SCHEDULE 14A
(Rule 14a-101)
Information Required in Proxy Statement
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<CAPTION>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, For Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-
11(c) or Rule 14a-12
</TABLE>
ATLANTIC FINANCIAL CORP.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
....................................................................
(2) Aggregate number of securities to which transaction applies:
....................................................................
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
....................................................................
(4) Proposed maximum aggregate value of transaction:
....................................................................
(5) Total fee paid:
....................................................................
<PAGE>
[ ] Fee paid previously with preliminary materials.
....................................................................
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
....................................................................
(2) Form, Schedule or Registration Statement no.:
....................................................................
(3) Filing Party:
....................................................................
(4) Date Filed:
....................................................................
<PAGE>
ATLANTIC FINANCIAL CORP.
Dear Shareholder:
You are cordially invited to attend the 1999 Annual Meeting of
Shareholders of Atlantic Financial Corp. (the "Company") to be held on Tuesday,
April 27, 1999 at 7:00 p.m. at the Omni Hotel located at 1000 Omni Boulevard,
Newport News, Virginia. At the Annual Meeting, you will be asked to elect five
directors for terms of three years each and to ratify the appointment of
independent auditors for the Company for 1999. Enclosed with this letter is a
formal notice of the Annual Meeting, a Proxy Statement and a form of proxy.
Whether or not you plan to attend the Annual Meeting, it is important
that your shares be represented and voted. Please complete, sign, date and
return the enclosed proxy promptly using the enclosed postage-paid envelope. The
enclosed proxy, when returned properly executed, will be voted in the manner
directed in the proxy.
We hope that you will participate in the Annual Meeting, either in
person or by proxy.
Sincerely,
/s/ William J. Farinholt
William J. Farinholt
President and Chief Executive Officer
Newport News, Virginia
April 7, 1999
<PAGE>
ATLANTIC FINANCIAL CORP.
737 J. Clyde Morris Boulevard
Newport News, Virginia 23601
___________________
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
___________________
The Annual Meeting of Shareholders (the "Annual Meeting") of Atlantic
Financial Corp. (the "Company") will be held on Tuesday, April 27, 1999 at 7:00
p.m. at the Omni Hotel located at 1000 Omni Boulevard, Newport News, Virginia,
for the following purposes:
1. To elect five directors to serve for terms of three years each
expiring at the 2002 annual meeting of shareholders;
2. To ratify the appointment of the firm of Yount, Hyde & Barbour,
P.C. as independent auditors for the Company for the fiscal year
ending December 31, 1999; and
3. To act upon such other matters as may properly come before the
Annual Meeting.
Only holders of record of shares of Common Stock at the close of
business on March 29, 1999, the record date fixed by the Board of Directors of
the Company, are entitled to notice of, and to vote at, the Annual Meeting.
By Order of the Board of Directors
/s/ Kenneth E. Smith
Kenneth E. Smith
Executive Vice President and Secretary
April 7, 1999
________________________________________________________________________________
YOU ARE CORDIALLY INVITED TO ATTEND THIS MEETING. IT IS IMPORTANT THAT YOUR
SHARES BE REPRESENTED REGARDLESS OF THE NUMBER THAT YOU OWN. EVEN IF YOU PLAN TO
BE PRESENT, YOU ARE URGED TO COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED PROXY
PROMPTLY IN THE ENVELOPE PROVIDED. IF YOU ATTEND THIS MEETING, YOU MAY VOTE
EITHER IN PERSON OR BY YOUR PROXY. ANY PROXY GIVEN MAY BE REVOKED BY YOU IN
WRITING OR IN PERSON AT ANY TIME PRIOR TO THE EXERCISE THEREOF.
________________________________________________________________________________
<PAGE>
ATLANTIC FINANCIAL CORP.
737 J. Clyde Morris Boulevard
Newport News, Virginia 23601
PROXY STATEMENT
This Proxy Statement is furnished to holders of the common stock, par
value $5.00 per share ("Common Stock"), of Atlantic Financial Corp. (the
"Company"), in connection with the solicitation of proxies by the Board of
Directors of the Company to be used at the 1999 Annual Meeting of Shareholders
(the "Annual Meeting") to be held on Tuesday, April 27, 1999 at 7:00 p.m. at the
Omni Hotel located at 1000 Omni Boulevard, Newport News, Virginia, and any duly
reconvened meeting after adjournment thereof.
Any shareholder who executes a proxy has the power to revoke it at any
time by written notice to the Secretary of the Company, by executing a proxy
dated as of a later date, or by voting in person at the Annual Meeting. It is
expected that this Proxy Statement and the enclosed proxy card will be mailed on
or about April 7, 1999 to all shareholders entitled to vote at the Annual
Meeting.
The cost of soliciting proxies for the Annual Meeting will be borne by
the Company. The Company does not intend to solicit proxies otherwise than by
use of the mails, but certain officers and regular employees of the Company or
its subsidiaries, without additional compensation, may use their personal
efforts, by telephone or otherwise, to obtain proxies. The Company may also
reimburse banks, brokerage firms and other custodians, nominees and fiduciaries
for their reasonable out-of-pocket expenses in forwarding proxy materials to the
beneficial owners of shares of Common Stock.
On March 29, 1999, the record date for determining those shareholders
entitled to notice of and to vote at the Annual Meeting, there were 4,189,385
shares of Common Stock issued and outstanding. Each outstanding share of Common
Stock is entitled to one vote on all matters to be acted upon at the Annual
Meeting. A majority of the shares of Common Stock entitled to vote, represented
in person or by proxy, constitutes a quorum for the transaction of business at
the Annual Meeting.
A shareholder may abstain or (only with respect to the election of
directors) withhold his or her vote (collectively, "Abstentions") with respect
to each item submitted for shareholder approval. Abstentions will be counted for
purposes of determining the existence of a quorum. Abstentions will not be
counted as voting in favor of the relevant item.
A broker who holds shares in "street name" has the authority to vote on
certain items when it has not received instructions from the beneficial owner.
Except for certain items for which brokers are prohibited from exercising their
discretion, a broker is entitled to vote on matters put to shareholders without
instructions from the beneficial owner. Where brokers do not have or do not
exercise such discretion, the inability or failure to vote is referred to as a
"broker nonvote." Under the circumstances where the broker is not permitted to,
or does not, exercise its discretion, assuming proper disclosure to the
<PAGE>
Company of such inability to vote, broker nonvotes will not be counted for
purposes of determining the existence of a quorum, and also will not be counted
as not voting in favor of the particular matter.
The Board of Directors is not aware of any matters other than those
described in this Proxy Statement that may be presented for action at the Annual
Meeting. However, if other matters do properly come before the Annual Meeting,
the persons named in the enclosed proxy card possess discretionary authority to
vote in accordance with their best judgment with respect to such other matters.
PROPOSAL ONE
ELECTION OF DIRECTORS
The Board of Directors consists of 14 directors, five of whom are
nominated for election as directors at the Annual Meeting to serve for terms of
three years each expiring on the date of the annual meeting of shareholders in
2002. Nine other directors have been elected to terms that end in either 2000 or
2001, as indicated below.
On December 1, 1998, the Company completed the merger of United
Community Bankshares, Inc. ("UCB") with and into the Company (the "Merger"). As
a result of the Merger, The Bank of Franklin ("BOF") and The Bank of Sussex and
Surry ("BSS"), the former subsidiaries of UCB, became wholly owned subsidiaries
of the Company. In addition, the Company's Board of Directors was divided into
three classes and restructured to consist of seven individuals who were
directors of the Company and seven individuals who were directors of UCB.
The election of each nominee for director requires the affirmative vote
of the holders of a plurality of the shares of Common Stock cast in the election
of directors. If the proxy is executed in such manner as not to withhold
authority for the election of any or all of the nominees for directors, then the
persons named in the proxy will vote the shares represented by the proxy for the
election of the five nominees named below. If the proxy indicates that the
shareholder wishes to withhold a vote from one or more nominees for director,
such instructions will be followed by the persons named in the proxy.
Each nominee has consented to being named in this Proxy Statement and
has agreed to serve if elected. The Board of Directors has no reason to believe
that any of the nominees will be unable or unwilling to serve. If, at the time
of the Annual Meeting, any nominee is unable or unwilling to serve as a
director, votes will be cast, pursuant to the enclosed proxy, for such
substitute nominee as may be nominated by the Board of Directors. No family
relationships exist among any of the directors or between any of the directors
and executive officers of the Company.
The following biographical information discloses each director's age,
business experience in the past five years and the year that each individual was
first elected to the Board of Directors or its predecessor.
2
<PAGE>
Nominees for Election For Terms That Expire in 2002
Charles F. Dawson, 57, has been a director of the Company since 1988.
Mr. Dawson is a land surveyor and a principal in Bay Design Group, P.C.
in Saluda, Virginia.
William J. Farinholt, 52, has been a director of the Company since 1988.
Mr. Farinholt is the President and Chief Executive Officer of the
Company and Peninsula Trust Bank, Incorporated ("PTB").
Harvey G. Pope, 79, has been a director of the Company since 1998 and was
previously a director of UCB since 1988.
Mr. Pope was formerly the President of Hancock Peanut Company in
Courtland, Virginia.
J. Russell West, 73, has been Vice Chairman of the Board and a director of the
Company since 1998 and was previously Chairman of the Board and a
director of UCB since 1970.
Mr. West is the owner of Ivor Furniture Company in Ivor, Virginia.
Thomas Z. Wilke, 45, has been a director of the Company since 1990.
Mr. Wilke is an agent with State Farm Insurance in Gloucester Point,
Virginia.
Incumbent Directors Whose Terms Expire in 2000
Harry M. Healy, 65, has been a director of the Company since 1988.
Mr. Healy is retired and formerly was President of Bailey Amusements in
Gloucester, Virginia.
Hersey M. Mason, Jr., 69, has been a director of the Company since 1990.
Mr. Mason is the owner of Mason Realty, Inc. in Middlesex County,
Virginia.
William B. Savedge, 51, has been a director of the Company since 1998.
Mr. Savedge is Vice President of Manry Rawls Corporation in Franklin,
Virginia.
J. D. Spivey, 72, has been a director of the Company since 1998 and was
previously a director of UCB since 1991.
Mr. Spivey is retired and formerly was Vice President of Southampton
Tractor Co., Inc. in Courtland, Virginia.
F. Bruce Stewart, 59, has been a director of the Company since 1998 and was
previously a director of UCB since 1988.
Mr. Stewart is an attorney with Stewart & Stewart in Franklin,
Virginia.
Incumbent Directors Whose Terms Expire in 2001
J. Philip Bain, Jr., 35, has been a director of the Company since 1998 and was
previously a director of UCB since 1988.
Mr. Bain is a stockbroker with Davenport & Company LLC in Richmond,
Virginia.
3
<PAGE>
Robert D. Foster, 56, has been a director of the Company since 1988.
Mr. Foster is President of Tre-Suz-Ann Development and Foster
Management and Vice President of Foster Realty, both of which are in
Gloucester, Virginia.
Joseph A. Lombard, Jr., DDS, 52, has been Chairman of the Board and a director
of the Company since 1988.
Dr. Lombard is a principal in Lombard, Luckham & Smith, a dentistry
practice in Gloucester, Virginia.
Wenifred O. Pearce, 57, has been a director of the Company since 1998 and was
previously a director of UCB since 1994.
Mr. Pearce is the Vice Chairman and Chief Operating Officer of the
Company and the President and Chief Executive Officer of BOF. From 1994
to 1998, he served as President and Chief Executive Officer of UCB.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE
NOMINEES SET FORTH ABOVE.
Executive Officers Who Are Not Directors
Kenneth E. Smith, 47, has served as Executive Vice President and Chief
Financial Officer of the Company and PTB, with primary oversight of operations,
since 1988. Mr. Smith has 25 years of banking experience. Prior to joining the
Company, he served as Compliance Officer and Auditor with Citizens and Farmers
Bank, West Point. Prior to that he spent 11 years as a commercial bank examiner
with the Federal Reserve Bank of Richmond. He served for two years with The
Colonial Bank of Providence Forge, Virginia. Before that he worked as an
internal auditor with United Virginia Bank and as a teller with Second National
Bank, Richmond, Virginia. He has experience in virtually all areas of the
Company, including lending, liquidity management, bank regulations and financial
analysis. He has attended various banking schools, is a graduate of the
University of Richmond and has taught at Rappahannock Community College.
D. Eugene Brittle, 49, has served as Executive Vice President of the
Company since 1998 and is President and Chief Executive Officer of BSS. Mr.
Brittle has 26 years of banking experience. He has served in the positions of
Assistant Cashier, Cashier and Executive Vice President of BSS, having become
President in 1994. Mr. Brittle has been a director of BSS since 1986. He has
experience in virtually all areas of BSS, having served as a teller and loan
officer. He also has experience in virtually all other areas of BSS, including
liquidity management, compliance, financial record keeping and analysis, and is
in charge of BSS's investment portfolio. He has completed various American
Institute of Banking courses, is a graduate of the Virginia-Maryland School of
Bank Management at The University of Virginia and graduated with a B.A. degree
in Economics from Randolph-Macon College. He has served in numerous capacities
with state banking organizations and is a past President of the Virginia
Association of Community Banks.
4
<PAGE>
Security Ownership of Management
The following table sets forth, as of March 29, 1999, certain
information with respect to the beneficial ownership of shares of Common Stock
by each of the members of the Board of Directors, by each of the executive
officers named in the "Summary Compensation Table" below and by all directors
and executive officers as a group. Beneficial ownership includes shares, if any,
held in the name of the spouse, minor children or other relatives of a director
living in such person's home, as well as shares, if any, held in the name of
another person under an arrangement whereby the director or executive officer
can vest title in himself at once or at some future time.
<TABLE>
<CAPTION>
Number Percent
of Shares (1) of Class (%)
------------- ------------
<S> <C> <C>
J. Philip Bain, Jr. 75,576 1.80
D. Eugene Brittle 6,729 *
Charles F. Dawson 10,962 *
William J. Farinholt 73,340 1.74
Robert D. Foster 84,342 2.01
Harry M. Healy 29,000 *
Joseph A. Lombard, Jr., DDS 55,236 1.32
Hersey M. Mason, Jr. 69,148 1.65
Wenifred O. Pearce 7,720 *
Harvey G. Pope 9,547 *
William B. Savedge 29,719 *
Kenneth E. Smith 39,560 *
J. D. Spivey 5,322 *
F. Bruce Stewart 8,341 *
J. Russell West 70,492 1.68
Thomas Z. Wilke 19,440 *
All directors and executive officers as a group
(16 persons) 594,474 13.95
__________________
</TABLE>
* Percentage of ownership is less than one percent of the outstanding
shares of Common Stock.
(1) Amounts disclosed include shares of Common Stock issuable upon the
exercise of stock options exercisable within 60 days of March 29, 1999.
5
<PAGE>
Security Ownership of Certain Beneficial Owners
The following table sets forth, as of March 29, 1999, certain
information with respect to the beneficial ownership of shares of Common Stock
by each person who owns more than five percent of the outstanding shares of
Common Stock.
Number Percent
of Shares of Class (%)
--------- ------------
Jack P. Bain 212,966 (1) 5.08
Hannah B. Bain
Wakefield, Virginia
__________________________
(1) Amount includes 60,800 shares held by Mr. Bain, 19,000 shares held in
trust by Mr. Bain as trustee for the benefit of his daughter, and
25,671 shares held by Mr. Bain as trustee under the will of Robert F.
Bain, Jr., all to which Mrs. Bain disclaims beneficial ownership;
amount also includes 107,495 shares held by Mrs. Bain, to which Mr.
Bain disclaims beneficial ownership.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's directors and executive officers, and any persons who own
more than 10% of the outstanding shares of Common Stock, to file with the
Securities and Exchange Commission ("SEC") reports of ownership and changes in
ownership of Common Stock. Officers and directors are required by SEC
regulations to furnish the Company with copies of all Section 16(a) reports that
they file. Based solely on review of the copies of such reports furnished to the
Company or written representation that no other reports were required, the
Company believes that, during fiscal year 1998, all filing requirements
applicable to its officers and directors were complied with, except that William
J. Farinholt, a director and executive officer, inadvertently filed late a
report on Form 4 covering the purchase of 490 shares of Common Stock in December
1998.
The Board of Directors and its Committees
There were 15 meetings of the Board of Directors in 1998. Each director
attended greater than 75% of the aggregate number of meetings of the Board of
Directors and meetings of committees of which the director was a member during
the period in 1998 for which he was a director.
The Company's Audit Committee, which meets on a bi-monthly basis, met
seven times in 1998. Members of the committee currently include J. D. Spivey,
Chairman, J. Philip Bain, Jr., Charles F. Dawson, Hersey M. Mason, Jr., William
B. Savedge, F. Bruce Stewart and Thomas Z. Wilke. The Audit Committee recommends
to the Board of Directors the appointment of a firm to serve as independent
auditors, subject to ratification by the Board of Directors and the shareholders
at the Annual Meeting.
The Company does not have a standing Nomination or Compensation
Committee.
The Chairman of the Board is an ex-officio member of all committees.
6
<PAGE>
Director Compensation
Each of the Company's directors is paid an annual retainer fee of
$4,000 and $100 for each Board of Directors meeting attended and $50 for each
committee meeting attended.
Executive Compensation
The following table shows, for the fiscal years ended December 31,
1998, 1997 and 1996, the cash compensation paid by the Company and its
subsidiaries (and their predecessors), as well as certain other compensation
paid or accrued for those years, to each of the named executive officers in all
capacities in which they served. This table includes compensation for services
rendered in all capacities to UCB and its subsidiaries by Messrs. Pearce and
Brittle during that period.
Summary Compensation Table
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
------------------- ----------------------
Other Annual Securities All Other
Name and Compen- Underlying Compen-
Principal Position Year Salary ($) Bonus ($) sation ($) Options (#) sation ($)(1)
------------------ ---- ---------- --------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
William J. Farinholt 1998 143,769 - * - 4,246
President and Chief Executive Officer 1997 106,266 25,000 * - 1,649
of the Company and PTB 1996 100,651 25,650 * - 1,501
Wenifred O. Pearce 1998 110,979 - * - 16,611
Vice Chairman and Chief Operating 1997 100,000 9,768 * 17,917 15,218
Officer of the Company and 1996 90,000 4,579 * - 9,480
President and Chief Executive
Officer of BOF
Kenneth E. Smith 1998 123,677 - * - 3,704
Executive Vice President and Chief 1997 92,942 21,750 * - 1,442
Financial Officer of the Company 1996 88,675 22,410 * - 1,321
and PTB
D. Eugene Brittle 1998 96,715 - * - 7,284
Executive Vice President of the 1997 90,539 5,000 * 16,125 766
Company and President and Chief 1996 86,648 - * - 797
Executive Officer of BSS
</TABLE>
____________________
* All benefits that might be considered of a personal nature did not exceed
the lesser of $50,000 or 10% of total annual salary and bonus for all
officers named in the table.
(1) Amounts for Messrs. Farinholt and Smith represent matching
contributions by the Company in its 401(k) plan, which was established
on March 1, 1995. Amounts for Mr. Pearce include $7,500, $8,712 and
$7,500 for 1998, 1997 and 1996, respectively, relating to contributions
by BOF on behalf of Mr. Pearce under BOF's deferred compensation plan.
7
<PAGE>
Stock Options
The Company and its predecessors did not grant any stock options to the
named executive officers during the year ended December 31, 1998. The following
table sets forth information with respect to exercised and unexercised options
held by such officers as of December 31, 1998. No stock options were exercised
by Messrs. Farinholt, Pearce, Smith or Brittle in 1998.
Fiscal Year End Option Values
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised Options In-The-Money Options
at December 31, 1998 (#) at December 31, 1998 ($)(1)
------------------------ ---------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
William J. Farinholt 34,000 - 316,250 -
Wenifred O. Pearce 2,050 15,867 10,547 81,636
Kenneth E. Smith 34,000 - 316,250 -
D. Eugene Brittle 1,935 14,190 9,956 73,008
</TABLE>
_________________
(1) The value of unexercised in-the-money options at fiscal year end was
calculated by determining the difference between (i) the fair market
value of common stock underlying the options at December 31, 1998 and
(ii) the exercise price of the options.
Employment Agreements
William J. Farinholt, President and Chief Executive Officer of the
Company and PTB, Wenifred O. Pearce, Vice Chairman and Chief Operating Officer
of the Company and President and Chief Executive Officer of BOF, Kenneth E.
Smith, Executive Vice President and Chief Financial Officer of the Company and
PTB, and D. Eugene Brittle, Executive Vice President of the Company and
President and Chief Executive Officer of BSS, each has entered into a five-year
Employment Agreement with the Company that commenced on December 1, 1998. Such
Employment Agreements superceded the existing employment agreements between UCB
and each of Messrs. Pearce and Brittle, as well as the agreements between PTB
and each of Messrs. Farinholt and Smith, which agreements provide for certain
benefits in the event of a change of control of PTB.
Mr. Farinholt's Employment Agreement provides that he will serve as the
President and Chief Executive Officer of the Company at an annual base salary of
$160,000. Base salary increases and bonuses will be in the discretion of the
Board of Directors. The Employment Agreement also provides that the Company will
provide Mr. Farinholt an appropriate automobile, as determined by the Board of
Directors. Under the Employment Agreement, Mr. Farinholt will be entitled to
participate in employee benefit plans, including the Company's stock option
plans, on the same basis as other employees of senior executive status. If the
Company terminates Mr. Farinholt's employment without cause, or if Mr. Farinholt
resigns for "good reason" during the contract term, he will be entitled to
salary and benefits for the remainder of the contract term, or one year,
whichever is greater, subject to his agreement not to compete with the Company
for a period of one year following the termination of his employment. Under the
Employment Agreement, "good reason" entitling Mr. Farinholt to resign includes a
change or reduction
8
<PAGE>
in Mr. Farinholt's authority; a reduction in base salary, as the same may have
been increased from time to time; the failure of the Company to provide him with
substantially the same fringe benefits that have been provided heretofore; a
relocation of his primary place of employment, which would require him to move
his personal residence; the failure of a successor corporation to assume the
Company's obligations under the Employment Agreement; a failure of the
shareholders to elect him a director of the Company; or a material breach of the
Employment Agreement by the Company.
Under the Employment Agreement, Mr. Farinholt would not be entitled to
any further compensation or benefits if the Company terminated the Agreement for
cause. Cause includes personal dishonesty, incompetence, 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 that have no material detrimental
effect on the Company) or final cease and desist order, or a material breach of
any provision of the Employment Agreement.
If Mr. Farinholt is terminated or if he resigns for good reason
following a change of control, he would be entitled to the same severance
benefits described above. If Mr. Farinholt resigned following a change of
control without good reason, he would be entitled to a $200,000 severance
benefit and immediate vesting of stock options.
The Employment Agreements of Messrs. Pearce, Smith and Brittle are in
substantially the same form as Mr. Farinholt's Employment Agreement and provide
for annual base salaries of $150,000, $125,000 and $115,000, respectively. The
Employment Agreements of Messrs. Pearce and Brittle, however, provide
additionally that each will be granted an option to purchase shares of Common
Stock with a fair market value equal to 167% of his annual base salary at the
time of grant at a price per share equal to the fair market value of Common
Stock on the date of grant. Such options are contingent on continued employment
and are not required to be granted before August 1, 2001. Such option grants
will be incentive stock options and will vest as rapidly as is consistent with
incentive stock option treatment. Mr. Pearce's Employment Agreement provides
that the Salary Continuation Plan Agreement provided to him by BOF will be kept
in force.
Transactions with Management
Some of the directors and officers of the Company and their families
are at present, as in the past, customers of one of the banking subsidiaries of
the Company, and have had and expect to have transactions with one or more of
the subsidiary banks in the ordinary course of business. In addition, some of
the directors and officers of the Company or its subsidiaries are at present, as
in the past, also directors and officers of corporations that are customers of
the subsidiary banks and that have had or expect to have transactions with the
subsidiary banks in the ordinary course of business. Such transactions were made
in the ordinary course of business on substantially the same terms, including
interest rates and collateral, as those prevailing at the time for comparable
transactions with other persons, and did not involve more than normal risk of
collectibility or present other unfavorable features.
As of December 31, 1998, the aggregate amount of loans, direct and
indirect, from PTB, BOF and BSS to the Company's directors, executive officers,
shareholders holding more than five percent of the outstanding voting securities
and entities in which they own significant interest, was $3,223,014.
9
<PAGE>
PROPOSAL TWO
APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors, upon recommendation by the Company's Audit
Committee, has appointed, subject to shareholder approval, the firm of Yount,
Hyde & Barbour, P.C. as independent public accountants to audit the consolidated
financial statements of the Company for the fiscal year ending December 31,
1999. Yount, Hyde & Barbour, P.C. audited the financial statements of the
Company for the year ended December 31, 1998. A majority of the votes cast by
holders of shares of Common Stock is required for the ratification of the
appointment of the independent public accountants.
The Company's principal accountant for the fiscal year ending December
31, 1997, Smith & Eggleston, P.C., declined to stand for reelection in 1998 as
of March 31, 1998. The report of Smith & Eggleston, P.C. on the Company's
financial statements for either of the past two years did not contain an adverse
opinion or disclaimer of opinion, and was not modified as to uncertainty, audit
scope or accounting principles. During the last two fiscal years and the
subsequent interim period, there were no disagreements with Smith & Eggleston,
P.C. on any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure, which disagreements, if not resolved
to the satisfaction of Smith & Eggleston, P.C., would have caused it to make a
reference to the subject matter of the disagreements in connection with its
report. The Company has not been advised by Smith & Eggleston, P.C. of any
reportable events that occurred during the last two fiscal years or the
subsequent interim period.
Representatives of Yount, Hyde & Barbour, P.C. are expected to be
present at the Annual Meeting, will have an opportunity to make a statement, if
they desire to do so, and will be available to respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE
APPOINTMENT OF YOUNT, HYDE & BARBOUR, P.C. AS THE COMPANY'S INDEPENDENT AUDITORS
FOR THE FISCAL YEAR ENDING DECEMBER 31, 1999.
PROPOSALS FOR 2000 ANNUAL MEETING OF SHAREHOLDERS
Under the regulations of the Securities and Exchange Commission, any
shareholder desiring to make a proposal to be acted upon at the 2000 annual
meeting of shareholders must cause such proposal to be received, in proper form,
at the Company's principal executive offices at 7171 George Washington Memorial
Highway, Gloucester, Virginia 23061, no later than December 8, 1999, in order
for the proposal to be considered for inclusion in the Company's Proxy Statement
for that meeting. The Company presently anticipates holding the 2000 annual
meeting of shareholders on April 27, 2000.
The Company's Bylaws also prescribe the procedure a shareholder must
follow to nominate directors or to bring other business before shareholders'
meetings. For a shareholder to nominate a candidate for director at the 2000
annual meeting of shareholders, notice of nomination must be received by the
Secretary of the Company not less than 60 days and not more than 90 days prior
to the date of the 2000 annual meeting. The notice must describe various matters
regarding the nominee and the shareholder giving the notice. For a shareholder
to bring other business before the 2000 annual meeting of shareholders, notice
must be received by the Secretary of the Company not less than 60 days and not
more than 90 days prior to the date of the 2000 annual meeting. The notice must
include a description of the proposed business, the reasons therefor, and other
specified matters. Any shareholder may obtain a copy of
10
<PAGE>
the Company's Bylaws, without charge, upon written request to the Secretary of
the Company. Based upon an anticipated date of April 27, 2000 for the 2000
annual meeting of shareholders, the Company must receive any notice of
nomination or other business no later than February 27, 2000 and no earlier than
January 28, 2000.
OTHER MATTERS
THE COMPANY'S ANNUAL REPORT FOR THE FISCAL YEAR ENDED DECEMBER 31,
1998, INCLUDING FINANCIAL STATEMENTS, IS BEING MAILED TO SHAREHOLDERS WITH THIS
PROXY STATEMENT. ADDITIONAL COPIES OF THE COMPANY'S ANNUAL REPORT MAY BE
OBTAINED WITHOUT CHARGE BY WRITING TO KENNETH E. SMITH, EXECUTIVE VICE PRESIDENT
AND SECRETARY, WHOSE ADDRESS IS 737 J. CLYDE MORRIS BOULEVARD, NEWPORT NEWS,
VIRGINIA 23601. THE ANNUAL REPORT IS NOT PART OF THE PROXY SOLICITATION
MATERIALS.
11
<PAGE>
[FORM OF PROXY]
Atlantic Financial Corp
Proxy Solicited on Behalf of the Board of Directors
The undersigned hereby appoints Joseph A. Lombard, Jr., DDS, W. J.
Farinholt and J. D. Spivey, jointly and severally, proxies, with full power to
act alone, and with full power of substitution, to represent the undersigned and
to vote, as designated hereon and upon any and all other matters that may
properly be brought before such meeting, all shares of Common Stock that the
undersigned would be entitled to vote at the Annual Meeting of Shareholders of
Atlantic Financial Corp, a Virginia corporation (the "Corporation"), to be held
at the Omni Hotel located at 1000 Omni Boulevard, Newport News, Virginia, on
Tuesday, April 27, 1999 at 7:00 p.m., local time, or any adjournments thereof,
for the purposes set forth on the reverse side of this document:
(To Be Continued And Signed On The Other Side)
<PAGE>
Please sign, date and mail your
proxy card back as soon as possible!
Annual Meeting of Shareholders
ATLANTIC FINANCIAL CORP
April 27, 1999
Please Detach and Mail in the Envelope Provided
| X | Please mark your
votes as in this
example.
<TABLE>
<CAPTION>
<S> <C>
FOR WITHHOLD
nominees listed at AUTHORITY
right (except to vote for all nominees
as indicated below) listed at right
1. To elect as _ _
directors the five |_| |_| Nominees: Charles F. Dawson
persons listed as William J. Farinholt
nominees at right for terms of three years each expiring at Harvey G. Pope
the 2002 Annual Meeting of Shareholders J. Russell West
Thomas Z. Wilke
(INSTRUCTION: To withhold authority to vote for any
individual nominee listed above, write that nominee's name on the
space provided below.)
_________________________________________________________________
2. To ratify the appointment of the firm of Yount, Hyde & FOR AGAINST ABSTAIN
Barbour, P.C. as independent auditors for the Corporation for _ _ _
the fiscal year ending December 31, 1999. |_| |_| |_|
</TABLE>
3. In their discretion, the proxies are authorized to vote upon
any other business that may properly come before the meeting,
or any adjournment thereof.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE SHAREHOLDER. IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED FOR ALL
NOMINEES LISTED IN ITEM 1 AND FOR ITEM 2.
PLEASE SIGN, DATE AND MAIL THIS PROXY IMMEDIATELY IN THE ENCLOSED ENVELOPE.
Please check one of the following boxes.
I will attend _ I will not _
the meeting |_| attend the |_|
meeting
Number of Attendees:____________________
Signature_____________________Signature____________________Dated__________, 1999
NOTE: PLEASE MARK, SIGN, DATE AND RETURN PROMPTLY. When signing as Attorney,
Executor, Administrator, Guardian or Trustee, please add your title as such.
