UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE
SECURITIES EXCHANGE ACT OF 1934
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Date of Report: December 30, 2005 Commission File Number: 0-15204
National Bankshares, Inc.
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(Exact name of Registrant as specified in its charter)
Virginia 54-1375874
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
101 Hubbard Street
Blacksburg, VA 24060
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(Address of principal executive offices)
Registrant's telephone number, including area code (540) 951-6300
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Page 1 of 2 Pages
ITEM 1.01 - ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT
On December 29, 2005, the Board of Directors of National Bankshares, Inc
(the "Company") approved a resolution to accelerate the vesting of all unvested
stock options outstanding (which as of December 29, 2005 totaled 71,000) under
the National Bankshares, Inc. 1999 Stock Option Plan. The options are held by
executive officers and have a range of exercise prices between $29.65 and $49.85
per share and a weighted average exercise price of $43.64 per share. The closing
price per share of the Company's common stock on December 29, 2005 was $46.50.
Except as described in the next paragraph, all other terms of the affected
options remained unchanged.
In order to offset unintended personal benefit to the named executive
officers of the Company as a result of the vesting acceleration, the Board's
action included a restriction that shares of the Company's common stock obtained
upon exercise of an accelerated option by a named executive officer may not be
sold or otherwise transferred prior to the expiration of the option's original
vesting period.
The Board determined to accelerate the vesting of these options in order
to eliminate the Company's recognition of compensation expense associated with
the affected options under Statement of Financial Accounting Standards No. 123R,
Share-Based Payment, which will apply to the Company beginning in the first
quarter of 2006. The Company anticipates that the aggregate pre-tax compensation
expense associated with the accelerated options that will be avoided by this
action is approximately $448,000, of which approximately $168,000 would have
been recognized in 2006. The Company believes that it will not be required to
recognize any compensation expense in future periods associated with the
affected options. However, there can be no assurance that the acceleration of
vesting of these options may not result in some future compensation expense.
SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
NATIONAL BANKSHARES, INC.
Date: December 30, 2005 By: /s/ James G. Rakes
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James G. Rakes
Chairman
President and Chief Executive Officer
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