GAAP and applicable law and regulation) as
may be necessary to conform Black Diamond's accounting and credit loss reserve
practices and methods to those of FNB (as such practices and methods are to be
applied from and after the Effective Time of the Merger) and to FNB's plans with
respect to the conduct of the business of Black Diamond following the Merger, as
well as the costs and expenses relating to the consummation by Black Diamond of
the Merger and the other transactions contemplated hereby. Any such accruals,
reserves and charge-offs shall not be deemed to cause any representation and
warranty of Black Diamond to be untrue or inaccurate as of the Effective Time of
the Merger.
4.9. Agreement as to Efforts to Consummate. Subject only to the other
terms and conditions of this Agreement, each of FNB and Black Diamond agrees to
use all reasonable efforts to take, or cause to be taken, all actions, and to
do, or cause to be done, all things necessary, proper or advisable under
applicable laws and regulations to consummate and make effective, as soon as
practicable after the date of this Agreement, the transactions contemplated by
this Agreement, including, without limitation, using reasonable effort to lift
or rescind any injunction or restraining order or other order adversely
affecting the ability of the parties to consummate the transactions contemplated
herein. Each of FNB and Black Diamond shall use its best efforts to obtain
consents of all third parties and governmental bodies necessary or desirable for
the consummation of the transactions contemplated by this Agreement.
4.10. Adverse Changes in Condition. FNB and Black Diamond each agrees
to give written notice promptly to the other concerning any event or
circumstance which would cause or constitute a breach of any of the
representations, warranties or covenants of such party contained herein. Each of
FNB and Black Diamond shall use its best efforts to prevent or promptly to
remedy the same. No notification made pursuant to this Section 4.10 shall be
deemed to cure any breach of any representation or warranty made in this
Agreement or any Schedule unless FNB or Black Diamond, as the case may be,
specifically agrees thereto in writing, nor shall any such notification be
considered to constitute or give rise to a waiver by Black Diamond on the one
hand, or FNB on the other hand, of any condition set forth in this Agreement.
4.11. Nasdaq National Market Listing. FNB will use its reasonable best
efforts to file with Nasdaq a Supplemental Listing Application for the shares of
FNB Common Stock to be issued in the Merger and have such shares approved for
listing on The Nasdaq National Market prior to the Effective Time of the Merger.
4.12. Updating of Schedules. Black Diamond shall notify FNB in writing,
and FNB shall notify Black Diamond in writing, of any changes, additions or
events which may cause any Schedules delivered by it under this Agreement to
become incomplete or inaccurate, promptly after the occurrence of same and at
the Closing Date by delivery of updates, including future quarterly and annual
Black Diamond Financial Statements. No notification made pursuant to this
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Section 4.12 shall be deemed to cure any breach of any representation or
warranty made in this Agreement or any Schedule unless FNB or Black Diamond, as
the case may be, specifically agrees thereto in writing, nor shall any such
notification be considered to constitute or give rise to a waiver by Black
Diamond on the one hand, or FNB on the other hand of any condition set forth in
this Agreement.
4.13. Transactions in FNB Common Stock. Other than the issuance or
acquisition of FNB Common Stock pursuant to FNB employee benefit plans, or the
purchase or sale of FNB Common Stock by FNB in its capacity as trustee under FNB
employee benefit plans or in any other fiduciary capacity in which it is
directed to sell or purchase FNB Common Stock, none of FNB, Acquisition Sub or
Black Diamond will, nor will any such party permit any affiliate to directly or
indirectly, purchase, publicly sell or publicly acquire any shares of FNB Common
Stock during the period between the first mailing of the Joint Proxy
Statement-Prospectus and the Effective Time of the Merger.
4.14. Reorganization for Tax Purposes. FNB, Acquisition Sub and Black
Diamond each undertakes and agrees to use its reasonable best efforts to cause
the Merger to qualify as a "reorganization" within the meaning of Section 368(a)
of the Code, and that it will not intentionally take any action that would cause
the Merger to fail to so qualify.
4.15. Accounting Treatment. FNB, Acquisition Sub and Black Diamond each
undertakes and agrees to use its reasonable best efforts to cause the Merger to
qualify to be treated as a "pooling-of-interests" for accounting purposes and
that it will not intentionally take any action that would cause the Merger to
fail to so qualify.
4.16. Other Permissible Transactions. Black Diamond agrees that FNB and
its subsidiaries may offer to acquire, enter into agreements to acquire and
acquire financial institution holding companies and their subsidiaries,
financial institutions or financial services entities and their subsidiaries,
leasing companies and other entities which are permissible for financial
institutions to own, and/or the assets and liabilities of such entities prior to
the Effective Time of the Merger.
ARTICLE V
Conditions of Merger
5.1. Conditions to Obligations of FNB. The obligations of FNB to
perform this Agreement and to consummate the Merger are subject to the
satisfaction at or prior to the Effective Time of the Merger of the following
conditions unless waived by FNB.
A. Representations and Warranties; Performance of Obligations.
The representations and warranties of Black Diamond set forth in Section 3.l
hereof shall be true and correct in all material respects as of the date of this
Agreement and as of the Effective Time of the Merger as though made on and as of
the Effective Time of the Merger (or on the date when made in the case of any
representation and warranty which specifically relates to an earlier date);
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Black Diamond shall have in all material respects performed all obligations
required to be performed by it and satisfied all conditions required to be
satisfied by it under this Agreement prior to the Effective Time of the Merger;
and FNB shall have received a certificate signed by the Chief Executive Officer
and by the Chief Financial Officer of Black Diamond to such effects.
B. Authorization of Transaction. All action necessary to
authorize the execution, delivery and performance of this Agreement by Black
Diamond and the consummation of the transactions contemplated herein (including
the shareholder action referred to in Section 4.2) shall have been duly and
validly taken, and not rescinded, by the Board of Directors and the shareholders
of Black Diamond, and the Board of Directors and shareholders of FNB, and Black
Diamond shall have full power and right to execute the Plan of Merger provided
in Exhibit A.
C. Opinion of Counsel. FNB shall have received an opinion of
Williams, Mullen, Christian & Dobbins, counsel to Black Diamond, dated the
Closing Date and satisfactory in form and substance to counsel to FNB, in
substantially the form attached hereto as Exhibit B.
D. The Registration Statement. The Registration Statement
shall be effective under the 1933 Act and FNB shall have received all state
securities laws or "blue sky" permits and other authorizations or there shall be
exemptions from registration requirements necessary to offer and issue the FNB
Common Stock in connection with the Merger, and neither the Registration
Statement nor any such permit, authorization or exemption shall be subject to a
stop order or threatened stop order by the SEC or any state securities
authority.
E. Tax Opinion. FNB shall have received, in form and substance
satisfactory to it, an opinion of Smith, Anderson, Blount, Dorsett, Mitchell &
Jernigan, L.L.P. to the effect that, for federal income tax purposes, the Merger
will qualify as a "reorganization" under Section 368(a) of the Code.
F. Regulatory Approvals. All required approvals from federal
and state regulatory authorities having jurisdiction to permit FNB to consummate
the Merger and to issue FNB Common Stock to Black Diamond shareholders shall
have been received and shall have contained no conditions deemed in good faith
to be materially disadvantageous by FNB.
G. Affiliate Agreements. Within 60 days of the date hereof,
each shareholder of Black Diamond who is a Black Diamond Affiliate shall have
executed and delivered a commitment and undertaking in the form of Exhibit C
(the "Affiliates' Agreement") relating to restrictions on shares of FNB Common
Stock to be received by such Black Diamond Affiliate pursuant to this Agreement.
Certificates for the shares of FNB Common Stock issued to Black Diamond
Affiliates shall bear a restrictive legend (substantially in the form as shall
be set forth in the Affiliates' Agreement) with respect to the restrictions
applicable to such shares.
H. Nasdaq National Market Listing. If the shares of FNB Common
Stock to be issued in the Merger are not repurchased on the open market, such
shares to be issued in the
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Merger shall have been approved for listing, upon notice of issuance, on The
Nasdaq National Market.
I. Acceptance by FNB Counsel. The form and substance of all
legal matters contemplated hereby and of all papers delivered hereunder shall be
reasonably acceptable to Smith, Anderson, Blount, Dorsett, Mitchell & Jernigan,
L.L.P., counsel for FNB.
J. Exercise of Dissenters' Rights. The aggregate number of
shares of Black Diamond Common Stock as to which cash is required to be paid as
the result of the exercise of any dissenters' rights pursuant to 12 C.F.R. ss.
552.14, when coupled with any other shares of Black Diamond Common Stock deemed
tainted for "pooling-of-interest" purposes, shall not exceed 10% of the total
number of shares of Black Diamond Common Stock outstanding at the date of this
Agreement or at the Effective Time of the Merger.
K. Employment and Non-Compete Agreements. Don M. Green, Ben
Sergent and Esther W. Bolling shall each have entered into employment and
non-compete agreements with Black Diamond substantially in the form of Exhibits
D, E and F, respectively, and such employment and non-compete agreements shall
have replaced and superseded any prior employment agreements between such
individuals and Black Diamond. Each of such employment and non-compete
agreements shall be in full force effect and there shall not exist any breach
thereunder.
L. Accounting Treatment. (i) FNB shall have received
assurances from PricewaterhouseCoopers LLP, in form and substance satisfactory
to FNB, to the effect that the Merger will qualify to be treated as a
"pooling-of-interests" for accounting purposes; (ii) if requested by FNB, Black
Diamond's independent public accountants shall have delivered to FNB a letter in
form and content satisfactory to FNB to the effect that such accountants are not
aware of any fact or circumstance that might cause the Merger not to qualify for
such treatment; and (iii) it shall not have come to the attention of management
of FNB that any event has occurred or that any condition or circumstance exists
that makes it likely that the Merger may not so qualify.
M. Black Diamond Board of Directors. FNB shall have received
the written resignation, satisfactory in form and substance to FNB, from each
director of Black Diamond, other than Don M. Green and Jack Kennedy, effective
as of the Effective Time of the Merger, and Ernest J. Sewell, Robert F.
Albright, R. Michael Hendricks, Richard L. Powell, Michael W. Shelton and Ben
Sergent shall have been elected to the board of directors of Black Diamond as of
the Effective Time of the Merger.
N. Fairness Opinion. FNB shall have received a written opinion
in form and substance satisfactory to FNB from Equity Research Services, Inc.,
addressed to FNB and dated as of the date of the Joint Proxy
Statement-Prospectus which is mailed to shareholders of FNB, to the effect that
the terms of the Merger, including the Exchange Ratio, are fair, from a
financial point of view, to FNB and its shareholders.
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5.2. Conditions of Obligations of Black Diamond. The obligations of
Black Diamond to perform this Agreement and consummate the Merger are subject to
the satisfaction at or prior to the Effective Time of the Merger of the
following conditions unless waived by Black Diamond:
A. Representations and Warranties; Performance of Obligations.
The representations and warranties of FNB set forth in Section 3.2 hereof shall
be true and correct in all material respects as of the date of this Agreement
and as of the Effective Time of the Merger as though made on and as of the
Effective Time of the Merger (or on the date when made in the case of any
representation and warranty which specifically relates to an earlier date); FNB
shall have in all material respects performed all obligations required to be
performed by it and satisfied all conditions required to be satisfied by it
under this Agreement prior to the Effective Time of the Merger; and Black
Diamond shall have received a certificate signed by the Chief Executive Officer
and by the Chief Financial Officer of FNB, which may be to their best knowledge
after due inquiry, to such effects.
B. Authorization of Transaction. All action necessary to
authorize the execution, delivery and performance of this Agreement by FNB and
the consummation of the transactions contemplated hereby shall have been duly
and validly taken by the Board of Directors of FNB, the shareholders of FNB, and
the Board of Directors and shareholders of Black Diamond, and Acquisition Sub
shall have full power and right to merge with Black Diamond on the terms
provided herein.
C. Opinion of Counsel. Black Diamond shall have received an
opinion of Smith, Anderson, Blount, Dorsett, Mitchell & Jernigan, L.L.P.,
counsel to FNB, dated the Closing Date and satisfactory in form and substance to
counsel to Black Diamond, in the form attached hereto as Exhibit G.
D. The Registration Statement. The Registration Statement
shall be effective under the 1933 Act and FNB shall have received all state
securities laws or "blue sky" permits and other authorizations or there shall be
exemptions from registration requirements necessary to offer and issue the FNB
Common Stock in connection with the Merger, and neither the Registration
Statement nor any such permit, authorization or exemption shall be subject to a
stop order or threatened stop order by the SEC or any state securities
authority.
E. Regulatory Approvals. All required approvals from federal
and state regulatory authorities having jurisdiction to permit Black Diamond to
consummate the transactions contemplated hereby and to permit FNB to issue FNB
Common Stock to Black Diamond shareholders shall have been received.
F. Acceptance by Black Diamond's Counsel. The form and
substance of all legal matters contemplated hereby and of all papers delivered
hereunder shall be reasonably acceptable to counsel for Black Diamond.
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G. Nasdaq National Market Listing. If the shares of FNB Common
Stock to be issued in the Merger are not repurchased on the open market, such
shares to be issued in the Merger shall have been approved for listing, upon
notice of issuance, on The Nasdaq National Market.
H. Fairness Opinion. Black Diamond shall have received a
written opinion in form and substance satisfactory to Black Diamond from Austin
Financial Services, Incorporated, addressed to Black Diamond and dated as of the
date of the Joint Proxy Statement-Prospectus which is mailed to shareholders of
Black Diamond, to the effect that the terms of the Merger, including the
Exchange Ratio, are fair, from a financial point of view, to Black Diamond and
its shareholders.
I. Employment and Non-Compete Agreements. Don M. Green, Ben
Sergent and Esther W. Bolling shall each have executed on the date hereof
employment and non-compete agreements with Black Diamond substantially in the
form of Exhibits D, E and F, respectively.
ARTICLE VI
Closing Date; Effective Time
6.1. Closing Date. Unless another date or place is agreed to in writing
by the parties, the closing of the transactions contemplated in this Agreement
shall take place at the offices of Smith, Anderson, Blount, Dorsett, Mitchell &
Jernigan, Raleigh, North Carolina, at 10:00 A.M., local time, on such date as
FNB shall designate to Black Diamond at least 10 days prior to the designated
Closing Date and as reasonably acceptable to Black Diamond; provided, that the
date so designated shall not be earlier than 5 days after OTS approval, and
shall not be later than 60 days after such approval and, in no event, shall be
later than March 31, 2000 (the "Closing Date").
6.2. Filings at Closing. Subject to the provisions of Article V hereof,
at the Closing Date, FNB and Acquisition Sub shall cause Articles of Combination
relating to the Plan of Merger to be filed in accordance with the rules and
regulations of the OTS, and each of FNB, Acquisition Sub and Black Diamond shall
take any and all lawful actions to cause the Merger to become effective.
6.3. Effective Time. Subject to the terms and conditions set forth
herein, including receipt of all required regulatory approvals, the Merger shall
become effective at the time Articles of Combination filed with the OTS are made
effective (the "Effective Time of the Merger").
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ARTICLE VII
Termination; Waiver and Amendment
7.1. Termination. This Agreement shall be terminated, and the Merger
abandoned, if the shareholders of either Black Diamond or FNB shall not have
approved the Merger at the meetings required by Section 4.2. Notwithstanding
such approvals by such shareholders, this Agreement may be terminated at any
time prior to the Effective Time of the Merger, by:
A. The mutual consent of FNB and Black Diamond, as expressed
by their respective Boards of Directors;
B. FNB or Black Diamond, as expressed by their respective
Boards of Directors, if the Merger has not occurred by March 31, 2000, provided
that the failure of the Merger to so occur shall not be due to a willful breach
of any representation, warranty, covenant or agreement by the party seeking to
terminate this Agreement;
C. FNB in writing authorized by its Board of Directors if
Black Diamond has, or by Black Diamond in writing authorized by its Board of
Directors, if FNB has, in any material respect, breached (i) any covenant or
agreement contained herein, or (ii) any representation or warranty contained
herein, in any case if such breach has not been cured by the earlier of 30 days
after the date on which written notice of such breach is given to the party
committing such breach or the Closing Date; provided that it is understood and
agreed that either party may terminate this Agreement on the basis of any such
material breach of any representation or warranty by the other party which is
not cured within 30 days of written notice thereof contained herein
notwithstanding any qualification therein relating to the knowledge of the other
party;
D. FNB in writing authorized by its Board of Directors if any
Purchase Event described in Section 3(b)(i), Section 3(b)(iii) or Section
3(b)(iv) of the Stock Option Agreement shall have occurred or if a Purchase
Event described in Section 3(b)(ii) of the Stock Option Agreement shall have
occurred and the Board of Directors of Black Diamond does not, within three (3)
days after such Purchase Event described in Section 3(b)(ii), confirm in writing
to FNB and publicly that a majority of the Board of Directors of Black Diamond
supports the Merger and will recommend to the shareholders of Black Diamond that
they approve the Merger;
E. FNB or Black Diamond, as expressed by their respective
Boards of Directors, in the event that any of the conditions precedent to the
obligations of such parties to consummate the Merger have not been satisfied or
fulfilled or waived by the party entitled to so waive on or before the Closing
Date, provided that no party shall be entitled to terminate this Agreement
pursuant to this subparagraph D if the condition precedent or conditions
precedent which provide the basis for termination can reasonably be and are
satisfied within a reasonable period of time, in which case, the Closing Date
shall be appropriately postponed;
F. FNB, if the Board of Directors of FNB shall have determined
in its sole discretion, exercised in good faith, that the Merger, has become
inadvisable or impracticable by reason of (1) the issuance of any order, decree
or ruling of any regulatory authority containing
30
<PAGE> 33
conditions or requirements reasonably deemed objectionable to FNB or (2) the
institution of any litigation or proceeding (including under federal antitrust
laws) to restrain or prohibit the consummation of the Merger or to obtain other
relief in connection with this Agreement;
G. Black Diamond, if the Board of Directors of Black Diamond
shall have determined in its sole discretion, exercised in good faith, that the
Merger, has become inadvisable or impracticable by reason of (1) the issuance of
any order, decree or ruling of any regulatory authority containing conditions or
requirements reasonably deemed objectionable to Black Diamond or (2) the
institution of any litigation or proceeding (including under federal antitrust
laws) to restrain or prohibit the consummation of the Merger or to obtain other
relief in connection with this Agreement;
H. FNB or Black Diamond, if the Federal Reserve Board, the
OTS, the North Carolina Banking Commission, or the VSCC deny approval of the
transactions contemplated hereby and the time period for all appeals or requests
for reconsideration has run; or
I. FNB if, prior to the Effective Time of the Merger, the
Board of Directors of Black Diamond shall have withdrawn or modified in a manner
adverse to FNB its approval or recommendation of the Merger, or shall have
recommended another offer or shall have resolved to do any of the foregoing.
7.2. Effect of Termination. In the event of the termination and
abandonment of this Agreement and the Merger pursuant to Section 7.1, including
as a result of breach or violation of the provisions hereof, this Agreement,
other than the provisions of Sections 4.1 (last three sentences), 7.4 and 9.2,
shall become void and have no effect, without any liability on the part of any
party or its directors, officers or shareholders, provided that nothing
contained in this Section 7.2 shall relieve any party from liability for any
willful breach of this Agreement.
7.3. Waiver and Amendment. Any term or provision of this Agreement may
be waived in writing at any time by the party which is, or whose shareholders
are, entitled to the benefits thereof and this Agreement may be amended or
supplemented by written instructions duly executed by all parties hereto at any
time, whether before or after the meetings of Black Diamond or FNB shareholders
referred to in Section 4.2 hereof, excepting statutory requirements and
requisite approvals of shareholders and regulatory authorities, provided that
any such amendment or waiver executed after shareholders of Black Diamond or FNB
have approved this Agreement and the Plan of Merger shall not modify either the
amount or form of the consideration to be given hereunder for shares of Black
Diamond Common Stock or otherwise materially adversely affect such shareholders
without their approval.
7.4 Termination Expenses and Fees.
A. In the event FNB terminates this Agreement pursuant to
Section 7.1C or 7.1I, Black Diamond shall pay FNB's expenses incurred in
connection with the proposed Merger, including without limitation reasonable
attorney fees, in an amount not to exceed
31
<PAGE> 34
$300,000, such payment to be made by wire transfer of immediately available
funds to an account designated by FNB.
B. In the event Black Diamond terminates this Agreement
pursuant to Section 7.1C, FNB shall pay Black Diamond's expenses incurred in
connection with this Agreement, including without limitation reasonable attorney
fees, in an amount not to exceed $200,000, such payment to be made by wire
transfer of immediately available funds to an account designated by Black
Diamond.
C. Notwithstanding any other provisions of this Agreement, and
in addition to the provisions of Paragraph 7.4A if applicable, if FNB terminates
this Agreement because prior to the termination of this Agreement, a Purchase
Event (as defined in the Stock Option Agreement) has occurred, or after the date
of this Agreement and prior to termination of this Agreement Black Diamond or
any Black Diamond subsidiary engages in negotiations (including without
limitation negotiations occurring after the date of this Agreement which arise
from or are a continuation of negotiations that may have been commenced prior to
the date of this Agreement) relating to any such transaction and a letter of
intent or other written or verbal agreement is entered into within one year
following the termination of this Agreement, then Black Diamond shall be
obligated to pay to FNB a termination fee of $200,000, such payment to be made
by wire transfer of immediately available funds to an account designated by FNB.
ARTICLE VIII
Additional Covenants
8.1. Indemnification of Black Diamond Officers and Directors; Liability
Insurance. After the Effective Time of the Merger, FNB agrees to provide
indemnification to the directors and officers of Black Diamond and the
subsidiaries thereof for events occurring prior to or subsequent to the
Effective Time of the Merger as if they had been directors or officers of FNB
prior to the Effective Time of the Merger, to the extent permitted under the
North Carolina Business Corporation Act and the Articles of Incorporation and
Bylaws of FNB as in effect as of the date of this Agreement. Such
indemnification shall continue for three years after the Effective Time of the
Merger, provided that any right to indemnification in respect of any claim
asserted or made within such three year period shall continue until final
disposition of such claim. FNB will use its reasonable efforts to provide
officers and directors liability insurance coverage to all Black Diamond
directors and officers, whether or not they become part of the FNB organization
after the Effective Time of the Merger, to the same extent it is provided to
FNB's officers and directors, provided that coverage will not extend to acts as
to which notice has been given prior to the Effective Time of the Merger. The
right to indemnification and insurance provided in this Section 8.1 is intended
to be for the benefit of directors, employees and officers of Black Diamond and
as such may be personally enforced by them at law or in equity.
32
<PAGE> 35
8.2. Employee Benefit Matters.
A. Plan Participation. All employees of Black Diamond
immediately prior to the Effective Time of the Merger who are employed by Black
Diamond immediately following the Effective Time of the Merger will be entitled
to participate in FNB's 401(k) plan and to the extent they are eligible based on
their length of service, compensation, job classification, and position, and the
existing Black Diamond 401(k) plan shall be terminated prior to the Effective
Time of the Merger. Except as specifically provided in this Section 8.2 and as
otherwise prohibited by law, an employee's service with Black Diamond which is
recognized by the applicable benefit plan of Black Diamond at the Effective Time
of the Merger shall be recognized as service with FNB for purposes of
eligibility to participate and vesting if applicable, (but not for purposes of
benefit accrual) under the corresponding FNB benefit plan, if any, subject to
applicable break-in-service rules.
B. Cooperation. Black Diamond agrees to cooperate with FNB in
implementing any decision made by FNB under this Section 8.2 with respect to
employee benefit plans and to provide to FNB on or before the Effective Time of
the Merger a schedule of service credit for its employees.
8.3 Board of Directors. Subject to any necessary regulatory and
shareholder approval, as soon as practicable following the Effective Time of the
Merger (or earlier, in FNB's sole discretion), FNB shall take such steps as
necessary of appropriate to appoint Don M. Green and Gary G. Blosser, or cause
them to be elected, as members of FNB's Board of Directors, and, for such
service, Mr. Green and Mr. Blosser shall be compensated in accordance with FNB's
standard arrangements for the compensation of directors.
8.4. Actions of Acquisition Sub. Subject to the terms and conditions of
this Agreement, FNB agrees to cause Acquisition Sub to take all actions
reasonably necessary to consummate the Merger.
ARTICLE IX
Miscellaneous
9.1. Nonsurvival of Representations and Warranties. None of the
representations and warranties in this Agreement or in any instrument delivered
pursuant to this Agreement shall survive the Effective Time of the Merger and
all such representations and warranties will be extinguished on consummation of
the Merger and neither Black Diamond, FNB, Acquisition Sub, nor any officer,
director or employee or stockholder of any of them shall be under any liability
whatsoever with respect to any such representation or warranty after such time.
This Section 9.1 shall not limit any covenant or agreement of the parties which
by its terms contemplates performance after the Effective Time of the Merger,
including without limitation the covenants set forth in Article II and Article
VIII of this Agreement.
33
<PAGE> 36
9.2. Expenses. Except as set forth in Section 7.4, each party hereto
shall bear and pay the costs and expenses incurred by it relating to the
transactions contemplated hereby. All costs incurred in connection with the
printing and mailing of the Joint Proxy Statement-Prospectus shall be deemed to
be incurred and shall be paid sixty-nine percent (69%) by FNB and thirty-one
percent (31%) by Black Diamond.
9.3. Entire Agreement. This Agreement contains the entire agreement
among FNB, Acquisition Sub and Black Diamond with respect to the transactions
contemplated hereby and the related transactions and supersedes all prior
agreements, arrangements or understandings with respect thereto.
9.4. Descriptive Headings. Descriptive headings are for convenience
only and shall not control or affect the meaning or construction of any
provisions of this Agreement.
9.5. Notices. All notices or other communications which are required or
permitted hereunder shall be in writing and sufficient if delivered personally
or sent by registered or certified mail, postage prepaid, addressed as follows:
If to FNB or Acquisition Sub:
Ernest J. Sewell
President and Chief Executive Officer
FNB Financial Services Corporation
2025 S. Main Street
Reidsville, North Carolina 27320
Copy to:
Gerald F. Roach, Esq.
Smith, Anderson, Blount, Dorsett, Mitchell & Jernigan, L.L.P.
2500 First Union Capitol Center
Raleigh, North Carolina 27601
If to Black Diamond Savings Bank, FSB:
Don M. Green
President and Chief Executive Officer
Black Diamond Savings Bank, FSB
600 Trent Street
Norton, Virginia 24273
34
<PAGE> 37
Copy to:
Howard W. Dobbins, Esq.
Williams, Mullen, Christian & Dobbins
Two James Center
1021 East Cary Street
Richmond, Virginia 23210-1320
9.6. Counterparts. This Agreement may be executed in any number of
counterparts, and each such counterpart hereof shall be deemed to be an original
instrument, but all such counterparts together shall constitute but one
agreement.
9.7. Governing Law. Except as may otherwise be required by the laws of
the United States, this Agreement shall be governed by and construed in
accordance with the laws of North Carolina.
9.8. Severability. The invalidity or unenforceability of any term,
phrase, clause, paragraph, restriction, covenant, agreement, or other provision
hereof shall in no way affect the validity or enforceability of any other
provision or part hereof.
9.9 Assignment. This Agreement may not be assigned by any party hereto
except with the prior written consent of the other parties hereto.
9.10 Inspections. Any right of FNB or Black Diamond hereunder to
investigate or inspect the assets, books, records, files, and other information
of FNB or Black Diamond, or their respective subsidiaries, in no way shall
establish any presumption that FNB or Black Diamond should have conducted any
investigation or that such right has been exercised by FNB or Black Diamond or
their respective agents, representatives, or others. Any investigations or
inspections that have been made by FNB or Black Diamond or their respective
agents, representatives, or others prior to the Closing Date shall not be deemed
in any way in derogation or limitation of the covenants, representations, and
warranties made by or on behalf of FNB or Black Diamond in this Agreement.
[remainder of page intentionally left blank; signatures begin on next page]
35
<PAGE> 38
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed on its behalf and its corporate seal (if any) to be
hereunto affixed and attested by its officers thereunto duly authorized, all as
of the day and year first above written.
FNB FINANCIAL SERVICES CORPORATION
By: /s/ Ernest J. Sewell
--------------------------------------
Name: Ernest J. Sewell
Title: President & Chief Executive Officer
FNB ACQUISITION SUB, F.S.B.
(In Organization)
By: /s/ Ernest J. Sewell
--------------------------------------
Name: Ernest J. Sewell
Title: Proposed President & Chief Executive Officer
BLACK DIAMOND SAVINGS BANK, F.S.B.
By: /s/ Don M. Green
--------------------------------------
Name: Don M. Green
Title: President and Chief Executive Officer
[signatures continued on next page]
36
<PAGE> 39
/s/ Harold E. Armsey
---------------------------------------
/s/ Ben F. Sergent, III
---------------------------------------
/s/ Jack Kennedy
---------------------------------------
/s/ Louis Hunter
---------------------------------------
/s/ Jerry W. Wharton
---------------------------------------
/s/ Don M. Green
---------------------------------------
/s/ Gary G. Blosser
---------------------------------------
/s/ Orden L. Harman
---------------------------------------
/s/ Gerald E. Myers
---------------------------------------
All of the Directors of Black Diamond have signed above to agree to vote all
their shares of Black Diamond Common Stock beneficially owned by them and with
respect to which they have power to vote (other than shares held by them in a
fiduciary capacity) in favor of the Merger and the transactions contemplated by
this Agreement and to cause the Merger and the Plan of Merger to be recommended
by the Board of Directors of Black Diamond to the shareholders of Black Diamond
in the proxy statement sent to shareholders in connection with such
shareholders' meeting.
37
<PAGE> 40
EXHIBIT A
PLAN OF MERGER
OF
FNB ACQUISITION SUB, F.S.B.
INTO
BLACK DIAMOND SAVINGS BANK, F.S.B.
Section 1. FNB Acquisition Sub, F.S.B. ("Acquisition Sub") shall, upon
the issuance of a certificate of merger by the Office of Thrift Supervision (the
"Effective Time of the Merger"), be merged (the "Merger") into Black Diamond
Savings Bank, F.S.B. ("Black Diamond"), which shall be the surviving bank (the
"Surviving Bank").
Section 2. Conversion of Stock. At the Effective Time of the Merger:
(i) Each share of Black Diamond Common Stock outstanding immediately
prior to the Effective Time of the Merger shall be converted into 1.3333 (the
"Exchange Ratio") shares of Common Stock of FNB Financial Services Corporation
("FNB"), rounded to the nearest whole share.
(ii) At the Effective Time of the Merger, each option or other right to
purchase shares of Black Diamond Common Stock pursuant to stock options ("Black
Diamond Options") granted by Black Diamond under its 1989 Incentive Stock Option
Plan (as amended, referred to herein as the "Black Diamond Stock Plan"), which
are outstanding at the Effective Time of the Merger, whether or not exercisable,
shall be converted into and become rights with respect to FNB Common Stock, and
FNB shall assume each Black Diamond Option, in accordance with the terms of the
Black Diamond Stock Plan and stock option agreement by which it is evidenced,
except that from and after the Effective Time (A) FNB and its Compensation
Committee shall be substituted for Black Diamond and the Committee of Black
Diamond's Board of Directors (including, if applicable, the entire Board of
Directors of Black Diamond) administering the Black Diamond Stock Plan, (B) each
Black Diamond Option assumed by FNB may be exercised solely for shares of FNB
Common Stock, (C) the number of shares of FNB Common Stock subject to such Black
Diamond Option shall be equal to the number of shares of Black Diamond Stock
subject to such Black Diamond Option immediately prior to the Effective Time of
the Merger multiplied by the Exchange Ratio and rounding to the nearest whole
share, and (D) the per share exercise price under each such Black Diamond Option
shall be adjusted by dividing the
<PAGE> 41
per share exercise price under each such Black Diamond Option by the Exchange
Ratio and rounding to the nearest cent.
(iii) Each share of Acquisition Sub Common Stock outstanding
immediately prior to the Effective Time of the Merger shall be converted into
one share of Black Diamond Common Stock (after giving effect to the conversion
contemplated above).
Section 3. Articles of Incorporation, Bylaws and Directors of the
Surviving Bank. At the Effective Time of the Merger, there shall be no change
caused by the Merger in the Charter (except any change caused by the filing of
Articles of Combination relating to the Merger), Bylaws, or Board of Directors
of the Surviving Bank.
Section 4. Conditions to Bank Merger. Consummation of the Merger is
subject to the following conditions:
(i) The approving vote of the holders of two-thirds of the outstanding
shares of Black Diamond Common Stock entitled to vote.
(ii) The approving vote of the holders of a majority of the outstanding
shares of FNB Common Stock present, in person or by proxy, at the meeting of
FNB's shareholders.
(iii) The approval of the Merger, to the extent required, by the North
Carolina Banking Commission, the Board of Governors of the Federal Reserve
System and the Office of Thrift Supervision.
(iv) The satisfaction of the conditions contained in the Agreement and
Plan of Reorganization and Merger, dated May 28, 1999, by and among FNB,
Acquisition Sub and Black Diamond, or the waiver of such conditions by the party
for whose benefit they were imposed.
Section 5. Manner of Exchange.
(i) After the Effective Time of the Merger, each holder of a
certificate for theretofore outstanding shares of Black Diamond Common Stock,
upon surrender of such certificate to the agent appointed by FNB to administer
the exchange of certificates (the "Exchange Agent"), accompanied by a letter of
transmittal in the form furnished by FNB and the Exchange Agent (the "Letter of
Transmittal"), shall be entitled to receive in exchange therefor the number of
full shares of FNB Common Stock into which shares of Black Diamond Common Stock
shall be converted pursuant to Section 2 hereof. Until so surrendered, each
outstanding certificate which, prior to the Effective Time of the Merger,
represented Black Diamond Common Stock will be deemed to evidence the right to
receive the number of full shares of FNB Common Stock into which the shares of
Black Diamond Common Stock represented thereby may be converted in accordance
with Section 2 hereof, and, after the Effective Time of the Merger, will be
deemed for all corporate purposes of FNB to evidence ownership of the number of
full shares of FNB
2
<PAGE> 42
Common Stock into which the shares of Black Diamond Common Stock represented
thereby were converted.
(ii) Until outstanding certificates formerly representing Black Diamond
Common Stock are surrendered in exchange for FNB Common Stock, no dividend
payable to holders of record of FNB Common Stock for any period as of any date
subsequent to the Effective Time of the Merger shall be paid to the holder of
such outstanding certificates in respect thereof. After the Effective Time of
the Merger, there shall be no further registry of transfer on the records of
Black Diamond of shares of Black Diamond Common Stock. If a certificate
representing such shares is presented to Black Diamond or FNB, it shall be
canceled and exchanged for a certificate representing shares of FNB Common Stock
as herein provided. Upon surrender of certificates of Black Diamond Common Stock
in exchange for FNB Common Stock, there shall be paid to the recordholder of the
certificates of FNB Common Stock issued in exchange therefor (i) the amount of
dividends theretofore paid for such full shares of FNB Common Stock as of any
date subsequent to the Effective Time of the Merger which have not yet been paid
to a public official pursuant to abandoned property laws and (ii) at the
appropriate payment date, the amount of dividends with a record date prior to
surrender and a payment date subsequent to surrender. No interest shall be
payable on such dividends upon surrender of outstanding certificates.
(iii) At the Effective Time of the Merger, each outstanding Black
Diamond Option shall be assumed in the manner provided in Section 2(ii) hereof .
Section 6. Effect of the Merger. The Merger, upon the Effective Time of
the Merger, shall have the effect provided by 12 C.F.R. 552.13.
3
<PAGE> 1
EXHIBIT 99.01
Press Release
FNB Financial Services Corporation
P.O. Box 2037 Reidsville, NC 27323-2037
FOR IMMEDIATE RELEASE
CONTACT: ERNEST J. SEWELL, PRESIDENT/CEO
PHONE: 336-342-3346
FAX: 336-634-4771
DATE: MAY 28, 1999
FNB FINANCIAL SERVICES CORPORATION ANNOUNCES AGREEMENT TO
MERGE WITH BLACK DIAMOND SAVINGS BANK, F.S.B.--BLACK DIAMOND TO
BECOME FNB'S FIRST VIRGINIA BANK
Reidsville, NC --- FNB Financial Services Corporation (NASDAQ/NMS: FNBF) today
announced the signing of a definitive merger agreement with Black Diamond
Savings Bank, F.S.B., a savings bank headquartered in Norton, Virginia, under
which FNB will acquire Black Diamond by exchanging FNB stock valued at
approximately $17.95 million.
As of March 31, 1999, the combined companies had total assets of approximately
$544 million and shareholders' equity of $52 million. Combined net income for
the first quarter of this year was $1.159 million, which represented a 10.0%
increase over the same quarter in 1998. FNB will add four offices in Virginia to
the currently existing ten offices located in North Carolina.
Commenting on the proposed acquisition, Ernest J. Sewell, President and Chief
Executive Officer of FNB said, "We are extremely pleased to add Black Diamond to
our existing franchise with this initial move outside the state of North
Carolina. Black Diamond has posted a consistent record of achievement over the
last several years, and we are confident that synergies exist between the two
organizations which will enable us to build upon their past accomplishments.
This well-managed, well-positioned organization will serve as a flagship for
possible further expansion into Virginia."
The merger agreement, unanimously approved by the boards of directors of both
companies, calls for the merger to be accounted for as a pooling-of-interests
and structured as a tax-free exchange. The proposed merger is valued at
approximately $21.50 per Black Diamond share, based on yesterday's closing price
of $16.125 per FNB share. Black Diamond shareholders will receive 1.3333 shares
of FNB common stock for each share of Black Diamond. In connection with the
merger agreement, FNB and Black Diamond also entered into a stock option
agreement, customary for transactions of this nature, which FNB may exercise
under certain circumstances to purchase up to 19.9 percent of Black Diamond
shares at approximately $17.25 per share.
Terms of the agreement call for Black Diamond to be operated as a wholly-owned
subsidiary of FNB. After the merger, Don M. Green, President and Chief Executive
Officer of Black Diamond, and Gary G. Blosser, a current director of Black
Diamond, will be added to FNB's Board of Directors. Completion of the merger,
which is subject to approval by the shareholders of both
<PAGE> 2
FNB and Black Diamond, regulatory approvals and customary conditions, is
expected during the third quarter of 1999.
FNB is a North Carolina bank holding company with consolidated assets of
approximately $413 million at March 31, 1999. FNB, through its subsidiary, FNB
Southeast, currently operates ten banking offices concentrated in the
Piedmont/Triad region of the state and in Wilmington. The Bank is community
oriented, characterized by local affiliations and personalized services, while
at the same time providing its customers with the financial sophistication and
breadth of products usually associated with much larger regional banks.
Black Diamond is a federally-chartered savings bank with total assets of
approximately $131 million, and shareholders' equity of approximately $9.3
million, at March 31, 1999. Black Diamond's net income for the quarter ended
March 31, 1999, was approximately $300,000. Black Diamond currently operates
four branches in Virginia, including three branches in the Norton area and one
in Harrisonburg. Since its opening in 1973, Black Diamond has established a
tradition of high quality customer service and convenience. This tradition will
be continued and expanded through Black Diamond's extensive ATM network, debit
card products and internet banking services.
Information in this press release contains "forward-looking statements." These
statements involve risks and uncertainties that could cause actual results to
differ materially, including without limitation, whether or not the proposed
acquisition actually occurs, the ability of the combined businesses to be
integrated with FNB's current operations, actual operating performance and the
actual costs of combining the businesses. Additional factors that could cause
actual results to differ materially are discussed in FNB's recent filings with
the Securities and Exchange Commission, including but not limited to its Annual
Report on Form 10-K and its other periodic reports, including its Form 10-Qs.
<PAGE> 1
EXHIBIT 99.02
Stock Option Agreement
<PAGE> 2
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT ("Option Agreement"), dated as of May 28, 1999,
by and between FNB Financial Services Corporation, a North Carolina corporation
("FNB"), and Black Diamond Savings Bank, FSB, a federal savings bank ("Black
Diamond").
BACKGROUND
A. The Boards of Directors of FNB and Black Diamond have approved an
Agreement and Plan of Reorganization and Merger dated of even date herewith (the
"Merger Agreement") providing for certain transactions whereby Black Diamond
would become a wholly-owned subsidiary of FNB, and Black Diamond shareholders
would become shareholders of FNB.
B. To induce FNB to enter into the Merger Agreement, Black Diamond has
agreed to grant to FNB an option to purchase 166,179 shares of the common stock
of Black Diamond.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements set forth herein, and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereto agree as follows:
1. Definitions.
(a) "Subsidiary" means, with respect to any person (the
"Owner"), any corporation or other person of which securities or other interests
having the power to elect a majority of that corporation's or other person's
board of directors or similar governing body, or otherwise having the power to
direct the business and policies of that corporation or other person (other than
securities or other interests having such power only in the event of a
contingency that has not occurred) are held by the Owner or one or more of its
Subsidiaries.
(b) Capitalized terms defined in the Merger Agreement and used
in this Option Agreement shall have the same meanings as in the Merger
Agreement.
2. Grant of Option.
(a) Subject to the terms and conditions set forth in this
Option Agreement, Black Diamond hereby grants to FNB an option ("Option") to
purchase up to 166,179 shares (the "Shares") of Black Diamond Common Stock, at a
price of $17.25 share (the "Purchase Price") payable in cash as provided in
Section 4 hereof.
(b) In the event of any change in Black Diamond Common Stock
by reason of a stock dividend, split-up, recapitalization, combination, exchange
of shares or similar transaction, the type and number of shares or securities
subject to the Option, and the Purchase
<PAGE> 3
Price therefor, shall be adjusted appropriately, and proper provision shall be
made in the agreements governing such transaction, so that FNB shall receive
upon exercise of the Option the number and class of shares or other securities
or property that FNB would have received in respect of Black Diamond Common
Stock if the Option had been exercised immediately prior to such event or the
record date therefor, as applicable. If any additional shares of Black Diamond
Common Stock are issued after the date of this Agreement, the number of shares
of Black Diamond Common Stock subject to the Option shall be adjusted so that,
after such issuance, it equals 19.9% of the number of shares of Black Diamond
Common Stock then issued and outstanding, without giving effect to any shares
subject to or issued pursuant to the Option.
(c) In the event that, prior to the termination of the Option
in accordance with Section 3(a) hereof, Black Diamond shall enter into an
agreement (i) to consolidate with or merge into any person, other than FNB or
one of its subsidiaries, and shall not be the continuing or surviving
corporation of such consolidation or merger, (ii) to permit any person, other
than FNB or one of its subsidiaries, to merge into Black Diamond and Black
Diamond shall be the continuing or surviving corporation, but, in connection
with such merger, the shares of Black Diamond Common Stock outstanding
immediately prior to the consummation of such merger shall be changed into or
exchanged for stock or other securities of Black Diamond or any other person or
cash or any other property, or the shares of Black Diamond Common Stock
outstanding immediately prior to the consummation of such merger shall after
such merger represent less than 50% of the outstanding voting securities of the
merged company, or (iii) to sell or otherwise transfer all or substantially all
of its assets to any person, other than FNB or one of its subsidiaries, then,
and in each such case, the agreement governing such transaction shall make
proper provisions so that the Option shall, upon the consummation of any such
transaction and upon the terms and conditions set forth herein, be converted
into, or exchanged for, an option (the "Substitute Option"), at the election of
FNB, of either (I) the Acquiring Corporation (as defined below) or (II) any
person that controls the Acquiring Corporation (any such person specified in
clause (I) or (II) being referred to as "Substitute Option Issuer").
(d) The Substitute Option shall have the same terms as the
Option; provided that the exercise price therefor and number of shares subject
thereto shall be as set forth in Section 2(e); provided, further, that the
Substitute Option shall be exercisable immediately upon issuance without the
occurrence of a Purchase Event with respect to the Substitute Option; and
provided, further, that if the terms of the Substitute Option cannot, for legal
reasons, be the same as the Option (subject to the variations described in the
foregoing provisos), such terms shall be as similar as possible and in no event
less advantageous to FNB. Substitute Option Issuer shall also enter into an
agreement with FNB in substantially the same form as this Agreement (subject to
the variations described in the foregoing provisos), which shall be applicable
to the Substitute Option.
(e) The Substitute Option shall be exercisable for such number
of shares of Substitute Common Stock (as defined below) as is equal to the
Assigned Value (as defined below) multiplied by the number of shares of Black
Diamond Common Stock for which the Option was theretofore exercisable, divided
by the Average Price (as defined below), rounded
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up to the nearest whole share. The exercise price per share of Substitute
Common Stock of the Substitute Option (the "Substitute Option Price") shall then
be equal to the Purchase Price multiplied by a fraction in which the numerator
is the number of shares of Black Diamond Common Stock for which the Option was
theretofore exercisable and the denominator is the number of shares of
Substitute Common Stock for which the Substitute Option is exercisable.
(f) In no event, pursuant to any of the foregoing paragraphs,
shall the Substitute Option be exercisable for more than 19.9% of the aggregate
of the shares of Substitute Common Stock outstanding prior to exercise of the
Substitute Option. In the event that the Substitute Option would be exercisable
for more than 19.9% of the aggregate of the shares of outstanding Substitute
Common Stock but for the limitation in the first sentence of this Section 2(f),
Substitute Option Issuer shall make a cash payment to FNB equal to the excess of
(i) the value of the Substitute Option without giving effect to the limitation
in the first sentence of this Section 2(f) over (ii) the value of the Substitute
Option after giving effect to the limitation in the first sentence of this
Section 2(f). This difference in value shall be determined by a nationally
recognized investment banking firm selected by FNB.
(g) Black Diamond shall not enter into any transaction
described in Section 2(c) unless the Acquiring Corporation and any person that
controls the Acquiring Corporation assume in writing all the obligations of
Black Diamond hereunder and take all other actions that may be necessary so that
the provisions of this Agreement are given full force and effect (including,
without limitation, any action that may be necessary so that the holders of the
other shares of common stock issued by Substitute Option Issuer are not entitled
to exercise any rights comparable to the rights described herein by reason of
the issuance or exercise of the Substitute Option and the shares of Substitute
Common Stock are otherwise in no way distinguishable from or have lesser
economic value than other shares of common stock issued by Substitute Option
Issuer (other than any diminution in value resulting from the fact, if
applicable, that the shares of Substitute Common Stock are restricted
securities, as defined in Rule 144 under the Securities Act or any successor
provision)).
(h) For purposes of this Agreement, the following terms have
the following meanings:
(1) "Acquiring Corporation" means (i) the continuing
or surviving corporation of a consolidation or merger with Black Diamond (if
other than Black Diamond), (ii) Black Diamond in a merger in which Black Diamond
is the continuing or surviving corporation and (iii) the transferee of all or
substantially all of Black Diamond's assets.
(2) "Assigned Value" means the highest of (w) the
price per share of Black Diamond Common Stock at which a tender offer or
exchange offer for Black Diamond Common Stock has been made after the date
hereof and prior to the consummation of the consolidation, merger or sale
referred to in Section 2(c), (x) the price per share to be paid by any third
party or the consideration per share to received by holders of Black Diamond
Common Stock, in each case pursuant to the agreement with Black Diamond with
respect to the consolidation, merger or sale referred to in Section 2(c), (y)
the highest bid price per share for
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<PAGE> 5
Black Diamond Common Stock quoted on the Nasdaq National Market (or if such
Black Diamond Common Stock is not quoted thereon, the highest bid price per
share as quoted on the principal trading market on which such shares are traded
as reported by a recognized source) during the 12-month period immediately
preceding the consolidation, merger or sale referred to in Section 2(c) and (z)
in the event the transaction referred to in Section 2(c) is a sale of all or
substantially all of Black Diamond's assets, an amount equal to (i) the sum of
the price paid in such sale for such assets (including assumed liabilities) and
the current market value of the remaining assets of Black Diamond, as determined
by a nationally recognized investment banking firm selected by FNB divided by
(ii) the number of shares of Black Diamond Common Stock outstanding at such
time. In the event that a tender offer or exchange offer is made for Black
Diamond Common Stock or an agreement is entered into for a merger or
consolidation involving consideration other than cash, the value of the
securities or other property issuable or deliverable in exchange for Black
Diamond Common Stock shall be determined by a nationally recognized investment
banking firm selected by FNB.
(3) "Average Price" means the average closing sales
price per share of a share of Substitute Common Stock quoted on the New York
Stock Exchange ("NYSE") (or if such Substitute Common Stock is not quoted on the
NYSE, the highest bid price per share as quoted on the Nasdaq National Market
or, if the shares of Substitute Common Stock are not quoted thereon, on the
principal trading market on which such shares are traded as reported by a
recognized source) for the twenty trading days immediately preceding the fifth
business day prior to the consolidation, merger or sale in question, but in no
event higher than the closing price of the shares of Substitute Common Stock on
the day preceding such consolidation, merger or sale; provided that if
Substitute Option Issuer is Black Diamond, the Average Price shall be computed
with respect to a share of common stock issued by Black Diamond, the person
merging into Black Diamond or by any company which controls such person, as FNB
may elect.
(4) "Substitute Common Stock" means the shares of
capital stock (or similar equity interest) with the greatest voting power in
respect of the election of directors (or persons similarly responsible for the
direction of the business and affairs) of the Substitute Option Issuer.
3. Exercise of Option.
(a) FNB may exercise the Option, in whole or in part, at any
time or from time to time if a Purchase Event (as defined below) shall have
occurred and be continuing; provided that to the extent the Option shall not
have been exercised, it shall terminate and be of no further force or effect
upon the earliest to occur of (i) the Effective Time of the Merger or (ii)
termination of the Merger Agreement in accordance with the provisions thereof
prior to the occurrence of a Purchase Event (other than a termination resulting
from a breach by Black Diamond of any covenant contained therein) or (iii) six
months after termination of the Merger Agreement if such termination follows the
occurrence of a Purchase Event or is due to a breach by Black Diamond of any
covenant contained therein. Any such exercise shall be subject to compliance
with applicable provisions of law.
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(b) As used herein, a "Purchase Event" shall mean any of the
following events or transactions occurring after the date hereof:
(i) Black Diamond or any Black Diamond Subsidiary,
without having received FNB's prior written consent, shall have entered into an
agreement with any person, whereby such person would (x) merge or consolidate,
or enter into any similar transaction, with Black Diamond or any Black Diamond
Subsidiary, (y) purchase, lease or otherwise acquire all or substantially all of
the assets of Black Diamond or any Black Diamond Subsidiary or (z) purchase or
otherwise acquire (including by way of merger, consolidation, share exchange or
any similar transaction) securities representing 20% or more of the voting power
of Black Diamond or any Black Diamond Subsidiary;
(ii) any person shall have acquired beneficial
ownership or the right to acquire beneficial ownership of 20% or more of the
outstanding shares of the Common Stock of Black Diamond (the term "beneficial
ownership" for purposes of this Option Agreement having the meaning assigned
thereto in Section 13(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") and the regulations promulgated thereunder);
(iii) Black Diamond, acting through its Board of
Directors or duly authorized officers, deliberately breaches any of its
obligations under the Merger Agreement after any person (x) shall have made a
bona fide proposal to Black Diamond by public announcement or written
communication that is or becomes the subject of public disclosure to acquire
Black Diamond or any Black Diamond Subsidiary by merger, consolidation, purchase
of all or substantially all of its assets or any other similar transaction, (y)
shall have commenced a bona fide tender or exchange offer to purchase shares of
Black Diamond Common Stock such that upon consummation of such offer such person
would own or control 20% or more of the outstanding shares of Black Diamond
Common Stock, or (z) shall have filed an application or notice with any federal
or state regulatory agency for clearance or approval to engage in any
transaction described in clause (i) or (ii) above; or
(iv) any federally insured depository or registered
holding company thereof (not affiliated with FNB) or any person, corporation or
other legal entity with a net worth exceeding $20 million (x) shall have made a
bona fide proposal to Black Diamond by public announcement or written
communication that is or becomes the subject of public disclosure to acquire
Black Diamond or any Black Diamond Subsidiary by merger, consolidation, purchase
of all or substantially all of its assets or any other similar transaction, (y)
shall have commenced a bona fide tender or exchange offer to purchase shares of
Black Diamond Common Stock such that upon consummation of such offer such person
would own or control 20% or more of the outstanding shares of Black Diamond
Common Stock, or (z) shall have filed an application or notice with any federal
or state regulatory agency for clearance or approval to engage in any
transaction described in clause (i) or (ii) above, and thereafter the Board of
Directors of Black Diamond shall have failed to recommend, or shall have revoked
its recommendation of, the Merger Agreement and the transactions contemplated
thereby or the holders of Black Diamond Common Stock shall have not approved the
Merger Agreement and
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<PAGE> 7
the transactions contemplated thereby at the meeting of such stockholders held
for such purpose or such meeting shall have not been held or shall have been
canceled prior to termination of the Merger Agreement.
If more than one of the transactions giving rise to a Purchase Event
under this Section 3(b) is undertaken or effected, then all such transactions
shall give rise only to one Purchase Event, which Purchase Event shall be deemed
continuing for all purposes under this Option Agreement until all such
transactions are abandoned. As used in this Option Agreement, "person" shall
have the meanings specified in Sections 3(a)(9) and 13(d)(3) of the Exchange
Act.
(c) In the event FNB wishes to exercise this Option, it shall
send to Black Diamond a written notice (the date of which shall be the "Notice
Date") specifying (i) the total number of shares it will purchase pursuant to
such exercise, and (ii) a place and date not earlier than three business days
nor later than 60 business days from the Notice Date for the closing of such
purchase (the "Closing Date"); provided that if prior notification to or
approval of any federal or state regulatory agency is required in connection
with such purchase, FNB shall promptly file the required notice or application
for approval and shall expeditiously process the same and the period of time
that otherwise would run pursuant to this sentence shall run instead from the
date on which any required notification period has expired or been terminated or
such approval has been obtained and any requisite waiting period shall have
passed.
4. Payment and Delivery of Certificates.
(a) At the closing referred to in Section 3 hereof, FNB shall
pay to Black Diamond the aggregate purchase price for the Shares purchased
pursuant to the exercise of the Option in immediately available funds by a wire
transfer to a bank account designated by Black Diamond.
(b) At such closing, simultaneously with the delivery of cash
as provided in Section 4(a), Black Diamond shall deliver FNB a certificate
representing the number of shares of Black Diamond Common Stock purchased by
FNB.
5. Regulatory Filings. Black Diamond and FNB agree to file with state
and federal governmental bodies and authorities (including without limitation
the Office of Thrift Supervision and the Federal Reserve Board) all required
applications, notifications and report forms and other documents required to be
filed under any applicable law, rule or regulation, to permit the purchase
contemplated by this Agreement (collectively, "Regulatory Filings"). Black
Diamond agrees to cooperate fully with FNB in connection with the preparation of
any Regulatory Filing. Upon the happening of a Purchase Event, all additional
fees, expenses and charges of any kind or nature whatsoever incurred in
connection with any Regulatory Filing up to but not exceeding $25,000 shall be
borne and paid by Black Diamond. Without limitation, Black Diamond shall
indemnify and hold harmless FNB, its affiliates and its officers and directors
from and against any and all losses, claims, damages, liabilities and expenses
(including, without limitation, all out-of-pocket expenses, investigation
expenses, expenses
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incurred with respect to any judgment and fees and disbursements of counsel and
accountants) arising out of or based upon any statements contained in, omissions
or alleged omissions from, each Regulatory Filing, other than statements or
omissions made in reliance on and in conformity with information provided in
writing by FNB included in such Regulatory Filing.
6. Representations and Warranties.
Black Diamond represents, warrants and covenants to FNB as follows:
(a) Shares. The Shares, when delivered to FNB upon exercise of
the Option, will be duly authorized, validly issued, fully paid, nonassessable,
free of preemptive rights, and free and clear of all claims, liens, charges,
encumbrances and security interests of any nature whatsoever.
(b) Authority. Black Diamond has full right, power and
authority to execute and deliver this Option Agreement, to grant the Option and
to sell, assign, transfer and deliver the Shares to FNB upon exercise of the
Option.
(c) Binding Obligation. The execution and delivery of this
Option Agreement and the consummation of the transactions contemplated hereby
have been duly authorized by all necessary corporate action on the part of Black
Diamond. This Option Agreement has been duly executed and delivered by Black
Diamond and constitutes the legal, valid and binding obligation of Black
Diamond, enforceable against Black Diamond in accordance with its terms.
(d) Absence of Conflicting Agreements. The execution, delivery
and performance of this Option Agreement will not (i) conflict with, result in a
breach of, or constitute a default under, any applicable law, judgment,
ordinance, regulation or ruling of any court or governmental authority, or under
any contract or agreement to which Black Diamond is a party or by which Black
Diamond may be bound, or (ii) create any lien, charge, claim or encumbrance upon
the Shares.
(e) Consents. No consent, approval, permit or authorization
of, or filing with any governmental authority or any third party is required to
consummate this Option Agreement and the transactions contemplated hereby.
(f) Claims and Legal Actions. There is no claim, liability,
legal action, governmental investigation or other legal, administrative or tax
proceeding, nor any order, decree or judgment, in progress or pending, or to the
knowledge of Black Diamond, threatened against Black Diamond which could
adversely affect the Shares, nor does Black Diamond know or have reason to be
aware of any basis for the same.
(g) Reservation of Shares. Black Diamond has taken all
necessary corporate action to reserve from the authorized and unissued shares of
Black Diamond Common Stock to issue, upon exercise of the Option, all of the
Shares. At all times from the date hereof until
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<PAGE> 9
such time as the Option is no longer exercisable, Black Diamond will reserve for
issuance, upon exercise of the Option, the number of shares of Black Diamond
Common Stock equal to the number of Shares for which the Option is then
exercisable.
7. Severability. If any term, provision, covenant or restriction
contained in this Option Agreement is held by a court or a federal or state
regulatory agency of competent jurisdiction to be invalid, void or
unenforceable, the remainder of the terms, provisions and covenants and
restrictions contained in this Option Agreement shall remain in full force and
effect, and shall in no way be affected, impaired or invalidated. If for any
reason such court or regulatory agency determines that the Option will not
permit the holder to acquire the full number of shares of Black Diamond Common
Stock as provided in Section 2 hereof, it is the express intention of Black
Diamond to allow the holder to acquire such lesser number as may be permissible,
without any amendment or modification hereof.
8. Additional Documents. Black Diamond will, upon request of FNB,
promptly execute and deliver all additional documents reasonably deemed by FNB
to be necessary, appropriate or desirable to complete and evidence any sale,
assignment or transfer of the Shares pursuant to this Option Agreement and to
vest in FNB good, valid and marketable title to the Shares so transferred.
9. Limitation of Profit.
(a) Notwithstanding any other provision herein, in no event
shall FNB's Total Profit (as defined below) exceed $3,000,000, and, if it
otherwise would exceed such amount, FNB, at its sole discretion, shall either
(i) reduce the number of shares subject to the Option, (ii) deliver to Black
Diamond for cancellation shares of Black Diamond Common Stock (or other
securities into which such Option Shares are converted or exchanged), (iii) pay
cash to Black Diamond, or (iv) any combination of the foregoing, so that FNB's
actually realized Total Profit shall not exceed $3,000,000 after taking into
account the foregoing actions.
(b) For purposes of this Agreement, "Total Profit" shall mean:
(i) the aggregate amount of (A) Net Proceeds, plus (B) all amounts received by
FNB on the transfer of the Option, plus (C) all equivalent amounts with respect
to the Substitute Option, plus (D) all amounts received by FNB pursuant to
Section 7.4C of the Merger Agreement, minus (ii) the aggregate of (A) all
amounts of cash previously paid to Black Diamond pursuant to this Section 9 and
(B) the value of the Option Shares (or other securities) previously delivered to
Black Diamond for cancellation pursuant to this Section 9. "Net Proceeds" shall
mean the aggregate proceeds of such sale or disposition in excess of the product
of the Purchase Price multiplied by the number of such Option Shares (or
securities into which such shares are converted or exchanged) included in such
sale or disposition.
(c) Notwithstanding any other provision of this Agreement,
nothing in this Agreement shall affect the ability of FNB to receive, nor
relieve Black Diamond's obligation to pay, any payment provided for in Section
7.4C of the Merger Agreement; provided that if and to the extent the Total
Profit received by FNB would exceed $3,000,000, following receipt of
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such payment, FNB shall be obligated to comply with the terms of Section 9(a)
within 30 days of the latest of (i) the date of receipt of such payment, (ii)
the date of receipt of the Net Proceeds, (iii) the date of receipt of net cash
from disposition of the Option and (iv) the date of receipt of equivalent
amounts pursuant to the sale of the Substitute Option or shares of Substitute
Common Stock (or other securities into which such Substitute Common Stock is
converted or exchanged).
(d) For purposes of Section 9(a) and clause (ii) of Section
9(b), the value of any Option Shares delivered to Black Diamond shall be the
Assigned Value of such Option Shares and the value of any Substitute Common
Stock delivered to Black Diamond shall be the Highest Closing Price of such
Substitute Common Stock. "Highest Closing Price" means the highest closing sales
price for shares of Substitute Common Stock quoted on the NYSE (or if the
Substitute Common Stock is not quoted on the NYSE, the highest bid price per
share as quoted on the National Association of Securities Dealers Automated
Quotations System or, if the shares of Substitute Common Stock are not quoted
thereon, on the principal trading market on which such shares are traded as
reported by a recognized) during the six-month period preceding the issuance of
the Substitute Option.
(e) Notwithstanding anything in this Agreement or the Merger
Agreement to the contrary, if a court shall finally adjudicate that FNB's Total
Profit is unenforceable, then Net Proceeds shall be limited to the largest
amount enforceable, whether such amount is $3,000,000, $2,500,000, $2,000,000,
$1,750,000, $1,500,000, $1,250,000, $1,000,000, $900,000, $800,000, $700,000,
$600,000, $500,000 or some lesser amount. All Net Proceeds in excess of such
limitation shall be remitted to Black Diamond upon receipt.
10. Loss, Theft, Etc. of Agreement. This Agreement (and the Option
granted hereby) are exchangeable, without expense, at the option of FNB, upon
presentation and surrender of this Agreement at the principal office of Black
Diamond for other Agreements providing for Options of different denominations
entitling the holder thereof to purchase in the aggregate the same number of
shares of Black Diamond Common Stock purchasable hereunder. The terms
"Agreement" and "Option" as used herein include any other Agreements and related
Options for which this Agreement (and the Option granted hereby) may be
exchanged. Upon receipt by Black Diamond of evidence reasonably satisfactory to
it of the loss, theft, destruction or mutilation of this Agreement, and (in the
case of loss, theft or destruction) of reasonably satisfactory indemnification,
and upon surrender and cancellation of this Agreement, if mutilated, Black
Diamond will execute and deliver a new Agreement of like tenor and date. Any
such new Agreement executed and delivered shall constitute an additional
contractual obligation on the part of Black Diamond, whether or not the
Agreement so lost, stolen, destroyed or mutilated shall at any time be
enforceable by anyone.
11. Miscellaneous.
(a) Expenses. Except as otherwise provided herein, each of the
parties hereto shall bear and pay all costs and expenses incurred by it or on
its behalf in connection
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with the transactions contemplated hereunder, including fees and expenses of its
own financial consultants, investment bankers, accountants and counsel.
(b) Entire Agreement. Except as otherwise expressly provided
herein, this Option Agreement contains the entire agreement among the parties
with respect to the transactions contemplated hereunder and supersedes all prior
arrangements or understandings with respect thereto, written or oral. The terms
and conditions of this Option Agreement shall inure to the benefit of and be
binding upon the parties hereto and their responsible heirs, successors and
assigns. Nothing in this Option Agreement, expressed or implied, is intended to
confer upon any party, other than the parties hereto, and their respective
successors and assigns, any rights, remedies, obligations or liabilities under
or by reason of this Option Agreement, except as expressly provided herein.
(c) Assignment. Neither of the parties hereto may assign any
of its rights or obligations under this Option Agreement or the Option created
hereunder to any other person, without the express written consent of the other
party.
(d) Notices. All notices under this Agreement shall be deemed
to have been duly given when delivered in person, by recognized overnight
courier, or by confirmed facsimile to the parties as set forth below.
If to FNB:
Mr. Ernest J. Sewell
President and Chief Executive Officer
FNB Financial Services Corporation
202 S. Main Street
Reidsville, North Carolina 27320
Facsimile No. (336) 634-4776
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with a copy to:
Gerald F. Roach, Esq.
Smith, Anderson, Blount, Dorsett, Mitchell & Jernigan, L.L.P.
2500 First Union Capitol Center
Raleigh, NC 27601
Facsimile No. (919) 821-6800
If to Black Diamond:
Mr. Don M. Green
President and Chief Executive Officer
Black Diamond Savings Bank, FSB
600 Trent Street
Norton, Virginia 24273
Facsimile No. (540) 679-5818
with a copy to:
Howard W. Dobbins, Esq.
Williams, Mullen, Christian & Dobbins
Two James Center
1021 East Cary Street
Richmond, Virginia 23210-1320
Facsimile No. (804) 783-6507
(e) Counterparts. This Option Agreement may be executed in any
number of counterparts, and each such counterpart shall be deemed to be an
original instrument, but all such counterparts together shall constitute but one
agreement.
(f) Specific Performance. The parties agree that damages would
be an inadequate remedy for breach of the provisions of this Option Agreement by
either party hereto and that this Option Agreement may be enforced by either
party hereto through injunctive or other equitable relief.
(g) Governing Law. This Option Agreement shall be governed by
and construed in accordance with the laws of the State of North Carolina
applicable to agreements made and entirely to be performed within such state and
such federal laws as may be applicable.
[remainder of page intentionally left blank; signatures appear on next page]
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IN WITNESS WHEREOF, each of the parties hereto has executed this Option
Agreement as of the day and year first written above.
FNB FINANCIAL SERVICES CORPORATION
By: /s/ Ernest J. Sewell
-------------------------------------
Ernest J. Sewell
President and Chief Executive Officer
BLACK DIAMOND SAVINGS BANK, FSB
By: /s/ Don M. Green
-------------------------------------
Mr. Don M. Green
President and Chief Executive Officer
12
