As filed with the Securities and Exchange Commission on November 26, 1997
Registration No. 33-_____
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-8
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
Marathon Financial Corporation
(Exact Name of Registrant as Specified in Its Charter)
Virginia 54-1560968
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
4095 Valley Pike
Winchester, Virginia 22602
(Address of Principal Executive Office) (Zip Code)
Marathon Financial Corporation
1996 Long-Term Incentive Plan
(Full Title of the Plan)
Jody M. Wagner, Esq.
Kaufman & Canoles
P. O. Box 3037
Norfolk, VA 23514-3037
(Name and Address of Agent for Service)
(757) 624-3294
(Telephone Number, Including
Area Code, of Agent for Service)
CALCULATION OF REGISTRATION FEE
================================================================================
Proposed
Title of Proposed Maximum
Securities Amount Maximum Aggregate Amount of
to be to be Offering Price Offering Registration
Registered Registered Per Share(1) Price(1) Fee(1)
- --------------------------------------------------------------------------------
Common Stock,
no par value 350,000 $5.00 $1,750,000 $530.30
================================================================================
(1) Pursuant to rule 457(h), the registration fee was computed using $5.00 per
share of Common Stock which is the exercise price on granted options.
<PAGE>
PART II
INFORMATION REQUIRED IN REGISTRATION STATEMENT
AND NOT REQUIRED IN PROSPECTUS
Item 3: Incorporation of Documents by Reference.
The following documents of Marathon Financial Corporation, Inc., a Virginia
corporation (the "Company"), filed with the Securities and Exchange Commission
(the "Commission"), are incorporated by reference into this Registration
Statement:
(a) The Company's Annual Report on Form 10-KSB, as amended, for the
Company's fiscal year ended December 31, 1996 filed pursuant to Section 13(a) of
the Securities Exchange Act of 1934, as amended (the "1934 Act").
(b) All reports filed by the Company pursuant to Section 13(a) of the
1934 Act since the end of the Company's fiscal year ended December 31, 1996.
(c) The description of the Company's Common Stock registered under the
1934 Act contained in the Company's Registration Statement on Form S-1 (File No.
333-08995), which became effective on August 26, 1996.
All reports and other documents subsequently filed by the Company
pursuant to Sections 13(a), 13(c), 14 and 15(d) of the 1934 Act since the
Company's fiscal year ended December 31, 1996.
Any statement contained in a document incorporated in this Registration
Statement by reference shall be deemed to be modified or superseded for the
purposes of this Registration Statement to the extent that a statement contained
in this Registration Statement or in any other subsequently filed document which
also is or is deemed to be incorporated in this Registration Statement by
reference modifies or replaces such statement.
Item 4: Description of Securities.
Not applicable.
Item 5: Interests of the Named Experts and Counsel.
Not applicable.
Item 6: Indemnification of Directors and Officers.
Section 13.1-692.1 of the Virginia Stock Corporation Act (the "Act") provides
that in any proceeding brought by or in the right of a corporation or brought by
or on behalf of shareholders of the corporation, the damages assessed against an
officer or director arising out of a single transaction, occurrence or course of
conduct shall not exceed the lesser of (1) the monetary amount, including the
elimination of liability, specified in the articles of incorporation or, if
approved by the shareholders, in the bylaws as a limitation on or elimination of
the liability of the officer or director, or (2) the greater of (i) $100,000 or
(ii) the amount of cash compensation received by the officer or director from
the corporation during the 12 months immediately preceding the act or omission
for which liability was imposed. The liability of an officer or director may not
be limited under this section of the Act if the officer or director engaged in
willful misconduct or a knowing violation of the criminal law or of any federal
or state securities law, including, without limitation, any claim of unlawful
insider trading or manipulation of the market for any security.
Section 13.1-697 of the Act authorizes a Virginia corporation to indemnify an
individual made a party to a proceeding because he is or was a director against
liability incurred in the proceeding. A Virginia corporation may not indemnify a
director under this section in connection with a proceeding by or in the right
2
<PAGE>
of the corporation in which the director was adjudged liable to the corporation
or in connection with any other proceeding charging improper personal benefit to
him, whether or not involving action in his official capacity, in which he was
adjudged liable on the basis that personal benefit was improperly received by
him. Section 13.1-698 provides that, unless limited by its Articles of
Incorporation, a Virginia corporation must indemnify a director who entirely
prevails in the defense of any proceeding to which he was a party because he is
or was a director of the corporation against reasonable expenses incurred by him
in connection with the proceeding. Section 13.1-702 of the Act authorizes a
Virginia corporation to indemnify its officers, employees or agents to the same
extent as directors.
The Company's Articles of Incorporation provide that to the full extent that
the Act permits the limitation or elimination of the liability of directors or
officers, a director or officer of the Company shall not be liable to the
Company or its shareholders for monetary damages. The Company's Articles of
Incorporation also provide that to the full extent permitted and in the manner
prescribed by the Act and any other applicable law, the Company shall indemnify
a director or officer of the Company who is or was a party to any proceeding by
reason of the fact that he is or was such a director or officer or is or was
serving at the request of the Company as a director, officer, employee or agent
of another corporation, partnership, joint venture, trust, employee benefit plan
or other enterprise. Any aforesaid reference to directors, officers, employees
or agents includes former directors, officers, employees and agents and their
respective heirs, executors and administrators.
Officers and directors of the Company are covered by insurance that (with
certain exceptions and within certain limitations) indemnifies them against
losses and liabilities arising from an alleged "harmful act," including any
alleged error or misstatement or misleading statement or wrongful act or
omission or neglect or breach of duty.
Item 7: Exemption from Registration Claimed.
Not applicable.
Item 8: Exhibits.
<TABLE>
<CAPTION>
Number Description
- ------ -----------
<S> <C>
3.1 Articles of Incorporation of Marathon Financial Corporation incorporated herein by
reference to the Registrant's Form S-1, filed with the Securities and Exchange
Commission on August 26, 1996. (File No. 33-51366).
3.2 Bylaws of Marathon Financial Corporation incorporated herein by reference to the
Registrant's Form S-1, filed with the Securities and Exchange Commission on August
26, 1996. (File No. 33-51366).
3.3 Form of Marathon Financial Corporation Common Stock Certificate incorporated herein
by reference to the Registrant's Form S-1, filed with the Securities and Exchange
Commission on August 26, 1996. (File No. 333-08995).
**5.1 Opinion of Kaufman & Canoles, filed herewith.
**23.1 Consent of Yount, Hyde & Barbour, P.C.
**23.2 Consent of Kaufman & Canoles (included in the opinion
filed as Exhibit 5.1 to this Registration Statement).
24 Powers of Attorney (included on pages 5 and 6 of this Registration Statement).
**99 1996 Long-Term Incentive Plan
</TABLE>
- --------------------------------------------------------------------------------
* Not filed herewith. In Accordance with Rule 12b-32 of the General Rules and
Regulations under the Securities Exchange Act of 1934, the exhibit is
incorporated by reference.
** Filed herewith.
3
<PAGE>
Item 9: Undertakings.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers
or sales are being made, a post-effective amendment to this registration
statement to include any material information with respect to the plan of
distribution not previously disclosed in this registration statement or any
material change to such information in this registration statement;
(2) That, for the purpose of determining any
liability under the Securities Act of 1933, each such post-effective amendment
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof; and
(3) To remove from registration by means of a
post-effective amendment any of the securities being registered which remain
unsold at the termination of the offering.
(b) The registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 that is incorporated by reference in this registration
statement shall be deemed to be a new registration statement relating to the
securities offered therein; and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(h) Insofar as indemnification for liabilities arising under
the Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant, the registrant has been advised that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the registrant will,
unless in the opinion of counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant
certifies that it has reasonable grounds to believe that it meets all the
requirements for filing on Form S-8 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the County of Frederick, Commonwealth of Virginia, on November
26, 1997.
MARATHON FINANCIAL CORPORATION
By: /s/ Donald L. Unger
----------------------------
Donald L. Unger, President
and Chief Executive Officer
POWER OF ATTORNEY
Pursuant to the requirements of the Securities Act of 1933, the
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated. Each person in so signing, also makes,
constitutes and appoints Donald L. Unger and Joseph W. Hollis, and each of them
individually, his true and lawful attorney-in-fact in this place and stead, to
execute and cause to be filed with the Securities and Exchange Commission any
and all amendments to this Registration Statement.
Signature
/s/ Frank H. Brumback November 26, 1997
- -----------------------------------------------
Frank H. Brumback, Chairman of the Board
/s/ Donald L. Unger November 26, 1997
- -----------------------------------------------
Donald L. Unger, President and Chief Executive
Officer (Principal Executive Officer and Chief
Financial Officer)
/s/ Robert W. Claytor November 26, 1997
- -----------------------------------------------
Robert W. Claytor, Director
/s/ Clifton L. Good November 26, 1997
- -----------------------------------------------
Clifton L. Good, Director
/s/ Joseph W. Hollis November 26, 1997
- -----------------------------------------------
Joseph W. Hollis, Director
/s/ Gerald H. Kidwell November 26, 1997
- -----------------------------------------------
Gerald H. Kidwell, Director
<PAGE>
/s/ Lewis W. Spangler November 26, 1997
- ------------------------------------------------
Lewis W. Spangler, Director
/s/ Thomas W. Grove November 26, 1997
- -----------------------------------------------
Thomas W. Grove, Director
/s/ W. Houston Board, III November 26, 1997
- -----------------------------------------------
W. Houston Board, III, Director
/s/ Ralph S. Gregory November 26, 1997
- -----------------------------------------------
Ralph S. Gregory, Director
- ----------------------------------------------- November ___, 1997
George R. Irvin, Jr., Director
<PAGE>
EXHIBIT INDEX
The following exhibits are filed herewith unless otherwise indicated
<TABLE>
<CAPTION>
Number Description
- ------ -----------
<S> <C>
3.1 Articles of Incorporation of Marathon Financial Corporation incorporated herein by
reference to the Registrant's Form S-1, filed with the Securities and Exchange
Commission on August 26, 1996. (File No. 33-51366).
3.2 Bylaws of Marathon Financial Corporation incorporated herein by reference to the
Registrant's Form S-1, filed with the Securities and Exchange Commission on August
26, 1996. (File No. 33-51366).
3.3 Form of Marathon Financial Corporation Common Stock Certificate incorporated herein
by reference to the Registrant's Form S-1, filed with the Securities and Exchange
Commission on August 26, 1996. (File No. 333-08995).
**5.1 Opinion of Kaufman & Canoles, filed herewith.
**23.1 Consent of Yount, Hyde & Barbour, P.C.
**23.2 Consent of Kaufman & Canoles (included in the opinion
filed as Exhibit 5.1 to this Registration Statement).
24 Powers of Attorney (included on pages 5 and 6 of this Registration Statement.
**99 1996 Long-Term Incentive Plan
</TABLE>
- --------------------------------------------------------------------------------
* Not filed herewith. In Accordance with Rule 12b-32 of the General Rules and
Regulations under the Securities Exchange Act of 1934, the exhibit is
incorporated by reference.
** Filed herewith.
EXHIBIT 5.1
November 26, 1997
Marathon Financial Corporation
4095 Valley Pike
Winchester, VA 22602
Dear Sirs:
In connection with the registration on Form S-8 (the "Registration
Statement") under the Securities Act of 1933, as amended (the "Act"), of 350,000
shares of Common Stock, $1.00 par value, of Marathon Financial Corporation. (the
"Company"), which may be issued pursuant to the terms of the Company's 1996
Long-Term Incentive Plan (the "Plan"), we hereby advise you that in our opinion
that upon issuance pursuant to the terms of the Plans, the shares of Common
Stock which may be issued pursuant thereto will be validly issued, fully paid
and nonassesable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement.
Very truly yours,
Kaufman & Canoles, P.C.
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Marathon Financial Corporation
We consent to the incorporation by reference in the Registration Statement (No.
33- ) on Form S-8 of Marathon Financial Corporation. and subsidiaries of our
report dated January 24, 1997, related to the consolidated balance sheets of
Marathon Financial Corporation and subsidiaries as of December 31, 1996 and
1995, and the related consolidated statements of operations, shareholders'
equity and cash flows for each of the years in the three-year period ended
December 31, 1996, and the related schedule, which report appears in the
December 31, 1996 annual report on Form 10-K of Marathon Financial Corporation.
YOUNT, HYDE & BARBOUR, P.C.
Winchester, Virginia
November 26, 1997
MARATHON FINANCIAL CORPORATION
1996 LONG-TERM INCENTIVE PLAN
1. Purpose. The purpose of the Plan is to promote the interest of Marathon
Financial Corporation and its subsidiaries (the "Company") and its shareholders
by (i) retaining and motivating experienced and knowledgeable directors; (ii)
enabling such directors to participate in the long-term success of the Company;
and (iii) attracting, retaining and motivating key employees of the Company by
providing incentives to associate more closely their interests with the
interests of the Company's shareholders. These objectives are accomplished by
making Awards under the Plan, thereby providing Participants with a proprietary
interest in the growth and performance of the Company.
2. Definitions
2.1 "Award" shall mean the grant of any form of stock option
to a Plan Participant pursuant to such terms, conditions, performance
requirements, and limitations as the Committee may establish in order to fulfill
the objectives of the Plan.
2.2 "Award Agreement" shall mean an agreement between the
Company and a Participant that sets forth the terms, conditions, performance
requirements, and limitations applicable to an Award.
2.3 "Board" shall mean the Board of Directors of the Company.
2.4 "Change in Control" shall mean the happening of any of the
following:
(i) when any "person," as such term is used
in Sections 13(d) and 14(d) of the Exchange Act, (other than the Company or a
subsidiary of the Company or any Company employee benefit plan, including any
trustee of such plan acting as trustee) is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly of
securities of the Company representing twenty percent (20%) or more of the
combined voting power of the Company's then outstanding securities without the
consent of a majority of the Board;
(ii) the occurrence of any transaction or event
relating to the Company required to be described pursuant to the requirements
of Item 6(e) of Schedule 14A of the Exchange Act.;
(iii) when, during a period of two consecutive
years during the existence of the Plan, the individuals who, at the beginning
of such period, constitute the Board of Directors of the Company cease for any
reason other than death to constitute at least a two-thirds majority thereof,
provided however, that a director who was not a director at the beginning of
such period shall be deemed to have satisfied the two-year requirement if such
director was elected by, or on the recommendation of, at least two-thirds of the
directors who were directors at the beginning of such period (either actually or
by prior operation of this (iii)); or
<PAGE>
(iv) the occurrence of a transaction
requiring shareholder approval for the acquisition of the Company by an
entity other than the Company through purchase of assets, or by merger, or
otherwise.
2.5 "Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time.
2.6 "Committee" shall mean the Stock Option Committee of the
Board. If at any time no Stock Option Committee shall be in office, then the
functions of the Committee specified in the Plan shall be exercised by the
Board.
2.7 "Company" shall mean Marathon Financial Corporation, a
corporation organized under the laws of the Commonwealth of Virginia, and all of
its subsidiaries.
2.8 "Date of Grant" shall mean the date an Award is made to a
Participant.
2.9 "Director Stock Options" shall mean the nonstatutory stock
options granted under Section 8 of this Plan to Directors to purchase Stock.
2
<PAGE>
2.10 "Disability" or "Disabled" shall mean permanent and total
disability as determined under the Company's long-term disability program.
2.11 "Employee Stock Options" means the incentive and
nonstatutory stock options granted under Section 9 of this Plan to Key Employees
of the Company to purchase Stock.
2.12 "ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended.
2.13 "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
2.14 "Fair Market Value" shall mean as of any given date, the
following:
(i) With respect to Director Stock Options and
Employee Stock Options granted before the Stock is traded on the NASDAQ Small
Cap Market, the price at which the Company's shares of Stock are offered to the
public in the Company's Public Offering in September and October 1996;
(ii) If the Stock is traded on the
over-the-counter market (including the NASDAQ Small Cap Market, but excluding
the NASDAQ National Market), the average of the last sale price for the Stock on
each date the Stock traded during the twenty (20) consecutive trading days (days
on which the market was open for trading) immediately preceding such given date;
(iii) If the Stock is traded on the NASDAQ
National Market, the average last reported sale price on the NASDAQ National
Market (consolidated trading) of the Stock for the twenty (20) consecutive
trading days immediately preceding such given date; and
(iv) If the Stock is listed on a national
securities exchange, the average of the closing prices of the Stock of the
composite tape for the twenty (20) consecutive trading days immediately
preceding such given date.
2.15 "Good Standing" shall mean that during the calendar year
while a member of the Board, the member attended at least 75% of the meetings of
the Board and Board committees on which such member served, and the member has
not been otherwise determined by a resolution of the Board not to be in good
standing as a member of the Board.
2.16 "Involuntary Separation without Cause" shall mean a
termination of employment by the Company for reasons other than substantial
failure to perform duties, material violation of Company policies, unethical
activities, misconduct, fraud, or commission of an illegal act; provided, that,
Involuntary Separation without Cause does not include a resignation or a
voluntary separation from employment, in either case initiated by a Participant.
2.17 "Key Employee" means those officers and other key
employees of the Company who are in a position in which their decisions, actions
and efforts significantly contribute to the success of the Company.
3
<PAGE>
2.18 "Marathon Financial Corporation" shall mean Marathon
Financial Corporation, a Virginia corporation.
2.19 "Non-Employee Director" shall mean a director who
(i) is not currently an officer of the
Company or otherwise employed by the Company;
(ii) does not receive compensation, directly or
indirectly, from the Company for services rendered as a consultant or in any
capacity other than as a director, except for an amount that does not exceed the
dollar amount for which disclosure would be required pursuant to Section
229.404(a) of the SEC Regulations; and
(iii) does not possess an interest in any
transaction, and is not engaged in a business relationship for which
disclosure would be mandatorily required under Section 229.404 of the SEC
Regulations.
2.20 "Options" means the Director Stock Options and Employee
Stock Options granted under this Plan.
2.21 "Participant" shall mean a Key Employee or director of
the Company to whom an Award has been made under the Plan.
2.22 "Plan" shall mean the Marathon Financial Corporation 1996
Long-Term Incentive Plan.
2.23 "Potential Change in Control" shall mean the entering
into an agreement by the Company, or the commencement of a tender offer, the
consummation of which would result in a Change in Control of the Company as
defined in the definition of "Change in Control" above.
2.24 "SEC" shall mean the Securities and Exchange Commission.
2.25 "Stock" means the Common Stock, $1.00 par value per
share, of the Company.
3. Effective Date and Duration of the Plan. The effective date of the Plan is
September 17, 1996, subject to approval of the Plan by the shareholders of the
Company before or at the 1997 annual shareholders meeting. The Plan shall
remain in effect until all Awards under the Plan have been satisfied by the
issuance of shares, but no Award shall be granted more than seven (7) years
after the effective date of the Plan.
4. Capital Stock Available for Awards. The number of shares of Stock for which
Awards may be granted under the Plan shall not exceed 350,000; provided,
however, that in no event may the shares for which Awards may be granted under
the Plan exceed in the aggregate 10% of the issued and outstanding Stock of the
4
<PAGE>
Company at any time. Stock related to Awards that are forfeited, terminated,
expire unexercised, or are settled in such manner that all or some of the shares
covered by an Award under this Plan are not issued to a Participant shall
immediately become available for Awards under this Plan.
5. Administration.
5.1 Employee Stock Options.
(a) Employee Stock Option Committee. Employee
Stock Options shall be administered by the Committee appointed by the Board and
composed of not less than three Non-Employee Directors.
(b) Powers of the Committee. Within the limits
of the express provisions of the Plan, the Committee shall determine: (i) the
Key Employees to whom Employee Stock Options hereunder shall be granted, (ii)
the time or times at which such Employee Stock Options shall be granted, (iii)
the form and amount of the Employee Stock Options and (iv) the limitations,
restrictions and conditions applicable to any such Employee Stock Options. In
making such determinations, the Committee may take into account the nature of
the services rendered by such Key Employees, their present and potential
contributions to the Company's success and such other factors as the Committee
in its discretion shall deem relevant.
(c) Interpretations. Subject to the express
provisions of the Plan, the Committee may prescribe, amend and rescind rules and
regulations relating to Employee Stock Options, determine the terms and
provisions of the Employee Stock Options and make all other determinations it
deems necessary or advisable for the administration of the Employee Stock
Options.
(d) Determinations. The determinations of the
Committee on all matters regarding the Employee Stock Options shall be
conclusive. A member of the Committee shall only be liable for any action taken
or determination made in bad faith.
(e) Nonuniform Determinations. The
Committee's determinations with respect to Employee Stock Options, including
without limitation, determinations as to the Key Employees to receive Employee
Stock Options, the terms and provisions of such Incentive Stock Options and the
agreements evidencing the same, need not be uniform and may be made by it
selectively among the Key Employees who receive or are eligible to receive
Employee Stock Options, whether or not such Key Employees are similarly
situated.
5.2 Director Stock Options.
5.2.1 Administration by Board. The Director
Stock Options shall be administered by the Board. The Board shall have no
authority, discretion or power to select the individuals who are or will be
eligible to receive the Director Stock Options under the Plan. The Board shall
not have any discretion to determine the amount, price or timing of any Director
Stock Options granted or to be granted hereunder, and shall only administer the
Director Stock Options pursuant to the express terms of the Plan.
5
<PAGE>
5.2.2 Powers of Board. The Board shall have the
power, subject to, and within the limitations of, the express provisions of
the Plan:
(i) to construe and interpret the Plan
with respect to any Director Stock Options, to construe and interpret any
conditions or restrictions imposed on the Stock acquired pursuant to the
exercise of Director Stock Options, to define the terms used herein (to the
extent not already defined) and to establish, amend, and revoke rules and
regulations for administration of the Director Stock Options. The Board, in the
exercise of this power, may correct any defect, omission, or inconsistency in
the Director Stock Options in a manner and to the extent it shall deem necessary
or expedient to make the Director Stock Options fully effective;
(ii) to amend, modify, suspend, or
terminate the Director Stock Options in accordance with Section 16; and
(iii) generally, to exercise such
powers and to perform such acts as the Board deems necessary or expedient to
promote the best interests of the Company in connection with the Director Stock
Options.
6. Eligibility. Participants shall be limited to the Board and Key Employees.
7. Awards Under the Plan.
7.1 Employee Stock Options. The Committee shall determine the
type or types of Awards to be made to each Key Employee Participant and shall
set forth in each Award Agreement the terms, conditions, and limitations
applicable to each Award. Awards may be granted singly, in combination or in
tandem. Awards may also be made in combination or in tandem with, in replacement
of, or as alternatives to, grants or rights under any other employee plan of the
Company, including the plan of any acquired entity.
7.2 Director Stock Options. Awards of Director Stock
Options shall be set forth in an Award Agreement memorializing the terms,
conditions and limitations set forth in this Plan.
8. Terms of Director Stock Option Grants.
8.1 Option Grant; Number of Shares. In consideration for
services performed for and to be performed for, past and future contributions
to, and benefits conferred upon and to be conferred upon the Company, the
Company grants, on the Effective Date, Director Stock Options to each of its
Directors in office on the Effective Date other than Donald L. Unger, President
of the Company (who shall qualify for Employee Stock Options), to purchase
10,000 shares of Stock each, which options shall become vested and exercisable
as set forth in Sections 8.3 below.
8.2 Option Exercise Price. The exercise price of all
Options granted under this Plan shall be 100% of the Fair Market Value on the
Date of Grant.
6
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8.3 Vesting and Exercise of Options. All Director Stock
Options shall become vested and exercisable as set forth below, and shall expire
on the tenth year anniversary of the Date of Grant. A Director Stock Option
shall only vest if the Participant is a member of the Board in Good Standing on
the vesting date.
Exercise Period
--------------------
Number of Shares Vesting Commencement Expiration
Subject to Option Date Date Date
- ----------------- ---- ---- ----
5,000 September 17, 1996 * September 16, 2006
1,000 September 17, 1998 September 17, 1998 September 16, 2006
1,000 September 17, 1999 September 17, 1999 September 16, 2006
1,000 September 17, 2000 September 17, 2000 September 16, 2006
1,000 September 17, 2001 September 17, 2001 September 16, 2006
1,000 September 17, 2002 September 17, 2002 September 16, 2006
* Date of shareholder approval of the Plan.
8.4 Taxation of Bank Director Stock Options. The Company does
not intend that Director Stock Options granted under the Plan shall constitute
"incentive stock options" within the meaning of Section 422 of the Code.
Accordingly, the Director Stock Options shall be subject to taxation under
Section 83 of the Code.
9. Terms of Employee Stock Options.
9.1 General. Awards to Key Employees may be made in the form
of incentive stock options or nonqualified stock options, as set forth in
Sections 9.2 and 9.3 below.
9.2 Incentive Stock Options. Incentive stock options, or
substitutes therefor, are options to purchase Stock which, in addition to being
subject to applicable terms, conditions and limitations established by the
Committee, comply with Section 422 of the Code. Incentive stock options shall be
evidenced by Award Agreements which shall contain in substance the following
terms and conditions:
9.2.1 Option Price. The purchase price per
share of Stock deliverable upon the exercise of an incentive stock option
shall not be less than 100% of the Fair Market Value of the Stock on the day the
incentive stock option is granted.
9.2.2 Exercise of Option. Each Award Agreement
pursuant to which incentive stock options are granted shall state the period
or periods of time within which the incentive stock option may be exercised by
the Participant, in whole or in part, which shall be such period or periods of
time as may be determined by the Committee, provided that the exercise period
shall not commence earlier than six months after the date of the grant of the
incentive stock option nor end later than 10 years after the date of the grant
of the incentive stock option.
7
<PAGE>
9.2.3 Nontransferability. Each Award Agreement
shall state that the incentive stock option is not transferable other than by
will or the laws of descent and distribution, and during the lifetime of the
Participant is exercisable only by the Participant.
9.2.4 Payment for Shares. Stock purchased
pursuant to an incentive stock option shall be paid for in full in cash or,
unless the Committee determines otherwise at or prior to the time of exercise,
Stock at Fair Market Value or a combination thereof, in an amount or having a
combined value equal to the aggregate purchase price for the shares subject to
the incentive stock option or portion thereof being exercised.
9.2.5 Rights Upon Termination of Employment. In
the event that a Participant ceases to be an employee of the Company for any
reason other than death, Disability, retirement (including early retirement) or
Involuntary Separation without Cause, all incentive stock options granted to the
Participant shall lapse forthwith or at such other time as determined by the
Committee. In the event employment ceases because a Participant retires, becomes
Disabled, or is Involuntarily Separated without Cause, prior to expiration of
the Participant's incentive stock option, without having fully exercised such
incentive stock option, if permitted by the Committee, the Participant shall
have the right to exercise the incentive stock option during its term within a
period of three months after the date employment so ceased, to the extent that
the incentive stock option was exercisable on the date employment ceased. In the
event a Participant ceases to be an employee of the Company because of death
prior to the expiration of the Participant's incentive stock option, without
having fully exercised such incentive stock option, Participant's legatees,
executors, personal representatives and/or distributees shall have the right to
exercise the incentive stock option during its term within a period of one year
after the date employment so ceased, to the extent that the incentive stock
option was exercisable on the date employment ceased.
9.2.6 Individual Limitations.
(i) Notwithstanding anything herein to
the contrary, to the extent that the aggregate Fair Market Value (determined
as of the time the option is granted) of stock for which any Participant is
granted incentive stock options that are exercisable for the first time during
any calendar year (under all such plans of the Company) shall exceed $100,000
(such excess to be determined by taking incentive stock options into account in
the order in which granted), such incentive stock options to such extent shall
be treated as options which are not incentive stock options.
(ii) Notwithstanding anything herein to
the contrary, no incentive stock option shall be granted to any individual if
at the time the incentive stock option is to be granted the individual owns
Stock possessing more than 10% of the total combined voting power of all classes
of stock of the Company or of any parent or subsidiary corporation unless at the
time such incentive stock option is granted the option price is at least 110% of
the Fair Market Value of the Stock subject to the incentive stock option and
such incentive stock option by its terms is not exercisable after the expiration
of five years from the date such incentive stock option is granted.
9.2.7 Code Compliance. Each Award Agreement pursuant
to which incentive stock options are granted shall contain such other terms,
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conditions and provisions as the Committee may determine to be necessary or
desirable in order to qualify such option as a tax-favored option within the
meaning of Section 422 of the Code, or the regulations thereunder. The Board
shall have the power without further approval to amend the terms of the Plan or
any Awards or Award Agreements thereunder for such purpose.
9.2.8 Cashless Exercise. To the extent permitted
under the applicable laws and regulations under Section 16 of the Exchange Act
and the rules and regulations promulgated thereunder, and with the consent of
the Committee, the Company agrees to cooperate in a "cashless exercise" of an
incentive stock option. The cashless exercise shall be effected by the
Participant delivering to a registered securities broker acceptable to the
Company instructions to sell a sufficient number of shares of Stock to cover the
costs and expenses associated therewith.
9.3 Non-Qualified Stock Options. Non-qualified stock options,
or substitutes therefore, are options to purchase Stock of the Company which are
not intended to comply with Section 422 of the Code. Non-qualified stock options
shall be evidenced by Award Agreements which shall contain in substance the
following terms and conditions:
9.3.1 Option Price. The purchase price per
share of stock deliverable upon the exercise of a non-qualified stock option
shall be not less than 100% of the Fair Market Value of the Stock on the day the
non-qualified stock option is granted, as determined by the Committee.
9.3.2 Exercise of Option. Each Award Agreement
pursuant to which non-qualified stock options are granted shall state the
period or periods of time within which the non-qualified stock option may be
exercised by the Participant, in whole or in part, which shall be such period or
periods of time as may be determined by the Committee at the time of grant,
provided that the exercise period shall not commence earlier than six months
after the date of the grant of the non-qualified stock option.
9.3.3 Payment for Shares. Stock purchased
pursuant to a non-qualified stock option shall be paid for in full in cash or,
unless the Committee determines otherwise at or prior to the time of exercise,
in Stock of the Company at Fair Market Value or a combination of cash and such
Stock, in an amount or having a combined value equal to the aggregate purchase
price for the shares subject to the non-qualified stock option or portion
thereof being exercised.
9.3.4 Rights Upon Termination of Employment. In
the event that a Participant ceases to be an employee of the Company for any
reason other than death, Disability, retirement (including early retirement) or
Involuntary Separation without Cause, all non-qualified stock options granted to
such Participant shall lapse forthwith or at such other time as determined by
the Committee. In the event employment ceases because a Participant dies,
retires, or becomes Disabled, or is Involuntarily Separated without Cause prior
to expiration of the Participant's non-qualified stock option without having
fully exercised such non-qualified stock option, the Participant shall have the
right to exercise the non-qualified stock option during its term within a period
of twelve months after the date employment so ceased, to the extent that the
non-qualified stock option was exercisable on the date employment ceased.
9.3.5 Cashless Exercise. To the extent
permitted under the applicable laws and regulations under Section 16 of the
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Exchange Act and the rules and regulations promulgated thereunder, and with the
consent of the Committee, the Company agrees to cooperate in a "cashless
exercise" of a non-qualified stock option. The cashless exercise shall be
effected by the Participant delivering to a registered securities broker
acceptable to the Company instructions to sell a sufficient number of shares of
Stock to cover the costs and expenses associated therewith.
10. Accelerated Exercise in the Event of Change of Control. Any other
provision of this Plan notwithstanding, all Options granted to a Participant
shall be automatically vested and exercisable in the event of a Change in
Control, or a Potential Change in Control of the Company.
11. General Restrictions.
11.1 Conditions on Company's Obligations. The Company's
obligations with respect to each Award under the Plan shall be subject to the
requirement that, if at any time the Committee shall determine that (i) the
listing, registration or qualification of the shares of Stock subject or related
thereto upon any securities exchange or under any state or federal law, (ii) the
consent or approval of any government regulatory body, or (iii) an agreement by
the recipient of an Award with respect to the disposition of shares of Stock, is
necessary or desirable as a condition of or in connection with the granting of
such Award, such Award may not be consummated in whole or in part unless such
listing, registration, qualification, consent, approval or agreement shall have
been effected or obtained free of any conditions not acceptable to the
Committee.
11.2 Per Participant Limitation on Stock Options.
Notwithstanding anything in this Plan to the contrary, no Participant shall
receive incentive stock options and non-qualified stock options that, in the
aggregate, allow the Participant the option to purchase in excess of 50,000
shares of Stock of the Company in any given year the Plan is in effect.
12. Rights To Terminate Employment. Nothing in the Plan or in any Award
Agreement or other agreement entered into pursuant to the Plan shall confer upon
any Participant the right to continue in the employment of the Company or affect
any right which the Company may have to terminate the employment of such
Participant.
13. Withholding. Whenever the Company proposes or is required to issue or
transfer shares of Stock under the Plan, the Company shall have the right to
require the Participant to remit to the Company an amount sufficient to satisfy
any federal, state and/or local tax withholding requirements prior to the
delivery of any certificate for such shares or, in the discretion of the
Committee, the Company may withhold from the shares to be delivered shares
sufficient to satisfy all or a portion of such tax withholding requirements.
14. Nontransferability. No Award under the Plan shall be assignable or
transferable by the Participant other than by will or by the laws of descent and
distribution. During the life of the Participant, all Awards shall be
exercisable only by such person or by such Participant's guardian or legal
representative.
15. Adjustments. In the event of any change in the outstanding Stock of the
Company by reason of a stock dividend or distribution, recapitalization, merger,
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consolidation, stock-split, combination, exchange of shares or the like, in
which the number of shares held by the Company shareholders prior to such event
is affected by such event, then the Committee shall adjust the number of shares
of Stock which may be issued under the Plan and shall provide for an equitable
adjustment of any outstanding Award or the number or kind of shares issuable
pursuant to an outstanding Award under the Plan. Notwithstanding the foregoing,
all changes in the outstanding Stock of the Company shall be considered in
determining the number of shares of outstanding Stock of the Company for
purposes of Section 4 of this Plan.
16. Termination and Amendment of the Plan. The Committee (or the Board in the
case of Director Stock Options) may from time to time amend, modify, terminate
or suspend the Plan; provided, however, that:
16.1 Except as provided in Sections 9.2.7 and 15, no such
amendment, modification, suspension, or termination shall impair or adversely
alter any Options or rights theretofore granted under the Plan, except with the
consent of the optionee, nor shall any amendment, modification, suspension, or
termination deprive any optionee of any Common Stock which he may have acquired
through or as a result of the Plan;
16.2 To the extent necessary under Section 16(b) of the Act
and the rules and regulations promulgated thereunder, no amendment shall be
effective unless approved by the shareholders of the Company in accordance with
applicable law. Specifically, the Committee (or the Board in the case of
Director Stock Options) may not without the approval of the shareholders of the
Company:
(i) materially increase the total number of
shares of Stock available for grant under the Plan;
(ii) materially modify the class of eligible
individuals under the Plan; or
(iii) materially increase the benefits to any
Participant who is subject to the restrictions of Section 16 of the Act.
16.3 With respect to Director Stock Options, the provisions of
the Plan governing:
(i) the number of Director Stock Options to be
awarded to Directors;
(ii) the Stock to be covered by each Director
Stock Option;
(iii) the exercise price per share under each
Director Stock Option;
(iv) when and under what circumstances each
Director Stock Option will be granted; and
(v) the period within which each Director Stock
Option may be exercised
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shall in no event be amended more often than once every six (6) months, other
than to comport with changes in the Code, ERISA or the rules and regulations
promulgated thereunder.
17. Effect on Other Plans. Participation in the Plan shall not affect an
employee's eligibility to participate in any other benefit or incentive plan of
the Company, and any Awards made pursuant to the Plan shall not be used in
determining the benefits provided under any other plan of the Company unless
specifically provided.
18. Compliance With Exemptive Rules Under Section 16 of the Exchange Act. It
is the intent of the Company that transactions involving equity securities under
the Plan by persons subject to Section 16 of the Exchange Act be exempt under
Rule 16b-3 under the Exchange Act. Accordingly, if any provision of the Plan or
any Award agreement does not comply with the requirements of Rule 16b-3 as then
applicable to such a transaction, such provision shall be construed or deemed
amended to the extent necessary to conform to such requirements with respect to
such transaction.
19. Governing Law. To the extent that federal laws do not otherwise control,
the Plan shall be governed by and construed in accordance with the laws of the
Commonwealth of Virginia.
Adopted by the Board of Directors September 17, 1996.
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