Document:

Exhibit 4.1

JAMES MONROE BANK

1998
STOCK OPTION PLAN

1.             Purpose of
Plan.

The purposes of this
James Monroe Bank 1998 Stock Option Plan are (a) to attract and retain
outstanding key management employees; (b) to further the growth, development
and financial success of James Monroe Bank by recognizing and rewarding those
key employees responsible therefor; and (c) to provide an incentive to, and
encourage, stock ownership in the Bank by those employees responsible for the
policies and operations of the Bank.

2.             Definitions.

As used herein, the
following definitions shall apply:

(a)          “Affiliate” shall mean any “parent
corporation” or “subsidiary corporation” of the Bank, as such terms are defined
in Section 424(e) and (f), respectively, of the Code.

(b)         “Agreement” shall mean a mitten
agreement entered into in accordance with Paragraph 5(c).

(c)          “Awards” shall mean a grant of
Options, unless the context clearly indicates a different meaning.

(d)         “Bank” shall mean James Monroe Bank.

(e)          “Board” shall
mean the Board of Directors of the Bank.

(f)          “Change in Control” shall mean anyone
of the following events occurring after the Effective Date:(1) the acquisition
of ownership of, holding or power to vote more than 51% of the Bank’s voting
stock; (2) the acquisition of the power to control the election of a majority
of the Bank’s directors; (3) the exercise of a controlling influence over the
management or policies of the Bank by any person or by persons acting as a “group”
(within the meaning of Section 13(d) of the Securities Exchange Act of 1934);
or (4) the failure of Continuing Directors to constitute at least two-thirds of
the Board during any period of two (2) consecutive years. For purposes of this
Plan, “Continuing Directors” shall include only those individuals who were
members of the Board at the Effective Date and those other individuals whose
election or nomination for election as a member of the Board was approved by a
vote of at least two-thirds of the Continuing Directors then in office. For
purposes of this subparagraph only, the term “person” refers to an individual
or a corporation, partnership, trust, association, joint venture, pool,
syndicate, sole proprietorship, unincorporated organization or any other form
of entity not specifically listed herein. The decision of the Committee as to
whether a change in control has occurred shall be conclusive and binding.

 (g)        “Code”
shall mean the Internal Revenue Code of 1986, as amended.

 (h)        “Committee”
shall mean the Compensation and Stock Option Committee appointed by the Board
in accordance with Paragraph 5(a) hereof or, in the absence thereof, the entire
Board.

 (i)          “Common
Stock” shall mean the common stock, par value $5.00 per share, of the Bank.

 (j)          “Continuous
Service” shall mean the absence of any interruption or termination of service
to the Bank as an employee or Director. Continuous Service shall not be
considered interrupted in the case of sick leave, military leave or any other
leave of absence approved by the Bank or in the case of transfers between payroll
locations of the Bank or between the Bank, an Affiliate or a successor.

 

 (k)         “Effective
Date” shall mean the date specified in Paragraph 13 hereof.

 (l)          “Employee”
shall mean any person employed by the Bank or by an Affiliate, within the
meaning of Section 3401(c) of the Code.

 (m)        “Exercise
Price” shall mean the price per Optioned Share at which an Option may be
exercised.

 (n)        “ISO”
means an option to purchase Common Stock which meets the requirements set forth
in the Plan, and which is intended to be and is identified as an “incentive
stock option” within the meaning of Section 422 of the Code.

 (o)        “Market
Value” shall mean the fair market value of the Common Stock, as determined
under Paragraph 7(b) hereof.

 (p)        “Non-ISO”
means an option to purchase Common Stock which meets the requirements set forth
in the Plan but which is not intended to be and is not identified as an ISO.

 (q)        “Option”
means an ISO and/or a Non-ISO.

 (r)         “Optioned
Shares” shall mean Shares subject to an Option granted pursuant to this Plan.

(s)          “Participant” shall mean any person
who receives an Award pursuant to the Plan.

(t)          “Plan” shall mean this James Monroe
Bank 1998 Stock Option Plan.

(u)         “Rule 16b-3” shall mean Rule 16b-3 of
the General Rules and Regulations under the Securities Exchange Act of 1934, as
amended.

(v)         “Share” shall mean one share of Common
stock.

3.    Term of the Plan and
Awards.

(a)           Term of the Plan.  The Plan shall continue in effect for a term
of five (5) years from the Effective Date, unless sooner terminated pursuant to
Paragraph 16 hereof. No Award shall be granted under the Plan after five (5)
years from the Effective Date.

(b)           Term of Awards.  The term of each Award granted under the Plan
shall be established by the Committee, but shall not exceed ten (10) years,
provided, however, that in the case of an ISO granted to an Employee who owns
Shares representing more than 10% of the outstanding Common Stock at the time
an ISO is granted, the term of such ISO shall not exceed five (5) years.

4.             Shares Subject
to the Plan.

                 Except as otherwise required by the provisions
of Paragraph 12 hereof, the aggregate number of Shares deliverable pursuant to
Awards shall not exceed 66,880 Shares. Optioned Shares may either be authorized
but unissued Shares or Shares held in treasury. If Awards should expire, become
unexercisable or be forfeited for any reason without having been exercised or
become vested in full, the Optioned Shares shall, unless the Plan shall have
been terminated, be available for the grant of Additional Awards under the
Plan.

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5.             Administration of the
Plan.

(a)           Composition of the
Committee.  The Plan shall be
administered by the Committee, which shall consist of not less than four (4)
members of the Board. Members of the Committee shall serve at the pleasure of
the Board. In the absence at any time of a duly appointed Committee, the Plan
shall be administered by the entire Board.

(b)           Powers of the Committee.  Except as limited by the express provisions
of the Plan or by resolutions adopted by the Board, the Committee shall have
sole and complete authority and discretion (i) to select Participants and grant
Awards, (ii) to determine the form and content of Awards to be issued in the
form of Agreements under the Plan, (iii) to interpret the Plan, (iv) to
prescribe, amend and rescind rules and regulations relating to the Plan and (v)
to make other determinations necessary or advisable for the administration of
the Plan. The Committee shall have and may exercise such other power and
authority as may be delegated to it by the Board from time to time. A majority
of the entire Committee shall constitute a quorum and the action of a majority
of the members present at any meeting at which a quorum is present, or acts
approved in writing by a majority of the Committee without a meeting, shall be
deemed the action of the Committee.

(c)           Agreement.  Each Award shall be evidenced by a written
agreement containing such provisions as may be approved by the Committee. Each
such Agreement shall constitute a binding contract between the Bank and the
Participant, and every Participant, upon acceptance of such Agreement, shall be
bound by the terms and restrictions of the Plan and of such agreement. The
terms of each such Agreement shall be in accordance with the Plan, but each
agreement may include such additional provisions and restrictions determined by
the Committee, in its discretion, provided that such additional provisions and
restrictions are not inconsistent with the terms of the Plan. In particular,
the Committee shall set forth in each Agreement (i) the Exercise Price of an
Option, (ii) the number of Shares subject to, and the expiration date of, the
Award, (iii) the manner, time and rate (cumulative or otherwise) of exercise or
vesting of such Award,(iv) the restrictions, if any, to be placed upon such
Award, or upon Shares which may be issued upon exercise of such Award and (v)
whether the Option is an ISO or a Non-ISO.

                                The
Chairman of the Committee and such other officers as shall be designated by the
committee are hereby authorized to execute Agreements on behalf of the Bank and
to cause them to be delivered to the recipients of Awards.

(d)           Effective of the Committee’s Decisions.  All decisions, determinations and
interpretations of the Committee shall be final and conclusive on all persons
affected thereby.

(e)           Indemnification.  In addition to such other rights of
indemnification as they may have, the members of the Committee shall be
indemnified by the Bank in connection with any claim, action, suit or
proceeding relating to any action taken or failure to act under or in
connection with the Plan or any Award, granted hereunder to the full extent
provided for under the Bank’s Articles of Incorporation or Bylaws with respect
to the indemnification of Directors.

6.             Grant of
Options.

(a)           General Rule.  In its
sole discretion, the Committee may grant Options or Non-ISO to Employees of the
Bank or its Affiliates.

(b)           Special Rules for ISOs.  The aggregate Market Value, as of the date the Option is granted, of the Shares with
respect to which ISOs are exercisable for the first time by an employee during
any calendar year (under all incentive stock option plans, as defined in
Section 422 of the Code, of the Bank or any present or future Parent or Subsidiary
of the Bank) shall not exceed $100,000. Notwithstanding the prior provisions of
this paragraph or designation of an Option as an ISO, the Committee may grant
Options in excess of the foregoing limitations in which case such Options
granted in excess of such limitation shall be Options which are Non-ISOs.

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7.             Exercise
Price for Options.

(a)           Limits on Committee
Discretion.  The Exercise
Price as to any particular Option granted under the Plan shall not be less than
the Market Value of the Optioned Shares on the date of grant. In the case of an
Employee who owns Shares representing more than 10% of the Bank’s outstanding
Shares of Common Stock at the time an ISO is granted, the Exercise Price shall
not be less than 110% of the Market Value of the Optioned Shares at the time
the ISO is granted.

(b)           Standards for Determining
Exercise Price.  If the Common
Stock is listed on a national securities exchange (including the NASDAQ
National Market) on the date in question, then the Market Value per Share shall
be not less than the average of the highest and lowest selling price on such
exchange on such date, or if there were no sales on such date, then the
Exercise Price shall be not less than the mean between the bid and asked price
on such date. If the Common Stock is traded otherwise than on a national
securities exchange on the date in question, then the Market Value per Share
shall be not less than the mean between the bid and asked price on such date,
or, if there is no bid and asked price on such date, then on the next prior
business day on which there was a bid and asked price. If no such bid and asked
price is available, then the Market Value per Share shall be its fair market
value as determined by the Committee, in its sole and absolute discretion.

(c)           Reissuance of Options.  Notwithstanding anything herein to the
contrary, the Committee shall have the authority to cancel outstanding Options
with the consent of the Participant and to reissue new Options at a lower
Exercise Price equal to the then Market Value per share of Common Stock in the
event that the Market Value per share of Common Stock at any time prior to the
date of exercise outstanding Options falls below the Exercise Price.

8.             Exercise of
Options.

a.             Generally.  Any Option granted hereunder shall be
exercisable at such times and under such conditions as shall be permissible
under the terms of the Plan and of the Agreement granted to a Participant. An
Option may not be exercised for a fractional Share.

b.             Procedure
for Exercise.      A
Participant may exercise Options, subject to provisions relative to its
termination and limitations on its exercise, only by (1) written notice of
intent to exercise the Option with respect to a specified number of Shares and
(2) payment to the Bank) contemporaneously with delivery of such notice) in
cash, in Common Stock, or a combination of cash and Common Stock, of the amount
of the Exercise Price for the number of Shares with respect to which the Option
is then being exercised. Each such notice (and payment where required) shall be
delivered, or mailed by prepaid registered or certified mail, addressed to the
Secretary of the Bank at the Bank’s executive offices. Common Stock utilized in
full or partial payment of the Exercise Price for Options shall be value at its
Market Value at the date of exercise.

(c)           Period of Exercisability.  Except
to the extent otherwise provided in the terms of an Agreement, an ISO or
Non-ISO may be exercised by an Employee Participant only while he is an
Employee or Director and has maintained Continuous Service from the date of the
grant of the ISO, or within three months after termination of such Continuous
Service (but not later than the date on which the Option would otherwise
expire), except if the Employee’s Continuous Service terminates by reason of:

(1)           “Just Cause” which for purposes
hereof shall have the meaning set forth in any unexpired employment or
severance agreement between the Participant and the Bank and/or the Bank (and,
in the absence of any such agreement, shall mean termination because of the
Employee’s personal dishonesty, willful misconduct, breach of fiduciary duty
involving personal profit, intentional failure to perform stated duties,
willful violation of any law, rule or regulation (other than traffic violations
or similar offenses) or final cease-and-desist order), then the Participant’s
rights to exercise such ISO shall expire on the date of such termination;

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(2)           Death, then to the extent that the
Participant would have been entitled to exercise the ISO immediately prior to
his death, such ISO of the deceased Participant may be exercised within two (2)
years from the date of his death (but not later than the date on which the
Option would otherwise expire) by the personal representatives of his estate or
person or persons to whom his rights under such ISO shall have passed by will
or by laws of descent and distribution;

(3)           Permanent and Total Disability (as
such term is defined in Section 22(e)(3) of the Code), then to the extent that
the Participant would have been entitled to exercise the ISO immediately prior
to his Permanent and Total Disability, such ISO may be exercised within one
year from the date of such Permanent and Total Disability, but not later than
the date on which the ISO would otherwise expire.

Notwithstanding
the provisions of any Option which provides for its exercise in installments as
designated by the Committee, such Option shall become immediately exercisable
upon the Participant’s death or Permanent and Total Disability.

(d)           Effect of the Committee’s
Decisions.  The Committee’s
determination whether a Participant’s Continuous Service has ceased, and the
effective date thereof, shall be final and conclusive on all persons affected
thereby.

9.             Change in Control.

(a)           General Rule.  Notwithstanding the provisions of any Award
which provide for its exercise or vesting in installments, all Options shall be
immediately exercisable and fully vested upon a Change in Control. With respect
to Options, at the time of a Change in Control, the Participant shall, at the
discretion of the Committee, be entitled to receive cash in an amount equal to
the excess of the Market Value of the Common Stock subject to such Option over
the Exercise Price of such Shares, in exchange for the cancellation of such
Options by the Participant.

(b)           Exception to General Rule.  Notwithstanding subparagraph (a) of this
Paragraph, in no event may an Option be canceled in exchange for cash within
the six-month period following the date of its grant.

10.           Effect of Changes in
Common Stock Subject to the Plan.

(a)           Recapitalization, Stock
Splits, Etc.  The number and
kind of shares reserved for issuance under the Plan, and the number and kind of
shares subject to outstanding Awards and the Exercise Price thereof, shall be
proportionately adjusted for any increase, decrease, change or exchange of
Shares for a different number or kind of shares or other securities of the Bank
which results from a merger, consolidation, recapitalization, reorganization,
reclassification, stock dividend, stock split, combination of shares, or
similar event in which the number or kinds of shares is changed without the
receipt or payment of consideration by the Bank.

(b)           Transactions in which the
Bank is Not the Surviving Entity. 
Subject to Paragraph 9 hereof, in the event of (i) the liquidation or
dissolution of the Bank, (ii) a merger or consolidation in which the Bank is
not the surviving entity , or (iii) the sale or disposition of all or
substantially all of the Bank’s assets (any of the foregoing to be referred to
herein as a “Transaction”), all Awards outstanding at the effectiveness of such
Transaction shall be surrendered. With respect to each Award so surrendered,
the Committee shall, in its sole and absolute discretion, determine whether the
holder of the surrendered Award shall receive:

(1)           for each Share then subject to an
outstanding Award the number and kind of shares into which each outstanding
Share (other than Shares held by 

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dissenting stockholders)
is changed or exchanged, together with an appropriate adjustment to the
Exercise Price in the case of Options; or

(2)           a cash payment (from the Bank or the
successor corporation), in an amount equal to the Market Value of the Shares
subject to the Award on the date of the Transaction, less the Exercise Price of
the Award.

(c)           Special Rule for
ISOs.  Any adjustment made
pursuant to subparagraph (a) or (b)(1) hereof shall be made in such a manner as
to constitute a modification, within the meaning of Section 424(h) of the Code,
of outstanding ISOs.

(d)           Conditions and
Restrictions of New, Additional or Different Shares or Securities.  If, by reason of any adjustment made pursuant
to this Paragraph, a Participant becomes
entitled to new, additional or different shares of stock or securities, such
new, additional or different shares of stock or securities shall thereupon be
subject to all of the conditions and restrictions which were applicable to the
Shares pursuant to the Award before the adjustment was made.

(e)           Other Issuances.  Except as expressly provided in this
Paragraph, the issuance by the Bank or an Affiliate of shares of stock of any
class, or of securities convertible into Shares of stock of another class, for
cash or property or for labor or services either upon direct sale or upon the
exercise of rights or warrants to subscribe therefor, shall not affect, and no
adjustment shall be made with respect to, the number, class or Exercise Price
of Shares then subject to Awards or reserved for issuance under the Plan.

11.           Non-Transferability of
Awards.

                Awards
may not be sold, pledged, assigned, hypothecated, transferred or disposed of in
any manner other than by will or by the law of descent and distribution, or
pursuant to the terms of a “qualified domestic relations order” (within the meaning
of Section 414(p) of the Code and the regulations and rulings thereunder).

12.           Time of Granting Awards.

                The
date of grant of an Award shall, for all purposes, be the later of the date on
which the Committee makes the determination of granting such Award and the
Effective Date. Notice of the determination shall be given to each Participant
to whom an Award is so granted within a reasonable time after the date of such
grant.

13.           Effective Date.

                The
Plan shall be effective as of August 12, 1998. Awards may be made prior to
approval of the Plan by the stockholders of the Bank if the exercise of Awards
in the form of Options are conditioned upon stockholder approval of the Plan.

14.           Approval by Stockholders.

                       The
Plan shall be approved by stockholders of the Bank within twelve (12) months
before or after the Effective Date.

15.           Modification of Awards.

                At
any time, and from time to time, the Board may authorize the Committee to
direct execution of an instrument providing for the modification of any
outstanding Award, provided no such modification shall confer on the holder of
said Award any right or benefit which could not be conferred on 

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him by the grant of a new
Award at such time, or impair the Award without the consent of the holder of
the Award.

16.           Amendment and Termination
of the Plan.

                The
Board may from time to time amend the terms of the Plan and, with respect to
any Shares at the time not subject to Awards, suspend or terminate the Plan. No
amendment, suspension or termination of the Plan shall, without the consent of
any affected holders of an Award, alter or impair any rights or obligations
under any Award theretofore granted.

17.           Conditions Upon Issuance
of Shares.

(a)           Compliance with Securities
Laws.  Shares of Common Stock
shall not be issued with respect to any Award unless the issuance and delivery
of such Shares shall comply with all relevant provisions of law, including,
without limitation, the Securities Act of 1933, as amended, the rules and
regulations promulgated thereunder, any applicable state securities law and the
requirements of any stock exchange upon which the Shares may then be listed.
The Plan is intended to comply with Rule 16b-3, and any provision of the Plan
which the Committee determines in its sole and absolute discretion to be
inconsistent with said Rule shall, to the extent of such inconsistency, be
inoperative and null and void, and shall not affect the validity of the
remaining provisions of the Plan.

(b)           Special Circumstances.  The inability of the Bank to obtain approval
from any regulatory body or authority deemed by the Bank’s counsel to be
necessary to the lawful issuance and sale of any Shares hereunder shall relieve
the Bank of any liability in respect of the non-issuance or sale of such
Shares. As a condition to the exercise of any Option, the Bank may require the
person exercising the Option to make such representations and warranties as may
be necessary to assure the availability of an exemption from the registration
requirements of federal or state securities law.

(c)           Committee Discretion. 
The Committee shall have the discretionary authority to impose in
Agreements such restrictions in Shares as it may deem appropriate or desirable,
including, but not limited to, the authority to impose a right of first refusal
or to establish repurchase rights or both of these restrictions.

18.           Reservation of Shares.

                       The
Bank, during the term of the Plan, will reserve and keep available a number of
shares sufficient to satisfy the requirements of the Plan.

19.           Withholding Tax.

                       The
Bank’s obligation to deliver Shares upon exercise of Options shall be subject
to the Participant’s satisfaction of all applicable federal, state and local
income and employment tax withholding obligations. The Committee, in its
discretion, may permit the Participant to satisfy the obligation, in whole or
in part, by irrevocably electing to have the Bank withhold Shares, or to
deliver to the Bank Shares that he already owns, having a value equal to the
amount required to be withheld. The value of Shares to be withheld, or
delivered to the Bank, shall be based on the Market Value of the Shares on the
date the amount of tax to be withheld is to be determined. As an alternative,
the Bank may retain, or sell without notice, a number of such Shares sufficient
to cover the amount required to be withheld.

20.           No Employment or Other
Rights.

                       In
no event shall an Employee’s eligibility to participate or participation in the
Plan create or be deemed to create any legal or equitable right of the Employee
or any other party to continue service with the Bank or any Affiliate of such
corporations. No Employee shall have a right to be granted an Award or, having
received an Award, the right to again be granted an Award. However, an Employee
who has been granted an Award may, if otherwise eligible, be granted an
additional Award or Awards.

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21.           Governing Law.

                       The
Plan shall be governed by and construed in accordance with the laws of the
Commonwealth of Virginia except to the extent that federal law shall be deemed
to apply.

 

 8Exhibit 4.2

JAMES MONROE BANCORP, INC.

1999 DIRECTOR STOCK OPTION PLAN

1.             Purpose of
Plan.

The
purposes of this James Monroe Bancorp, Inc. (“Corporation”) 1999 Director Stock
Option Plan are to enable the Corporation to continue to attract and retain
outstanding outside Directors of the Corporation and to further the growth,
development and financial success of the Corporation and its wholly-owned
subsidiary, James Monroe Bank.

2.             Definitions.

As used herein, the
following definitions shall apply:

(a)          “Affiliate” shall mean any “parent
corporation” or “subsidiary corporation” of the Corporation, as such terms are
defined in Section 424(e) and (f), respectively, of the Code.

(b)         “Agreement” shall mean a written
agreement entered into in accordance with Paragraph 5(c).

(c)          “Awards”
shall mean a grant of Options, unless the context clearly indicates a different
meaning.

(d)         “Corporation” shall mean James Monroe
Bancorp, Inc.

(e)          “Board” shall mean the Board of
Directors of the Corporation.

(f)          “Change in Control” shall mean any one
of thc following events occurring after the Effective Date: (1) the acquisition
of ownership of, holding or power to vote more than 51% of the Corporation’s
voting stock; (2) thc acquisition of the power to control the election of a majority
of thc Corporation’s directors; (3) the exercise of a controlling influence
over thc management or policies of the Corporation by any person or by persons
acting as a “group” (within the meaning of Section 13(d) of the Securities
Exchange Act of 1934); or (4) the failure of Continuing Directors to constitute
at least two-thirds of the Board during any period of two (2) consecutive
years. For purposes of this Plan, “Continuing Directors” shall include only
those individuals who were members of the Board at the Effective Date and those
other individuals whose election or nomination for election as a member of the
Board was approved by a vote of at least two-thirds of the Continuing Directors
then in office. For purposes of this subparagraph only, the term “person”
refers to an individual or a corporation, partnership, trust, association,
joint venture, pool, syndicate, sole proprietorship, unincorporated
organization or any other form of entity not specifically listed herein. The
decision of the Committee as to whether a change in control has occurred shall
be conclusive and binding.

(g)         “Code” shall mean the Internal Revenue
Code of 1986, as amended.

(h)         “Committee” shall mean the entire Board
of Directors of the Corporation which shall serve as the Stock Option
Committee.

 (i)          “Common
Stock” shall mean the common stock, par value $1.00 per share, of the
Corporation.

(j)           “Effective Date” shall mean the date
specified in Paragraph 13 hereof.

(k)          “Exercise Price” shall mean the price
per Optioned Share at which an Option may be exercised.

 

(l)           “Market Value” shall mean the fair
market value of the Common Stock, as determined under Paragraph 7(b) hereof.

(m)         “Optioned Shares” shall mean Shares
subject to an Option granted pursuant to this Plan.

(n)         “Options” shall mean options granted
pursuant to this Plan.

(o)         “Participant” shall mean any person who
receives an Award pursuant to the Plan.

(p)         “Plan” shall mean this James Monroe
Bancorp, Inc. 1999 Director Stock Option Plan.

(q)         “Rule 16b-3” shall mean Rule 16b-3 of
the General Rules and Regulations under the Securities Exchange Act of 1934, as
amended.

(r)          “Share” shall mean one share of Common
Stock.

3.                     Term of the Plan and
Awards.

(a)           Term of the Plan.  The Plan shall continue in effect for a term
of five (5) years from the Effective Date, unless sooner terminated pursuant to
Paragraph 16 hereof. No Award shall be granted under the Plan after five (5)
years from the Effective Date.

(b)           Term of Awards.  The term of each Award granted under the Plan
shall be established by the Committee, but shall not exceed ten (10) years.

4.             Shares
Subject to the Plan.

                Except
as otherwise required by the provisions of Paragraph 12 hereof, the aggregate
number of Shares deliverable pursuant to Awards shall not exceed 66,880 Shares.
Optioned Shares may either be authorized but unissued Shares or Shares held in
treasury. If Awards should expire, become unexercisable or be forfeited for any
reason without having been exercised in full, the Optioned Shares shall, unless
the Plan shall have been terminated, be available for the grant of additional
Awards under the Plan.

5.             Administration
of the Plan.

(a)           Composition of thc
Committee.  The Plan shall be
administered by the entire Board of Directors of the Corporation which shall
serve as the Stock Option Committee (“Committee”).

(b)           Powers of the Committee.  The Committee shall have sole and complete
authority and discretion (i) to select Participants and grant Awards, (ii) to
determine the form and content of Awards to be issued in the form of Agreements
under the Plan, (iii) to interpret the Plan, (iv) to prescribe, amend and
rescind rules and regulations relating to the Plan and (v) to make other
determinations necessary or advisable for the administration of the Plan. The
Committee may appoint an advisory subcommittee to make recommendations to the
Committee as to the administration of the Plan.

(c)           Agreement.  Each Award shall be evidenced by a written
agreement containing such provisions as may be approved by the Committee. Each
such Agreement shall constitute a binding contract between the Corporation and
the Participant, and every Participant, upon acceptance of such Agreement,
shall be bound by the terms and restrictions of the Plan and of such Agreement.
The terms of each such Agreement shall be in accordance with the Plan, but each
Agreement may include such additional provisions and restrictions determined by
the Committee, in its discretion, provided that such additional provisions and
restrictions are not inconsistent with the terms of the Plan. In particular,
the 

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Committee shall set forth in each Agreement (i) the
Exercise Price of an Option, (ii) the number of Shares subject to, and the
expiration date of, the Award, (iii) the manner, time and rate (cumulative or
otherwise) of exercise or vesting of such Award, and (iv) the restrictions, if
any, to be placed upon such Award, or upon Shares which may be issued upon
exercise of such Award.

The
Chairman of the Committee, the Chief Executive Officer of the Corporation and
such other officers as shall be designated by the Committee are hereby
authorized to execute Agreements on behalf of the Corporation and to cause them
to be delivered to the recipients of Awards.

(d)           Effect of the Committee’s
Decisions.  All decisions,
determinations and interpretations of the Committee shall be final and
conclusive on all persons affected thereby.

(e)           Indemnification.  In addition to such other rights of
indemnification as they may have, the members of the Committee shall be indemnified
by the Corporation in connection with any claim, action, suit or proceeding
relating to any action taken or failure to act under or in connection with the
Plan or any Award, granted hereunder to the full extent provided for under the
Corporation’s Articles of Incorporation or Bylaws with respect to the
indemnification of Directors.

6.             Grant of
Options.  In its sole
discretion, the Committee may grant Options to Directors of the Corporation or
its Affiliates who are not employees of the Corporation or its Affiliates.

7.             Exercise
Price for Options.

(a)           Limits on Committee
Discretion.  The Exercise
Price as to any particular Option granted under the Plan shall not be less than
the Market Value of the Optioned Shares on the date of grant.

(b)           Standards for Determining
Exercise Price.  If the Common
Stock is listed on a national securities exchange (including thc NASDAQ
National Market) on the date in question, then the Market Value per Shares
shall be not less than the average of the highest and lowest selling price on
such exchange on such date, or if there were no sales on such date, then the
Exercise Price shall be not less than the mean between the bid and asked price
on such date. If the Common Stock is traded otherwise than on a national
securities exchange on the date in question, then the Market Value per Share
shall be not less than the mean between the bid and asked price on such date,
or, if there is no bid and asked price on such date, then on the next prior
business day on which there was a bid and asked price. If no such bid and asked
price is available, then the Market Value per Share shall be its fair market
value as determined by the Committee, in its sole and absolute discretion.

(c)           Reissuance of Options.  Notwithstanding anything herein to the
contrary, the Committee shall have the authority to cancel outstanding Options
with the consent of the Participant and to reissue new Options at a lower
Exercise Price equal to the then Market Value per share of Common Stock in the
event that the Market Value per share of Common Stock at any time prior to the
date of exercise outstanding Options falls below the Exercise Price.

8.             Exercise of
Options.

(a)           Generally.  Any Option granted hereunder shall be
exercisable at such times and under such conditions as shall be permissible
under the terms of the Plan and of the Agreement granted to a Participant. An
Option may not be exercised for a fractional Share.

(b)           Procedure for Exercise.  A Participant may exercise Options, subject to
provisions relative to its termination and limitations on its exercise, only by
(1) written notice of intent to exercise the Option with respect to a specified
number of Shares and (2) payment to the Corporation (contemporaneously with
delivery of such notice) in cash, in Common Stock, or a combination of cash and
Common Stock, of the amount of the Exercise Price for the number of Shares with
respect to which the Option is then being exercised. Each such notice (and
payment where required) shall be delivered, or 

 3
 

 

mailed by prepaid registered or certified mail,
addressed to the Secretary of the Corporation at the Corporation’s executive
offices. Common Stock utilized in full or partial payment of the Exercise Price
for Options shall be value at its Market Value at the date of exercise.

(c)           Period of Exercisability.  Any Option granted hereunder shall be
exercisable by a Participant:

(1)           In the event of death, to the extent
that the Participant would have been entitled to exercise the Option
immediately prior to his death, such Option of the deceased Participant may be
exercised within two (2) years from the date of his death (but not later than
the date on which the Option would otherwise expire) by the personal
representatives of his estate or person or persons to whom his rights under
such option shall have passed by will or by laws of descent and distribution;

(2)           In the event of permanent and total
disability (as such term is defined in Section 22(e)(3) of the Code), then to
the extent that the Participant would have been entitled to exercise the Option
immediately prior to his permanent and total disability, such option may be
exercised within one year from the date of such permanent and total disability,
but not later than the date on which the option would otherwise expire.

Notwithstanding
the provisions of any Option which provides for its exercise in installments as
designated by the Committee, such Option shall become immediately exercisable
upon the Participant’s death or Permanent and Total Disability.

9.             Change in
Control.

(a)           General Rule.  Notwithstanding the provisions of any Award
which provide for its exercise or vesting in installments, all Options shall be
immediately exercisable and fully vested upon a Change in Control. With respect
to Optioned Shares, at the time of a Change in Control, the Participant shall,
at the discretion of the Committee, be entitled to receive cash in an amount
equal to the excess of the Market Value of the Common Stock subject to such
Option over the Exercise Price of such Shares, in exchange for the cancellation
of such Options by the Participant.

(b)           Exception to General Rule.  Notwithstanding subparagraph (a) of this
Paragraph, in no event may an Option be canceled in exchange for cash within
the six-month period following the date of its grant.

10.           Effect of Changes in
Common Stock Subject to the Plan.

(a)           Recapitalization, Stock
Splits, Etc.  The number and
kind of Shares reserved for issuance under the Plan, and the number and kind of
Shares subject to outstanding Awards and the Exercise Price thereof, shall be
proportionately adjusted for any increase, decrease, change or exchange of
Shares for a different number or kind of Shares or other securities of the
Corporation which results from a merger, consolidation, recapitalization,
reorganization, reclassification, stock dividend, stock split, combination of
Shares, or similar event in which the number or kinds of Shares is changed
without the receipt or payment of consideration by the Corporation.

(b)           Transactions in which the
Corporation is Not the Surviving Entity.  Subject to Paragraph 9 hereof, in the event
of (i) the liquidation or dissolution of the Corporation, (ii) a merger or
consolidation in which the Corporation is not the surviving entity, or (iii)
the sale or disposition of all or substantially all of the Corporation’s assets
(any of the foregoing to be referred to herein as a “Transaction”), all Awards
outstanding at the effectiveness of such Transaction shall be surrendered. With
respect to each Award so surrendered, the Committee shall, in its sole and
absolute discretion, determine whether the holder of the surrendered Award
shall receive:

 4
 

 

(1)           for each Option then subject to an
outstanding Award, an Option for the number and kind of Shares into which each
outstanding Share (other than Shares held by dissenting stockholders) is
changed or exchanged, together with an appropriate adjustment to the Exercise
Price; or

(2)           a cash payment (from the Corporation
or the successor corporation), in an amount equal to the Market Value of the
Shares subject to the Award on the date of the Transaction, less the Exercise
Price of the Award.

(c)           Conditions and
Restrictions of New, Additional or Different Shares or Securities.  If, by reason of any adjustment
made pursuant to this Paragraph, a Participant becomes entitled to new,
additional or different Shares or securities, such new, additional or different
Shares or securities shall thereupon be subject to all of the conditions and
restrictions which were applicable to the Shares pursuant to the Award before
the adjustment was made.

(d)           Other Issuances.  Except as expressly provided in this
Paragraph, the issuance by the Corporation or an Affiliate of Shares of any
class, or of securities convertible into Shares of another class, for cash or
property or for labor or services either upon direct sale or upon the exercise
of rights or warrants to subscribe therefor, shall not affect, and no
adjustment shall be made with respect to, the number, class or Exercise Price
of Shares then subject to Awards or reserved for issuance under the Plan.

11.           Non- Transferability of
Awards.

Awards may not be
sold, pledged, assigned, hypothecated, transferred or disposed of in any manner
other than by will or by the law of descent and distribution, or pursuant to
the terms of a “qualified domestic relations order” (within the meaning of
Section 414(p) of the Code and the regulations and rulings thereunder).

12.           Time of Granting Awards.

The date of grant
of an Award shall, for all purposes, be the later of the date on which the
Committee makes the determination of granting such Award and the Effective
Date. Notice of the determination shall be given to each Participant to whom an
Award is so granted within a reasonable time after the date of such grant.

13.           Effective Date.

The Plan shall be
effective as of April 14, 1999. Awards may be made prior to approval of the
Plan by the stockholders of the Corporation if the exercise of Awards in the
form of Options are conditioned upon stockholder approval of the Plan.

14.           Approval by Stockholders.

The Plan shall be
approved by stockholders of the Corporation within twelve (12) months before or
after the Effective Date.

15.           Modification
of Awards.

At any time, and
from time to time, the Board may authorize the Committee to direct execution of
an instrument providing for the modification of any outstanding Award, provided
no such modification shall confer on the holder of said Award any right or
benefit which could not be conferred on him by the grant of a new Award at such
time, or impair the Award without the consent of the holder of the Award.

 5
 

 

16.           Amendment and Termination
of the Plan.

The Board may from
time to time amend the terms of the Plan and, with respect to any Shares at the
time not subject to Awards, suspend or terminate the Plan. No amendment,
suspension or termination of the Plan shall, without the consent of any
affected holders of an Award, alter or impair any rights or obligations under
any Award theretofore granted.

17.           Conditions Upon Issuance
of Shares.

(a)           Compliance with Securities
Laws.  Shares of Common Stock
shall not be issued with respect to any Award unless the issuance and delivery
of such Shares shall comply with all relevant provisions of law, including,
without limitation, the Securities Act of 1933, as amended, the rules and
regulations promulgated thereunder, any applicable state securities law and the
requirements of any stock exchange upon which the Shares may then be listed.
The Plan is intended to comply with Rule 16b-3, and any provision of the Plan
which the Committee determines in its sole and absolute discretion to be
inconsistent with said Rule shall, to the extent of such inconsistency, be
inoperative and null and void, and shall not affect the validity of the
remaining provisions of the Plan. No shares acquired upon the exercise of an
Option granted hereunder may be sold or disposed of within six (6) months of
the date of the grant of said Option.

(b)           Special Circumstances.  The inability of the Corporation to obtain
approval from any regulatory body or authority deemed by the Corporation’s
counsel to be necessary to the lawful issuance and sale of any Shares hereunder
shall relieve the Corporation of any liability in respect of the non-issuance
or sale of such Shares. As a condition to the exercise of any Option, the
Corporation may require the person exercising the Option to make such
representations and warranties as may be necessary to assure the availability
of an exemption from the registration requirements of federal or state
securities law.

(c)           Committee Discretion.  The Committee shall have the discretionary
authority to impose in Agreements such restrictions in Shares as it may deem
appropriate or desirable, including, but not limited to, the authority to
impose a right of first refusal or to establish repurchase rights or both of
these restrictions.

18.           Reservation of Shares.

The Corporation,
during the term of the Plan, will reserve and keep available a number of Shares
sufficient to satisfy the requirements of the Plan.

19.           Withholding
Tax.

The Corporation’s
obligation to deliver Shares upon exercise of Options shall be subject to the
Participant’s satisfaction of all applicable federal, state and local income
and employment tax withholding obligations. Thc Committee, in its discretion,
may permit thc Participant to satisfy the obligation, in whole or in part, by
irrevocably electing to have thc Corporation withhold Shares, or to deliver to
the Corporation Shares that he already owns, having a value equal to the amount
required to be withheld. The value of Shares to be withheld, or delivered to
the Corporation, shall bc based on the Market Value of the Shares on thc date
the amount of tax to be withheld is to be determined. As an alternative, the
Corporation may retain, or sell without notice, a number of such Shares
sufficient to cover the amount required to be withheld.

20.           No Employment or Other
Rights.

In no event shall
a Director’s eligibility to participate or participation in the Plan create or
be deemed to create any legal or equitable right of the Director or any other
party to continue service with the Corporation or any Affiliate. No Director
shall have a right to be granted an Award or, having received an Award, the
right to again be granted an Award. However, a Director who has been granted an
Award may, if otherwise eligible, be granted an additional Award or Awards.

 6
 

 

21.           Governing Law.

The Plan shall be
governed by and construed in accordance with the laws of the Commonwealth of
Virginia except to the extent that federal law shall be deemed to apply.

 

 7

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