Exhibit 10(b)
JAMES MONROE BANK
1998 STOCK OPTION PLAN
1. PURPOSE OF PLAN.
The purposes of this James Monroe Bank 1998 Stock Option Plan are (a)
to attract and retain outstanding key management employees; (b) to further the
growth, development and financial success of James Monroe Bank by recognizing
and rewarding those key employees responsible therefor; and (c) to provide an
incentive to, and encourage, stock ownership in the Bank by those employees
responsible for the policies and operations of the Bank.
2. DEFINITIONS.
As used herein, the following definitions shall apply:
(a) "Affiliate" shall mean any "parent corporation" or "subsidiary
corporation" of the Bank, as such terms are defined in Section 424(e) and (f),
respectively, of the Code.
(b) "Agreement" shall mean a mitten agreement entered into in
accordance with Paragraph 5(c).
(c) "Awards" shall mean a grant of Options, unless the context
clearly indicates a different meaning.
(d) "Bank" shall mean James Monroe Bank.
(e) "Board" shall mean the Board of Directors of the Bank.
(f) "Change in Control" shall mean anyone of the following events
occurring after the Effective Date:(1) the acquisition of ownership of, holding
or power to vote more than 51% of the Bank's voting stock; (2) the acquisition
of the power to control the election of a majority of the Bank's directors; (3)
the exercise of a controlling influence over the management or policies of the
Bank by any person or by persons acting as a "group" (within the meaning of
Section 13(d) of the Securities Exchange Act of 1934); or (4) the failure of
Continuing Directors to constitute at least two-thirds of the Board during any
period of two (2) consecutive years. For purposes of this Plan, "Continuing
Directors" shall include only those individuals who were members of the Board at
the Effective Date and those other individuals whose election or nomination for
election as a member of the Board was approved by a vote of at least two-thirds
of the Continuing Directors then in office. For purposes of this subparagraph
only, the term "person" refers to an individual or a corporation, partnership,
trust, association, joint venture, pool, syndicate, sole proprietorship,
unincorporated organization or any other form of entity not specifically listed
herein. The decision of the Committee as to whether a change in control has
occurred shall be conclusive and binding.
(g) "Code" shall mean the Internal Revenue Code of 1986, as
amended.
(h) "Committee" shall mean the Compensation and Stock Option
Committee appointed by the Board in accordance with Paragraph 5(a) hereof or, in
the absence thereof, the entire Board.
(i) "Common Stock" shall mean the common stock, par value $5.00
per share, of the Bank.
(j) "Continuous Service" shall mean the absence of any
interruption or termination of service to the Bank as an employee or Director.
Continuous Service shall not be considered interrupted in the case of sick
leave, military leave or any other leave of absence approved by the Bank or in
the case of transfers between payroll locations of the Bank or between the Bank,
an Affiliate or a successor.
(k) "Effective Date" shall mean the date specified in Paragraph 13
hereof.
(l) "Employee" shall mean any person employed by the Bank or by an
Affiliate, within the meaning of Section 3401(c) of the Code.
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(m) "Exercise Price" shall mean the price per Optioned Share at
which an Option may be exercised.
(n) "ISO" means an option to purchase Common Stock which meets the
requirements set forth in the Plan, and which is intended to be and is
identified as an "incentive stock option" within the meaning of Section 422 of
the Code.
(o) "Market Value" shall mean the fair market value of the Common
Stock, as determined under Paragraph 7(b) hereof.
(p) "Non-ISO" means an option to purchase Common Stock which meets
the requirements set forth in the Plan but which is not intended to be and is
not identified as an ISO.
(q) "Option" means an ISO and/or a Non-ISO.
(r) "Optioned Shares" shall mean Shares subject to an Option
granted pursuant to this Plan.
(s) "Participant" shall mean any person who receives an Award
pursuant to the Plan.
(t) "Plan" shall mean this James Monroe Bank 1998 Stock Option
Plan.
(u) "Rule 16b-3" shall mean Rule 16b-3 of the General Rules and
Regulations under the Securities Exchange Act of 1934, as amended.
(v) "Share" shall mean one share of Common stock.
3. TERM OF THE PLAN AND AWARDS.
(a) TERM OF THE PLAN. The Plan shall continue in effect for a
term of five (5) years from the Effective Date, unless sooner terminated
pursuant to Paragraph 16 hereof. No Award shall be granted under the Plan after
five (5) years from the Effective Date.
(b) TERM OF AWARDS. The term of each Award granted under the
Plan shall be established by the Committee, but shall not exceed ten (10) years,
provided, however, that in the case of an ISO granted to an Employee who owns
Shares representing more than 10% of the outstanding Common Stock at the time an
ISO is granted, the term of such ISO shall not exceed five (5) years.
4. SHARES SUBJECT TO THE PLAN.
Except as otherwise required by the provisions of Paragraph 12 hereof,
the aggregate number of Shares deliverable pursuant to Awards shall not exceed
66,880 Shares. Optioned Shares may either be authorized but unissued Shares or
Shares held in treasury. If Awards should expire, become unexercisable or be
forfeited for any reason without having been exercised or become vested in full,
the Optioned Shares shall, unless the Plan shall have been terminated, be
available for the grant of Additional Awards under the Plan.
5. ADMINISTRATION OF THE PLAN.
(a) COMPOSITION OF THE COMMITTEE. The Plan shall be
administered by the Committee, which shall consist of not less than four (4)
members of the Board. Members of the Committee shall serve at the pleasure of
the Board. In the absence at any time of a duly appointed Committee, the Plan
shall be administered by the entire Board.
(b) POWERS OF THE COMMITTEE. Except as limited by the express
provisions of the Plan or by resolutions adopted by the Board, the Committee
shall have sole and complete authority and discretion (i) to select Participants
and grant Awards, (ii) to determine the form and content of Awards to be issued
in the form of Agreements under the Plan, (iii) to interpret the Plan, (iv) to
prescribe, amend and rescind rules and regulations
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relating to the Plan and (v) to make other determinations necessary or advisable
for the administration of the Plan. The Committee shall have and may exercise
such other power and authority as may be delegated to it by the Board from time
to time. A majority of the entire Committee shall constitute a quorum and the
action of a majority of the members present at any meeting at which a quorum is
present, or acts approved in writing by a majority of the Committee without a
meeting, shall be deemed the action of the Committee.
(c) AGREEMENT. Each Award shall be evidenced by a written
agreement containing such provisions as may be approved by the Committee. Each
such Agreement shall constitute a binding contract between the Bank and the
Participant, and every Participant, upon acceptance of such Agreement, shall be
bound by the terms and restrictions of the Plan and of such agreement. The terms
of each such Agreement shall be in accordance with the Plan, but each agreement
may include such additional provisions and restrictions determined by the
Committee, in its discretion, provided that such additional provisions and
restrictions are not inconsistent with the terms of the Plan. In particular, the
Committee shall set forth in each Agreement (i) the Exercise Price of an Option,
(ii) the number of Shares subject to, and the expiration date of, the Award,
(iii) the manner, time and rate (cumulative or otherwise) of exercise or vesting
of such Award,(iv) the restrictions, if any, to be placed upon such Award, or
upon Shares which may be issued upon exercise of such Award and (v) whether the
Option is an ISO or a Non-ISO.
The Chairman of the Committee and such other officers as shall
be designated by the committee are hereby authorized to execute Agreements on
behalf of the Bank and to cause them to be delivered to the recipients of
Awards.
(d) EFFECTIVE OF THE COMMITTEE'S DECISIONS. All decisions,
determinations and interpretations of the Committee shall be final and
conclusive on all persons affected thereby.
(e) INDEMNIFICATION. In addition to such other rights of
indemnification as they may have, the members of the Committee shall be
indemnified by the Bank in connection with any claim, action, suit or proceeding
relating to any action taken or failure to act under or in connection with the
Plan or any Award, granted hereunder to the full extent provided for under the
Bank's Articles of Incorporation or Bylaws with respect to the indemnification
of Directors.
6. GRANT OF OPTIONS.
(a) GENERAL RULE. In its sole discretion, the Committee may
grant Options or Non-ISO to Employees of the Bank or its Affiliates.
(b) SPECIAL RULES FOR ISOs. The aggregate Market Value, as of
the date the Option is granted, of the Shares with respect to which ISOs are
exercisable for the first time by an employee during any calendar year (under
all incentive stock option plans, as defined in Section 422 of the Code, of the
Bank or any present or future Parent or Subsidiary of the Bank) shall not exceed
$100,000. Notwithstanding the prior provisions of this paragraph or designation
of an Option as an ISO, the Committee may grant Options in excess of the
foregoing limitations in which case such Options granted in excess of such
limitation shall be Options which are Non-ISOs.
7. EXERCISE PRICE FOR OPTIONS.
(a) LIMITS ON COMMITTEE DISCRETION. The Exercise Price as to
any particular Option granted under the Plan shall not be less than the Market
Value of the Optioned Shares on the date of grant. In the case of an Employee
who owns Shares representing more than 10% of the Bank's outstanding Shares of
Common Stock at the time an ISO is granted, the Exercise Price shall not be less
than 110% of the Market Value of the Optioned Shares at the time the ISO is
granted.
(b) STANDARDS FOR DETERMINING EXERCISE PRICE. If the Common
Stock is listed on a national securities exchange (including the NASDAQ National
Market) on the date in question, then the Market Value per Share shall be not
less than the average of the highest and lowest selling price on such exchange
on such date, or if there were no sales on such date, then the Exercise Price
shall be not less than the mean between the bid
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and asked price on such date. If the Common Stock is traded otherwise than on a
national securities exchange on the date in question, then the Market Value per
Share shall be not less than the mean between the bid and asked price on such
date, or, if there is no bid and asked price on such date, then on the next
prior business day on which there was a bid and asked price. If no such bid and
asked price is available, then the Market Value per Share shall be its fair
market value as determined by the Committee, in its sole and absolute
discretion.
(c) REISSUANCE OF OPTIONS. Notwithstanding anything herein to
the contrary, the Committee shall have the authority to cancel outstanding
Options with the consent of the Participant and to reissue new Options at a
lower Exercise Price equal to the then Market Value per share of Common Stock in
the event that the Market Value per share of Common Stock at any time prior to
the date of exercise outstanding Options falls below the Exercise Price.
8. EXERCISE OF OPTIONS.
a. GENERALLY. Any Option granted hereunder shall be
exercisable at such times and under such conditions as shall be permissible
under the terms of the Plan and of the Agreement granted to a Participant. An
Option may not be exercised for a fractional Share.
b. PROCEDURE FOR EXERCISE. A Participant may exercise Options,
subject to provisions relative to its termination and limitations on its
exercise, only by (1) written notice of intent to exercise the Option with
respect to a specified number of Shares and (2) payment to the Bank)
contemporaneously with delivery of such notice) in cash, in Common Stock, or a
combination of cash and Common Stock, of the amount of the Exercise Price for
the number of Shares with respect to which the Option is then being exercised.
Each such notice (and payment where required) shall be delivered, or mailed by
prepaid registered or certified mail, addressed to the Secretary of the Bank at
the Bank's executive offices. Common Stock utilized in full or partial payment
of the Exercise Price for Options shall be value at its Market Value at the date
of exercise.
(c) PERIOD OF EXERCISABILITY. Except to the extent otherwise
provided in the terms of an Agreement, an ISO or Non-ISO may be exercised by an
Employee Participant only while he is an Employee or Director and has maintained
Continuous Service from the date of the grant of the ISO, or within three months
after termination of such Continuous Service (but not later than the date on
which the Option would otherwise expire), except if the Employee's Continuous
Service terminates by reason of:
(1) "Just Cause" which for purposes hereof shall have the meaning set
forth in any unexpired employment or severance agreement between the Participant
and the Bank and/or the Bank (and, in the absence of any such agreement, shall
mean termination because of the Employee's personal dishonesty, willful
misconduct, breach of fiduciary duty involving personal profit, intentional
failure to perform stated duties, willful violation of any law, rule or
regulation (other than traffic violations or similar offenses) or final
cease-and-desist order), then the Participant's rights to exercise such ISO
shall expire on the date of such termination;
(2) Death, then to the extent that the Participant would have been
entitled to exercise the ISO immediately prior to his death, such ISO of the
deceased Participant may be exercised within two (2) years from the date of his
death (but not later than the date on which the Option would otherwise expire)
by the personal representatives of his estate or person or persons to whom his
rights under such ISO shall have passed by will or by laws of descent and
distribution;
(3) Permanent and Total Disability (as such term is defined in Section
22(e)(3) of the Code), then to the extent that the Participant would have been
entitled to exercise the ISO immediately prior to his Permanent and Total
Disability, such ISO may be exercised within one year from the date of such
Permanent and Total Disability, but not later than the date on which the ISO
would otherwise expire.
Notwithstanding the provisions of any Option which provides for its exercise in
installments as designated by the Committee, such Option shall become
immediately exercisable upon the Participant's death or Permanent and Total
Disability.
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(d) EFFECT OF THE COMMITTEE'S DECISIONS. The Committee's
determination whether a Participant's Continuous Service has ceased, and the
effective date thereof, shall be final and conclusive on all persons affected
thereby.
9. CHANGE IN CONTROL.
(a) GENERAL RULE. Notwithstanding the provisions of any Award
which provide for its exercise or vesting in installments, all Options shall be
immediately exercisable and fully vested upon a Change in Control. With respect
to Options, at the time of a Change in Control, the Participant shall, at the
discretion of the Committee, be entitled to receive cash in an amount equal to
the excess of the Market Value of the Common Stock subject to such Option over
the Exercise Price of such Shares, in exchange for the cancellation of such
Options by the Participant.
(b) EXCEPTION TO GENERAL RULE. Notwithstanding subparagraph
(a) of this Paragraph, in no event may an Option be canceled in exchange for
cash within the six-month period following the date of its grant.
10. EFFECT OF CHANGES IN COMMON STOCK SUBJECT TO THE PLAN.
(a) RECAPITALIZATION, STOCK SPLITS, ETC. The number and kind
of shares reserved for issuance under the Plan, and the number and kind of
shares subject to outstanding Awards and the Exercise Price thereof, shall be
proportionately adjusted for any increase, decrease, change or exchange of
Shares for a different number or kind of shares or other securities of the Bank
which results from a merger, consolidation, recapitalization, reorganization,
reclassification, stock dividend, stock split, combination of shares, or similar
event in which the number or kinds of shares is changed without the receipt or
payment of consideration by the Bank.
(b) TRANSACTIONS IN WHICH THE BANK IS NOT THE SURVIVING
ENTITY. Subject to Paragraph 9 hereof, in the event of (i) the liquidation or
dissolution of the Bank, (ii) a merger or consolidation in which the Bank is not
the surviving entity , or (iii) the sale or disposition of all or substantially
all of the Bank's assets (any of the foregoing to be referred to herein as a
"Transaction"), all Awards outstanding at the effectiveness of such Transaction
shall be surrendered. With respect to each Award so surrendered, the Committee
shall, in its sole and absolute discretion, determine whether the holder of the
surrendered Award shall receive:
(1) for each Share then subject to an outstanding Award the number and
kind of shares into which each outstanding Share (other than Shares held by
dissenting stockholders) is changed or exchanged, together with an appropriate
adjustment to the Exercise Price in the case of Options; or
(2) a cash payment (from the Bank or the successor corporation), in an
amount equal to the Market Value of the Shares subject to the Award on the date
of the Transaction, less the Exercise Price of the Award.
(c) SPECIAL RULE FOR ISOs. Any adjustment made pursuant to
subparagraph (a) or (b)(1) hereof shall be made in such a manner as to
constitute a modification, within the meaning of Section 424(h) of the Code, of
outstanding ISOs.
(d) CONDITIONS AND RESTRICTIONS OF NEW, ADDITIONAL OR
DIFFERENT SHARES OR SECURITIES. If, by reason of any adjustment made pursuant to
this Paragraph, a Participant becomes entitled to new, additional or different
shares of stock or securities, such new, additional or different shares of stock
or securities shall thereupon be subject to all of the conditions and
restrictions which were applicable to the Shares pursuant to the Award before
the adjustment was made.
(e) OTHER ISSUANCES. Except as expressly provided in this
Paragraph, the issuance by the Bank or an Affiliate of shares of stock of any
class, or of securities convertible into Shares of stock of another class, for
cash or property or for labor or services either upon direct sale or upon the
exercise of rights or warrants to subscribe therefor, shall not affect, and no
adjustment shall be made with respect to, the number, class or Exercise Price of
Shares then subject to Awards or reserved for issuance under the Plan.
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11. NON-TRANSFERABILITY OF AWARDS.
Awards may not be sold, pledged, assigned, hypothecated, transferred or
disposed of in any manner other than by will or by the law of descent and
distribution, or pursuant to the terms of a "qualified domestic relations order"
(within the meaning of Section 414(p) of the Code and the regulations and
rulings thereunder).
12. TIME OF GRANTING AWARDS.
The date of grant of an Award shall, for all purposes, be the later of
the date on which the Committee makes the determination of granting such Award
and the Effective Date. Notice of the determination shall be given to each
Participant to whom an Award is so granted within a reasonable time after the
date of such grant.
13. EFFECTIVE DATE.
The Plan shall be effective as of August 12, 1998. Awards may be made
prior to approval of the Plan by the stockholders of the Bank if the exercise of
Awards in the form of Options are conditioned upon stockholder approval of the
Plan.
14. APPROVAL BY STOCKHOLDERS.
The Plan shall be approved by stockholders of the Bank within twelve
(12) months before or after the Effective Date.
15. MODIFICATION OF AWARDS.
At any time, and from time to time, the Board may authorize the
Committee to direct execution of an instrument providing for the modification of
any outstanding Award, provided no such modification shall confer on the holder
of said Award any right or benefit which could not be conferred on him by the
grant of a new Award at such time, or impair the Award without the consent of
the holder of the Award.
16. AMENDMENT AND TERMINATION OF THE PLAN.
The Board may from time to time amend the terms of the Plan and, with
respect to any Shares at the time not subject to Awards, suspend or terminate
the Plan. No amendment, suspension or termination of the Plan shall, without the
consent of any affected holders of an Award, alter or impair any rights or
obligations under any Award theretofore granted.
17. CONDITIONS UPON ISSUANCE OF SHARES.
(a) COMPLIANCE WITH SECURITIES LAWS. Shares of Common Stock
shall not be issued with respect to any Award unless the issuance and delivery
of such Shares shall comply with all relevant provisions of law, including,
without limitation, the Securities Act of 1933, as amended, the rules and
regulations promulgated thereunder, any applicable state securities law and the
requirements of any stock exchange upon which the Shares may then be listed. The
Plan is intended to comply with Rule 16b-3, and any provision of the Plan which
the Committee determines in its sole and absolute discretion to be inconsistent
with said Rule shall, to the extent of such inconsistency, be inoperative and
null and void, and shall not affect the validity of the remaining provisions of
the Plan.
(b) SPECIAL CIRCUMSTANCES. The inability of the Bank to obtain
approval from any regulatory body or authority deemed by the Bank's counsel to
be necessary to the lawful issuance and sale of any Shares hereunder shall
relieve the Bank of any liability in respect of the non-issuance or sale of such
Shares. As a condition to the exercise of any Option, the Bank may require the
person exercising the Option to make such representations and warranties as may
be necessary to assure the availability of an exemption from the registration
requirements of federal or state securities law.
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(c) COMMITTEE DISCRETION. The Committee shall have the
discretionary authority to impose in Agreements such restrictions in Shares as
it may deem appropriate or desirable, including, but not limited to, the
authority to impose a right of first refusal or to establish repurchase rights
or both of these restrictions.
18. RESERVATION OF SHARES.
The Bank, during the term of the Plan, will reserve and keep available
a number of shares sufficient to satisfy the requirements of the Plan.
19. WITHHOLDING TAX.
The Bank's obligation to deliver Shares upon exercise of Options shall
be subject to the Participant's satisfaction of all applicable federal, state
and local income and employment tax withholding obligations. The Committee, in
its discretion, may permit the Participant to satisfy the obligation, in whole
or in part, by irrevocably electing to have the Bank withhold Shares, or to
deliver to the Bank Shares that he already owns, having a value equal to the
amount required to be withheld. The value of Shares to be withheld, or delivered
to the Bank, shall be based on the Market Value of the Shares on the date the
amount of tax to be withheld is to be determined. As an alternative, the Bank
may retain, or sell without notice, a number of such Shares sufficient to cover
the amount required to be withheld.
20. NO EMPLOYMENT OR OTHER RIGHTS.
In no event shall an Employee's eligibility to participate or
participation in the Plan create or be deemed to create any legal or equitable
right of the Employee or any other party to continue service with the Bank or
any Affiliate of such corporations. No Employee shall have a right to be granted
an Award or, having received an Award, the right to again be granted an Award.
However, an Employee who has been granted an Award may, if otherwise eligible,
be granted an additional Award or Awards.
21. GOVERNING LAW.
The Plan shall be governed by and construed in accordance with the laws
of the Commonwealth of Virginia except to the extent that federal law shall be
deemed to apply.
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