NATIONAL BANKSHARES, INC. Exhibit 4.3
1999 STOCK OPTION PLAN
ARTICLE I
ESTABLISHMENT, PURPOSE, AND DURATION
1.1 ESTABLISHMENT OF THE PLAN. National Bankshares, Inc., a Virginia
corporation (the "Company"), hereby establishes an incentive compensation
plan for the Company and its subsidiaries to be known as the "National
Bankshares, Inc. 1999 Stock Option Plan", as set forth in this document.
Unless otherwise defined herein, all capitalized terms shall have the
meanings set forth in Section 2.1 herein. The Plan permits the grant of
Incentive Stock Options and Non-qualified Stock Options.
The Plan was adopted by the Board of Directors of the Company on
March 10, 1999, and shall become effective on the date thereof (the
"Effective Date"), subject to the approval by vote of shareholders of the
Company in accordance with applicable laws.
1.2 PURPOSE OF THE PLAN. The purpose of the Plan is to promote the
success of the Company and its subsidiaries by providing incentives to Key
Employees that will promote the identification of their personal interest
with the long-term financial success of the Company and with growth in
shareholder value. The Plan is designed to provide flexibility to the
Company, including its subsidiaries, in its ability to motivate, attract,
and retain the services of Key Employees upon whose judgment, interest, and
special effort the successful conduct of its operation is largely
dependent.
1.3 DURATION OF THE PLAN. The Plan shall commence on the Effective
Date, as described in Section 1.1 herein, and shall remain in effect,
subject to the right of the Board of Directors of the Company to terminate
the Plan at any time pursuant to Article IX herein, until March 9, 2009, at
which time it shall terminate except with respect to Awards made prior to,
and outstanding on, that date which shall remain valid in accordance with
their terms.
ARTICLE II
DEFINITIONS
2.1 DEFINITIONS. Except as otherwise defined in the Plan, the
following terms shall have the meanings set forth below:
(a) "Agreement" means a written agreement implementing the grant
of each Award signed by an authorized officer of the Company and by
the Participant.
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(b) "Award" means, individually or collectively, a grant under
this Plan of Incentive Stock Options or Non-qualified Stock Options.
(c) "Award Date" or "Grant Date" means the date on which an
Award is made by the Committee under this Plan.
(d) "Board" or "Board of Directors" means the Board of Directors
of the Company, unless otherwise indicated.
(e) "Change in Control" means the occurrence, after the
Effective Date, of either an "Acquisition of Controlling Ownership" (as
defined in clause (i) below), a "Change in the Incumbent Board" (as defined
in clause (ii) below), a "Business Combination" (as defined in clause (iii)
below), or a "Liquidation or Dissolution" (as defined in clause (iv)
below).
(i) "Acquisition of Controlling Ownership" means the
acquisition by any individual, entity or group (within the meaning of
Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a "Person") of
beneficial ownership (within the meaning of Rule 13d-3 promulgated
under the Exchange Act) of 20% or more of either (x) the then
outstanding shares of common stock of the Company (the "Outstanding
Common Stock") or (y) the combined voting power of the then
outstanding voting securities of the Company entitled to vote
generally in the election of directors (the "Outstanding Voting
Securities"). Notwithstanding the foregoing, for purposes of this
clause (i), the following acquisitions shall not constitute a Change
in Control:
(A) any acquisition directly from the Company;
(B) any acquisition by the Company;
(C) any acquisition by any employee benefit plan (or
related trust) sponsored or maintained by the Company or any
corporation controlled by the Company; or
(D) any acquisition by any corporation pursuant to a
transaction which complies with paragraphs (A), (B) and (C) of clause
(iii) of this Section 2.1(e).
(ii) "Change in the Incumbent Board" means that individuals
who, as of the Effective Date, constitute the Board (the "Incumbent
Board") cease for any reason to constitute at least a majority of the
Board. For this purpose, any individual who becomes a director
subsequent to the Effective Date whose election, or nomination for
election by the Company's shareholders, was approved by a vote of at
least a majority of the directors then comprising the Incumbent Board
shall be thereupon considered a member of the Incumbent Board (with
his predecessor thereafter ceasing to be a member), but excluding, for
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this purpose, any such individual whose initial assumption of office
occurs as a result of an actual or threatened election contest with
respect to the election or removal of directors or other actual or
threatened solicitation of proxies or consents by or on behalf of a
Person other than the Board.
(iii) "Business Combination" means the consummation of a
reorganization, merger or consolidation or sale or other disposition
of all or substantially all of the assets of the Company (a "Business
Combination") unless all of the following occur:
(A) all or substantially all of the individuals and
entities who were the beneficial owners respectively, of the
Outstanding Common Stock and Outstanding Voting Securities immediately
prior to such Business Combination beneficially own, directly or
indirectly, more than 60% of, respectively, the then outstanding
shares of common stock and the combined voting power of the then
outstanding voting securities entitled to vote generally in the
election of directors, as the case may be, of the corporation
resulting from such Business Combination (including, without
limitation, a corporation which as a result of such transaction owns
the Company or all or substantially all of the Company's assets either
directly or through one or more subsidiaries, in substantially the
same proportions as their ownership, immediately prior to such
Business Combination of the Outstanding Common Stock and Outstanding
Voting Securities, as the case may be,
(B) no Person (excluding any corporation resulting
from such Business Combination or any employee benefit plan (or
related trust) of the Company or such corporation resulting from such
Business Combination) beneficially owns, directly or indirectly, 20%
or more of, respectively, the then outstanding shares of common stock
of the corporation resulting from such Business Combination, or the
combined voting power of the then outstanding voting securities of
such corporation except to the extent that such ownership existed
prior to the Business Combination, and
(C) at least a majority of the members of the board of
directors of the corporation resulting from such Business Combination
were members of the Incumbent Board or were elected by such majority
at the time of the execution of the initial agreement, or of the
action of the Board, providing for such Business Combination.
(iv) "Liquidation or Dissolution" means the approval by the
shareholders of the Company of a complete liquidation or dissolution
of the Company.
(f) "Code" means the Internal Revenue Code of 1986, as amended
from time to time.
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(g) "Committee" means the committee of the Board appointed by
the Board to administer the Plan pursuant to Article III herein, all
of the members of which shall be "non-employee directors" as defined
in Rule 16b-3, as amended, under the Exchange Act or any similar or
successor rule and "outside directors" within the meaning of Section
162(m)(4)(C)(i) of the Code. Unless otherwise determined by the
Board, the Committee shall consist of all non-employee director
members of the Board meeting the above requirements.
(h) "Company" means National Bankshares, Inc., or any successor
thereto as provided in Article XI herein.
(i) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(j) "Fair Market Value" of a Share means the mean between the
high and low sales price of the Stock on the relevant date if it is a
trading date, or if not, on the most recent date on which the Stock
was traded prior to such date, as reported by NASDAQ National Market
System, or if, in the opinion of the Committee, this method is
inapplicable or inappropriate for any reason, the fair market value as
determined pursuant to a reasonable method adopted by the Committee in
good faith for such purpose.
(k) "Incentive Stock Option" or "ISO" means an option to
purchase Stock, granted under Article VI herein, which is designated
as an incentive stock option and is intended to meet the requirements
of Section 422 of the Code.
(l) "Key Employee" means an officer or other key employee of the
Company or its Subsidiaries, who, in the opinion of the Committee, can
contribute significantly to the growth and profitability of, or
perform services of major importance to, the Company and its
Subsidiaries. Key Employee does not include non-employee officers or
directors, but may include officers or directors who are employees.
(m) "Non-qualified Stock Option" or "NQSO" means an option to
purchase Stock, granted under Article VI herein, which is not intended
to be an Incentive Stock Option.
(n) "Option" means an Incentive Stock Option or a Non-qualified
Stock Option.
(o) "Participant" means a Key Employee who is granted an Award
under the Plan.
(p) "Person" shall have the meaning ascribed to such term in
Section 3(a)(9) of the Exchange Act and used in Sections 13(d) and
14(d) thereof, including a "group" as defined in Section 13(d).
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(q) "Plan" means the National Bankshares, Inc. 1999 Stock Option
Plan, as described and as hereafter from time to time amended.
(r) "Stock" or "Shares" means the common stock of the Company.
(s) "Subsidiary" shall mean a corporation at least 50% of the
total combined voting power of all classes of stock of which is owned
by the Company, either directly or through one or more of its
Subsidiaries.
ARTICLE III
ADMINISTRATION
3.1 THE COMMITTEE. The Plan shall be administered by the Committee
which shall have all powers necessary or desirable for such administration.
The express grant in this Plan of any specific power to the Committee shall
not be construed as limiting any power or authority of the Committee. In
addition to any other powers and, subject to the provisions of the Plan,
the Committee shall have the following specific powers: (i) to determine
the terms and conditions upon which the Awards may be made and exercised;
(ii) to determine all terms and provisions of each Agreement, which need
not be identical; (iii) to construe and interpret the Agreements and the
Plan; (iv) to establish, amend or waive rules or regulations for the Plan's
administration; (v) to accelerate the exercisability of any Award; and (vi)
to make all other determinations and take all other actions necessary or
advisable for the administration of the Plan.
3.2 DELEGATION OF CERTAIN DUTIES. The Committee may in its sole
discretion delegate all or part of its duties and obligations to designated
officer(s) to administer the Plan with respect to Awards to Key Employees
who are not subject to Section 16 of Exchange Act.
3.3 SELECTION OF PARTICIPANTS. The Committee shall have the
authority to grant Awards under the Plan, from time to time, to such Key
Employees as may be selected by it. Each Award shall be evidenced by an
Agreement.
3.4 DECISIONS BINDING. All determinations and decisions made by the
Board or the Committee pursuant to the provisions of the Plan shall be
final, conclusive and binding.
3.5 RULE 16B-3 REQUIREMENTS AND CODE SECTION 162(M). Notwithstanding
any other provision of the Plan, the Board or the Committee may impose such
conditions on any Award, and amend the Plan in any such respects, as may be
required to satisfy the requirements of Rule 16b-3, as amended (or any
successor or similar rule), under the Exchange Act. Any provision of the
Plan to the contrary notwithstanding, and except to the extent that the
Committee determines otherwise: (i) transactions by and with respect to
officers and directors of the Company who are subject to Section 16(b) of
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the Exchange Act (hereafter, "Section 16 Persons") shall comply with any
applicable conditions of SEC Rule 16b-3; (ii) transactions with respect to
persons whose remuneration is subject to the provisions of Section 162(m)
of the Code shall conform to the requirements of Section 162(m)(4)(C) of
the Code; and (iii) every provision of the Plan shall be administered,
interpreted and construed to carry out the foregoing provisions of this
sentence. Notwithstanding any provision of the Plan to the contrary, the
Plan is intended to give the Committee the authority to grant Awards that
qualify as performance-based compensation under Code Section 162(m)(4)(C)
as well as Awards that do not so qualify. Every provision of the Plan
shall be administered, interpreted and construed to carry out such
intention and any provision that cannot be so administered, interpreted and
construed shall to that extent be disregarded; and any provision of the
Plan that would prevent an Award that the Committee intends to qualify as
performance-based compensation under Code Section 162(m)(4)(C) from so
qualifying shall be administered, interpreted and construed to carry out
such intention and any provision that cannot be so administered,
interpreted and construed shall to that extent be disregarded.
3.6 INDEMNIFICATION OF COMMITTEE. In addition to such other rights
of indemnification as they may have as directors or as members of the
Committee, the members of the Committee shall be indemnified by the Company
against reasonable expenses, including attorneys' fees, actually and
reasonably incurred in connection with the defense of any action, suit or
proceeding, or in connection with any appeal therein, to which they or any
of them may be a party by reason of any action taken or failure to act
under or in connection with the Plan or any Award granted or made
hereunder, and against all amounts reasonably paid by them in settlement
thereof or paid by them in satisfaction of a judgment in any such action,
suit or proceeding, if such members acted in good faith and in a manner
which they believed to be in, and not opposed to, the best interests of the
Company and its Subsidiaries.
ARTICLE IV
STOCK SUBJECT TO THE PLAN
4.1 NUMBER OF SHARES. Subject to adjustment as provided in Section
4.3 herein, the maximum aggregate number of Shares that may be issued
pursuant to Awards made under the Plan shall not exceed 250,000. Except as
provided in Sections 4.2 and 4.3 herein, the issuance of Shares in
connection with the exercise of, or as other payment for Awards, under the
Plan shall reduce the number of Shares available for future Awards under
the Plan.
4.2 LAPSED AWARDS OR FORFEITED SHARES. If any Award granted under
this Plan (for which no material benefits of ownership have been received)
terminates, expires, or lapses for any reason other than by virtue of
exercise of the Award, any Stock subject to such Award again shall be
available for the grant of an Award under the Plan.
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4.3 DELIVERY OF SHARES AS PAYMENT. In the event a Participant pays
the Option Price for Shares pursuant to the exercise of an Option with
previously acquired Shares, the number of Shares available for future
Awards under the Plan shall be reduced only by the net number of new Shares
issued upon the exercise of the Option.
4.4 CAPITAL ADJUSTMENTS. The number and class of Shares subject to
each outstanding Award, the Option Price (as hereinafter defined) and the
aggregate number and class of Shares for which Awards thereafter may be
made shall be subject to such adjustment, if any, as the Committee in its
sole discretion deems appropriate to reflect such events as stock
dividends, stock splits, recapitalizations, mergers, consolidations or
reorganizations of or by the Company.
ARTICLE V
ELIGIBILITY
Persons eligible to participate in the Plan include all employees of
the Company and its Subsidiaries who, in the opinion of the Committee, are
Key Employees.
ARTICLE VI
STOCK OPTIONS
6.1 GRANT OF OPTIONS. Subject to the terms and provisions of the
Plan, Options may be granted to Key Employees at any time and from time to
time as shall be determined by the Committee. The Committee shall have
complete discretion in determining the number of Shares subject to Options
granted to each Participant, provided, however, that (i) no Key Employee
may be granted Options in any calendar year for more than 25,000 Shares and
(ii) that the aggregate Fair Market Value (determined at the time the Award
is made) of Shares with respect to which any Participant may first exercise
ISOs granted under the Plan during any calendar year may not exceed
$100,000 or such amount as shall be specified in Section 422 of the Code
and rules and regulation thereunder.
6.2 OPTION AGREEMENT. Each Option grant shall be evidenced by an
Agreement that shall specify the type of Option granted, the Option Price,
the duration of the Option, the number of Shares to which the Option
pertains, any conditions imposed upon the exercisability of Options in the
event of retirement, death, disability or other termination of employment,
and such other provisions as the Committee shall determine. The Agreement
shall specify whether the Option is intended to be in Incentive Stock
Option within the meaning of Section 422 of the Code, or Nonqualified Stock
Option not intended to be within the provisions of Section 422 of the Code.
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6.3 OPTION PRICE. The exercise price per share of Stock covered by
an Option ("Option Price") shall be determined by the Committee subject to
the following limitations. The Option Price shall not be less than 100% of
the Fair Market Value of such Stock on the Grant Date. In addition, an ISO
granted to an employee who, at the time of grant, owns (within the meaning
of Section 425(d) of the Code) Stock possessing more than 10% of the total
combined voting power of all classes of Stock of the Company, shall have an
Option Price which is at least equal to 110% of the Fair Market Value of
the Stock.
6.4 DURATION OF OPTIONS. Each Option shall expire at such time as
the Committee shall determine at the time of grant provided, however, that
no Option shall be exercisable later than the tenth (10th) anniversary date
of its Award Date. In addition, no ISO granted to an employee who, at the
time of grant, owns (within the meaning of Section 425(d) of the Code)
Stock possessing more than 10% of the total combined voting power of all
classes of Stock of the Company, shall be exercisable later than the fifth
(5th) anniversary date of its Award Date.
6.5 EXERCISABILITY. Options granted under the Plan shall be
exercisable at such times and be subject to such restrictions and
conditions as the Committee shall determine, which need not be the same for
all Participants.
6.6 METHOD OF EXERCISE. Options shall be exercised by the delivery
of a written notice to the Company in the form prescribed by the Committee
setting forth the number of Shares with respect to which the Option is to
be exercised, accompanied by full payment for the Shares which shall be
deemed to include any arrangements approved by the Committee for the
delivery to the Company of the proceeds of a sale or margin loan in the
case of a "cashless" exercise. The Option Price shall be payable to the
Company in full either in cash (including, where approved by the Committee,
the proceeds of a cashless exercise in the Committee's discretion), by
delivery of Shares of Stock valued at Fair Market Value at the time of
exercise (in the Committee's discretion), delivery of a promissory note (in
the Committee's discretion) or by a combination of the foregoing. As soon
as practicable after receipt of written notice and payment, the Company
shall deliver to the Participant, stock certificates in an appropriate
amount based upon the number of Options exercised, issued in the
Participant's name. No Participant who is awarded Options shall have
rights as a shareholder until the date of exercise of the Options.
6.7 RESTRICTIONS ON STOCK TRANSFERABILITY. The Committee may impose
such restrictions on any Shares acquired pursuant to the exercise of an
Option under the Plan as it may deem advisable, including, without
limitation, restrictions under the applicable Federal securities law, under
the requirements of the National Association of Securities Dealers, Inc. or
any stock exchange upon which such Shares are then listed and under any
blue sky or state securities laws applicable to such Shares.
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6.8 NONTRANSFERABILITY OF OPTIONS. Except as specifically provided
in an Agreement pursuant to 6.9 below, no Option granted under the Plan may
be sold, transferred, pledged, assigned, or otherwise alienated or
hypothecated, otherwise than by will or by the laws of descent and
distribution, and all Options granted to a Participant under the Plan shall
be exercisable during his lifetime only by such Participant or his guardian
or legal representative.
6.9 TRANSFERABILITY OF CERTAIN OPTIONS. In addition to
nontransferable Options, the Committee may grant Nonqualified Stock Options
that are transferable during the lifetime of the Key Employee, provided
that no consideration is paid for the transfer. The transferee of an
Option shall be subject to all restrictions applicable to the Option prior
to its transfer. The Agreement granting the Option shall set forth the
transfer conditions and restrictions. The Committee may impose on any
transferable Option and on Stock issued upon the exercise of any Option
such limitations and conditions as the Committee deems appropriate.
ARTICLE VII
CHANGE IN CONTROL
In the event of a Change in Control of the Company, the Committee, as
constituted before such Change in Control, in its sole discretion may, as
to any outstanding Award, either at the time the Award is made or any time
thereafter, take any one or more of the following actions: (i) provide for
the acceleration of any time periods relating to the exercise or
realization of any such Award so that such Award may be exercised or
realized in full on or before a date initially fixed by the Committee
(assuming the Agreement with respect to the Award does not already provide
for such acceleration); (ii) provide for the purchase or settlement of any
such Award by the Company, upon a Participant's request, for an amount of
cash equal to the amount which could have been obtained upon the exercise
of such Award or realization of such Participant's rights had such Award
been currently exercisable or payable; (iii) make such adjustment to any
such Award then outstanding as the Committee deems appropriate to reflect
such Change in Control; or (iv) cause any such Award then outstanding to be
assumed, or new rights substituted therefor, by the acquiring or surviving
corporation in such Change in Control.
ARTICLE VIII
MODIFICATION, EXTENSION AND RENEWALS OF AWARDS
Subject to the terms and conditions and within the limitations of the
Plan, the Committee may modify, extend or renew outstanding Awards, or, if
authorized by the Board, accept the surrender of outstanding Awards (to the
extent not yet exercised) granted under the Plan and authorize the granting
of new Awards pursuant to the Plan in substitution therefor, and the
substituted Awards may specify a lower exercise price than the surrendered
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Awards, a longer term than the surrendered Awards or may contain any other
provisions that are authorized by the Plan. The Committee may also modify
the terms of any outstanding Agreement. Notwithstanding the foregoing,
however, no modification of an Award, shall, without the consent of the
Participant, adversely affect the rights or obligations of the Participant.
ARTICLE IX
AMENDMENT, MODIFICATION AND TERMINATION OF THE PLAN
9.1 AMENDMENT, MODIFICATION AND TERMINATION. At any time and from
time to time, the Board may terminate, amend, or modify the Plan. Such
amendment or modification may be without shareholder approval except to the
extent that such approval is required by the Code, pursuant to the rules
under Section 16 of the Exchange Act, by any national securities exchange
or system on which the Stock is then listed or reported, by any regulatory
body having jurisdiction with respect thereto or under any other applicable
laws, rules or regulations.
9.2 AWARDS PREVIOUSLY GRANTED. No termination, amendment or
modification of the Plan other than pursuant to Section 4.4 herein shall in
any manner adversely affect any Award theretofore granted under the Plan,
without the written consent of the Participant.
ARTICLE X
WITHHOLDING
10.1 TAX WITHHOLDING. The Company shall have the power and the right
to deduct or withhold, or require a Participant to remit to the Company, an
amount sufficient to satisfy Federal, State and local taxes (including the
Participant's FICA obligation) required by law to be withheld with respect
to any grant, exercise, or payment made under or as a result of this Plan.
10.2 STOCK WITHHOLDING. With respect to withholding required upon the
exercise of Non-qualified Stock Options or upon the occurrence of any other
similar taxable event, Participants may elect, subject to the approval of
the Committee, to satisfy the withholding requirement, in whole or in part,
by having the Company withhold Shares of Stock having a Fair Market Value
equal to the amount required to be withheld. The value of the Shares to be
withheld shall be based on Fair Market Value of the Shares on the date that
the amount of tax to be withheld is to be determined. All elections shall
be irrevocable and be made in writing, signed by the Participant on forms
approved by the Committee in advance of the day that the transaction
becomes taxable.
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ARTICLE XI
SUCCESSORS
All obligations of the Company under the Plan, with respect to Awards
granted hereunder, shall be binding on any successor to the Company,
whether the existence of such successor is the result of a direct or
indirect purchase, merger, consolidation or otherwise, of all or
substantially all of the business and/or assets of the Company.
ARTICLE XII
GENERAL
12.1 REQUIREMENTS OF LAW. The granting of Awards and the issuance of
Shares of Stock under this Plan shall be subject to all applicable laws,
rules, and regulations, and to such approvals by any governmental agencies
as may be required.
12.2 EFFECT OF PLAN. The establishment of the Plan shall not confer
upon any Key Employee any legal or equitable right against the Company, a
Subsidiary or the Committee, except as expressly provided in the Plan. The
Plan does not constitute an inducement or consideration for the employment
of any Key Employee, nor is it a contract between the Company or any of its
Subsidiaries and any Key Employee. Participation in the Plan shall not
give any Key Employee any right to be retained in the service of the
Company or any of its Subsidiaries.
12.3 CREDITORS. The interests of any Participant under the Plan or
any Agreement are not subject to the claims of creditors and may not, in
any way, be assigned, alienated or encumbered.
12.4 GOVERNING LAW. The Plan, and all Agreements hereunder, shall be
governed, construed and administered in accordance with and governed by the
laws of the Commonwealth of Virginia and the intention of the Company is
that ISOs granted under the Plan qualify as such under Section 422 of the
Code.
12.5 SEVERABILITY. In the event any provision of the Plan shall be
held illegal or invalid for any reason, the illegality or invalidity shall
not affect the remaining parts of the Plan, and the Plan shall be construed
and enforced as if the illegal or invalid provision had not been included.
Adopted by the Board of Directors:
March 10, 1999
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