SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<CAPTION>
<S> <C>
[ ] Preliminary Proxy Statement Confidential, for Use of the
[X] Definitive Proxy Statement Commission Only (as permitted
[ ] Definitive Additional Materials by Rule 14a-6(e)(2)) [ ]
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
Fauquier Bankshares, Inc.
(Name of Registrant as Specified in its Charter)
N/A
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1. Title of each class of securities to which transaction applies:
----------------------------------------------------------------------
2. Aggregate number of securities to which transaction applies:
----------------------------------------------------------------------
3. Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
----------------------------------------------------------------------
4. Proposed maximum aggregate value of transaction:
----------------------------------------------------------------------
5. Total Fee Paid:
----------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1. Amount Previously Paid:
----------------------------------------------------------------------
2. Form, Schedule or Registration Statement No.:
----------------------------------------------------------------------
3 Filing Party:
----------------------------------------------------------------------
4. Date Filed:
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<PAGE>
FAUQUIER BANKSHARES, INC.
10 COURTHOUSE SQUARE
WARRENTON, VIRGINIA 20186
APRIL 14, 2000
Fellow Shareholders:
You are cordially invited to attend the Annual Meeting of Shareholders (the
"Annual Meeting") of Fauquier Bankshares, Inc. (the "Company"), the holding
company for The Fauquier Bank (the "Bank"), which will be held on May 23, 2000,
at 11:00 a.m., Eastern Time, at The Fauquier Springs Country Club, Springs Road,
Warrenton, Virginia.
The attached Notice of Annual Meeting and Proxy Statement describe the
formal business to be transacted at the Annual Meeting. Directors and officers
of Fauquier Bankshares, Inc., as well as a representative of Yount, Hyde &
Barbour, P.C., the Company's independent auditors, will be present at the Annual
Meeting to respond to any questions that shareholders may have regarding the
business to be transacted.
The Board of Directors of Fauquier Bankshares, Inc. has determined that the
matters to be considered at the Annual Meeting are in the best interests of the
Company and its shareholders. For the reasons set forth in the Proxy Statement,
the Board unanimously recommends that you vote "FOR" each matter to be
considered.
YOUR COOPERATION IS APPRECIATED SINCE A MAJORITY OF THE COMMON STOCK MUST
BE REPRESENTED, EITHER IN PERSON OR BY PROXY, TO CONSTITUTE A QUORUM FOR THE
CONDUCT OF BUSINESS. WHETHER OR NOT YOU EXPECT TO ATTEND, PLEASE SIGN, DATE AND
RETURN THE ENCLOSED PROXY CARD PROMPTLY IN THE POSTAGE-PAID ENVELOPE PROVIDED SO
THAT YOUR SHARES WILL BE REPRESENTED.
On behalf of the Board of Directors and all of the employees of the Company
and the Bank, I thank you for your continued interest and support.
Sincerely yours,
/s/ C. Hunton Tiffany
C. Hunton Tiffany
Chairman
President/CEO
<PAGE>
FAUQUIER BANKSHARES, INC.
10 COURTHOUSE SQUARE
WARRENTON, VIRGINIA 20186
(540) 347-2700
-------------------------------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD TUESDAY, MAY 23, 2000
--------------------------------------------------
Warrenton, Virginia
April 14, 2000
To the Shareholders of Fauquier Bankshares, Inc.:
NOTICE is hereby given that the ANNUAL MEETING OF SHAREHOLDERS OF FAUQUIER
BANKSHARES, INC. (the "Company") will be held at THE FAUQUIER SPRINGS COUNTRY
CLUB, SPRINGS ROAD, WARRENTON, VIRGINIA, ON TUESDAY, MAY 23, 2000, at 11:00
o'clock a.m., for the following purposes:
1. To elect the Class I members of the Board of Directors to serve until
the third succeeding Annual Meeting of Shareholders of the Company
subsequent to this Annual Meeting, i.e. until 2003, and until their
successors are duly elected and qualify.
2. To ratify the Amended and Restated Fauquier Bankshares, Inc. Omnibus
Stock Ownership and Long Term Incentive Plan.
3. To transact such other business as may properly come before the
Meeting or any adjournments thereof, including whether or not to
adjourn the Meeting.
The Board of Directors has fixed the close of business on April 7, 2000, as
the record date for determining Shareholders entitled to notice of, and to vote
at, the Meeting.
A copy of the Annual Report of the Company for the year ended December 31,
1999, the recommended Omnibus Stock Ownership and Long Term Incentive Plan as
amended and restated, a form of Proxy and a Proxy Statement accompany this
Notice.
Whether or not you expect to be present at the Meeting, please sign, date,
and mail the enclosed Proxy in the enclosed, stamped envelope.
FAUQUIER BANKSHARES, INC.
By Order of the Board of Directors
/s/ H. Frances Stringfellow
H. Frances Stringfellow, Secretary
<PAGE>
IT IS IMPORTANT THAT YOUR STOCK BE REPRESENTED AT THE MEETING. WHETHER OR
NOT YOU ARE EXPECTING TO BE PRESENT IN PERSON, PLEASE COMPLETE, SIGN, DATE, AND
PROMPTLY MAIL THE ENCLOSED PROXY. IF YOU ARE PRESENT AT THE MEETING, YOU MAY, IF
YOU WISH, WITHDRAW YOUR PROXY AND VOTE YOUR SHARES PERSONALLY. ANY SHAREHOLDER
GIVING A PROXY HAS THE RIGHT TO REVOKE IT AT ANY TIME BEFORE IT IS EXERCISED, IF
HE WISHES, BY WRITTEN NOTICE TO THE SECRETARY THE COMPANY. A RETURN ENVELOPE IS
ENCLOSED FOR YOUR CONVENIENCE THAT REQUIRES NO POSTAGE IF MAILED WITHIN THE
UNITED STATES.
2
<PAGE>
FAUQUIER BANKSHARES, INC.
10 COURTHOUSE SQUARE
WARRENTON, VIRGINIA 20186
(540) 347-2700
PROXY STATEMENT
SOLICITATION AND VOTING OF PROXIES
This proxy statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Fauquier Bankshares, Inc. (the "Company")
for use at the Annual Meeting of Shareholders to be held at THE FAUQUIER SPRINGS
COUNTRY CLUB, SPRINGS ROAD, WARRENTON, VIRGINIA, ON TUESDAY, MAY 23, 2000 AT
11:00 O'CLOCK A.M., and at any adjournments thereof.
The cost of solicitation will be borne by the Company. Additional
solicitations may be made by letter, telephone or telefax by the Company or by
its directors or regular employees, without additional compensation therefor.
The Company began mailing this Proxy Statement and the form of Proxy
solicited hereby to its Shareholders on or about April 14, 2000.
Any proxy given pursuant to this solicitation may be revoked by the person
executing it at any time prior to its exercise by submitting a written notice of
revocation to the Secretary of the Company or a properly-executed proxy bearing
a later date, or by attending the meeting and voting in person.
Other than the matters set forth on the attached Notice of Annual Meeting
of Shareholders, the Board of Directors knows of no additional matters that will
be presented for consideration at the Annual Meeting. Execution of a proxy,
however, confers on the designated proxy holders discretionary authority to vote
the shares in accordance with their best judgment on such other business, if
any, that may properly come before the Annual Meeting or any adjournment
thereof, including whether or not to adjourn the Annual Meeting.
VOTING SECURITIES
As of April 7, 2000, the record date fixed for the determination of
Shareholders entitled to notice of, and to vote at, the Annual Meeting, there
were 1,774,811 outstanding shares of Common Stock, which is the only class of
stock of the Company. Each such share of Common Stock is entitled to one vote.
Shares of stock represented by valid proxies received pursuant to this
solicitation, and not revoked before they are exercised, will be voted as
specified therein. If no specification is made, signed proxy cards will be voted
for the election of each of the nominees for director named in this Proxy
Statement and for adoption of the proposal set forth in this Proxy Statement.
The presence, in person or by proxy, of the holders of at least a majority
of the total number of shares of Common Stock entitled to vote is necessary to
constitute a quorum at the Annual Meeting. In the event that there are not
sufficient votes for a quorum, or to approve or ratify any matter being
presented at the time of the Annual Meeting, the Annual Meeting may be adjourned
in order to permit further solicitation of proxies.
3
<PAGE>
As to the election of directors, the form of Proxy being provided by the
Board of Directors enables a shareholder to vote "FOR" the election of the
nominees proposed by the Board of Directors or to "WITHHOLD AUTHORITY" to vote
for one or more of the nominees being proposed. Under Virginia law, directors
are elected by a plurality of votes cast, without regard to either broker
non-votes or proxies as to which authority to vote for one or more of the
nominees being proposed is withheld.
As to the ratification of the Amended and Restated Fauquier Bankshares,
Inc. Omnibus Stock Ownership and Long Term Incentive Plan, by checking the
appropriate box, a stockholder may: (i) vote "FOR" the item; (ii) vote "AGAINST"
the item, or (iii) "ABSTAIN" from voting on the item. Under Virginia law, such
matter shall be determined by a majority of the votes cast, without regard to
either broker non-votes or proxies marked "ABSTAIN" as to that matter.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS.
No person or entity is known to the Company to be the beneficial owner of
more than five percent (5%) of the Company's Common Stock.
The following table sets forth, as of April 7, 2000, the number and
percentage of shares of Company Common Stock held by each director and nominee
of the Company, the executive officers named in the Summary Compensation Table,
and all directors and executive officers of the Company and The Fauquier Bank
(the "Bank") as a group who are the beneficial owners of any Company Common
Stock.
<TABLE>
<CAPTION>
NON-EMPLOYEE
NAME OF AMOUNT AND NATURE OF DIRECTOR STOCK PERCENT
BENEFICIAL OWNER(S) BENEFICIAL OWNERSHIP OPTIONS* OF CLASS
- ------------------- -------------------- -------- --------
<S> <C> <C> <C>
Diane B. Coppage 640 .04%
Randy K. Ferrell 14,100 .79%
Alexander G. Green, Jr. 65,200 (1) 5,600 3.99%
Stanley C. Haworth 38,414 (2) 5,600 2.48%
John J. Norman, Jr. 600 1,120 .10%
Douglas C. Larson 1,560 (3) 4,480 .34%
C. H. Lawrence, Jr. 16,043 5,600 1.22%
D. Harcourt Lees, Jr. 11,200 (4) 5,600 .95%
Randolph T. Minter 800 4,480 .30%
B. S. Montgomery 9,332 (5) 5,600 .84%
H. P. Neale 20,524 (6) 5,600 1.47%
Pat H. Nevill 9,440 (7) 5,600 .85%
Henry M. Ross 9,200 (8) 5,600 .83%
Gary R. Shook 1,230 (9) .07%
H. Frances Stringfellow 6,076 (10) .34%
C. Hunton Tiffany 20,706 (11) 1.17%
All directors and executive
officers as a group (14 persons): 279,945 15.77%
</TABLE>
4
<PAGE>
*Number of Shares that have been granted, are vested and could be exercised and
issued to Directors within 60 days, pursuant to the Non-Employee Director Stock
Option Plan established in 1995.
(1) Includes 2,720 shares held jointly with Alexander G. Green, III, his son;
2,720 shares held jointly with Courtenay G. Mullen, his daughter; and 2,720
shares held jointly with Mary Blake Green, his daughter.
(2) Includes 32,740 shares held jointly with Mildred W. Haworth, his wife.
(3) Includes 1,000 shares held jointly with Edith J. Larson, his mother.
(4) Includes 1,600 shares owned by Eleanor T. Lees, his wife.
(5) Includes 5,188 shares held jointly with Patty M. Montgomery, his wife.
(6) Includes 9,608 shares owned by Fontaine G. Neale, his wife.
(7) Includes 800 shares owned jointly with H.T.A. Nevill, her husband; 6,000
shares owned by H. T. A. Nevill; and 2,200 shares for which Mr. Nevill has
voting power.
(8) Includes 800 shares held jointly with Lois B. Ross, his wife.
(9) Includes 140 shares held by Ann Rodman Shook, his wife, as Custodian for
their children.
(10) Includes 2,588 shares owned jointly with Dallas F. Stringfellow, her
husband; and 700 shares owned by Dallas F. Stringfellow.
(11) Includes 14,306 shares owned by Susanne J. McC. Tiffany, his wife.
The Company is not aware of any definitive arrangement that may operate at
a subsequent date to effect a change in control of the Company.
ELECTION OF CLASS I DIRECTORS
The Company's Articles of Incorporation provide that the Board of Directors
of the Company is classified into three classes. Only the terms of office of the
Class I directors expire this year, and only nominees to fill the vacancies
created by the expiration of such terms will be considered at the Annual
Meeting. The Class II directors serve until 2001, and the Class III directors
serve until 2002.
The four (4) individuals listed immediately below are proposed for election
as Class I directors. These individuals shall hold office until the third
succeeding Annual Meeting of the shareholders of the Company subsequent to this
Annual Meeting, i.e. until 2003, and until their successors shall have been
elected and shall qualify.
5
<PAGE>
<TABLE>
<CAPTION>
CLASS I
POSITION HELD WITH COMPANY
AND/OR PRINCIPAL OCCUPATIONS FIRST YEAR
AND DIRECTORSHIPS DURING THE AS DIRECTOR
NAME PAST FIVE YEARS OF COMPANY AGE
- ---- --------------- ---------- ---
<S> <C> <C> <C>
C. H. Lawrence, Jr. Business Development Consultant as 1984 55
Independent Contractor with
the Bank; Chairman of the Board
of the Bank 1996-`97; President, Country
Chevrolet, Inc.,1976-'97; Director of the
Bank since 1980.
Henry M. Ross President, Ross Industrial Develop 1984 72
Corp., President, Greenwich Corp.,
Vice Chairman of the Board of the Bank;
Director of the Bank since 1976.
C. Hunton Tiffany Chairman of the Board of the 1984 60
Company and Bank; President
Fauquier Bank Services, Inc.;
President of the Company since
1984; President of the Bank since
1982; Director of the Bank since 1974.
John J. Norman, Jr. Vice President, Associate 1998 37
Broker, Norman Realty, Inc.;
Director of the Bank since 1998.
</TABLE>
The Board of Directors has no reason to believe that any of the above nominees
will be unable to serve as a director. However, if any should be unable for any
reason to accept the nomination or election, it is the intention of the persons
named in the enclosed form of Proxy to vote those proxies authorizing them to
vote for the election of directors for the election of such other person or
persons as the Board of Directors may in its discretion recommend.
The Class II and Class III directors, whose terms expire in 2001 and 2002,
respectively, and the information with respect to them, are as follows:
<TABLE>
<CAPTION>
CLASS II
<S> <C> <C> <C>
Stanley C. Haworth Auctioneer; President, Warrenton 1984 75
Nurseries; Director of the Bank
since 1971.
Harold Paul Neale Farming; Director of the Bank 1984 78
since 1971.
Brian S. Montgomery President, Warrenton Foreign Car, 1990 47
Inc.; President, Montgomery Auto
Parts; Director of the Bank since 1990.
Pat H. Nevill Secretary-Treasurer, The Stable Door, 1993 53
Inc.; Director of the Bank since 1993.
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
CLASS III
POSITION HELD WITH COMPANY
AND/OR PRINCIPAL OCCUPATIONS FIRST YEAR
AND DIRECTORSHIPS DURING THE AS DIRECTOR
NAME PAST FIVE YEARS OF COMPANY AGE
- ---- --------------- ---------- ---
<S> <C> <C> <C>
Alexander G. Green, Jr. Retired Postmaster, Merchant, 1984 83
and Farmer; Director of the
Bank since 1950.
Douglas C. Larson Director, Airlie Foundation; 1996 53
Director, International Academy
of Preventive Medicine; Director
of the Bank since 1996.
D. Harcourt Lees, Jr. Chairman, D. H. Lees & Co., Inc. 1984 78
(Insurance); President, D. H. Lees
Real Estate; Director of the Bank
since 1954.
Randolph T. Minter President, Moser Funeral Home; 1996 40
President, Bright View Cemetery, Inc.;
Director of the Bank since 1996.
H. Frances Stringfellow Administrative Consultant as Independent 1999 61
Contractor with Bank since June 1999;
Employee/Officer of Bank 1986-May 1999;
Secretary of the Company since 1991.
</TABLE>
COMMITTEES OF THE BOARD
During the year ended December 31, 1999, the Board of Directors acted as a
Committee of the whole as to all matters. On October 21, 1999 the Board of
Directors established Audit and Executive Committees of the Company. The
Committees held no formal meetings in 1999.
MEETINGS OF BOARD OF DIRECTORS
During the year ended December 31, 1999, the Board of Directors of the
Company held six meetings. All directors were in attendance at each meeting
except for two directors. Each of the two directors was unable to attend one
meeting.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE. Pursuant to
Section 16(a) of the Securities Exchange Act of 1934, officers, directors and
beneficial owners of more than 10% of the Company's Common Stock are required to
file reports on Forms 3, 4 and 5 with the Securities and Exchange Commission to
report their beneficial ownership of the Company's Common Stock as well as
certain changes in such beneficial ownership. Based upon the Company's review of
such reports, an Amended Form 3, Initial Statement of Beneficial Ownership of
Securities, was filed by Director Henry M. Ross on November 15, 1999. The
original Form 3 for Mr. Ross was filed on June 18, 1999, and failed to reflect
2,000 shares of Fauquier Bankshares, Inc. Common Stock held in an IRA Account. A
Form 4, Statement of Changes in Beneficial Ownership, due on October 10, 1999,
was filed by Director John J. Norman, Jr., on November 15, 1999, and reflected
the purchase of an additional 100 shares of Fauquier Bankshares, Inc. Common
Stock. Apart from the foregoing, to the Company's knowledge, no officer,
director or more than 10% beneficial owner failed to file required reports on
Forms 3, 4 or 5 on a timely basis during the fiscal year ended December 31,
1999.
7
<PAGE>
REMUNERATION AND OTHER TRANSACTIONS WITH MANAGEMENT
DIRECTORS' COMPENSATION
MEETING FEES. Non-Employee Directors of the Company receive a fee of $200
for each Board meeting attended. Non-Employee Directors of the Bank receive a
fee of $500 for each Board meeting and $200 for each Committee meeting attended.
However, no Director may receive fees for more than two Board and Committee
meetings held in any one day.
DIRECTOR DEFERRED COMPENSATION PLAN. Effective April 1, 1995, the Board
approved and established a Director Deferred Compensation Plan (the "Deferred
Compensation Plan"). This plan provides that any non-employee director of the
Company or the Bank may elect to defer receipt of all or any portion of his or
her compensation as a director. A participating Director may elect to have
amounts deferred under the Deferred Compensation Plan held in a deferred cash
account credited on a quarterly basis with interest equal to the highest rate
offered by the Bank at the end of the preceding quarter. Alternatively, a
participant may elect to have a deferred stock account in which deferred amounts
are treated as if invested in the Company's Common Stock at the fair market
value on the date of deferral. The value of a stock account will increase and
decrease based upon the fair market value of an equivalent number of shares of
Common Stock. In addition, the deferred amounts deemed invested in Common Stock
will be credited with dividends on an equivalent number of shares. Amounts
considered invested in the Company's Common Stock are paid, at the election of
the director, either in cash or in whole shares of the Common Stock and cash in
lieu of fractional shares. Directors may elect to receive amounts contributed to
their respective accounts in one or up to five installments. The Company may
establish a trust to hold amounts deferred and which accumulate under the plan.
The purpose of the Deferred Compensation Plan is to give the non-employee
directors the option of deferring current taxation on directors' fee income.
NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN. In addition, the Board approved
and established, effective April 1, 1995, a Non-Employee Director Stock Option
Plan (the "Option Plan"). Under the Option Plan each Director who is not an
employee of the Company or its subsidiary received an option grant covering
1,120 shares of Company Common Stock on April 1 of each year during the five
year term of the Option Plan. The first grant under the Option Plan was made on
May 1, 1995. The exercise price of awards was fixed at the fair market value of
the shares on the date the option was granted. During the term of the Option
Plan, a total of 61,600 shares of Common Stock could be granted. The options
granted under the Option Plan were exercisable six months from the date of grant
except in the case of death or disability. Options that were not exercisable at
the time a director's services on the Board terminates for reasons other than
death, disability or retirement in accordance with the Company's policy will be
forfeited. The purpose of the Option Plan was to promote a greater identity of
interest between non-employee directors and the Company's shareholders by
increasing each participant's proprietary interest in the Company through the
award of options to purchase Company Common Stock. The five year term of the
Plan expired in 1999.
8
<PAGE>
The status of the options as of December 31, 1999 is as follows:
<TABLE>
<CAPTION>
YEAR OF OPTION WEIGHTED AVERAGE NUMBER OF SHARES REMAINING
GRANT EXERCISE PRICE GRANTED CONTRACTUAL LIFE
----- -------------- ------- ----------------
<S> <C> <C> <C>
1995 $8.75 11,200 5.33
1996 10.13 13,440 6.25
1997 12.50 13,440 7.25
1998 20.00 11,200 8.25
1999 19.50 12,320 9.25
</TABLE>
A total of 61,600 shares of Common Stock were granted during the five year
term of the Plan. During 1999, 2,240 option shares were exercised by the Estate
of L. Arthur Grove and 2,240 option shares were exercised by John B. Adams. The
shares represented options granted under the Non-Employee Director Stock Option
Plan prior to the two directors' retirement from the Company, and were exercised
at the weighted average exercise price at date of grant. The total number of
shares remaining available to be exercised: 57,120.
All options have been restated giving retroactive effect to stock splits.
INDEPENDENT CONTRACTOR AGREEMENT. C. H. Lawrence, Jr., a non-employee
director of the Company and the Bank, continues to provide business development
and customer relations services to the Bank under an Independent Contractor
Agreement dated February 23, 1998, which contract is renewable annually. In
1999, compensation for his business development services amounted to $77,400.
H. Frances Stringfellow, a non-employee director of the Company, elected in
June 1999, continues to serve as Corporate Secretary of the Company, and is a
consultant to the Bank and Company under an Independent Contractor Agreement
dated June 1, 1999, which contract is renewable annually. Ms. Stringfellow
manages the outsourced internal audit function; provides administrative and
advisory support to the Board of Directors and Committees of the Bank and
Company; and coordinates strategic planning efforts. She retired as a Senior
Vice President and Secretary of the Bank on May 31, 1999, and continued to
coordinate the Year 2000 Preparedness Committee efforts and advise on Human
Resources issues pending the hiring and training of a Human Resources Manager.
Compensation for Ms. Stringfellow's contractual services in 1999 amounted to
$26,977.
EXECUTIVE COMPENSATION
Report of Compensation and Benefits Committee. The following report of the
Compensation and Benefits Committee of the Board of Directors of The Fauquier
Bank provides information with respect to the compensation paid to The Fauquier
Bank's Chief Executive Officer, C. Hunton Tiffany and to its other executive
officers, Mr. Gary R. Shook, Mr. Randy K. Ferrell and Ms. Diane B. Coppage.
The Fauquier Bank executive compensation program is administered by the
Compensation and Benefits Committee (the "Committee") of the Board of Directors
of The Fauquier Bank. The Committee is comprised of the individuals listed
below, each of whom is a non-employee director of the Bank and the Company. The
Fauquier Bank compensation program for executive officers consists of some or
all of the following elements: base salary; performance-based cash rewards under
the Management Incentive Plan (the "Incentive Plan"); annual grants of options
under the 1998 Omnibus Stock Incentive Plan (the "1998 Plan"); annual matching
contributions under The Fauquier Bank Employees 401k Savings Plan (the "Bank
Savings Plan"), and Split Dollar Insurance.
9
<PAGE>
The Fauquier Bank executive compensation program is designed to enable the
Bank to attract, retain and reward executive officers. The Committee intends to
keep compensation levels competitive with a representative sample of the Bank's
peer institutions. The peer group used by the Committee includes other community
banks of similar size located in Virginia. The Committee's strategy is to
maintain a structure within the executive compensation program that strengthens
the link between executive compensation, The Fauquier Bank's performance,
individual performance of the executive officers and shareholder interests.
The following sections of this Report describe the compensation program for
executive officers in effect in 1999.
Base Salary. The base salary paid to The Fauquier Bank's Chief Executive
Officer, Hunton Tiffany, is determined by the Committee. The Committee
establishes performance thresholds or other measures that directly relate his
base salary to operating performance and a review of the range of salaries
earned by CEOs within a representative peer group, although there is no
predetermined point within such range at which the Committee targets the salary.
Mr. Tiffany's 1999 salary was at the midpoint of the range of salaries paid to
the Chief Executive Officers of the Bank's peer group. The Committee believes
that Mr. Tiffany's 1999 base salary, which reflects an 8.45% increase over his
1998 base salary, is appropriate in relation to the Bank's performance and
consistent with the salaries earned by executives of the Bank's peer group.
The base salaries paid to the Bank's other executive officers, Mr. Shook,
Mr. Ferrell and Ms. Coppage are determined by the CEO. The CEO manages executive
salaries in relation to the salaries paid to executives in peer institutions,
giving effect to operating performance, their relative contributions, and
experience of each executive. Mr. Shook and Mr. Ferrell were each paid
approximately 6% above the midpoint for similar positions in peer organizations,
in each case reflecting a 4% base salary increase for 1999. Ms. Coppage was paid
approximately 10% below the midpoint, and received an 8% salary increase in
1999. In determining base salary, the CEO utilizes a computer based model,
developed by the Bank's outside consultants, for computing salary increases
based on performance reviews. The Committee believes that the base salaries paid
to Mr. Shook, Mr. Ferrell and Ms. Coppage give fair consideration to their
individual contributions in 1999 and are competitive with the Bank's peer group.
Incentive Compensation. Incentive compensation awards for executive
officers of The Fauquier Bank granted under the Management Incentive Plan are
recommended by the Committee and approved by the Bank's Board of Directors based
on each executive officer's achievement of his or her individual performance
objectives. These objectives are tied to measurements of corporate objectives,
such as return on average assets, asset growth, deposit growth, efficiency ratio
and delinquency and charge off percentages, and in some instances, other
objectives that are specific to the executive officer's job function. The
Committee's actions reflect a commitment to maintaining a strong incentive
compensation plan that is directly related to maximizing long-term shareholder
value.
10
<PAGE>
For performance during 1999, The Fauquier Bank awarded cash incentive
compensation under the Management Incentive Plan totaling $116,968 to executive
officers. The incentive compensation awards granted to Mr. Tiffany, Mr. Shook,
Mr. Ferrell and Ms. Coppage were based solely upon The Fauquier Bank's
performance as measured by the corporate objectives set forth above. Each of the
executive officers met the performance objectives established for him for 1999.
Stock Options. The Committee awards stock options to executive officers as
a long-term incentive to align the executives' interest with those of other
shareholders and to encourage significant stock ownership. Under the 1998 Plan,
the Committee grants to selected key employees options to purchase The Company's
Common Stock at a price equal to the fair market value of The Company's Common
Stock on the date of grant. Employees selected under the 1998 Plan are those key
employees who, in the judgment of the committee, are in a position to materially
affect the overall success of The Fauquier Bank and its subsidiaries by reason
of the nature and extent of their duties.
In 1999, pursuant to the 1998 Plan, the Committee granted options for
20,480 shares of The Company's Common Stock to employees of The Fauquier Bank,
including options for 11,992 shares granted to Mr. Tiffany, 2,966 shares granted
each to Mr. Shook, Mr. Ferrell and 2,556 shares granted to Ms. Coppage. The
Committee has not adopted any objective criterion that relates the level of
options granted to the executive officers to performance of The Fauquier Bank or
the individuals. In awarding the grant to the executives, the Committee
considered numerous factors, including The Fauquier Bank's operating
performance, each executive's prior contributions and potential to contribute in
the future and practices within the Bank's peer group with respect to granting
options, although none of these factors was individually determinative.
The stock options granted under the 1998 Plan generally become exercisable
on the third anniversary of the date of grant. The option recipients, including
Mr. Tiffany, will receive value from these grants only to the extent that the
price of The Company's Common Stock exceeds the grant price.
Matching Contributions. The Bank 401K Savings Plan is a voluntary defined
contribution benefit plan designed to provide additional incentive and
retirement security for eligible employees of the Bank. All Bank employees over
the age of 21 are eligible to participate in the Bank Savings Plan. The
executive officers of The Fauquier Bank participate in the Bank Savings Plan on
the same basis as all other eligible employees of the Bank. Under the Bank
Savings Plan, each eligible employee of the Bank may elect to contribute on a
pre-tax basis to the Bank Savings Plan 2% to 15 % of his or her compensation,
subject to certain limitations that may lower the maximum contributions of more
highly compensated participants.
The Board of Directors determines each year whether to match employee
contributions based on the previous year's profitability. In 1999, the Fauquier
Bank's matched fifty cents ($.50) on each dollar contributed by an employee up
to six percent (6%) of that employee's contribution. For 1999, the Bank's
matching contributions to executives totaled $12,951, including $4,800
contributed to the account of Mr. Tiffany, $3,216 contributed to the account of
Mr. Shook, $3,242 contributed to the account of Mr. Ferrell and $1,693
contributed to the account of Ms. Coppage.
11
<PAGE>
Split Dollar Life Insurance Agreement. The Bank currently has a Split
Dollar Life Insurance Agreement with Mr. Ferrell, entered into on January 1,
1996. The policy provides for a combined death benefit of $440,000 to be paid to
named beneficiaries, and the Bank is entitled to policy proceeds in excess of
death benefits. The Bank paid $5,626 for premiums in 1999 in connection with
this agreement.
This report is submitted by the Compensation and Benefits Committee of the
Board of Directors of The Fauquier Bank.
COMPENSATION AND BENEFITS COMMITTEE:
Brian S. Montgomery, Chairman Stanley C. Haworth
Douglas C. Larson Randolph T. Minter
Pat H. Nevill
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN COMPENSATION
DECISIONS. The Compensation and Benefits Committee of The Fauquier Bank is
composed of outside, independent directors, none of whom was, during the fiscal
year 1999 or prior to that time, an employee or officer of the Company, the Bank
or subsidiaries.
SUMMARY COMPENSATION TABLE. The following table sets forth the remuneration
accrued or paid by the Company or The Fauquier Bank (the "Bank") during the
calendar years 1999, 1998, and 1997 for the Bank's Chief Executive Officer and
the two other executive officers who received total annual salary and bonus in
excess of $100,000 in the fiscal year ended December 31, 1999 (the "Named
Executive Officers").
<TABLE>
<CAPTION>
Long Term
Compensation
Annual Compensation Awards
------------------------------------ --------------------
Other All Other
Annual Options/ Compen-
Name and Salary Bonus(1) Compensation SARs(3) sation(4)
Principal Position Year $ $ (2)($) (#) $
----------------------- ------ ---------- ---------- ------------- ----- --------
<S> <C> <C> <C> <C> <C> <C>
($)
C. Hunton Tiffany 1999 169,621 53,371 5,339 11,992 4,800
President & CEO 1998 156,400 37,195 4,619 6,422 4,800
1997 148,631 37,195 4,428 4,442
Randy K. Ferrell 1999 90,290 21,199 103 2,966 8,868
SVP, Commercial Banking 1998 90,863 18,000 135 2,557 8,987
1997 88,863 18,000 135 8,846
Gary R. Shook
SVP, Retail 1999 90,290 21,199 44 2,966 3,216
Investments & 1998 89,775 18,000 48 2,493 3,203
Trust Services 1997 86,275 14,675 48 2,588
</TABLE>
(1) Reflects Incentive Compensation.
(2) Reflects automobile allowance of $1,365 for the President in 1999, $1,362 in
1998, and $1,241 in 1997; group life insurance in excess of $50,000 premiums of
$3,974 for the President in 1999, $3,257 in 1998, and $3,187 in 1997; and group
life insurance in excess of $50,000 for the Senior Vice Presidents.
12
<PAGE>
(3) Reflects the number of Incentive Stock Options and Non-Qualified Stock
Options granted by the Board of Directors.
(4) Represents 401(k) Match paid by the Bank for the President; represents the
portion of split dollar life insurance premiums paid by the Bank on Mr.
Ferrell's behalf of $5,626 in 1999, $5,711 in 1998, and $5,787 in 1997, 401(k)
Match paid by the Bank for Mr. Ferrell of $3,242 in 1999, $3,276 in 1998, and
$3,059 in 1997; and represents 401(k) Match paid by the Bank for Mr. Shook.
OMNIBUS STOCK OWNERSHIP AND LONG TERM INCENTIVE PLAN. On August 29, 1999,
the Board of Directors granted incentive stock options and non-qualified
options, which options, if exercised, would equal 20,480 shares of common stock
pursuant to the Plan. The options have an exercise price of $19.00 per share.
Generally, the options are not exercisable until three years from the date of
grant and generally require continuous employment during the period prior to
exercise. The options will expire in no more than ten years after the date of
grant. For a further description of the Plan, see "Ratification of Amended and
Restated Omnibus Stock Ownership and Long Term Incentive Plan."
The following table provides certain information with respect to options
granted to the Named Executive Officers during the fiscal year ended December
31, 1999.
OPTIONS/SAR GRANTS IN 1999
<TABLE>
<CAPTION>
Number of Percent of
securities Total
underlying options/SARs Exercise or
Options/SARSs granted to employees base price Expiration
Name Granted (#) in fiscal year ($/sh) date 5% ($) 10% ($)
---- ----------- -------------- ------ ---- ------- -------
<S> <C> <C> <C> <C> <C> <C>
C. Hunton Tiffany 11,992 58.5% $19.00 8-18-2009 143,304 363,118
Randy K. Ferrell 2,966 14.5% $19.00 8-18-2009 35,444 89,810
Gary R. Shook 2,966 14.5% $19.00 8-18-2009 35,444 89,810
</TABLE>
The following table provides certain information with respect to the number
of shares of Common Stock represented by outstanding stock options held by the
Named Executive Officers at December 31, 1999. None of the options held by the
Named Executive Officers were "in the money" at December 31, 1999 and no options
were exercised by the Named Executive Officers during the year ended December
31, 1999.
13
<PAGE>
NUMBER OF SECURITIES UNDERLYING
UNEXERCISED OPTIONS AT FISCAL YEAR END (#)
NAME EXERCISABLE UNEXERCISABLE
---- ----------- -------------
C. Hunton Tiffany 0 18,414
Randy K. Ferrell 0 5,523
Gary R. Shook 0 5,459
PENSION PLAN. The Bank has a non-contributory benefit plan which covers
substantially all employees of the Bank who are 21 years of age or older, who
have at least one year of service, and work a minimum of 1,000 hours per year.
The Plan's Normal Retirement Benefit formula is as follows:
(a) 1.35% of the Participant's final 5-year average compensation per year
of service up to 35 years plus
(b) 0.60% of the Participant's final 5-year average compensation, in
excess of his/her Covered Compensation Level, per year of service up
to 35 years.
For purposes of the Plan, "Covered Compensation Level" equals the
average of the last 35 years of the social security wage base at normal
retirement. The Bank's pension plan expense for the fiscal year ended
December 31, 1999 was $69,982. Cash benefits under the Plan generally
commence on retirement, death or other termination of employment and are
payable in various forms, generally at the Participant's election.
PENSION PLAN TABLE
YEARS OF SERVICE
<TABLE>
<CAPTION>
5 YEAR AVERAGE
SALARY 10 15 20 25 30 35
------ -- -- -- -- -- --
<S> <C> <C> <C> <C> <C> <C>
50,000 7,770 11,655 15,540 19,425 23,310 27,195
65,000 10,695 16,043 21,390 26,738 32,085 37,433
80,000 13,620 20,430 27,240 34,050 40,860 47,670
100,000 17,520 26,280 35,040 43,800 52,560 61,320
125,000 22,395 33,593 44,790 55,988 67,185 78,383
150,000 27,270 40,905 54,540 68,175 81,810 95,445
160,000 and 29,220 43,830 58,440 73,050 87,660 102,270
above
</TABLE>
Based on a straight life annuity assuming full benefit at age 65, no
offsets, and covered compensation of $33,000 for a person age 65 in 1999.
Compensation is currently limited to $160,000 by Internal Revenue Service
Regulations and includes all regular pay, overtime and regular bonuses.
14
<PAGE>
The approximate years of service as of January 1, 2000 for the executive
officers are as follows:
<TABLE>
<CAPTION>
SERVICE
NAME YEARS MONTHS DATE OF HIRE
---- ----- ------ ------------
<S> <C> <C> <C> <C>
C. Hunton Tiffany 34 0 1-18-65
Randy K. Ferrell 5 3 9-19-94
Gary R. Shook 5 0 1-17-95
Diane B. Coppage 27 3 9-11-72
</TABLE>
RETIREMENT PLAN. The Bank has a defined contribution retirement plan under
Code Section 401(k) of the Internal Revenue Service covering employees who have
completed six months of service and who are at least 21 years of age. Under the
plan a participant may contribute an amount up to 15% of their covered
compensation for the year, subject to certain limitations. The Bank may also
make, but is not required to make, a discretionary matching contribution. The
amount of this matching contribution, if any, is determined on an annual basis
by the Board of Directors. The Bank made a contribution to the plan for the year
ended December 31, 1999 of $63,057.
INCENTIVE PLANS. No officer or director received remuneration other than as
stated above, in the form of bonus, profit-sharing, pension, retirement, options
or warrants to purchase stock or any other remuneration plan, for the year ended
December 31, 1999. An incentive compensation plan for 1999 was approved by the
Board of Directors to be shared by all employees of the Bank. An incentive pool
of $302,649 for 1999 was divided among all employees of the Bank. There are no
commission agreements between the Company or the Bank and their respective
directors or officers.
CHANGE OF CONTROL AGREEMENTS. The Fauquier Bank has entered into change of
control agreements with the Executive Officers. The change of control agreements
are intended to attract and retain experienced, well-qualified executives who
will advance the best interests of the Bank. The continued success of the Bank
and the Company depends to a significant degree on the skills and competence of
these executives.
The agreements become operative upon a change of control in the Bank. For
purposes of the agreements, a change of control of the Bank occurs if, (i) any
person, including a "group" as defined in Section 13(d)(3) of the Securities
Exchange Act of 1934 (but excluding any group of which the Executive is a
member), becomes the beneficial owner of securities of the Bank or of the
Company having 20% or more of the combined voting power of the then outstanding
Bank or Company securities that may be cast for the election of the Bank or
Company directors other than as a result of an issuance of securities initiated
by the Bank or Company, as long as the majority of the Board of Directors
approving the purchases is a majority at the time the purchases are made; or
(ii) as the direct or indirect result of, or in connection with, a tender or
exchange offer, a merger or other business combination, a sale of assets,
contested election, or any combination of these events, the persons who were
directors of the Bank or Company before such events cease to constitute a
majority of the Bank or Company's Board of Directors, or any successor's board,
within two years of the last of such transactions.
15
<PAGE>
If, after a change of control occurs, an Executive's employment is
terminated within three (3) years, the Executive is entitled to receive the
payments specified in the agreements, unless such termination was for Cause or
the Executive terminates employment without Good Reason. "Cause" means the
Executive's gross negligence or willful misconduct, which is detrimental to the
best interests of the Bank's business operations. "Good Reason" means (i) a
material change in the Executive's functions, duties, responsibilities,
authority, benefits or perquisites, or relocation of the Executive's principal
place of employment, (ii) removal from or failure to re-elect the Executive to a
current position, (iii) a reduction of the Executive's base salary or a failure
to increase such salary in accordance with cost-of-living increases, or (iv) the
failure of any successor to assume and agree to perform the agreements.
If an Executive is terminated not for Cause or terminates employment for
Good Reason: (i) the Bank is required to pay the Executive as compensation for
services rendered to the Bank a cash amount (subject to any applicable payroll
or other taxes required to be withheld) equal to 2.99 times the highest annual
compensation paid to the Executive by the Bank for any six months ending with
the Executive's termination; (ii) In addition to the benefits to which an
Executive is entitled under the retirement plans or programs, in effect, the
Bank is required to pay an Executive a cash amount equal to the actuarial
equivalent of the retirement pension to which the Executive would have been
entitled under the terms of such retirement plan or programs, without regard to
"vesting" thereunder, had the Executive accumulated three (3) additional years
of continuous service after termination at the Executive's base rate in effect
at the time of termination, reduced by the single sum actuarial equivalent of
any amounts to which the Executive is entitled pursuant to the provisions of
said retirement plans or programs; (iii) The Bank is required to maintain in
full force and effect, for the continued benefit of the Executive for a
three-year period after termination, all employee benefit plans and programs or
arrangements in which the Executive was entitled to participate immediately
prior to termination, or substantially similar programs if the Executive's
continued participation is not possible under the general terms and provisions
of such existing plans and programs; and (iv) All stock options granted to the
Executive under any of the Bank's stock option plans shall become immediately
exercisable with respect to all or any portion of the shares covered thereby
regardless of whether such options are otherwise exercisable. The Bank is
required to reimburse the Executive for any federal income tax liability
incurred by the Executive in connection with the exercise of such options which
would not have been incurred by the Executive in connection with the exercise of
such options which would not have been incurred by the Executive in the absence
of such options becoming immediately available upon a change of control.
If any payment made or benefit provided to an Executive pursuant to the
Agreements would constitute an "excessive parachute payment" within the meaning
of Section 280G of the Internal Revenue Code of 1986, as amended and any
regulations thereunder, thereby resulting in a loss of an income tax deduction
by the Bank or the imposition of an excise tax on the Executive under Section
4999 of the Internal Revenue Code of 1986, as amended, then the payments
scheduled under the agreements will be reduced to one dollar less than the
maximum amount which may be paid without causing any such payment or benefit to
be nondeductible.
SPLIT DOLLAR LIFE INSURANCE AGREEMENT. On January 1, 1996, the Bank entered
into a Split Dollar Life Insurance Agreement with Mr. Ferrell pursuant to which
the Bank purchased two existing policies of insurance on Mr. Ferrell's life.
Pursuant to the agreement, the Bank pays a portion of the annual premium on the
insurance policies. The policies provide for a combined death benefit of
$440,000 to be paid to the beneficiaries named therein, and the Bank is entitled
to the total policy proceeds in excess of the death benefits. The Bank paid
$5,626 for premiums in 1999 in connection with this agreement.
16
<PAGE>
STOCK PERFORMANCE GRAPH. The following graph shows a comparison of total
stockholder return on the Company's Common Stock based on its market price,
assuming the reinvestment of dividends, with the cumulative total returns for
the companies on the Nasdaq Stock Market (U.S.) and the SNL Bank Stocks indices
for the period beginning on June 16, 1999, the date that the Company's Common
Stock became registered pursuant to the Securities Exchange Act of 1934, as
amended and ending on December 31, 1999. The graph reflects data from a limited
period of time and, as a result, may not be indicative of possible future
performance of the Common Stock.
[FAUQUIER BANKSHARES PERFORMANCE GRAPH OMITTED]
<TABLE>
<CAPTION>
PERIOD ENDING
----------------------------------------------------------------------------------------------
INDEX 06/16/99 06/30/99 07/31/99 08/31/99 09/30/99 10/31/99 11/30/99 12/31/99
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Fauquier Bankshares, Inc. 100.00 98.03 100.74 97.42 97.42 98.80 92.79 94.79
NASDAQ - Total US* 100.00 106.52 104.87 109.00 108.99 117.05 129.70 158.18
SNL Bank Index 100.00 103.84 97.32 93.50 89.35 103.18 97.91 91.37
</TABLE>
17
<PAGE>
TRANSACTIONS WITH CERTAIN RELATED PERSONS
The Bank has had, and may be expected to have in the future, banking
transactions in the ordinary course of business with executive officers,
directors, their immediate families and affiliated companies in which they are
principal stockholders. Such loans were made on substantially the same terms as
those prevailing for comparable transactions with similar risk. At December 31,
1999, these loans (excluding loans which total less than $60,000) totaled
$4,109,901. During 1999, total principal additions were $1,495,549 and total
principal payments were $1,610,126.
RATIFICATION OF AMENDED AND RESTATED OMNIBUS
STOCK OWNERSHIP AND LONG TERM INCENTIVE PLAN
Introduction. The Board of Directors recommends that you vote for the
ratification of the Amended and Restated Omnibus Stock Ownership and Long Term
Incentive Plan. A brief summary of the Plan follows, with the full text printed
in Exhibit A. Exhibit A contains definitions for many terms used in this
summary.
The Plan is designed to encourage and motivate employees and non-employee
directors to contribute to the successful performance of the Company and the
growth of the market value of the Company's Common Stock; as well as to achieve
a unity of purpose between employees, non-employee directors and shareholders by
providing ownership opportunities. The Plan supports the achievement of the
Company's primary longterm performance objectives and helps to retain employees
and non-employee directors. The original Plan adopted by Shareholders in 1998
was available only to employees; non-employee directors have been included in
the amended Plan.
Administration Of The Plan, Eligibility. The Compensation Committee of the
Company's Board of Directors will administer the Plan. All employees and
non-employee directors of the Company and its Subsidiaries are eligible to
receive Rights under the Plan if the Committee determines that an employee or
non-employee director has contributed, or can be expected to contribute,
significantly to the Company or the Subsidiaries. The granting of Rights to
Eligible Employees and Non-Employee Directors is in the exclusive discretion of
the Committee.
Amount Of Stock Available For The Award Of Rights. Two hundred ninety
thousand (290,000) shares of Common Stock will be reserved and available for
issuance under the amended Plan. The number of shares represents 200,000
initially approved under the Plan adopted in 1998 plus an additional 90,000
shares to be reserved and available for issuance under the amended Plan.
Types Of Rights That May Be Granted Under The Plan. Incentive Stock
Options, Non-Qualified Options, Restricted Stock, Long Term Incentive
Compensation Units, and Stock Appreciation Rights may be granted under the
amended Plan to Eligible Employees.
Restricted Stock, Long Term Incentive Compensation Units, Stock
Appreciation Rights, and Non-Qualified Options may be granted under the amended
Plan to Non-Employee Directors.
18
<PAGE>
Options: The Committee may grant Options to Eligible Employees and
establish the terms and conditions for exercising an Option. The Options may be
Incentive Stock Options or Non-Qualified Options. The exercise price of an
Option will be at least 100% of the Fair Market Value of Common Stock on the
date that the Option is granted by the Committee. Stock Appreciation Rights may
be granted on all or any part of an Option, and also are subject to terms and
conditions set by the Committee.
Stock Appreciation Rights: The Committee may grant Stock Appreciation
Rights to Eligible Employees and Non-Employee Directors. A Stock Appreciation
Right entitles the Employee or Non-Employee Director to receive an amount equal
to the excess of (i) the Fair Market Value of Common Stock on the date of
exercise of stock covered by the surrendered Stock Appreciation Right over (ii)
the Fair Market Value of the Common Stock on the date the Stock Appreciation
Right was granted. The amount will be paid in cash.
Restricted Stock Awards: The Committee may grant Restricted Stock under the
Plan to Eligible Employees or Non-Employee Directors. The Restricted Stock will
be Common Stock subject to certain terms and conditions in the Plan. The
Restricted Stock is forfeited if the restrictions are not met.
Long-Term Incentive Compensation Units: The Committee may grant Units to
Eligible Employees or Non-Employee Directors subject to achievement of
performance objectives during a Performance Period. Performance objectives
include the financial performance of the Company. A Performance period would
generally be at least two years. Retained Units can be paid in the form of a
combination of Common Stock and cash, as determined by the Committee.
Non-Qualified Options may be granted to Non-Employee Directors subject to
specific regulatory and compliance requirements. The grant agreement may specify
the period within which the option will first become exercisable and shall also
state the time or other circumstances under which the Non-Qualified Option is
forfeited or otherwise may cease to be exercisable.
Transferability Of Rights, Modification Of Rights Awarded. When granting
Rights, the Committee can allow such Rights to become fully exercisable or
vested upon a Change in Control. An Optionee may not transfer an Incentive Stock
Option except by will or the laws of descent and distribution. Additionally, an
Optionee may transfer Non-Qualified Options to the extent provided by the
Committee and in accordance with regulatory and compliance laws and regulations.
Optionees cannot sell, transfer, or pledge shares of Restricted Stock until it
becomes unrestricted as provided in an award agreement. Long Term Incentive
Compensation Units and Stock Appreciation Rights may be transferred according to
the terms and conditions for such Units and Rights under the Plan.
Term, Modification Of Plan. The amended Plan is effective as of January 1,
2000. The grant of Rights is generally contingent on shareholder approval of the
Plan and meeting federal or state securities law requirements. Furthermore,
employees and non-employee directors cannot exercise any Options or Stock
Appreciation Rights granted under the Plan until these same conditions are met.
The Plan will terminate ten years after the Effective Date, unless the Board of
Directors terminates it prior to that date.
19
<PAGE>
The Board of Directors can amend or terminate the Plan with respect to
participants, except that only Shareholders can approve amendments that would
(i) increase the number of shares of Common Stock that are reserved and
available for issuance under the Plan; (ii) materially change or impact which
employees or non-employee directors are eligible to participate in the Plan; or
(iii) materially change the benefits that Eligible Employees or Non-Employee
Directors may receive under the Plan. However, the Company can amend the Plan as
necessary and without shareholder approval to ensure that the Plan complies with
certain legal requirements.
Federal Income Tax Consequences. A recipient will not incur federal income
tax liability when granted a Non-Qualified Option, an Incentive Stock Option,
Restricted Stock, a Long Term Incentive Compensation Unit, or a Stock
Appreciation Right.
Upon exercise of a Non-Qualified Option or a Stock Appreciation Right, the
employee or non-employee director, in most circumstances, will be treated as
having received ordinary income. The amount of income will be equal to the
difference between the Fair Market Value of Common Stock on the date of the
exercise and the Option price (for Non-Qualified Options) or the Fair Market
Value of Common Stock on the date of grant (for Stock Appreciation Rights). No
income is received for tax purposes when an Incentive Stock Option is exercised,
unless an employee is subject to the alternative minimum tax.
The employee or non-employee director is taxed on the current Fair Market
Value of Common Stock when the restrictions lapse on Restricted Stock. For Long
Term Incentive Compensation Units, the employee or non-employee director is
taxed on the amount of Common Stock or cash received when payment is made. Both
amounts are taxed as ordinary income.
Any ordinary income taxable to the employee or non-employee director is
subject to income tax withholding by the Company. The employee or non-employee
director is also taxable on the capital gain resulting from any sales of Common
Stock acquired under the Plan. There are three different possible kinds of
capital gains treatment. Gains on the sale of Common Stock held for one year or
less will be taxed to an employee or non-employee director as short-term capital
gain. Gains on the sale of Common Stock held for more than one year, but not
more than 18 months, will be taxed as mid-term capital gain. Finally, gains on
the sale of Common Stock held for more than 18 months will be taxed as long-term
capital gain. Tax rates for mid-term capital gains are usually lower than rates
for short-term capital gains. Tax rates for long-term capital gains are always
lower than rates for mid-term capital gains.
The Company usually will be entitled to a business expense deduction at the
time and in the amount that the recipient of a Right recognizes ordinary income.
As stated above, this usually occurs upon exercise of Non-Qualified Options and
Stock Appreciation Rights, the lapse of restrictions on restricted Stock, and
payments under Long Term Incentive Compensation Units. No deduction is allowed
in connection with an Incentive Stock Option unless the employee disposes of
common Stock received upon exercise in violation of the holding period
requirements. Also there can be circumstances when the deduction is not allowed
for certain transfers of Common Stock or payments to an employee or non-employee
director upon the exercise of a Right that has been accelerated as a result of a
Change in Control.
20
<PAGE>
NEW PLAN BENEFITS. As of the date of this Proxy Statement, no determination
has been made regarding the granting of Awards under the Plan.
The Amended and Restated Fauquier Bankshares, Inc. Omnibus Stock Ownership
and Long Term Incentive Plan is hereby submitted to the shareholders for
ratification.
OTHER MATTERS
The Board of Directors is not aware of any other matters to come before the
Meeting. However, if any other matters properly come before the Meeting, it is
the intention of the persons named in the enclosed form of Proxy to vote said
Proxy in accordance with their judgment in such matters.
The deadline for submitting shareholder proposals for the Year 2001 Annual
Shareholders Meeting will be on or before December 15, 2000.
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors of the Company selected Yount, Hyde & Barbour, P.C.,
independent public accountants to certify the Company's annual financial
statements for the year ending December 31, 1999. Yount, Hyde & Barbour, P.C.
has acted as the independent accountant for the Company since January 1, 1986.
Yount, Hyde & Barbour, P.C. has also acted as the independent accountant for The
Fauquier Bank (the "Bank"), the Company's wholly owned subsidiary, since January
1, 1986. A representative of Yount, Hyde & Barbour, P.C. is expected to be
present at the meeting with the opportunity of making a statement if he so
desires, and to respond to appropriate questions of the Shareholders.
In addition to the audit of the 1999 financial statements of the Company
and the Bank, Yount, Hyde & Barbour, P.C. performed non-audit related services
for the Bank, including the preparation of the Bank's income tax returns, tax
planning, and other accounting services. The retention of Yount, Hyde & Barbour,
P.C. to perform the audit-related services was authorized by the Board of
Directors of the Bank with the knowledge that they also assisted in the
preparation of the Bank's income tax returns, did tax planning, and performed
other accounting services.
21
<PAGE>
FINANCIAL STATEMENTS
Financial statements of the Company are contained in the Annual Report for
the year ended December 31, 1999 which accompanies the Proxy Statement. However,
the Annual Report and the financial statements contained therein are not to be
considered as part of this soliciting material.
RETURN OF PROXIES
WHETHER OR NOT YOU EXPECT TO ATTEND THIS MEETING, PLEASE COMPLETE, DATE,
SIGN AND RETURN YOUR PROXY AS PROMPTLY AS POSSIBLE TO ASSURE REPRESENTATION OF
YOUR STOCK AND HELP ASSURE A QUORUM FOR THE MEETING. YOU MAY REVOKE YOUR PROXY
AT ANY TIME PRIOR TO ITS EXERCISE.
FAUQUIER BANKSHARES, INC.
By Order of the Board of Directors
/s/ C. Hunton Tiffany
C. Hunton Tiffany
Chairman
President/CEO
Warrenton, Virginia
April 14, 2000
22
<PAGE>
REVOCABLE PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
FAUQUIER BANKSHARES, INC.
FAUQUIER BANKSHARES, INC.
ANNUAL MEETING OF SHAREHOLDERS
MAY 23, 2000
11:00 A.M. EASTERN TIME
The undersigned hereby appoints Douglas C. Larson, D. Harcourt Lees, Jr. and
Randolph T. Minter and each of them (with full power to act without the either)
to act as proxy for the undersigned, and to vote all shares of Common Stock of
Fauquier Bankshares, Inc. (the "Company") which the undersigned is entitled to
vote only at the Annual Meeting of Shareholders, to be held on May 23, 2000, at
11:00 a.m. Eastern Time, at The Fauquier Springs Country Club, Springs Road,
Warrenton, Virginia, and at any and all adjournments thereof, as set forth on
the reverse side.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH OF THE PROPOSALS PRESENTED.
THE UNDERSIGNED ACKNOWLEDGES RECEIPT FROM THE COMPANY PRIOR TO THE
EXECUTION OF THIS PROXY OF A NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND PROXY
STATEMENT DATED APRIL 14, 2000 AND OF THE ANNUAL REPORT TO SHAREHOLDERS.
PLEASE COMPLETE, DATE, SIGN AND MAIL THIS PROXY
PROMPTLY IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
Signature(s) Dated:
-------------------------------------- ----------------
NOTE: Please sign exactly as your name appears on this card. When signing as
attorney, executor, administrator, trustee or guardian, please give
your full title. If shares are held jointly, each holder may sign but
only one signature is required.
(Continued, and to be marked on the other side)
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<TABLE>
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<S> <C> <C>
1. The election as directors of all nominees listed VOTE
(except as marked to the contrary below). FOR WITHHELD
C.H. Lawrence, Jr., H.M. Ross, C.H. Tiffany and J.J. Norman, Jr.
INSTRUCTION: To withhold your vote for any individual nominee, write
that nominee's name on the line provided below.
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2. The ratification of the Amended and Restated Fauquier Bankshares, FOR AGAINST ABSTAIN
Inc. Omnibus Stock Ownership and Long Term Incentive Plan.
</TABLE>
THIS PROXY IS REVOCABLE AND WILL BE VOTED AS DIRECTED, BUT IF NO
INSTRUCTIONS ARE SPECIFIED, THIS PROXY WILL BE VOTED FOR EACH OF THE PROPOSALS
LISTED. IF ANY OTHER BUSINESS IS PRESENTED AT THE ANNUAL MEETING, INCLUDING
WHETHER OR NOT TO ADJOURN THE MEETING, THIS PROXY WILL BE VOTED BY THE PROXY
HOLDERS IN THEIR BEST JUDGMENT. AT THE PRESENT TIME, THE PROXY HOLDERS KNOWS OF
NO OTHER BUSINESS TO BE PRESENTED AT THE ANNUAL MEETING.
EXHIBIT 1
FAUQUIER BANKSHARES, INC.
OMNIBUS STOCK OWNERSHIP AND
LONG TERM INCENTIVE PLAN
AMENDED AND RESTATED EFFECTIVE JANUARY 1, 2000
THIS IS THE OMNIBUS STOCK OWNERSHIP AND LONG TERM INCENTIVE PLAN
("Plan") of FAUQUIER BANKSHARES, INC. (the "Corporation" or "Company"), a
Virginia corporation with its principal office in Warrenton, Virginia, under
which Incentive Stock Options to acquire shares of the Stock may be granted from
time to time to Eligible Employees, and Non-Qualified Options to acquire shares
of the Stock, Restricted Stock, Stock Appreciation Rights, and/or Units may be
granted from time to time to Eligible Employees and Non-Employee Directors of
the Corporation and of any of its Subsidiaries (the "Subsidiaries"), subject to
the following provisions:
ARTICLE I
DEFINITIONS
The following terms shall have the meanings set forth below. Additional
terms defined in this Plan shall have the meanings ascribed to them when first
used herein.
1.1 BOARD. The Board of Directors of FAUQUIER BANKSHARES, INC.
1.2 CHANGE IN CONTROL TRANSACTION.
(a) Any person, including a "group" as defined in Section 13(d)(3) of
the 1934 Act becomes the owner or beneficial owner of securities of the Company
or of the Fauquier Bank (the "Bank") having 20% or more of the combined voting
power of the then outstanding Bank of Company securities that may be cast for
the election of the Bank or Company directors other than a result of an issuance
of securities initiated by the Bank or Company, as long as the majority of the
Board of Directors approving the purchases is a majority at the time the
purchases are made; or
(b) as the direct or indirect result of, or in connection with, a
tender or exchange offer, a merger or other business combination, a sale of
assets, contested election, or any combination of these events, the persons who
were directors of the Bank or Company before such events cease to constitute a
majority of the Bank's or Company's Board, or any successor's board, within two
years of the last of such transactions.
For purposes of this Agreement, the date of the Change in Control
Transaction is the date on which an event described in (a) or (b) occurs. If a
Change in Control Transaction occurs on account of a series of transactions, the
date of the Change in Control Transaction is the date of the last of such
transactions.
1.3 CODE. The Internal Revenue Code of 1986, as amended.
1.4 COMMITTEE. The Compensation Committee of the Board.
1.5 COMMON STOCK. The common stock, $3.13 par value per share, of
the Corporation.
1.6 DEATH. The date of death as established by the relevant death
certificate.
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1.7 DISABILITY. For purposes of Incentive Stock Options, the date
on which an Eligible Employee becomes permanently and totally disabled within
the meaning of Section 22 (e) (3) of the Code, which shall be determined by the
Committee on the basis of such medical or other evidence as it may reasonably
require or deem appropriate. For purposes of other Rights, the date on which an
Eligible Employee or Non-Employee Director becomes disabled as determined by the
Committee in its sole discretion on the basis of such medical or other evidence
as it may reasonably require or deem appropriate
1.8 EFFECTIVE DATE. The date on which this Plan is adopted by the
Board.
1.9 ELIGIBLE EMPLOYEES. Those individuals who meet the following
eligibility requirements:
(i) Such individual must be a full time employee of the
Corporation or a Subsidiary. For this purpose, an individual shall be
considered to be an "employee" only if there exists between the
Corporation or a Subsidiary and the individual the legal and bona fide
relationship of employer and employee. In determining whether such
relationship exists, the regulations of the United States Treasury
Department relating to the determination of such relationship for the
purpose of collection of income tax at the source on wages shall be
applied.
(ii) Such individual falls within the job grade
classifications set forth in Schedule 1. Such job grade classification
may be amended, expanded, restricted or otherwise modified by the
Committee, subject to ratification of such action by the Board.
(iii) Such individual, being otherwise an Eligible Employee
under the foregoing items, shall have been selected by the Committee as
a person to whom a Right or Rights shall be granted under the Plan.
1.10 FAIR MARKET VALUE. With respect to the Corporation's Common
Stock, the market price per share of such Common Stock determined by the
Committee, consistent with the requirements of Section 422 of the Code and to
the extent consistent therewith, as follows, as of the date specified in the
context within which such term is used:
(i) if the Common Stock was traded on a stock exchange on the
date in question, then the Fair Market Value will be equal to the
closing price reported by the applicable composite-transactions report
on the last trading day prior to such date;
(ii) if the Common Stock was traded over-the-counter on the
date in question and was classified as a national market issue, then
the Fair Market Value will be equal to the last transaction price
quoted by the Nasdaq National Market System ("NMS") on the last trading
day prior to such date;
(iii) if the Common Stock was traded over-the-counter on the
date in question but was not classified as a national market issue,
then the Fair Market Value will be equal to the average of the last
reported representative bid and asked prices quoted by Nasdaq on the
last trading day prior to such date; and
(iv) if none of the foregoing provisions is applicable, then
the Fair Market Value will be determined by the Committee in good faith
on such basis as it deems appropriate. In such case, the Committee
shall maintain a written record of its method of determining Fair
Market Value.
1.11 ISO. An "incentive stock option" as defined in Section 422 of
the Code.
1.12 JUST CAUSE TERMINATION. A termination by the Corporation or a
Subsidiary of an Eligible Employee's employment by the Corporation or the
Subsidiary in connection with the good faith determination of the Board or the
Board of Directors of the Subsidiary, as applicable, that the Eligible Employee
is incompetent or otherwise has engaged in any acts involving dishonesty or
moral turpitude or in any acts that materially and adversely affect the
business, affairs or reputation of the Corporation or the Subsidiary.
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1.13 NON-EMPLOYEE DIRECTOR. A member of the Board who is not an
employee of the Corporation on the date of grant.
1.14 NON-QUALIFIED OPTION. Any Option granted under III whether
designated by the Committee as a Non-Qualified Option or otherwise, other than
an Option designated by the Committee as an ISO, or any Option so designated but
which, for any reason, fails to qualify as an ISO pursuant to Section 422 of the
Code and the rules and regulations thereunder. Options granted under VII are
also Non-Qualified Options.
1.15 OPTION AGREEMENT. The agreement between the Corporation and an
Optionee with respect to Options granted to such Optionee, including such terms
and provisions as are necessary or appropriate under III or VII.
1.16 OPTIONS. ISOs and Non-Qualified Options are collectively
referred to herein as "Options;" provided, however, whenever reference is
specifically made only to ISOs or Non-Qualified Options, such reference shall be
deemed to be made to the exclusion of the other.
1.17 PLAN POOL. A total of two hundred and ninety thousand
(290,000) shares of authorized, but unissued, Common Stock, as adjusted pursuant
to Section 2.3(b), which shall be available as Stock under this Plan.
1.18 REGISTRATION. The registration by the Corporation under the
1933 Act and applicable state "Blue Sky" and securities laws of this Plan, the
offering of Rights under this Plan, the offering of Stock under this Plan,
and/or the Stock acquirable under this Plan.
1.19 RESTRICTED STOCK. The Stock which a Holder shall be awarded
with restrictions when, as, in the amounts and with the restrictions described
in IV.
1.20 RESTRICTED STOCK GRANT AGREEMENT. The agreement between the
Corporation and a Holder with respect to Rights to Restricted Stock, including
such terms and provisions as are necessary or appropriate under IV.
1.21 RETIREMENT. "Retirement" shall mean
(i) the termination of an Eligible Employee's employment under
conditions which would constitute "normal retirement" or "early
retirement" under any tax qualified retirement plan maintained by the
Corporation or a Subsidiary, or
(ii) the termination of an Eligible Employee's employment
after attaining age 65 (except in the case of a Just Cause
Termination); or
(iii) the termination of a Non-Employee Director's service as
a member of the Board after attaining age 65, or otherwise in
accordance with Company policy regarding the retirement of Non-Employee
Directors.
1.22 RIGHTs. The rights to exercise or receive the Options,
Restricted Stock, Units and SARs described herein.
1.23 RIGHTS AGREEMENT. An Option Agreement, a Restricted Stock
Grant Agreement, a Unit Agreement or an SAR Agreement.
1.24 SAR. The Right of an SAR Recipient to receive cash when, as
and in the amounts described in VI.
1.25 SAR AGREEMENT. The agreement between the Corporation and an
SAR Recipient with respect to the SAR awarded to the SAR Recipient, including
such terms and conditions as are necessary or appropriate under VI.
1.26 SEC. The Securities and Exchange Commission.
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1.27 STOCK. The shares of Common Stock in the Plan Pool available
for issuance pursuant to the valid exercise of a Right.
1.28 TAX WITHHOLDING LIABILITY. All federal and state income taxes,
social security tax, and any other taxes applicable to the compensation income
arising from the transaction required by applicable law to be withheld by the
Corporation.
1.29 TRANSFER. The sale, assignment, transfer, conveyance, pledge,
hypothecation, encumbrance, loan, gift, attachment, levy upon, assignment for
the benefit of creditors, by operation of law (by will or descent and
distribution), transfer by a qualified domestic relations order, a property
settlement or maintenance agreement, transfer by result of the bankruptcy laws
or otherwise of a share of Stock or of a Right.
1.30 UNITS. The Right of a Unit Recipient to receive a combination
of cash and Stock when, as and in the amounts described in V.
1.31 UNIT AGREEMENT. The agreement between the Corporation and Unit
Recipient with respect to the award of Units to the Unit Recipient, including
such terms and conditions as are necessary or appropriate under V.
1.32 1933 ACT. The Securities Act of 1933, as amended.
1.33 1934 ACT. The Securities Exchange Act of 1934, as amended.
ARTICLE II
2.1 PURPOSE. The purposes of this Plan are to encourage and
motivate employees within specified job grade classifications and Non-Employee
Directors to contribute to the successful performance of the Corporation and its
Subsidiaries and the growth of the market value of the Corporation's Common
Stock; to achieve a unity of purpose between such employees, Non-Employee
Directors and shareholders by providing ownership opportunities; and to retain
such employees and Non-Employee Directors by rewarding them with potentially
tax-advantageous future compensation. These objectives will be promoted through
the granting of Rights to designated Eligible Employees and Non-Employee
Directors pursuant to the terms of this Plan.
2.2 ADMINISTRATION.
(a) The Plan shall be administered by the Committee which shall consist
of two or more non-employee directors as defined in Rule 16b-3(b)(3)(i)
promulgated by the SEC under the 1934 Act. The Committee may designate any
officers or employees of the Corporation or any Subsidiary to assist in the
administration of the Plan, to execute documents on behalf of the Committee and
to perform such other ministerial duties as may be delegated to them by the
Committee.
(b) Subject to the provisions of the Plan, the determinations and the
interpretation and construction of any provision of the Plan by the Committee
shall be final and conclusive upon persons affected thereby. By way of
illustration and not of limitation, the Committee shall have the discretion:
(i) to construe and interpret the Plan and all Rights granted
hereunder and to determine the terms and provisions (and amendments
thereof) of the Rights granted under the Plan (which need not be
identical);
(ii) to define the terms used in the Plan and in the Rights
granted hereunder;
(iii) to prescribe, amend and rescind the rules and
regulations relating to the Plan;
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(iv) to determine the Eligible Employees to whom and the time
or times at which such Rights shall be granted, the number of shares of
Stock, as and when applicable, to be subject to each Right, the
exercise price or, other relevant purchase price or value pertaining to
a Right, and the determination of leaves of absence which may be
granted to Eligible Employees without constituting a termination of
their employment for the purposes of the Plan; and
(v) to make all other determinations and interpretations
necessary or advisable for the administration of the Plan.
(c) It shall be in the discretion of the Committee to grant Options to
purchase shares of Stock which qualify as ISOs under the Code or which will be
given tax treatment as Non-Qualified Options. Any Options granted which fail to
satisfy the requirements for ISOs shall become Non-Qualified Options.
(d) In determining the Eligible Employees to whom Rights may be granted
and the number of shares of Stock to be covered by each Right, the Committee
shall take into account such factors as the Committee shall deem relevant. An
Eligible Employee who has been granted a Right under this Plan may be granted an
additional Right or Rights under this Plan if the Committee shall so determine.
If, pursuant to the terms of this Plan, or otherwise in connection with this
Plan, it is necessary that the percentage of stock ownership of an Eligible
Employee be determined, the ownership attribution provisions set forth in
Section 424(d) of the Code shall be controlling.
(e) The granting of Rights to Eligible Employees and Non-Employee
Directors is in the exclusive discretion of the Committee, and until the
Committee acts, no Eligible Employee or Non-Employee Director shall have any
rights under this Plan. The terms of this Plan shall be interpreted in
accordance with this intent. The grant of Rights shall not obligate the Company
to pay an Eligible Employee any particular amount of remuneration, to continue
the employment of the Eligible Employee after the grant or to make further
grants to the Eligible Employee at any time thereafter. Neither the adoption of
the Plan, its operation, documents describing or referring to the Plan (or any
part thereof) shall confer on any Non-Employee Director any right to continue
service as a member of the Board.
2.3 STOCK AVAILABLE FOR RIGHTS.
(a) Shares of the Stock shall be subject to, or underlying, grants of
Options, Restricted Stock and Units under this Plan. The total number of shares
of Stock for which, or with respect to which, Rights may be granted (including
the number of shares of Stock in respect of which Units may be granted) under
this Plan shall be those designated in the Plan Pool. In the event that a Right
granted under this Plan to any Eligible Employee or Non-Employee Director
expires or is terminated unexercised as to any shares of Stock covered thereby,
such shares thereafter shall be deemed available in the Plan Pool for the
granting of Rights under this Plan; provided, however, if the expiration or
termination date of a Right is beyond the term of existence of this Plan as
described in Section 8.3, then any shares of Stock covered by unexercised or
terminated Rights shall not reactivate the existence of this Plan and therefore
shall not be available for additional grants of Rights under this Plan.
(b) In the event the outstanding shares of Common Stock are increased,
decreased, changed into or exchanged for a different number or kind of
securities as a result of a stock split, reverse stock split, stock dividend,
recapitalization, merger, share exchange acquisition, combination or
reclassification appropriate proportionate adjustments will be made in: (i) the
aggregate number and/or kind of shares of Stock in the Plan Pool that may be
issued pursuant to the exercise of, or that are underlying, Rights granted
hereunder; (ii) the exercise or other purchase price or value pertaining to, and
the number and/or kind of shares of Stock called for with respect to, or
underlying, each outstanding Right granted hereunder; and (iii) other rights and
matters determined on a per share basis under this Plan or any Rights Agreement.
Any such adjustments will be made only by the Committee, subject to ratification
by the Board, and when so made will be effective, conclusive and binding for all
purposes with respect to this Plan and all Rights then outstanding. No such
adjustments will be required by reason of (i) the issuance or sale by the
Corporation for cash of additional shares of its Common Stock or securities
convertible into or exchangeable for shares of its Common Stock, or (ii) the
issuance of shares of Common Stock in exchange for shares of the capital stock
of any corporation, financial institution or other organization acquired by the
Corporation or any Subsidiary in connection therewith.
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(c) The grant of a Right pursuant to this Plan shall not affect in any
way the right or power of the Corporation to make adjustments, reclassification,
reorganizations or changes of its capital or business structure or to merge or
to consolidate or to dissolve, liquidate or sell, or transfer all or any part of
its business or assets.
(d) No fractional shares of Stock shall be issued under this Plan for
any adjustment under Section 2.3(b).
2.4 SEVERABLE PROVISIONS. The Corporation intends that the provisions
of each of Articles III, IV, V, VI, and VII in each case together with Articles
I, II and VIII, shall each be deemed to be effective on an independent basis,
and that if one or more of such Articles, or the operative provisions thereof,
shall be deemed invalid, void or voidable, the remainder of such Articles shall
continue in full force and effect.
ARTICLE III
OPTIONS
3.1 GRANT OF OPTIONS.
(a) Options may be granted to Eligible Employees as provided in this
Article III. Options will be deemed granted pursuant to this Article III only
upon (i) authorization by the Committee, and (ii) the execution and delivery of
an Option Agreement by the Eligible Employee optionee ("the "Optionee") and a
duly authorized officer of the Company. Options will not be deemed granted
hereunder merely upon authorization of such grant by the Committee. The
aggregate number of shares of Stock potentially acquirable under all Options
granted shall not exceed the total number of shares of Stock remaining in the
Plan Pool, less all shares of Stock potentially acquired under, or underlying,
all other Rights outstanding under this Plan.
(b) The Committee shall designate Options at the time a grant is
authorized as either ISOs or Non-Qualified Options. In accordance with Section
422 (d) of the Code, the aggregate Fair Market Value (determined as of the date
an ISO is granted) of the shares of Stock as to which an ISO may first become
exercisable by an Optionee in a particular calendar year (pursuant to Article
III and all other plans of the Company and/or its Subsidiaries) may not exceed
$100,000 (the "$100,000 Limitation"). If an Optionee is granted Options in
excess of the $100,000 Limitation, or if such Options otherwise become
exercisable with respect to a number of shares of Stock which would exceed the
$100,000 Limitation, such excess Options shall be Non-Qualified Options.
3.2 EXERCISE PRICE.
(a) The initial exercise price of each Option granted under this Plan
(the "Exercise Price") shall be determined by the Committee in its discretion;
provided, however, that the Exercise Price of an ISO shall not be less than (i)
the Fair Market Value of the Common Stock on the date of grant of the Option, in
the case of any Eligible Employee who does not own stock possessing more than
ten percent (10%) of the total combined voting power of all classes of the
capital stock of the Company (within the meaning of Section 422 (b) (6) of the
Code), or (ii) one hundred ten percent (110%) of such Fair Market Value in the
case of any Eligible Employee who owns stock in excess of such amount.
(b) In its discretion and subject to the provisions of Section 3.2(a)
(as to the establishment of the Exercise Price of an Option on the date of
grant), the Committee may establish that the Exercise Price of an Option shall
be adjusted based on subsequent events. The adjustments may include adjustments,
upward or downward, on a quarterly basis, based upon the market value
performance of the Common Stock in comparison with the aggregate market value
performance of one or more indices composed of publicly-traded financial
institutions and financial institution holding companies deemed by the Committee
to be similar (in terms of asset size, capitalization, trading volumes and other
factors deemed relevant by the Committee) to the Company (an "Index" and the
"Indices"). The Exercise Price of an ISO shall not be adjustable if, under the
Code, such adjustable Exercise Price would disqualify the ISO as an ISO. The
Committee may utilize Indices published by third parties and/or may construct
one or more Indices meeting the characteristics described above or other
characteristics.
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The Indices utilized may be recalculated quarterly, including in such
quarterly recalculation such adjustments for stock splits, reverse stock splits
and stock dividends of the companies in the indices and of the Company as are
appropriate. If more than one Index is utilized by the Committee, it may give
such weighting to each Index utilized as the Committee may determine in its sole
discretion, consistent with the provisions of this Article III.
3.3 TERMS AND CONDITIONS OF OPTIONS.
(a) All Options must be granted within ten (10) years of the Effective
Date.
(b) The Committee may grant ISOs and Non-Qualified Options, either
separately or jointly, to an Eligible Employee.
(c) Each grant of Options shall be evidenced by an Option Agreement in
form and substance satisfactory to the Committee in its discretion, consistent
with the provisions of this Article III.
(d) At the discretion of the Committee, an Optionee, as a condition to
the granting of an Option, may be required to execute and deliver to the Company
a confidential information agreement or other employment-related agreements
approved by the Committee.
(e) Except as otherwise provided herein, each Option Agreement may
specify the period or periods of time within which each Option or portion
thereof will first become exercisable (the "Vesting Period") with respect to the
total number of shares of Stock acquirable thereunder. Such Vesting Periods will
be fixed by the Committee in its discretion, and may be accelerated or shortened
by the Committee in its discretion.
(f) An Optionee shall have no rights as a shareholder of the Company
with respect to any shares of Stock covered by Options granted to the Optionee
until payment in full of the Exercise Price by such Optionee for the shares
being purchased. No adjustment shall be made for dividends (ordinary or
extraordinary, whether in cash, securities or other property) or distributions
or other rights for which the record date is prior to the date such Stock is
fully paid for, except as provided in Sections 2.3(b) and 3.2(b).
(g) To the extent provided in an Option Agreement, shares of Stock
obtained pursuant to an Option which qualifies as an ISO may be held in escrow
for a period which ends on the later of (i) two (2) years from the date of the
granting of the ISO or (ii) one (1) year after the issuance of such shares
pursuant to the exercise of the ISO. Such shares of Stock shall be held by the
Company or its designee. The Optionee who has exercised the ISO shall have all
rights of a shareholder, including, but not limited to, the rights to vote,
receive dividends and sell such shares. The sole purpose of the escrow is to
inform the Company of a disqualifying disposition of the shares of Stock
acquired within the meaning of Section 422 of the Code, and it shall be
administered solely for this purpose.
3.4. EXERCISE OF OPTIONS.
(a) An Optionee must be an Eligible Employee at all times from the date
of grant until the exercise of the Options granted, except as provided in
Section 3.5(b) or in the Option Agreement.
(b) An Option may be exercised to the extent exercisable (i) by giving
written notice of exercise to the Company, specifying the number of full shares
of Stock to be purchased and, if applicable, accompanied by full payment of the
Exercise Price thereof and the amount of the Tax Withholding Liability pursuant
to Section 3.4(c) below; and (ii) by giving assurances satisfactory to the
Company that the shares of Stock to be purchased upon such exercise are being
purchased for investment and not with a view to resale in connection with any
distribution of such shares in violation of the 1933 Act; provided, however,
that in the event the prior occurrence of the Registration or in the event
resale of such Stock without such Registration would otherwise be permissible,
this second condition will be inoperative if, in the opinion of counsel for the
Company, such condition is not required under the 1933 Act or any other
applicable law, regulation or rule of any governmental agency.
(c) As a condition to the issuance of the shares of Stock upon full or
partial exercise of a Non-Qualified Option, the Optionee will pay to the Company
in cash, or in such other form as the Committee may determine in its discretion
(including the withholding of shares of Stock as to which the Option is then
being exercised), the amount of the Company's Tax Withholding Liability required
in connection with such exercise.
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(d) The Exercise Price of an Option shall be payable to the Company
either (i) in United States dollars, in cash or by check, Corporation draft or
money order payable to the order of the Company, or (ii) at the discretion of
the Committee, through the delivery of shares of the Stock owned by the Optionee
(including, if the Committee so permits, a portion of the shares of stock as to
which the Option is then being exercised) with a Fair Market Value as of the
date of delivery equal to the Exercise Price, or (iii) at the discretion of the
Committee by a combination of (i) and (ii) above. No shares of Stock shall be
delivered until full payment has been made.
3.5 TERM AND TERMINATION OF OPTION.
(a) The Committee shall determine, and each Option Agreement shall
state, the expiration date or dates of each Option, but such expiration date
shall be not later than ten (10) years after the date such Option was granted
(the "Option Period"). In the event an ISO is granted to a 10% Shareholder, the
expiration date or dates of each Option Period shall be not later than five (5)
years after the date such Option is granted. The Committee, in its discretion,
may extend the expiration date or dates of an Option Period of any Non-Qualified
Option after such date was originally set; provided, however such expiration
date may not exceed the maximum expiration date described in this Section
3.5(a).
(b) To the extent not previously exercised, each Option will terminate
upon the expiration of the Option Period specified in the Option Agreement;
provided, however, that, subject to the provisions of Section 3.5(a), each ISO
will terminate upon the earlier of: (i) ninety (90) days after the date that the
Optionee ceases to be an Eligible Employee for any reason, other than by reason
of Death, Disability, or a Just Cause Termination; (ii) twelve (12) months after
the date that the Optionee ceases to be an Eligible Employee by reason of
Disability. The Committee may, in its discretion, specify other events that will
result in the termination of an ISO (including, without limitation, termination
of employment by reason of Death, or a Just Cause Termination). In the case of
Non-Qualified Options, the Committee shall have full discretion to specify what,
if any, events will terminate the Option prior to the expiration of the Option
Period.
3.6 CHANGE IN CONTROL TRANSACTION. At any time prior to the date of
consummation of a Change in Control Transaction, the Committee may, in its
absolute discretion, determine that all or any part of the Options theretofore
granted under this Article III shall become immediately exercisable in full and
may thereafter be exercised at any time before the date of consummation of the
Change in Control Transaction (except as otherwise provided in Article II
hereof. Any Option that has not been fully exercised before the date of
consummation of the Change in Control Transaction shall terminate on such date,
unless a provision has been made in writing in connection with such transaction
for the assumption of all Options theretofore granted, or the substitution for
such Options of options to acquire the voting stock of a successor employer
corporation, or a parent or a subsidiary thereof, with appropriate adjustments
as to the number and kind of shares and prices, in which event the Options
theretofore granted shall continue in the manner and under the terms so
provided.
3.7 RESTRICTIONS ON TRANSFER. An Incentive Stock Option may not be
Transferred except by will or the laws of descent and distribution and, during
the lifetime of the Optionee to whom it was granted, may be exercised only by
such Optionee. A Non-Qualified Stock Option may not be Transferred except by
will or the laws of descent and distribution, unless otherwise provided in the
Option Agreement.
3.8 STOCK CERTIFICATES. Certificates representing the Stock issued
pursuant to the exercise of Options will bear all legends required by law and
necessary to effectuate the provisions hereof. The Company may place a "stop
transfer" order against such shares of Stock until all restrictions and
conditions set forth in this Article III, the applicable Option Agreement, and
in the legends referred to in this Section 3.8 have been complied with.
3.9 AMENDMENT AND DISCONTINUANCE. The Board may amend, suspend or
discontinue the provisions of this Article III at any time or from time to time;
provided that no action of the Board will cause ISOs granted under this Plan not
to comply with Section 422 of the Code unless the Board specifically declares
such action to be made for that purpose; and, provided, further, that no such
action may, without the approval of the shareholders of the Company, materially
increase (other than by reason of an adjustment pursuant to Section 2.3(b)
hereof) the maximum aggregate number of shares of Stock in the Plan Pool,
materially increase the benefits accruing to Eligible Employees or materially
modify eligibility requirements for participation under this Article III.
Moreover, no such action may alter or impair any Option previously granted under
this Article III without the consent of the applicable Optionee.
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3.10 COMPLIANCE WITH RULE 16B-3. With respect to persons subject to
Section 16 of the 1934 Act, transactions under this Article III are intended to
comply with all applicable conditions of Rule 16b-3 or its successors under the
1934 Act. To the extent any provision of this Article III or action by the Board
or the Committee fails so to comply, it shall be deemed null and void, to the
extent permitted by law and deemed advisable by the Committee
ARTICLE IV
RESTRICTED STOCK GRANTS
4.1 GRANTS OF RESTRICTED STOCK.
(a) Restricted Stock may be issued to Eligible Employees and
Non-Employee Directors as provided in this Article IV. Restricted Stock will be
deemed issued only upon (i) authorization by the Committee and (ii) the
execution and delivery of a Restricted Stock Grant Agreement by the Eligible
Employee or Non-Employee Director to whom such Restricted Stock is to be issued
(the "Holder") and a duly authorized officer of the Company. Restricted Stock
will not be deemed to have been issued merely upon authorization by the
Committee.
(b) Each issuance of Restricted Stock pursuant to this Article IV will
be evidenced by a Restricted Stock Grant Agreement between the Company and the
Holder in form and substance satisfactory to the Committee in its sole
discretion, consistent with this Article IV. Each Restricted Stock Grant
Agreement will specify the purchase price per share, if any, paid by the Holder
for the Restricted Stock, such amount to be fixed by the Committee in its
discretion.
(c) Without limiting the foregoing, each Restricted Stock Grant
Agreement shall set forth the terms and conditions of any forfeiture provisions
regarding the Restricted Stock, (including any provisions for accelerated
vesting in the event of a Change in Control Transaction) as determined by the
Committee in its discretion.
(d) At the discretion of the Committee, the Holder, as a condition to
the issuance of shares, may be required (i) to execute and deliver to the
Company a confidential information agreement approved by the Committee, and/or
(ii) to agree to pay to the Corporation in cash, or in such other form as the
Committee may determine in its discretion (including the withholding of shares
of Stock as to which the Option is then being exercised), the amount of the
Corporation's Tax Withholding Liability required in connection with lapse of
restrictions on such Restricted Stock.
4.2 RESTRICTIONS ON TRANSFER OF RESTRICTED STOCK.
(a) Shares of Restricted Stock acquired by a Holder may be Transferred
only in accordance with the specific limitations on the Transfer of Restricted
Stock imposed by applicable state or federal securities laws or set forth below,
and subject to certain undertakings of the transferee set forth in Section
4.2(c). All Transfers of Restricted Stock not meeting the conditions set forth
in this Section 4.2(a) are expressly prohibited.
(b) Any prohibited Transfer of Restricted Stock is void and of no
effect. Should such a Transfer purport to occur, the Company may refuse to carry
out the Transfer on its books, attempt to set aside the Transfer, enforce any
undertaking or right under this Section 4.2(b), and/or exercise any other legal
or equitable remedy.
(c) Any Transfer of Restricted Stock that would otherwise be permitted
under the terms of this Plan is prohibited unless the transferee executes such
documents as the Company may reasonably require to ensure the Company's rights
under a Restricted Stock Grant Agreement and this Article IV are adequately
protected with respect to the Restricted Stock so Transferred. Such documents
may include, without limitation, an agreement by the transferee to be bound by
all of the terms of this Plan applicable to Restricted Stock and of the
applicable Restricted Stock Grant Agreement, as if the transferee were the
original Holder of such Restricted Stock.
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(d) To facilitate the enforcement of the restrictions on Transfer set
forth in this Article IV, the Committee may, at its discretion, require the
Holder of shares of Restricted Stock to deliver the certificate(s) for such
shares with a stock power executed in blank by the Holder and the Holder's
spouse, to the Secretary of the Company or his or her designee, and the Company
may hold said certificate(s) and stock power(s) in escrow and take all such
actions as are necessary to insure that all Transfers and/or releases are made
in accordance with the terms of this Plan. The certificates may be held in
escrow so long as the shares of Restricted Stock whose ownership they evidence
are subject to any restriction on Transfer under this Article IV or under a
Restricted Stock Grant Agreement. Each Holder shall acknowledge that the
Secretary of the Company (or his or her designee) is so appointed as the escrow
holder with the foregoing authorities as a material inducement to the issuance
of shares of Restricted Stock under this Article IV, that the appointment is
coupled with an interest, and that it accordingly will be irrevocable. The
escrow holder will not be liable to any party to a Restricted Stock Grant
Agreement (or to any other party) for any actions or omissions unless the escrow
holder is grossly negligent relative thereto. The escrow holder may rely upon
any letter, notice or other document executed by any signature purported to be
genuine.
4.3 COMPLIANCE WITH LAW. Notwithstanding any other provision of this
Article IV, Restricted Stock may be issued pursuant to this Article IV only
after there has been compliance with all applicable federal and state securities
laws, and such issuance will be subject to this overriding condition. The
Company may include shares of Restricted Stock in a Registration, but will not
be required to register or qualify Restricted Stock with the SEC or any state
agency.
4.4 STOCK CERTIFICATES. Certificates representing the Restricted Stock
issued pursuant to this Article IV will bear all legends required by law and
necessary to effectuate the provisions hereof. The Company may place a "stop
transfer" order against shares of Restricted Stock until all restrictions and
conditions set forth in this Article IV, the applicable Restricted Stock Grant
Agreement and the legends referred to in this Section 4.4 have been complied
with.
4.5 MARKET STANDOFF. To the extent requested by the Company and any
underwriter of securities of the Company in connection with a firm commitment
underwriting, no Holder of any shares of Restricted Stock will Transfer any such
shares not included in such underwriting, or not previously registered in a
Registration, during the one hundred twenty (120) day period following the
effective date of the registration statement filed with the SEC under the 1933
Act in connection with such offering.
4.6 AMENDMENT AND DISCONTINUANCE. The Board may amend, suspend or
discontinue this Article IV at any time or from time to time; provided, that no
such action of the Board shall alter or impair any rights previously granted to
Holders under this Article IV without the consent of such affected Holders.
4.7 COMPLIANCE WITH RULE 16B-3. With respect to persons subject to
Section 16 of the 1934 Act, transactions under this Article IV are intended to
comply with all applicable conditions of Rule 16b-3 or its successors under the
1934 Act. To the extent any provision of this Article IV or action by the Board
or the Committee fails so to comply, it shall be deemed null and void, to the
extent permitted by law and deemed advisable by the Committee.
ARTICLE V
LONG-TERM INCENTIVE COMPENSATION UNITS
5.1 AWARDS OF UNITS.
(a) Units may be granted to Eligible Employees and Non-Employee
Directors as provided in this Article V. Units will be deemed granted only upon
(i) authorization by the Committee and (ii) the execution and delivery of a Unit
Agreement by the Eligible Employee or Non-Employee Director to whom Units are to
be granted (a "Unit Recipient") and an authorized officer of the Company. Units
will not be deemed granted merely upon authorization by the Committee. Units may
be granted in each of the years 1997 through 2004 in such amounts and to such
Unit Recipients as the Committee may determine in its sole discretion subject to
the limitation in Section 5.2 below.
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(b) Each grant of Units pursuant to this Article V will be evidenced by
a Unit Award Agreement between the Company and the Unit Recipient in form and
substance satisfactory to the Committee in its sole discretion, consistent with
this Article V.
(c) Except as otherwise provided herein, Units will be distributed only
after the end of a performance period of two or more years ("Performance
Period") beginning with the year in which such Units were awarded. The
Performance Period shall be set by the Committee for each award of Units.
(d) The percentage of the Units awarded under this Section 5.1 or
credited pursuant to Section 5.5 that will be distributed to Unit Recipients
shall depend on the levels performance objectives achieved during each year of
the Performance Period. The Committee may adopt one or more performance
categories, including financial performance. Financial performance shall be
based on the consolidated results of the Company and its Subsidiaries prepared
on the same basis as the financial statements published for financial reporting
purposes and determined in accordance with Section 5.1(e) below. Other
performance categories adopted by the Committee shall be based on such
measurements of performance as the Committee shall deem appropriate.
(e) Distributions of Units awarded will be based on the Company's
performance as compared to the performance objectives. The Committee may provide
for annual or longer performance measurement periods. The performance results
will be translated into percentage factors according to graduated criteria
established by the Committee for the entire Performance Period. The resulting
percentage factors shall determine the percentage of Units to be distributed.
The Committee may provide that to distributions of Units, based on financial
performance and other performance, shall be made if a minimum average percentage
of the applicable measurement of performance, to be established by the
Committee, is not achieved for the Performance Period. The performance levels
achieved for each Performance Period and percentage of Units to be distributed
shall be conclusively determined by the Committee.
(f) The percentage of Units awarded which Unit Recipients become
entitled to receive based on the levels of performance (including those Units
credited under Section 5.5) will be determined as soon as practicable after each
Performance Period and are called "Retained Units."
(g) As soon as practical after determination of the number of Retained
Units, such Retained Units shall be distributed in the form of a combination of
shares and cash in the relative percentages as between the two as determined by
the Committee in its sole discretion. The Units awarded, but which Unit
Recipients do not become entitled to receive, shall be canceled.
(h) Notwithstanding any other provision in this Article V, the
Committee, if it determines in its sole discretion that it is necessary or
advisable under the circumstances, may adopt rules pursuant to which Eligible
Employees and Non-Employee Directors, by virtue of hire, or promotion or upgrade
to a higher job grade classification, or special individual circumstances, may
be granted the total award of Units or any portion thereof, with respect to one
or more Performance Periods that began in prior years and that at the time of
the awards have not yet been completed.
5.2 LIMITATIONS.
The aggregate number of shares of Stock potentially distributable under
all Units granted, including those Units credited pursuant to Section 5.5, shall
not exceed the total number of shares of Stock remaining in the Plan Pool, less
all shares of Stock potentially acquirable under, or underlying, all other
Rights outstanding under this Plan.
5.3 TERMS AND CONDITIONS.
(a) All awards of Units must be made within ten (10) years of the
Effective Date.
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(b) The award of Units shall be evidenced by a Unit Award Agreement in
form and substance satisfactory to the Committee in its discretion, consistent
with the provisions of this Article V.
(c) At the discretion of the Committee, a Unit Recipient, as a
condition to the award of Units, may be required to execute and deliver to the
Company a confidential information agreement approved by the Committee.
(d) A Unit Recipient shall have no rights as a shareholder of the
Company with respect to any Units until the distribution of shares of Stock in
connection therewith. No adjustment shall be made in the number of Units for
dividends (ordinary or extraordinary, whether in cash, securities or other
property) or distributions or other rights for which the record date is prior to
the date such Stock is distributed, except as provided in Sections 2.3(b) and
5.6(a).
5.4 SPECIAL DISTRIBUTION RULES.
(a) Except as otherwise provided in this Section 5.4 or in an Option
Agreement, a Unit Recipient must be an Eligible Employee or a Non-Employee
Director from the date a Unit is awarded to him or her continuously through and
including the date of distribution of such Unit.
(b) In case of the Death or Disability of a Unit Recipient prior to the
end of any Performance Period, the number of Units awarded to the Unit Recipient
for such Performance Period shall be reduced pro rata based on the number of
months remaining in the Performance Period after the month of Death or
Disability. The remaining Units, reduced in the discretion of the Committee to
the percentage indicated by the levels of performance achieved prior to the date
of Death or Disability, if any, shall be distributed within a reasonable time
after Death or Disability. All other Units awarded to the Unit Recipient for
such Performance Period shall be canceled.
(c) If a Unit Recipient enters into Retirement prior to the end of any
Performance Period, the Units awarded to such Unit Recipient under this Article
V and not yet distributed shall be prorated to the end of the year in which such
Retirement occurs and distributed at the end of the Performance Period based
upon the Company's performance for such period.
(d) In the event of the termination of the Unit Recipient's status as
an Eligible Employee or Non-Employee Director prior to the end of any
Performance Period for any reason other than Death, Disability or Retirement,
all Units awarded to the Unit Recipient with respect to any such Performance
Period shall be immediately forfeited and canceled.
(e) Upon a Unit Recipient's promotion to a higher job grade
classification, the Committee may award to the Unit Recipient the total Units,
or any portion thereof, which are associated with the higher job grade
classification for the then current Performance Period.
(f) Notwithstanding any other provision of this Plan, the Committee may
reduce or eliminate awards to a Unit Recipient who has been demoted to a lower
job grade classification, and where circumstances warrant, may permit continued
participation, proration or early distribution, or a combination thereof, of
awards which would otherwise be canceled.
5.5 DIVIDEND EQUIVALENT UNITS. On each record date for dividends on the
Common Stock, an amount equal to the dividend payable on one share of Common
Stock will be determined and credited (the "Dividend Equivalent Credit") on the
payment date to each Unit Recipient's account for each Unit which has been
awarded to the Unit Recipient and not distributed or canceled. Such amount will
be converted within the account to an additional number of Units equal to the
number of shares of Common Stock that could be purchased at Fair Market Value on
such dividend payment date. These Units will be treated for purposes of this
Article V in the same manner as those Units granted pursuant to Section 5.1.
5.6 ADJUSTMENTS.
(a) In addition to the provisions of Section 2.3(b), if an
extraordinary change occurs during a Performance Period which significantly
alters the basis upon which the performance levels were established under
Section 5.1 for that Performance Period, to avoid distortion in the operation of
this Article V, but subject to Section 5.2, the Committee may make adjustments
in such performance levels to preserve the incentive features of this Article V,
whether before or after the end of the Performance Period, to the extent it
deems appropriate in its sole discretion, which adjustments shall be conclusive
and binding upon all parties concerned. Such changes may include, without
limitation, adoption of, or changes in, accounting practices, tax laws and
regulatory or other laws or regulations; economic changes not in the ordinary
course of business cycles; or compliance with judicial decrees or other legal
authorities.
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(b) At any time prior to the date of consummation of a Change in
Control Transaction, the Committee may, in its absolute discretion, determine
that all or any part of the Units theretofore awarded under this Article V shall
become immediately distributable (reduced pro rata based on the number of months
remaining in the Performance Period after the consummation of the Change in
Control Transaction) and may thereafter be distributed at any time before the
date of consummation of the Change in Control Transaction (except as otherwise
provided in Article II hereof). Except as otherwise provided in a Unit Award
Agreement, any Units that have not been distributed before the date of
consummation of the Change in Control Transaction shall terminate on such date,
unless a provision has been made in writing in connection with such transaction
for the assumption of all awards of Units theretofore made, or the substitution
for such units of awards of compensation units having comparable characteristics
under a long term incentive award plan of a successor employer corporation, or a
parent or a subsidiary thereof, with appropriate adjustments, in which event the
awards of Units theretofore made shall continue in the manner and under the
terms so provided.
5.7 OTHER CONDITIONS.
(a) No person shall have any claim to be granted an award of Units
under this Article V and there is no obligation for uniformity of treatment of
Eligible Employees, Non-Employee Directors or Unit Recipients under this Article
IV.
(b) The Company shall have the right to deduct from any distribution or
payment in cash under this Article V, and the Unit Recipient or other person
receiving shares of Stock under this Article V shall be required to pay to the
Company, any Tax Withholding Liability. The number of shares of Stock to be
distributed to any individual Unit Recipient may be reduced by the number of
shares of Stock, the Fair Market Value of which on the Distribution Date (as
defined in Section 5.7(d) below) is equivalent to the cash necessary to pay any
Tax Withholding Liability, where the cash to be distributed is not sufficient to
pay such Tax Withholding Liability, or the Unit Recipient may deliver to the
Company cash sufficient to pay such Tax Withholding Liability.
(c) Any distribution of shares of Stock under this Article V may be
delayed until the requirements of any applicable laws or regulations, and any
stock exchange or Nasdaq-NMS requirements, are satisfied. The shares of Stock
distributed under this Article V shall be subject to such restrictions and
conditions on disposition as counsel for the Company shall determine to be
desirable or necessary under applicable law.
(d) For the purpose of distribution of Units in cash, the value of a
Unit shall be the Fair Market Value on the Distribution Date. Except as
otherwise determined by the Committee, the "Distribution Date" shall be March
15th in the year of distribution, (or the first business day thereafter) except
that in the case of special distributions the Distribution Date shall be the
first business day of the month in which the Committee determines the amount and
form of the distribution.
(e) Notwithstanding any other provision of this Article V, no Dividend
Equivalent Credits shall be made and no distributions of Units shall be made if
at the time a Dividend Equivalent Credit or distribution would otherwise have
been made:
(i) The regular quarterly dividend on the Common Stock has
been omitted and not subsequently paid or there exists any default in
payment of dividends on any such outstanding shares of capital stock of
the Corporation.
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(ii) The rate of dividends on the Common Stock is lower than
at the time the Units to which the Dividend Equivalent Credit relates
were awarded, adjusted for any change of the type referred to in
Section 2.3(b).
(iii) Estimated consolidated net income of the Corporation for
the twelve month period preceding the month the Dividend Equivalent
Credit or distribution would otherwise have been made is less than the
sum of the amount of the Dividend Equivalent Credits and Units eligible
for distribution under this Article V in that month plus all dividends
applicable to such period on an accrual basis, either paid, declared or
accrued at the most recently paid rate, on all outstanding shares of
Common Stock; or
(iv) The Dividend Equivalent Credit or distribution would
result in a default in any agreement by which the Corporation is bound.
(f) In the event net income available under Section 5.7(e) above for
Dividend Equivalent Credits and awards eligible for distribution under this
Article V is sufficient to cover part but not all of such amounts, the following
order shall be applied in making payments: (i) Dividend Equivalent Credits, and
then (ii) Units eligible for distribution under this Article V.
5.8 DESIGNATION OF BENEFICIARIES. A Unit Recipient may designate a
beneficiary or beneficiaries to receive all or part of the Stock and/or cash to
be distributed to the Unit Recipient under this Article V in case of Death. A
designation of beneficiary may be replaced by a new designation or may be
revoked by the Unit Recipient at any time. A designation or revocation shall be
on a form to be provided for that purpose and shall be signed by the Unit
Recipient and delivered to the Corporation prior to the Unit Recipient's Death.
In case of the Unit Recipient's Death, any amounts to be distributed to the Unit
Recipient under this Article V with respect to which a designation of
beneficiary has been made (to the extent it is valid and enforceable under
applicable law) shall be distributed in accordance with this Article V to the
designated beneficiary or beneficiaries. The amount distributable to a Unit
Recipient upon Death and not subject to such a designation shall be distributed
to the Unit recipient estate. If there shall be any question as to the legal
right of any beneficiary to receive a distribution under this Article V, the
amount in question may be paid to the estate of the Unit Recipient, in which
event the Corporation shall have no further liability to anyone with respect to
such amount.
5.9 RESTRICTIONS ON TRANSFER. Units granted under Article V may not be
Transferred, except as provided in Section 5.8, and, during the lifetime of the
Unit Recipient to whom it was awarded, cash and stock receivable with respect to
Units may be received only by such Unit Recipient.
5.10 AMENDMENT AND DISCONTINUANCE. No award of Units may be granted
under this Article V after December 31, 2004. The Board may amend, suspend or
discontinue the provisions of this Article V at any time or from time to time.
5.11 COMPLIANCE WITH RULE 16B-3. With respect to persons subject to
Section 16 of the 1934 Act, transactions under this Article V are intended to
comply with all applicable conditions of Rule 16b-3 or its successors under the
1934 Act. To the extent any provision of this Article V or action by the Board
or the Committee fails so to comply, it shall be deemed null and void, to the
extent permitted by law and deemed advisable by the Committee.
ARTICLE VI
STOCK APPRECIATION RIGHTS
6.1 GRANTS OF SARS.
(a) Eligible Employees and Non-Employee Directors may be granted SARs
under this Article VI. SARs will be deemed granted only upon (i) authorization
by the Committee and (ii) the execution and delivery of a SAR Agreement by the
Eligible Employee or Non-Employee Director to whom the SARs are to be granted
(the "SAR Recipient") and a duly authorized officer of the Corporation. SARs
will not be deemed granted merely upon authorization by the Committee. The
aggregate number of SARs granted hereunder shall not exceed the total number of
shares of Stock provided in the Plan Pool.
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(b) Each grant of SARs pursuant to this Article VI shall be evidenced
by a SAR Agreement between the Corporation and the SAR Recipient, in form and
substance satisfactory to the Committee in its sole discretion, consistent with
this Article VI.
6.2 TERMS AND CONDITIONS OF SARS.
(a) All SARs must be granted within ten (10) years of the Effective
Date.
(b) Each SAR issued pursuant to this Article VI shall have an initial
base value (the "Base Value") equal to the Fair Market Value of a share of
Common Stock on the date of issuance of the SAR.
(c) In its discretion and subject to the provisions of Section 6.2(b)
(as to the establishment of the initial Base Value of a SAR), the Committee may
establish that the Base Value of a SAR shall be adjusted, upward or downward, on
a quarterly basis, based upon the market value performance of the Common Stock
in comparison with the aggregate market value performance of the Index or
Indices utilized under Section 3.2(b).
(d) At the discretion of the Committee, a SAR Recipient, as a condition
to the granting of a SAR, must execute and deliver to the Corporation a
confidential information agreement approved by the Committee.
(e) Except as otherwise provided herein, each SAR Agreement may specify
the period or periods of time within which each SAR or portion thereof will
first become exercisable (the "SAR Vesting Period"). Such SAR Vesting Periods
will be fixed by the Committee in its discretion, and may be accelerated or
shortened by the Committee in its discretion.
(f) A SAR Recipient shall have no rights as a shareholder of the
Corporation with respect to any shares of Stock underlying such SAR. No
adjustment shall be made for dividends (ordinary or extraordinary, whether in
cash, securities or other property) or distributions or other rights for which
the record date is prior to the date such Stock is fully paid for, except as
provided in Sections 2.3(b) and 6.2(c).
6.3 RESTRICTIONS ON TRANSFER OF SARS. SARs granted under this Article
VI may not be Transferred, except as provided in Section 6.7, and during the
lifetime of the SAR Recipient to whom it was granted, may be exercised only by
such SAR Recipient.
6.4 EXERCISE OF SARS.
(a) A SAR Recipient (or his or her executors or administrators, or
heirs or legatees) shall exercise a SAR by giving written notice of such
exercise to the Corporation. SARs may be exercised only upon the completion of
the SAR Vesting Period, if any, applicable to such SAR (the date such notice is
received by the Corporation being referred to herein as the "SAR Exercise
Date").
(b) Within ten (10) business days of the SAR Exercise Date applicable
to a SAR exercised in accordance with Section 6.4(a), the SAR Recipient shall be
paid in cash the difference between the Base Value of such SAR (as adjusted, if
applicable under Section 6.2(c), as of the most recently preceding quarterly
period) and the Fair Market Value of the Common Stock as of the SAR Exercise
Date, as such difference is reduced by the Company's Tax Withholding Liability
arising from such exercise.
6.5 TERMINATION OF SARS. The Committee shall determine in its
discretion, and each SAR Agreement shall state, the expiration date or dates of
each SAR, but such expiration date shall be not later than ten (10) years after
the date such SAR is granted (the "SAR Period"). The Committee, in its
discretion, may extend the expiration date or dates of a SAR Period after such
date was originally set; provided, however, such expiration date may not exceed
the maximum expiration date described in this Section 6.5(a).
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6.6 CHANGE IN CONTROL TRANSACTION. At any time prior to the date of
consummation of a Change in Control Transaction, the Committee may, in its
absolute discretion, determine that all or any part of the SARs theretofore
granted under this Article VI shall become immediately exercisable in full and
may thereafter be exercised at any time before the date of consummation of the
Change in Control Transaction (except as otherwise provided in Article II
hereof). Except as provided in an SAR Agreement, any SAR that has not been fully
exercised before the date of consummation of the Change in Control Transaction
shall terminate on such date, unless a provision has been made in writing in
connection with such transaction for the assumption of all SARs theretofore
granted, or the substitution for such SARs of grants of stock appreciation
rights having comparable characteristics under a stock appreciation rights plan
of a successor employer corporation or bank, or a parent or a subsidiary
thereof, with appropriate adjustments, in which event the SARs theretofore
granted shall continue in the manner and under the terms so provided.
6.7 DESIGNATION OF BENEFICIARIES. A SAR Recipient may designate a
beneficiary or beneficiaries to receive all or part of the cash to be paid to
the SAR Recipient under this Article VI in case of Death. A designation of
beneficiary may be replaced by a new designation or may be revoked by the SAR
Recipient at any time. A designation or revocation shall be on a form to be
provided for that purpose and shall be signed by the SAR Recipient and delivered
to the Corporation prior to the SAR Recipient's Death. In case of the SAR
Recipient's Death, the amounts to be distributed to the SAR Recipient under this
Article VI with respect to which a designation of beneficiary has been made (to
the extent it is valid and enforceable under applicable law) shall be
distributed in accordance with this Article VI to the designated beneficiary or
beneficiaries. The amount distributable to a SAR Recipient upon Death and not
subject to such a designation shall be distributed to the SAR Recipient's
estate. If there shall be any question as to the legal right of any beneficiary
to receive a distribution under this Article VI, the amount in question may be
paid to the estate of the SAR Recipient in which event the Corporation shall
have no further liability to anyone with respect to such amount.
6.8 AMENDMENT AND DISCONTINUANCE. The Board may amend, suspend or
discontinue the provisions of this Article VI at any time or from time to time.
No such action may alter or impair any SAR previously granted under this Article
VI without the consent of the applicable SAR Recipient.
6.9 COMPLIANCE WITH RULE 16B-3. With respect to persons subject to
Section 16 of the 1934 Act, transactions under this Article VI are intended to
comply with all applicable conditions of Rule 16b-3 or its successors under the
1934 Act. To the extent any provision of this Article VI or action by the Board
or the Committee fails so to comply, it shall be deemed null and void, is the
extent permitted by law and deemed advisable by the Committee.
ARTICLE VII
GRANTS TO NON-EMPLOYEE DIRECTORS
7.1 GRANT OF NON-QUALIFIED OPTIONS. Non-Qualified Options may be
granted to Non-Employee Directors as provided in this Article VII. The
provisions of Articles I, II, III and VIII shall apply to the grant of
Non-Qualified Options to Non-Employee Directors, except as provided in this
Article.
7.2 EXERCISE PRICE. The exercise price per share of Common Stock on a
Non-Qualified Option under
this Article shall be the Fair Market Value of a share of Common Stock.
7.3 EXERCISE OF OPTIONS. Each Option Agreement for the grant of a
Non-Qualified Option may specify the period or periods of time, if any, within
which each Non-Qualified Option or portion thereof will first become
exercisable. The Option Agreement shall also state the time or other
circumstances under which the Non-Qualified Option is forfeited or otherwise may
cease to be exercisable. A Non-Qualified Option may be exercised with respect to
any number of whole shares less than the full number for which the Non-Qualified
Option could be exercised. A partial exercise of a Non-Qualified Option shall
not affect the right to exercise the Non-Qualified Option from time to time in
accordance with this Plan and the applicable Option Agreement with respect to
the shares remaining subject to the Non-Qualified Option.
7.4 COMPLIANCE WITH LAW AND APPROVAL OF REGULATORY BODIES. No
Non-Qualified Option shall be exercisable, no Common Stock shall be issued, no
certificates for shares of Common Stock shall be delivered, and no payment shall
be made under this Plan except in compliance with all applicable federal and
state laws and regulations, and applicable requirements of any exchange or other
market having authority over the trading of the Corporation's stock.
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7.5 AMENDMENT AND DISCONTINUANCE. The Board may amend, suspend or
discontinue the provisions of this Article VII at any time or from time to time;
provided that no such action may alter or impair any Non-Qualified Option
previously granted under this Article VII without the consent of the applicable
Non-Employee Director.
7.6 COMPLIANCE WITH RULE 16b-3. With respect to persons subject to
Section 16 of the 1934 Act, transactions under this Article VII are intended to
comply with all applicable conditions of Rule 16b-3 or its successors under the
1934 Act. To the extent any provision of this Article VII or action by the Board
or the Committee fails so to comply, it shall be deemed null and void, to the
extent permitted by law and deemed advisable by the Committee
ARTICLE VIII
MISCELLANEOUS
8.1 APPLICATION OF FUNDS. The proceeds received by the Corporation from
the sale of Stock pursuant to the exercise of Rights will be used for general
corporate purposes.
8.2 NO OBLIGATION TO EXERCISE RIGHT. The granting of a Right shall
impose no obligation upon the recipient to exercise such Right.
8.3 TERM OF PLAN. Except as otherwise specifically provide herein,
Rights may be granted pursuant to this Plan from time to time within ten (10)
years from the Effective Date.
8.4 CAPTIONS AND HEADINGS; GENDER AND NUMBER. Captions and paragraph
headings used herein are for convenience only, do not modify or affect the
meaning of any provision herein, are not a part of, and shall not serve as a
basis for, interpretation or construction of this Plan. As used herein, the
masculine gender shall include the feminine and neuter, and the singular number
shall include the plural, and vice versa, whenever such meanings are
appropriate.
8.5 EXPENSES OF ADMINISTRATION OF PLAN. All costs and expenses incurred
in the operation and administration of this Plan shall be borne by the
Corporation or by one or more Subsidiaries. The Corporation shall also
indemnify, defend and hold each member of the Committee harmless against all
claims, expenses and liabilities arising out of or related to the exercise of
the Committee's powers and the discharge of the Committee's duties hereunder.
8.6 GOVERNING LAW. Without regard to the principles of conflicts of
laws, the laws of the Commonwealth of Virginia shall govern and control the
validity, interpretation, performance and enforcement of this Plan.
8.7 INSPECTION OF PLAN. A copy of this Plan, and any amendments
thereto, shall be maintained by the Secretary of the Corporation and shall be
shown to any Eligible Employee, Non-Employee Director or other proper person
making inquiry about it.
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