Exhibit 99.0
------------
VIRGINIA FINANCIAL GROUP, INC.
STOCK INCENTIVE PLAN
1. Purpose and Effective Date.
--------------------------
(a) The purpose of the Virginia Financial Group, Inc. Stock
Incentive Plan (the "Plan") is to further the long term stability and financial
success of Virginia Financial Group, Inc. (the "Company") by attracting and
retaining personnel, including employees and directors, through the use of stock
incentives. The Company believes that ownership of Company Stock will stimulate
the efforts of those persons upon whose judgment, interest and efforts the
Company is and will be largely dependent for the successful conduct of its
business and will further the identification of those persons' interests with
the interests of the Company's shareholders.
(b) The Plan was adopted by the respective Boards of
Directors of Virginia Financial Corporation ("VFNL") and Virginia Commonwealth
Financial Corporation ("VCFC") in connection with their adoption and approval of
the Agreement and Plan of Reorganization, dated June 12, 2001, providing for the
merger of VFNL and VCFC and the creation of the Company (the "Merger"). The Plan
will become effective (the "Effective Date") on the effective date of the
Merger, subject to the approval of the Merger and the Plan by the shareholders
of VFNL and VCFC at their respective special shareholders' meetings called to
consider and vote upon the Merger and the Plan.
2. Definitions.
-----------
Except as otherwise defined in the Plan, the following terms
shall be defined as set forth below:
(a) Act. The Securities Exchange Act of 1934, as
---
amended.
(b) Applicable Withholding Taxes. The aggregate amount of
----------------------------
federal, state and local income and payroll taxes that the Company is required
to withhold (based on the minimum applicable statutory withholding rates) in
connection with any exercise of an Option or Stock Appreciation Right or the
award, lapse of restrictions or payment with respect to Restricted Stock.
(c) Award. The award of an Option, Restricted Stock or
-----
Stock Appreciation Right under the Plan.
(d) Board. The Board of Directors of the Company.
-----
(e) Change of Control.
-----------------
(i) the acquisition by any individual, entity or
group (within the meaning of Section 13(d)(3) and 14(d)(2) of
the Act of beneficial ownership (within the meaning of Rule
13d-3 under the Act), of securities of the Company
representing 20% or more of the combined voting power of the
then outstanding securities; provided, however, that the
following acquisitions shall not constitute a Change of
Control:
(1) acquisition directly from the Company
(excluding an acquisition by virtue of the exercise
of a conversion privilege);
(2) any acquisition by the Company;
(3) any acquisition by any employee benefit
plan (or related trust) sponsored or maintained by
the Company or any corporation controlled by the
Company; or
(4) any acquisition pursuant to a
reorganization, merger or consolidation by any
corporation owned or proposed to be owned, directly
or indirectly, by shareholders of the Company if the
shareholders' ownership of securities of the
corporation resulting from such transaction
constitutes a majority of the ownership of securities
of the resulting entity and at least a majority of
the members of the board of directors of the
corporation resulting from such transaction were
members of the Incumbent Board as defined below at
the time of the execution of the initial agreement
providing for such reorganization, merger or
consolidation; or
(ii) where individuals who constitute the Board on
the Effective Date of this Plan (the "Incumbent Board") cease
for any reason to constitute at least a majority of such board
of directors; provided, however, that any individual becoming
a director subsequent to the Effective Date whose election, or
nomination for election by the shareholders was approved by a
vote of at least a majority of the directors then comprising
the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose initial
assumption of office occurs as a result of either an actual or
threatened election contest (as such terms are used in Rule
14a-11 of Regulation 14A promulgated under the Act) or other
actual or threatened solicitation of proxies or consents by or
on behalf of a person other than a member of the Board; or
(iii) the shareholders of the Company approve, or the
Company otherwise consummates,
2
(1) a merger, statutory share exchange, or
consolidation of the Company with any other
corporation, except as provided in subparagraph (i)
(4) of this sub-section, or
(2) the sale or other disposition of all or
substantially all of the assets of the Company.
(f) Code. The Internal Revenue Code of 1986, as amended.
----
(g) Committee. The Committee appointed to administer the
---------
Plan pursuant to Plan Section 15, or if no such Committee has been appointed,
the Board.
(h) Company. Virginia Financial Group, Inc., a Virginia
-------
corporation.
(i) Company Stock. Common stock of the Company. If the
-------------
par value of the Company Stock is changed, or in the event of a change in the
capital structure of the Company (as provided in Section 13 below), the shares
resulting from such a change shall be deemed to be Company Stock within the
meaning of the Plan.
(j) Date of Grant. The effective date of an Award
-------------
granted by the Committee.
(k) Disability or Disabled. As to an Incentive Stock
----------------------
Option a Disability within the meaning of Code Section 22(e)(3). As to all other
Incentive Awards, the Committee shall determine whether a Disability exists and
such determination shall be conclusive.
(l) Fair Market Value.
-----------------
(i) If the Company Stock is listed on any
established stock exchange or quoted on the NASDAQ stock
market system, its Fair Market Value shall be the closing
price for such Stock on the Date of Grant as reported by such
exchange or the NASDAQ stock market system, or, if there are
no trades on such date, the value shall be determined as of
the last preceding day on which the Company Stock was traded.
(ii) If the Company Stock is not publicly traded,
the Fair Market Value shall be determined by the Committee
using any reasonable method in good faith.
(iii) Fair Market Value shall be determined as of
the Date of Grant specified in the Award.
3
(m) Incentive Stock Option. An Option intended to meet
----------------------
the requirements of, and qualify for favorable federal income tax treatment
under, Code Section 422.
(n) Nonstatutory Stock Option. An Option that does not
-------------------------
meet the requirements of Code Section 422, or that is otherwise not intended to
be an Incentive Stock Option and is so designated.
(o) Option. A right to purchase Company Stock granted
------
under the Plan, at a price determined in accordance with the Plan.
(p) Participant. Any individual who is granted an Award
-----------
under the Plan.
(q) Related Option. An Option with respect to which a
--------------
Stock Appreciation has been granted.
(r) Restricted Stock. Company Stock awarded upon the
----------------
terms and subject to the restrictions set forth in Section 8 below.
(s) Rule 16b-3. Rule 16b-3 promulgated under the Act,
----------
including any corresponding subsequent rule or any amendments to Rule 16b-3
enacted after the effective date of the Plan.
(t) Stock Appreciation Right or SAR. An Award,
-------------------------------
designated as a stock appreciation right, granted to a Participant under the
Plan.
(u) Subsidiary. 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.
(v) 10% Shareholder. A person who owns, directly or
---------------
indirectly, stock possessing more than 10% of the total combined voting power of
all classes of stock of the Company or any parent or subsidiary of the Company.
Indirect ownership of stock shall be determined in accordance with Code Section
424(d).
(3) General. Awards of Options, Restricted Stock or Stock
-------
Appreciation Rights may be granted under the Plan. Options granted under the
Plan may be Incentive Stock Options or Nonstatutory Stock Options.
(4) Stock. Subject to Section 13 of the Plan, there shall be
-----
reserved for issuance under the Plan an aggregate of 750,000 shares of Company
Stock, which may include authorized, but unissued, shares. Shares allocable to
Options or Stock Appreciation Rights granted under the Plan that expire or
otherwise terminate unexercised and shares that are forfeited pursuant to
restrictions on Restricted Stock awarded under the
4
Plan may again be subjected to an Award under this Plan. For purposes of
determining the number of shares that are available for Awards under the Plan,
such number shall include the number of shares surrendered by a Participant or
retained by the Company (a) in connection with the exercise of an Option or (b)
in payment of Applicable Withholding Taxes.
(5) Eligibility.
-----------
(a) Any employee or director of the Company or a Subsidiary
who, in the judgment of the Committee, has contributed or can be expected to
contribute to the profits or growth of the Company is eligible to become a
Participant. The Committee shall have the power and complete discretion, as
provided in Section 15, to select eligible Participants and to determine for
each Participant the terms, conditions and nature of the Award and the number of
shares to be allocated as part of the Award; provided, however, that any Award
made to a member of the Committee must be approved by the Board. The Committee
is expressly authorized to make an Award to a Participant conditioned on the
surrender for cancellation of an existing Award.
(b) The grant of an Award shall not obligate the Company to
pay an employee any particular amount of remuneration, to continue the
employment of the employee after the grant or to make further grants to the
employee at any time thereafter.
(c) Non-employee directors shall not be eligible to receive
the Award of an Incentive Stock Option.
(d) The maximum number of shares with respect to which an
Award may be granted in any calendar year to any employee during such calendar
year shall be 150,000 shares.
6. Stock Options.
-------------
(a) Whenever the Committee deems it appropriate to grant
Options, notice shall be given to the Participant stating the number of shares
for which Options are granted, the exercise price per share, whether the options
are Incentive Stock Options or Nonstatutory Stock Options, and the conditions to
which the grant and exercise of the Options are subject. This notice, when duly
accepted in writing by the Participant, shall become a stock option agreement
between the Company and the Participant.
(b) The Committee shall establish the exercise price of
Options. The exercise price of an Incentive Stock Option shall be not less than
100% of the Fair Market Value of such shares on the Date of Grant, provided that
if the Participant is a 10% Shareholder, the exercise price of an Incentive
Stock Option shall not be less than 110% of the Fair Market Value of such shares
on the Date of Grant. The exercise price of Nonstatutory Stock Option Awards
intended to be performance-based for purposes of Code
5
Section 162(m) shall not be less than 100% of the Fair Market Value of such
shares on the Date of Grant.
(c) Subject to subsection (d) below, Options may be
exercised in whole or in part at such times as may be specified by the Committee
in the Participant's stock option agreement. The Committee may impose such
vesting conditions and other requirements as the Committee deems appropriate,
and the Committee may include such provisions regarding a Change of Control as
the Committee deems appropriate.
(d) The Committee shall establish the term of each Option
in the Participant's stock option agreement. The term of an Incentive Stock
Option shall not be longer than ten years from the Date of Grant, except that an
Incentive Stock Option granted to a 10% Shareholder shall not have a term in
excess of five years. No Option may be exercised after the expiration of its
term or, except as set forth in the Participant's stock option agreement, after
the termination of the Participant's employment. The Committee shall set forth
in the Participant's stock option agreement when, and under what circumstances,
an Option may be exercised after termination of the Participant's employment or
period of service; provided that no Incentive Stock Option may be exercised
after (i) three months from the Participant's termination of employment with the
Company for reasons other than Disability or death, or (ii) one year from the
Participant's termination of employment on account of Disability or death. The
Committee may, in its sole discretion, amend a previously granted Incentive
Stock Option to provide for more liberal exercise provisions, provided however
that if the Incentive Stock Option as amended no longer meets the requirements
of Code Section 422, and, as a result the Option no longer qualifies for
favorable federal income tax treatment under Code Section 422, the amendment
shall not become effective without the written consent of the Participant.
(e) An Incentive Stock Option, by its terms, shall be
exercisable in any calendar year only to the extent that the aggregate Fair
Market Value (determined at the Date of Grant) of the Company Stock with respect
to which Incentive Stock Options are exercisable by the Participant for the
first time during the calendar year does not exceed $100,000 (the "Limitation
Amount"). Incentive Stock Options granted under the Plan and all other plans of
the Company and any parent or subsidiary of the Company shall be aggregated for
purposes of determining whether the Limitation Amount has been exceeded. The
Board may impose such conditions as it deems appropriate on an Incentive Stock
Option to ensure that the foregoing requirement is met. If Incentive Stock
Options that first become exercisable in a calendar year exceed the Limitation
Amount, the excess Options will be treated as Nonstatutory Stock Options to the
extent permitted by law.
(f) If a Participant dies and if the Participant's stock
option agreement provides that part or all of the Option may be exercised after
the Participant's death, then such portion may be exercised by the personal
representative of the Participant's estate during the time period specified in
the stock option agreement.
6
7. Method of Exercise of Options.
-----------------------------
(a) Options may be exercised by giving written notice of the
exercise to the Company, stating the number of shares the Participant has
elected to purchase under the Option. Such notice shall be effective only if
accompanied by the exercise price in full in cash; provided that, if the terms
of an Option so permit, the Participant may (i) deliver Company Stock that the
Participant has previously acquired and owned (valued at Fair Market Value on
the date of exercise), or (ii) deliver a properly executed exercise notice
together with irrevocable instructions to a broker to deliver promptly to the
Company, from the sale or loan proceeds with respect to the sale of Company
Stock or a loan secured by Company Stock, the amount necessary to pay the
exercise price and, if required by the Committee, Applicable Withholding Taxes.
Unless otherwise specifically provided in the Option, any payment of the
exercise price paid by delivery of Company Stock acquired directly or indirectly
from the Company shall be paid only with shares of Company Stock that have been
held by the Participant for more than six months (or such longer or shorter
period of time required to avoid a charge to earnings for financial accounting
purposes).
(b) The Company may place on any certificate representing
Company Stock issued upon the exercise of an Option any legend deemed desirable
by the Company's counsel to comply with federal or state securities laws. The
Company may require of the Participant a customary indication of his or her
investment intent. A Participant shall not possess shareholder rights with
respect to shares acquired upon the exercise of an Option until the Participant
has made any required payment, including payment of Applicable Withholding
Taxes, and the Company has issued a certificate for the shares of Company Stock
acquired.
(c) Notwithstanding anything herein to the contrary, Awards shall
always be granted and exercised in such a manner as to conform to the provisions
of Rule 16b-3.
8. Restricted Stock Awards.
-----------------------
(a) Whenever the Committee deems it appropriate to grant a
Restricted Stock Award, notice shall be given to the Participant stating the
number of shares of Restricted Stock for which the Award is granted, the Date of
Grant, and the terms and conditions to which the Award is subject. Certificates
representing the shares shall be issued in the name of the Participant, subject
to the restrictions imposed by the Plan and the Committee. A Restricted Stock
Award may be made by the Committee in its discretion without cash consideration.
(b) The Committee may place such restrictions on the
transferability and vesting of Restricted Stock as the Committee deems
appropriate, including restrictions relating to continued employment and
financial performance goals. Without limiting the foregoing, the Committee may
provide performance or Change of Control acceleration
7
parameters under which all, or a portion, of the Restricted Stock will vest on
the Company's achievement of established performance objectives. Restricted
Stock may not be sold, assigned, transferred, disposed of, pledged, hypothecated
or otherwise encumbered until the restrictions on such shares shall have lapsed
or shall have been removed pursuant to subsection (c) below.
(c) The Committee shall establish as to each Restricted Stock
Award the terms and conditions upon which the restrictions on transferability
set forth in paragraph (b) above shall lapse. Such terms and conditions may
include, without limitation, the passage of time, the meeting of performance
goals, the lapsing of such restrictions as a result of the Disability, death or
retirement of the Participant, or the occurrence of a Change of Control.
(d) A Participant shall hold shares of Restricted Stock
subject to the restrictions set forth in the Award agreement and in the Plan. In
other respects, the Participant shall have all the rights of a shareholder with
respect to the shares of Restricted Stock, including, but not limited to, the
right to vote such shares and the right to receive all cash dividends and other
distributions paid thereon. Certificates representing Restricted Stock shall
bear a legend referring to the restrictions set forth in the Plan and the
Participant's Award agreement. If stock dividends are declared on Restricted
Stock, such stock dividends or other distributions shall be subject to the same
restrictions as the underlying shares of Restricted Stock.
9. Stock Appreciation Rights.
-------------------------
(a) Whenever the Committee deems it appropriate to grant Stock
Appreciation Rights, notice shall be given to the Participant stating the number
of shares for which SARs are granted, which shall be exercisable only in lieu of
the Related Option ("Tandem SARs").
(b) Tandem SARs may be exercised with respect to all or part
of the shares of Company Stock subject to the Related Option. The exercise of
Tandem SARs will reduce the number of shares of Company Stock subject to the
Related Option equal to the number of shares with respect to which the Tandem
SAR is exercised. Conversely, the exercise, in whole or in part, of a Related
Option, will reduce the number of shares subject to the Tandem SAR equal to the
number of shares with respect to which the Related Option is exercised. Shares
with respect to which the Tandem SAR shall have been exercised may not be
subject again to an Award under the Plan.
(c) A Tandem SAR will expire no later than the expiration of
the Related Option, will be transferable only when and under the same conditions
as the Related Option and will be exercisable only when the Related Option is
eligible to be exercised. In addition, if the Related Option is an Incentive
Stock Option, a Tandem SAR may be exercised for no more than 100% of the
difference between the exercise price of the
8
Related Option and the Fair Market Value of the shares subject to the Related
Option at the time the Tandem SAR is exercised.
(d) No Tandem SAR granted under the Plan will be exercisable
until the expiration of at least six months after the Grant Date, except that
such limitation shall not apply in the case of the death or Disability of the
Participant. In no event shall the term of any Tandem SAR granted under the Plan
exceed ten years from the Grant Date. A Tandem SAR may be exercised only when
the Fair Market Value of the Company Stock exceeds the exercise price of the
Related Option. A Tandem SAR shall be exercised by delivery to the Committee of
a notice of exercise in the form prescribed by the Committee.
(e) Subject to the provisions of the agreement with the
Participant, upon the exercise of a Tandem SAR, the Participant is entitled to
receive, without any payment to the Company (other than required tax withholding
amounts), an amount equal to the product of multiplying (i) the number of shares
with respect to which the Tandem SAR is exercised by (ii) an amount equal to the
excess of (A) the Fair Market Value per share on the date of exercise of the
Tandem SAR over (B) the exercise price of the Related Option.
(f) Payment to the Participant shall be made in shares of
Company Stock, valued at the Fair Market Value as of the date of exercise, or in
cash if the Participant has so elected in his written notice of exercise and
Committee has consented thereto, or a combination thereof. To the extent
required to satisfy the conditions of Rule 16b-3(e) under the Act, or any
successor or similar rule, or as otherwise provided in the agreement with
Participant, the Committee shall have the sole discretion to consent to or
disapprove the election of any Participant to receive cash in full or partial
settlement of a Tandem SAR. In cases where an election of settlement in cash
must be consented to by the Committee, the Committee may consent to, or
disapprove, such election at any time after such election, or within such period
for taking action as is specified in the election, and failure to give consent
shall be disapproval. Consent may be given in whole or as to a portion of the
Tandem SAR surrendered by the Participant. If the election to receive cash is
disapproved in whole or in part, the Tandem SAR shall be deemed to have been
exercised for shares of Company Stock, or, if so specified in the notice of
exercise and election, not to have been exercised to the extent the election to
receive cash is disapproved.
10. Applicable Withholding Taxes. Each Participant shall agree, as
----------------------------
a condition of receiving an Award, to pay to the Company, or make arrangements
satisfactory to the Company regarding the payment of, all Applicable Withholding
Taxes with respect to the Award. Until the Applicable Withholding Taxes have
been paid or arrangements satisfactory to the Company have been made, no stock
certificates (or, in the case of Restricted Stock, no stock certificates free of
a restrictive legend) shall be issued to the Participant. As an alternative to
making a cash payment to the Company to satisfy Applicable Withholding Tax
obligations, the Committee may establish procedures permitting the Participant
to elect to (a) deliver shares of already owned Company Stock or (b) have the
Company retain that number of shares of Company Stock that would satisfy all
9
or a specified portion of the Applicable Withholding Taxes. Any such election
shall be made only in accordance with procedures established by the Committee to
avoid a charge to earnings for financial accounting purposes and in accordance
with Rule 16b-3.
11. Nontransferability of Awards.
----------------------------
(a) In general, Awards, by their terms, shall not be
transferable by the Participant except by will or by the laws of descent and
distribution or except as described below. Options shall be exercisable, during
the Participant's lifetime, only by the Participant or by his guardian or legal
representative.
(b) Notwithstanding the provisions of (a) and subject to
federal and state securities laws, the Committee may grant or amend Nonstatutory
Stock Options that permit a Participant to transfer the Options to one or more
immediate family members, to a trust for the benefit of immediate family
members, or to a partnership, limited liability company, or other entity the
only partners, members, or interest-holders of which are among the Participant's
immediate family members. Consideration may not be paid for the transfer of
Options. The transferee of an Option shall be subject to all conditions
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
an Option such limitations and conditions as the Committee deems appropriate.
12. Termination, Modification, Change. If not sooner terminated by
---------------------------------
the Board, this Plan shall terminate at the close of business on the tenth
anniversary of the Effective Date. No Awards shall be made under the Plan after
its termination. The Board may terminate the Plan or may amend the Plan in such
respects as it shall deem advisable; provided, that, unless authorized by the
Company's shareholders, no change shall be made that (a) increases the total
number of shares of Company Stock reserved for issuance pursuant to Awards
granted under the Plan (except pursuant to Section 13), (b) expands the class of
persons eligible to receive Awards, (c) materially increases the benefits
accruing to Participants under the Plan, or (d) otherwise requires shareholder
approval under the Code, Rule 16b-3, or the rules of a domestic exchange on
which Company Stock is traded. Notwithstanding the foregoing, the Board may
unilaterally amend the Plan and Awards as it deems appropriate to ensure
compliance with Rule 16b-3 and to cause Incentive Stock Options to meet the
requirements of the Code and regulations thereunder. Except as provided in the
preceding sentence, a termination or amendment of the Plan shall not, without
the consent of the Participant, adversely affect a Participant's rights under an
Award previously granted to him.
13. Change in Capital Structure.
---------------------------
(a) In the event of a stock dividend, stock split or
combination of shares, spin-off, recapitalization or merger in which the Company
is the surviving corporation, or other change in the Company's capital stock
(including, but not limited to, the creation or
10
issuance to shareholders generally of rights, options or warrants for the
purchase of common stock or preferred stock of the Company), the number and kind
of shares of stock or securities of the Company to be issued under the Plan
(under outstanding Awards and Awards to be granted in the future), the exercise
price of options, and other relevant provisions shall be appropriately adjusted
by the Committee, whose determination shall be binding on all persons. If the
adjustment would produce fractional shares with respect to any Award, the
Committee may adjust appropriately the number of shares covered by the Award so
as to eliminate the fractional shares.
(b) In the event the Company distributes to its shareholders a
dividend, or sells or causes to be sold to a person other than the Company or a
subsidiary shares of stock in any corporation (a "Spinoff Company") which,
immediately before the distribution or sale, was a majority owned Subsidiary of
the Company, the Committee shall have the power, in its sole discretion, to make
such adjustments as the Committee deems appropriate. The Committee may make
adjustments in the number and kind of shares or other securities to be issued
under the Plan (under outstanding Awards and Awards to be granted in the
future), the exercise price of Options, and other relevant provisions, and,
without limiting the foregoing, may substitute securities of a Spinoff Company
for securities of the Company. The Committee shall make such adjustments as it
determines to be appropriate, considering the economic effect of the
distribution or sale on the interests of the Company's shareholders and the
Participants in the businesses operated by the Spinoff Company. The Committee's
determination shall be binding on all persons. If the adjustment would produce
fractional shares with respect to any Award, the Committee may adjust
appropriately the number of shares covered by the Award so as to eliminate the
fractional shares.
(c) Notwithstanding anything in the Plan to the contrary, the
Committee may take the foregoing actions without the consent of any Participant,
and the Committee's determination shall be conclusive and binding on all persons
for all purposes. The Committee shall make its determinations consistent with
Rule 16b-3 and the applicable provisions of the Code.
(d) To the extent required to avoid a charge to earnings for
financial accounting purposes, adjustments made by the Committee pursuant to
this Section 13 to outstanding Awards shall be made so that both (i) the
aggregate intrinsic value of an Award immediately after the adjustment is not
less than or greater than the Award's aggregate intrinsic value before the Award
and (ii) the ratio of the exercise price per share to the market value per share
is not reduced.
14. Change of Control. In the event of a Change of Control of the
-----------------
Company, the Committee may take such actions with respect to Awards as the
Committee deems appropriate. These actions may include, but shall not be limited
to the following:
(a) At the time the Award is made, provide for the
acceleration of the
11
vesting schedule relating to the exercise or realization of the Award so that
the Award may be exercised or realized in full on or before a date initially
fixed by the Committee;
(b) Provide for the purchase or settlement of any such Award
by the Company for any amount of cash equal to the amount which could have been
obtained upon the exercise of such Award or realization of a Participant's
rights had such Award been currently exercisable or payable;
(c) Make adjustments to Awards then outstanding as the
Committee deems appropriate to reflect such Change of Control provided, however,
that to the extent required to avoid a charge to earnings for financial
accounting purposes, such adjustments shall be made so that both (i) the
aggregate intrinsic value of an Award immediately after the adjustment is not
less than or greater than the Award's aggregate intrinsic value before the Award
and (ii) the ratio of the exercise price per share to the market value per share
is not reduced; or
(d) Cause any such Award then outstanding to be assumed, or
new rights substituted therefore by the acquiring or surviving corporation in
such Change of Control.
15. Administration of the Plan.
--------------------------
(a) The Plan shall be administered by the Committee, who shall
be appointed by the Board. If no Committee is appointed, the Plan shall be
administered by the Board. To the extent required by Rule 16b-3, all Awards
shall be made by members of the Committee who are "Non-Employee Directors" as
that term is defined in Rule 16b-3, or by the Board. Awards that are intended to
be performance-based for purposes of Code section 162(m) shall be made by a
Committee, or subcommittee of the Committee, comprised solely of two or more
"outside directors" as that term is defined for purposes of Code section 162(m).
(b) The Committee shall have the authority to impose such
limitations or conditions upon an Award as the Committee deems appropriate to
achieve the objectives of the Award and the Plan. Without limiting the foregoing
and in addition to the powers set forth elsewhere in the Plan, the Committee
shall have the power and complete discretion to determine (i) which eligible
persons shall receive an Award and the nature of the Award, (ii) the number of
shares of Company Stock to be covered by each Award, (iii) whether Options shall
be Incentive Stock Options or Nonstatutory Stock Options, (iv) the Fair Market
Value of Company Stock, (v) the time or times when an Award shall be granted,
(vi) whether an Award shall become vested over a period of time, according to a
performance-based vesting schedule or otherwise, and when it shall be fully
vested, (vii) the terms and conditions under which restrictions imposed upon an
Award shall lapse, (viii) whether a Change of Control exists, (ix) factors
relevant to the lapse of restrictions on Restricted Stock or Options, (x) when
Options may be exercised, (xi) whether to approve a Participant's election with
respect to Applicable Withholding Taxes, (xii) conditions
12
relating to the length of time before disposition of Company Stock received in
connection with an Award is permitted, (xiii) notice provisions relating to the
sale of Company Stock acquired under the Plan, and (xiv) any additional
requirements relating to Awards that the Committee deems appropriate.
Notwithstanding the foregoing, no "tandem stock options" (where two stock
options are issued together and the exercise of one option affects the right to
exercise the other option) may be issued in connection with Incentive Stock
Options.
(c) The Committee shall have the power to amend the terms
of previously granted Awards so long as the terms as amended are consistent with
the terms of the Plan and, where applicable, consistent with the qualification
of an Option as an Incentive Stock Option. The consent of the Participant must
be obtained with respect to any amendment that would adversely affect the
Participant's rights under the Award, except that such consent shall not be
required if such amendment is for the purpose of complying with Rule 16b-3 or
any requirement of the Code applicable to the Award.
(d) The Committee may adopt rules and regulations for
carrying out the Plan. The Committee shall have the express discretionary
authority to construe and interpret the Plan and the Award agreements, to
resolve any ambiguities, to define any terms, and to make any other
determinations required by the Plan or an Award agreement. The interpretation
and construction of any provisions of the Plan or an Award agreement by the
Committee shall be final and conclusive. The Committee may consult with counsel,
who may be counsel to the Company, and shall not incur any liability for any
action taken in good faith in reliance upon the advice of counsel.
(e) A majority of the members of the Committee shall
constitute a quorum, and all actions of the Committee shall be taken by a
majority of the members present. Any action may be taken by a written instrument
signed by all of the members, and any action so taken shall be fully effective
as if it had been taken at a meeting.
16. Notice. All notices and other communications required or
------
permitted to be given under this Plan shall be in writing and shall be deemed to
have been duly given if delivered personally, electronically, or mailed first
class, postage prepaid, as follows: (a) if to the Company - at its principal
business address to the attention of the Secretary; (b) if to any Participant -
at the last address of the Participant known to the sender at the time the
notice or other communication is sent.
13
17. Interpretation and Governing Law. The terms of this Plan and
--------------------------------
Awards granted pursuant to the Plan shall be governed, construed and
administered in accordance with the laws of the Commonwealth of Virginia. The
Plan and Awards are subject to all present and future applicable provisions of
the Code and, to the extent applicable, they are subject to all present and
future rulings of the Securities and Exchange Commission with respect to Rule
16b-3. If any provision of the Plan or an Award conflicts with any such Code
provision or ruling, the Committee shall cause the Plan to be amended, and shall
modify the Award, so as to comply, or if for any reason amendments cannot be
made, that provision of the Plan or the Award shall be void and of no effect.
IN WITNESS WHEREOF, our Company has caused this Plan to be adopted
and to become effective this 18th day of January, 2002.
VIRGINIA FINANCIAL GROUP, INC.
By /s/ Harry V. Boney, Jr.
----------------------------------
Harry V. Boney, Jr.
Chairman of the Board
14