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:
( ) 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 Section 240.14a-11(c) or Section 240.14a-12
COMMONWEALTH BANKSHARES, INC.
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement, if other than 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)(4) 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:
( ) 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>
COMMONWEALTH BANKSHARES, INC.
NOTICE OF 1997 ANNUAL MEETING OF SHAREHOLDERS
To the Shareholders of Commonwealth Bankshares, Inc.:
NOTICE is hereby given that the 1997 Annual Meeting of Shareholders of
Commonwealth Bankshares, Inc. (the "Corporation") will be held in the lobby of
the main office of Bank of the Commonwealth, Boush and Freemason Streets,
Norfolk, Virginia 23510, on Tuesday, April 29, 1997, at 3:00 p.m., local time,
for the following purposes:
1. Election of three members of the Board of Directors of the Corporation
as Class 3 directors to serve until the 2000 Annual Meeting of
Shareholders.
2. The approval of the First Amendment to the Commonwealth Bankshares,
Inc. 1990 Stock Option Plan.
3. The approval of the First Amendment to the Commonwealth Bankshares,
Inc. Non-Employee Director Stock Compensation Plan.
4. The transaction of such other business as may properly come before the
meeting or any adjournment thereof.
Only shareholders of record at the close of business on March 4, 1997
are entitled to notice of, and to vote at, such meeting or any adjournment
thereof.
Your attention is directed to the Proxy Statement accompanying this
notice for a more complete statement regarding matters proposed to be acted upon
at the meeting.
To assure that your shares are represented at the meeting, please fill
in, date and sign the enclosed proxy and return it promptly in the enclosed
envelope, regardless of whether you expect to attend the meeting. The enclosed
envelope requires no postage if mailed in the United States. If for any reason
you desire to revoke your proxy, you may do so at any time before it is voted by
contacting the President of the Corporation, Edward J. Woodard, Jr., in person
or in writing.
By Order of the Board of Directors
Edward J. Woodard, Jr., CLBB
Chairman of the Board, President and
Chief Executive Officer
Dated in Norfolk, Virginia and
mailed this 9th day of April, 1997
<PAGE>
COMMONWEALTH BANKSHARES, INC.
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
APRIL 29, 1997
The solicitation of the enclosed 1997 proxy is made by and on behalf of
the Board of Directors of Commonwealth Bankshares, Inc. (the "Corporation") to
be used at the 1997 Annual Meeting of Shareholders to be held on Tuesday, April
29, 1997 at 3:00 p.m., or any adjournment thereof, in the lobby of the main
office of the Bank of the Commonwealth (the "Bank"), Boush and Freemason Streets
(P.O. Box 1177), Norfolk, Virginia 23510. The approximate mailing date of this
Proxy Statement and the accompanying proxy is April 9, 1997. The matters to be
considered and acted upon are (i) the election of three Class 3 directors of the
Corporation to serve until the 2000 Annual Meeting of Shareholders, (ii) the
approval of the First Amendment to the Commonwealth Bankshares, Inc. 1990 Stock
Option Plan; (iii) the approval of the First Amendment to the Commonwealth
Bankshares, Inc. Non-Employee Director Stock Compensation Plan; and (iv) such
other business as may properly come before the meeting or any adjournment
thereof.
The cost of the solicitation of proxies will be borne by the
Corporation. Solicitations will be made only by the mails, except that, if
necessary, officers and regular employees of the Bank or the Corporation may
make solicitations of proxies in person or by telephone. Banks, brokerage firms,
and other custodians, nominees and fiduciaries will be requested to forward the
proxy soliciting material to the beneficial owners of the stock held of record
by such persons, and the Corporation will, upon request, reimburse them for
their reasonable charges and expenses in this connection.
Anyone who gives a proxy may still vote in person, if he so desires,
and may revoke the proxy at any time prior to the voting of such proxy by
contacting the President of the Corporation, Edward J. Woodard, Jr., in person
or in writing, or by filing a duly executed proxy bearing a later date. All
properly executed proxies delivered pursuant to this solicitation will be voted
at the meeting and in accordance with instructions contained therein, if any.
Enclosed with this Proxy Statement and the accompanying Proxy you will
find a separate Annual Report to Shareholders for the year ended December 31,
1996.
<PAGE>
Only shareholders of record at the close of business on March 4, 1997
will be entitled to vote at the meeting, or any adjournment thereof.
Shareholders are entitled to one vote for each share on all matters to come
before the meeting. In the election of directors, those nominees receiving the
greatest number of votes shall be deemed elected even though not receiving a
majority of the shares represented at the meeting in person or proxy. The
proposals to approve the First Amendment to the Commonwealth Bankshares, Inc.
1990 Stock Option Plan and the First Amendment to the Commonwealth Bankshares,
Inc. Non-Employee Director Stock Compensation Plan must be approved by the vote
of more than one-half of the votes cast thereon. The Corporation has issued only
Common Stock, $2.50 par value (the "Common Stock"). As of March 4, 1997 the
Corporation had issued and outstanding 947,501 shares of Common Stock held of
record by 524 shareholders. In accordance with Virginia law, broker non-votes
will be counted for purposes of determining the presence or absence of a quorum,
but will not be counted as a vote cast on any proposal. Accordingly, broker
non-votes will have no effect on the election of directors, approval of the
First Amendment to the Commonwealth Bankshares, Inc. 1990 Stock Option Plan and
approval of the First Amendment to the Commonwealth Bankshares, Inc.
Non-Employee Director Stock Compensation Plan. A majority of the shares of
outstanding Common Stock must be represented at the meeting in person or by
proxy in order to constitute a quorum for the transaction of business.
The Corporation is a one bank holding company organized under the laws
of the Commonwealth of Virginia. It's wholly-owned subsidiary, Bank of the
Commonwealth, is a Virginia state bank and member of the Federal Reserve. The
Bank operates six branches in Tidewater, Virginia.
PROPOSAL I
ELECTION OF DIRECTORS
The Corporation's Articles of Incorporation provide for the Board of
Directors to be divided into three classes, as nearly equal in number as
possible. Each class serves for a term of three years, with one class being
elected each year. The Board of Directors currently consists of eight directors.
At the 1997 Annual Meeting, three directors comprising Class 3 will be
elected to serve until the 2000 Annual Meeting of Shareholders and until their
successors are elected and qualified. The Board recommends that the three
nominees named below be elected. Proxies received will be voted for the election
of such nominees, unless marked to the contrary. A shareholder who desires to
withhold voting of the proxy for one or all of the nominees may so indicate on
the proxy. All of the nominees are currently members of the Board. All of the
nominees have consented to be named and have indicated their intent to serve if
elected. However, in the event any nominee is not available for election, the
proxies will be voted for such person as shall be designated by the Board as a
replacement.
There is set forth below as to each of the nominees, and the remaining
incumbent directors who will continue to serve as indicated below, certain
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<PAGE>
information including age, principal occupation, and the year each nominee or
incumbent director first became a director. The dates shown for the first
election as a director represents the year in which the nominee or incumbent
director was first elected to the Board of the Corporation or its predecessors.
Unless otherwise indicated, the business experience and principal occupation
shown for each nominee or incumbent director has extended five or more years.
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<PAGE>
The following table also sets forth as of March 4, 1997, certain
information with respect to the beneficial ownership of the Corporation's Common
Stock by (i) each director or nominee, (ii) the executive officer listed in the
Summary Compensation Table and (iii) all directors and executive officers as a
group.
<TABLE>
<CAPTION>
<S> <C>
Number (Percent) of
Served Shares Beneficially
as Principal Occupation Owned as of March 4,
Director During Past 1997*
Name Age Since Five Years (1)(2)
---- --- ----- -------------------- --------------------
Nominees For Election Whose Terms Will Expire in 2000 (Class 3)
William P. Kellam 82 1971 Retired President of 16,644(3)
Kellam-Eaton Insurance Agency, 1.7%
Inc. (real estate and
insurance), Virginia Beach,
Virginia, a position he held
until 1986.
Edward J. Woodard, Jr. 54 1973 Chairman of the Board, 17,206(4)
President and Chief Executive 1.7%
Officer of the Corporation and
the Bank.
Morton M. Zedd 61 1971 Real estate developer and 51,228(5)
investor in Richmond, Virginia. 5.1%
Incumbent Directors Whose Terms Expire in 1998 (Class 1)
William D. Payne, M.D. 61 1988 General, Laproscopic and 7,430(6)
Endoscopic surgeon and *
President with Drs. Payne,
Ives & Holland, Inc., General,
Laparoscopic and Endoscopic
Surgery in Norfolk, Virginia.
Morton Goldmeier 73 1988 President of Hampton Roads 39,402(7)
Management Associates, Inc. 3.9%
Richard J. Tavss 57 1988 Senior counsel of Tavss, 64,684(8)
Fletcher, Earley & King, P. C. 6.4%
in Norfolk, Virginia.
Incumbent Directors Whose Terms Expire in 1999 (Class 2)
Herbert L. Perlin 56 1987 General Agent for Guardian Life 22,525(9)
Insurance Co; President of 2.2%
Perlin Pension Services Inc., a
regional pension administration
company.
George H. Burton, Jr. 86 1981 President of Burton Lumber 32,140(10)
Corp., a building materials and 3.2%
supplies company located in
Chesapeake, Virginia.
All Directors, nominees and executive officers as Group (12 persons) 263,541
26.2%
</TABLE>
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<PAGE>
* Percentage of ownership is less than 1% of the outstanding
shares of Common Stock of the Corporation.
<PAGE>
(1) Beneficial ownership as reported in the above table has been
determined in accordance with Rule 13d-3 of the Securities and
Exchange Commission under the Securities Exchange Act of 1934, as
amended, and includes shares, where applicable, which an
individual has the right to acquire within 60 days through the
exercise of stock options.
(2) Based on 947,501 issued and outstanding shares of common stock as
of March 4, 1997 and stock options either currently exercisable or
which will become exercisable within sixty (60) days.
(3) Includes 5,459 shares which Mr. Kellam has the right to acquire
through the exercise of stock options.
(4) Includes 8,548 shares which Mr. Woodard has the right to acquire
through the exercise of stock options, 356 shares registered in
the name of E.J. Woodard, Jr., Custodian for Troy Brandon Woodard;
845 shares registered in the name of E.J. Woodard, Jr. and Sharon
W. Woodard, Custodians for Troy Brandon Woodard; and 1,179 shares
held in trust, representing the proceeds of a self-directed
Individual Retirement Trust for the benefit of E.J. Woodard, Jr.
(5) Includes 5,459 shares which Mr. Zedd has the right to acquire
through the exercise of stock options, 37,024 shares registered in
the name of Five Associates, a Virginia general partnership, of
which Mr. Zedd is managing partner; and 6,732 shares in the
Maxwell Zedd Trust, which Mr. Zedd is beneficiary.
(6) Includes 5,459 shares which Dr. Payne has the right to acquire
through the exercise of stock options.
(7) Includes 5,459 shares which Mr. Goldmeier has the right to acquire
through the exercise of stock options.
(8) Includes 5,459 shares which Mr. Tavss has the right to acquire
through the exercise of stock options, 697 shares registered in
the name of Richard J. Tavss, Custodian for Bobbie J. Tavss; and
435 shares registered in the name of the Estate of Daniel J. Tavss
c/o Richard J. Tavss, trustee under the will.
(9) Includes 5,459 shares which Mr. Perlin has the right to acquire
through the exercise of stock options, 11,061 shares registered in
the name of Herbert L. Perlin, Profit sharing Trust, of which Mr.
Perlin is Acting Trustee.
(10) Includes 5,459 shares which Mr. Burton has the right to acquire
through the exercise of stock options.
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<PAGE>
No family relationships exist among any of the directors or between any
of the directors and executive officers of the Corporation.
SECURITY OWNERSHIP OF PRINCIPAL SHAREHOLDERS
AND MANAGEMENT
As of March 4, 1997, there were two shareholders of the Corporation
known to it to be the beneficial owner of more than 5% of the Corporation's
Common Stock: Richard J. Tavss, Two Commercial Place, Norfolk, Virginia 23510
and Morton M. Zedd, 2 Sandown Circle, Richmond, Virginia 23329. See the
beneficial ownership table above related to holdings of Messrs. Tavss and Zedd.
INFORMATION REGARDING THE BOARD OF DIRECTORS
AND ITS COMMITTEES
The Corporation's Board of Directors has primary responsibility for the
determination of corporate policies and the overall financial condition of the
Corporation. The Board appoints a chief executive and other officers who are
responsible for conducting business on a day-to-day basis under the Board's
guidance and perspective. In turn, the management of the Corporation provides
the Board of Directors with a regular and detailed flow of information relating
to the Corporation's overall condition and financial performance.
During 1996, the Board of Directors met twelve times for regular
monthly meetings. All directors attended at least 75% of the total meetings of
the Board of Directors and the various committees on which they are members.
The Board of Directors has five standing committees: Executive
Committee; Audit Committee; Compensation Committee; Investment Committee; and
Nominating Committee. At its first meeting after the annual meeting of
shareholders, the Board elects each Committee. Committee members serve for one
year or until the first meeting of the Board following the next annual meeting
of shareholders.
Executive Committee
The Executive Committee consists of three members, selected in rotation
from the eight directors: E. J. Woodard, Jr.; George H. Burton, Jr.; William P.
Kellam; Morton M. Zedd; Morton Goldmeier; Richard J. Tavss; William D. Payne;
and Herbert L. Perlin. When the Board is not in session, the Executive Committee
is authorized to exercise all of the Board's power except for certain
fundamental responsibilities, such as approval of an amendment of the articles
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<PAGE>
of incorporation or a plan of merger or consolidation. The Executive Committee
meets to act on capital expenditures, to elect officers other than senior
officers and to review and consider certain matters and policies for
recommendation to the full Board. The Executive Committee met 32 times in 1996.
Audit Committee
The Audit Committee during 1996 was composed of three directors: George
H. Burton, Jr.; William P. Kellam; and Morton Goldmeier, none of whom is an
officer. E. J. Woodard, Jr. served as an ex-officio memeber. The functions of
the Audit Committee are to (i) recommend selection of independent certified
public accountants, (ii) approve the scope of the accountants' examination,
(iii) review internal accounting procedures, (iv) review reports of examination
by the accountants and by regulatory agencies having jurisdiction over the
Corporation, (v) monitor internal programs to ensure compliance with the law and
avoidance of conflicts of interest, and (vi) aid the Board in fulfilling its
responsibilities for financial reporting to the public. There was one meeting
held by the Audit Committee during 1996.
Personnel/Compensation Committee
The Personnel/Compensation Committee during 1996 was composed of four
directors: E. J. Woodard, Jr.; Richard J. Tavss; William P. Kellam and William
D. Payne, M.D. The Personnel/Compensation Committee recommends the compensation
of officers to the Executive Committee and the Board. There were two meetings
held by the Personnel/Compensation Committee during 1996. Mr. Woodard abstained
from discussion regarding his salary and is not permitted to participate in the
consideration and recommendation by the Committee as to his compensation.
Investment Committee
The Investment Committee during 1996 was composed of four directors: E.
J. Woodard, Jr.; Herbert L. Perlin; Morton Goldmeier; and George H. Burton, Jr.
The Investment Committee administers the investment policies of the Corporation.
The Committee met four times during 1996.
Nominating Committee
The Nominating Committee of the Board during 1996 was composed of four
directors: E. J. Woodard, Jr.; Morton M. Zedd; William P. Kellam; and Richard J.
Tavss. The basic function of this Committee is the recommendation of those
persons to be designated as Board nominees for election to the Board by the
shareholders of the Corporation at its Annual Meeting. The Nominating Committee
met one time in 1996.
The Nominating Committee will consider suggestions from all sources,
including shareholders, regarding possible candidates for nomination and
election to the Board. Generally, candidates should be highly qualified by
business, professional or comparable experience, affirmatively desirous of
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<PAGE>
serving on the Board, and able to represent the interests of all shareholders.
Shareholders wishing to nominate a candidate should forward the candidate's name
and a description of the candidate's background and qualifications to the
Corporate Secretary.
DIRECTORS' COMPENSATION
The fees paid the Corporation's directors during 1996 were $500 for
each meeting of the Board attended. In addition, directors received $200 for
attending meetings of each of the standing committees. The Corporation has
adopted a Directors' Deferred Compensation Plan by which directors may defer
recognition of income on all or a portion of their meeting fees earned during
the fiscal year. A total of $29,750 was deferred by directors in 1996 pursuant
to the Plan.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Loans to Officers and Directors
Certain directors and officers of the Corporation and the Bank, members
of their immediate families, and corporations, partnerships and other entities
with which such persons are associated, are customers of the Bank. As such, some
of these persons engaged in transactions with the Bank in the ordinary course of
business during 1996, and will have additional transactions with the Bank in the
future. All loans extended and commitments to lend by the Bank to such persons
are made in the ordinary course of business upon substantially the same terms,
including interest rates and collateral, as those prevailing at the time for
comparable transactions with unaffiliated persons and do not involve more than
the normal risk of collectibility or present other unfavorable features.
As of December 31, 1996, the amount of loans from the Bank to all
officers and directors of the Corporation and the Bank, and entities in which
they are associated, was approximately $2.601 million. This amount represented
28.0% of the total equity capital of the Bank as of December 31, 1996.
Extensions of credit for William P. Kellam, a current director and
director nominee of the Corporation and a director of the Bank, represent
material transactions for extension of credit in excess of 10% of the Bank's
equity capital accounts since the beginning of the Bank's last fiscal year as
follows:
Largest Aggregate
Amount Outstanding Balance at
Name of Debtor During 1996 December 31, 1996
-------------- ----------- -----------------
William P. Kellam (1) $ 1,027,047 $1,010,731
- ------------------
(1) Indebtedness represents long term obligations of Paco, Inc., guaranteed
by William P. Kellam. At December 31, 1996, his long term indirect obligations
totaled $1,010,731 with a fixed rate of 11.7%.
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<PAGE>
Business Relationships and Transactions with Management
In the ordinary course of its business, the Corporation and the Bank
engaged in certain transactions with their officers and directors in which such
officers and directors have a significant interest. All such transactions have
been made on substantially the same terms as those prevailing at the time for
comparable transactions with unaffiliated parties. The Bank has from time to
time retained the Norfolk, Virginia law firm of Tavss, Fletcher, Early and King,
P.C., of which Mr. Tavss, a director of the Corporation and the Bank, is senior
counsel, to perform certain legal services for the Corporation and the Bank.
In 1984, the Bank entered into a lease with Boush Bank Building
Associates, a limited partnership (the "Partnership"), to rent the headquarters
building (the "Headquarters") of the Corporation and the Bank, which is located
at the corners of Freemason and Boush Streets, Norfolk, Virginia. The general
partner of the Partnership is Boush Bank Building Corporation. All of the
limited partners of the Partnership, namely Messrs. Woodard, Burton and Kellam,
are directors of the Corporation and the Bank. The lease requires the Bank to
pay all taxes, maintenance and insurance. The term of the lease is twenty-three
years and eleven months, and began on December 19, 1984. In connection with this
property, the lessor has secured financing in the form of a $1,600,000
industrial development revenue bond from the Norfolk Redevelopment and Housing
Authority payable in annual installments, commencing on January 1, 1987, at
amounts equal to 3% of the then outstanding principal balance through the
twenty-fifth year, when the unpaid balance will become due. Interest on this
bond is payable monthly, at 68.6% of the prime rate of Crestar Bank in Richmond,
Virginia. Monthly rent paid by the Bank is equal to interest on the above bond,
plus any interest associated with secondary financing provided the lessor by the
Bank. The Bank has the right to purchase, at its option, an undivided interest
in the property at undepreciated original cost, and is obligated to purchase in
each January after December 31, 1986, an undivided interest in an amount equal
to 90% of the legal amount allowed by banking regulations for investments in
fixed properties, unless the Bank's return on average assets is less than
seven-tenths of one percent. Under this provision the Bank has purchased 54.4%
of this property for a total of $999,611. No purchases have been made after
1988. The terms of the lease are not less favorable than could be obtained from
a non-related party.
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<PAGE>
Non-Employee Director Stock Compensation Plan
On April 25, 1995 the shareholders approved a non-employee director
stock compensation plan (the "Non-Employee Director Plan") for the issuance of
50,000 shares of the Corporation's common stock to eligible non-employee
directors of the Corporation at prices determined by average of the five most
recent trades of the common stock on the over-the-counter market during the
period, not to exceed 30 calendar days, immediately preceding an option's grant
date or such other value per share as is determined by the employee directors.
No options may be awarded under the Director Plan after January 17, 2000. The
Board of Directors has approved, and is requesting the shareholders' approve, an
amendment to the Non-Employee Director Plan to increase shares available for
issuance under the Non-Employee Director Plan to 70,000 shares. See Proposal III
- - "Non-Employee Director Stock Compensation Plan" below.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THE
PROPOSAL TO ELECT THE THREE NOMINEES LISTED ABOVE AS THE DIRECTORS OF THE
CORPORATION.
EXECUTIVE COMPENSATION
The following table sets forth the annual compensation paid or accrued
by the Corporation and its subsidiaries to Edward J. Woodard, Jr., CLBB,
Chairman of the Board, President and Chief Executive Officer of the Corporation
and the Bank for the past three fiscal years. Compensation for each other
executive officer of the Corporation or the Bank did not exceed $100,000 in 1996
and, therefore, is not shown in the table.
Summary Compensation Table
<TABLE>
<CAPTION>
<S> <C>
Name and
Principal Position Annual Compensation
- ------------------ ------------------------------------------------------------------
All Other
Year Salary(1) Bonus Compensation
---- --------- ----- ------------
Edward J. Woodard, Jr., 1996 163,075 10,000 7,639(2)
CLBB 1995 148,300 10,000 6,759(3)
Chairman of the Board 1994 145,650 -- 7,068(4)
President and Chief
Executive Officer
</TABLE>
- --------------------
(1) Includes base salary and director fees.
(2) Amount represents (i) contributions of $3,214 to the Bank's 401(k)
Profit Sharing Plan on behalf of Mr. Woodard and (ii) accrual of $4,225 in
connection with a Deferred Supplemental Compensation Agreement with Mr. Woodard.
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<PAGE>
(3) Amount represents (i) contributions of $2,334 to the Bank's 401(k)
Profit Sharing Plan on behalf of Mr. Woodard and (ii) accrual of $4,425 in
connection with a Deferred Supplemental Compensation Agreement with Mr. Woodard.
(4) Amount represents (i) contributions of $2,643 to the Bank's 401(k)
Profit Sharing Plan on behalf of Mr. Woodard and (ii) accrual of $4,425 in
connection with a Deferred Supplemental Compensation Agreement with Mr. Woodard.
The table below sets forth information regarding stock option grants to
the executive officer listed in the Summary Compensation Table above during the
fiscal year ended December 31, 1996. The grant was made pursuant to the 1990
Stock Option Plan.
Option Grants in Last Fiscal Year
<TABLE>
<CAPTION>
<S> <C>
Number of % of Total Options
Securities Granted to
Underlying Options employees in Exercise Expiration
Name Granted Fiscal Year Price Date
- ---- ------- ----------- ----- ----
Edward J. Woodard, Jr. 2,500 50% $9.17 12/31/05
</TABLE>
No stock options were exercised in 1996 by the executive officer whose
compensation is disclosed in the summary Executive Compensation Table above. The
table below sets forth exercisable and unexercisable stock options held by the
executive officer as of December 31, 1996, all of which were granted pursuant to
the 1990 Stock Option Plan.
Fiscal Year End Options Table
<TABLE>
<CAPTION>
<S> <C>
Number of Securities
Underlying Unexercised Options Value of Unexercised In-The-Money
at Fiscal Year-End (#) Options at Fiscal Year-End ($)(1)
---------------------- ------------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ------------- ----------- -------------
Edward J. Woodard, Jr. 7,500 0 $9,325 0
</TABLE>
- ------------------
(1) The last known sale of the Company's Common Stock in 1996 was at $11.00
per share.
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<PAGE>
Employment Agreements
The Boards of Directors of the Corporation and the Bank approved the
execution of an employment agreement (the "Agreement"), effective January 1,
1990, between the Bank and Edward J. Mr. Woodard, Jr., Chairman of the Board,
President and Chief Executive Officer of the Corporation and the Bank. The
Agreement, as amended on January 1, 1994, provides for employment of Mr.
Woodard, with duties and responsibilities substantially the same as those
assigned on the date of the Agreement, until the earlier of (i) December 31,
1998, (ii) his death, or (iii) his physical or mental disability; provided,
however, that provisions are made for the termination of employment by either
the Bank or Mr. Woodard in the event of a "change in control" of the Corporation
or the Bank, or for "good reason"; and provided further, however, that the
Agreement will be renewed automatically for an additional period of one year on
each January 1, unless prior to August 1 in any given year either party to the
Agreement shall give notice of non-renewal to the other party.
In the case of termination (i) by the Corporation or the Bank prior to
a "change in control," unless "for good cause," or (ii) by Mr. Woodard for "good
reason," certain payments stipulated in the Agreement are due Mr. Woodard as
follows: (a) if by the Corporation or the Bank prior to "a change in control,"
unless "for good cause," twelve equal monthly payments equal to Mr. Woodard's
base salary, plus director fees, if any; and (b) if by Mr. Woodard for "good
reason" or by the Bank without "good cause," 60 equal monthly payments equal to
approximately three times Mr. Woodard's existing salary at the time of
termination.
A "change in control" is defined in the Agreement to occur upon (i) any
entity acquiring or entering into a definitive agreement to acquire more than
25% of the stock of either the Corporation or the Bank, (ii) a change in the
composition of a majority of the Board of Directors of either the Corporation or
the Bank in any twelve month period, or (iii) the Corporation ceasing to be the
owner of all of the Bank's stock, except for directors' qualifying shares. The
term "for good cause" is defined as dismissal of Mr. Woodard for his failure to
perform required services, gross or willful neglect of duty or illegal or
intentional acts demonstrating bad faith. The term "good reason" is defined to
include the assignment to Mr. Woodard of duties or responsibilities inconsistent
with those in effect on the dates of the Agreement, or a change of control of
either the Corporation or the Bank.
The Bank also has entered into a Deferred Supplemental Compensation
Agreement (the "Supplemental Agreement") with Mr. Woodard. The Supplemental
Agreement, as amended on April 27, 1993, provides that if Mr. Woodard remains in
the full-time employment of the Bank until age 65, then upon retirement Mr.
Woodard or his designated beneficiary shall be entitled to receive the sum of
$250,000 payable in 120 equal monthly installments. If Mr. Woodard is employed
full-time by the Bank and dies prior to age 65, then in addition to payment of
the foregoing amount in such installments, the Bank also shall make a lump sum
payment of $250,000 to Mr. Woodard's designated beneficiary. Notwithstanding the
foregoing, if Mr. Woodard's employment with the Bank is terminated for any
reason whatsoever at any time before Mr. Woodard attains the age of 65, then (i)
the sum of $250,000 shall be payable to Mr. Woodard or his designated
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beneficiary in 120 equal monthly installments commencing upon Mr. Woodard
attaining the age of 65 and (ii) a lump sum payment of $250,000 shall be payable
to Mr. Woodard's spouse, estate, trust or named beneficiary on his death. The
Supplemental Agreement obligates Mr. Woodard to make himself available to the
Bank after retirement, so long as he receives payments under the Supplemental
Agreement, for occasional consultation which the Bank may reasonably request.
All amounts unpaid under the Supplemental Agreement may be forfeited after
notice to Mr. Woodard in the event the Board of Directors of the Bank determines
in good faith that Mr. Woodard is performing services of any kind to a firm or
corporation competitive with the business of the Bank during the period that he
is receiving payments under the Supplemental Agreement.
Employee Benefit Plans
Employee Stock Options. On February 20, 1990, the Corporation's Board
of Directors approved a non-qualified stock option plan (the "1990 Plan") for
the issuance of 25,000 shares of the Corporation's Common Stock to eligible
officers and key employees of the Corporation and the Bank at prices not less
than the market value of the Corporation's Common Stock on the date of grant.
The Shareholders are being asked to approve an amendment to the 1990 Plan to
increase the number of shares available for issuance under the 1990 Plan to
45,000 shares. See Proposal II, below. The Employee Plan will expire on February
20, 2000. Until expiration, the options may be exercised in whole at any time or
in part from time to time. None of the options granted to employees had been
exercised as of March 4, 1997.
401(k) Profit Sharing Plan. In 1993, the Bank adopted a thrift and
profit sharing plan qualified under Section 401(k) of the Internal Revenue Code
(the "401(k) Plan") to replace the Bank's former Profit Sharing Plan. Employees
who have attained the age of 20 years and six months and completed six months of
service with the Bank are eligible to participate in the 401(k) Plan. Eligible
employees who elect to participate may contribute up to 15% of their annual
salary to the 401(k) Plan. The Bank may make a matching contribution. The amount
of the match, if any, will be determined by the Bank each year. The Bank
contributed a matching contribution of $15,444 and a discretionary profit
sharing contribution of $4,556 to the 401(k) Profit Sharing Plan during 1996.
PROPOSAL II
APPROVAL OF FIRST AMENDMENT TO
COMMONWEALTH BANKSHARES, INC.
1990 STOCK OPTION PLAN
The Commonwealth Bankshares, Inc. 1990 Stock Option Plan (the "1990
Plan"), adopted by the shareholders at the Company's 1990 Annual Meeting,
permits the Board of Directors to grant options for an aggregate of 25,000
shares of Common Stock to certain employees of the Company and its subsidiaries.
To date, the Company has granted options to purchase an aggregate of 22,000
shares of Common Stock under the 1990 Plan.
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The Board of Directors has determined that in order for it to be able
to continue to motivate key employees of the Company and its subsidiaries, it is
necessary and appropriate for the number of shares of Common Stock that may be
issued pursuant to options granted under the 1990 Plan be increased from 25,000
shares to 45,000 shares. This will create an additional 20,000 shares for which
options may be granted to key employees.
Section 5 of the 1990 Plan provides the following:
"Upon the exercise of any Option, the Company shall deliver to
the Participant authorized but unissued stock. The maximum
aggregate number of shares of Common Stock that may be issued
pursuant to options granted under this Plan is 25,000, subject
to adjustment as provided in Section 9. If an Option is
terminated, in whole or in part, for any reason other than its
exercise, the number of shares of Common Stock allocated to
the option or portion thereof may be reallocated to other
Options to be granted under this Plan."
The Board of Directors has approved, and is recommending to the
shareholders for their approval, an amendment to the 1990 Plan to delete
"25,000" contained in Section 5 and substitute the number "45,000" in lieu
thereof, such that the 1990 Plan will be amended to read as follows:
"Upon the exercise of any Option, the Company shall deliver to
the Participant authorized but unissued stock. The maximum
aggregate number of shares of Common Stock that may be issued
pursuant to options granted under this Plan is 45,000, subject
to adjustment as provided in Section 9. If an Option is
terminated, in whole or in part, for any reason other than its
exercise, the number of shares of Common Stock allocated to
the option or portion thereof may be reallocated to other
Options to be granted under this Plan." [Emphasis added.]
THE BOARD OF DIRECTORS RECOMMENDS THE SHAREHOLDERS VOTE FOR ADOPTION OF
THE FIRST AMENDMENT TO THE 1990 PLAN.
If not directed otherwise, the persons named in the enclosed Proxy will
vote FOR adoption of the First Amendment to the 1990 Plan.
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PROPOSAL III
APPROVAL OF FIRST AMENDMENT TO
COMMONWEALTH BANKSHARES, INC.
NON-EMPLOYEE DIRECTOR STOCK COMPENSATION PLAN
The Commonwealth Bankshares, Inc. Non-Employee Director Stock
Compensation Plan (the "Non-Employee Director Plan") adopted by the shareholders
at the Bank's 1995 Annual Meeting authorized a committee comprised of
non-employee directors the right to grant options for up to 50,000 shares of
Common Stock to non-employee directors. To date, options to acquire an aggregate
of 45,500 shares of Common Stock have been granted to directors of the Company.
In order to continue to motivate and reward directors for their commitment to
the Company, the Board of Directors has determined that it is necessary and
appropriate to increase the number of shares for which options may be granted
from 50,000 to 70,000 shares.
In addition, the Securities and Exchange Commission has amended Rule
16b-3, which exempts the grant and exercise of stock options under certain
conditions from the short swing profit provisions of Section 16 of the
Securities Exchange Act of 1934. The new Rule 16b-3 does not provide an
exemption for options granted and administered by a committee of non-employee
directors. The new Rule 16b-3 does, however, permit the Board of Directors,
itself, to grant and administer plans such as the Non-Employee Director Plan.
Accordingly, the Board of Directors has determined that it is necessary and
appropriate to amend the Non-Employee Director Plan to provide that grants and
administration under the Plan shall be the responsibility of the Board of
Directors.
In order to memorialize the above-described changes, the Board of
Directors has approved, and it is recommending to the shareholders, the
following amendments to the Non-Employee Director Plan:
1. Delete Article III, which currently reads as follows:
"The Plan shall be administered by the one or more persons who
are employees of the Company and directors of the Board (the
"Employee Directors"), and such additional employees as the
Employee Directors shall appropriately designate, who shall
have complete authority to interpret all provisions of this
Plan; to prescribe the form of Agreements; to adopt, amend and
rescind rules and regulations pertaining to the administration
of the Plan; and to make all other determinations necessary or
advisable for the administration of this Plan. Any decision
made, or action taken, by the Employee Directors in connection
with the administration of this Plan shall be final and
conclusive. All expenses of administering this Plan shall be
borne by the Company."
and substitute the following in lieu thereof:
"The Plan shall be administered by the Board, which shall have
authority to interpret all provisions of this Plan; to
prescribe the form of Agreements; to adopt, amend and rescind
rules and regulations pertaining to administration of this
Plan; and to make all other determinations necessary or
advisable for the administration of this Plan. Any decision
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<PAGE>
made or action taken by the Board in connection with the
administration of this Plan shall be final and conclusive. All
expenses of administering this Plan shall be borne by the
Company."
2. Delete Article IV, which currently reads as follows:
"GRANT OF OPTIONS.
The Board shall have authority to designate Participants to
whom Options are to be granted and shall specify the number of
shares subject to grants. All Options shall be evidenced by a
Memorandum of Option agreement which shall be subject to the
applicable provisions of the Plan and to such other provisions
as the Employee Directors may adopt."
and substitute the following in lieu thereof:
"GRANT OF OPTIONS.
The Board shall have authority to designate Participants to
whom Options are to be granted and shall specify the number of
shares subject to grants. All Options shall be evidenced by an
Agreement which shall be subject to the provisions of this
Plan and such other provisions as the Board may adopt."
3. Delete "50,000" contained in Article V and substitute "70,000" in
lieu thereof, so that Article V shall read as follows:
"Upon the exercise of any Option, the Company may
deliver to the Participant (or the Participant's broker if the
Participant so directs) authorized but unissued Common Stock.
The maximum aggregate number of shares of Common Stock that
may be issued pursuant to the exercise of Options under this
Plan is 70,000, subject to adjustment as provided in Article
IX. If an Option is terminated, in whole or in part, for any
reason other than its exercise, the number of shares of Common
Stock allocated to the option or portion thereof may be
reallocated to other Options to be granted under this Plan."
[Emphasis added.]
THE BOARD OF DIRECTORS RECOMMENDS THE SHAREHOLDERS VOTE "FOR" ADOPTION
OF THE FIRST AMENDMENT TO THE NON-EMPLOYEE DIRECTOR PLAN.
If not directed otherwise, the persons named in the enclosed Proxy will
vote FOR the adoption of the First Amendment to the Non-Employee Director Plan.
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INDEPENDENT PUBLIC ACCOUNTANTS
The Corporation's Board of Directors approved the appointment of Plott
& Walton, P.C., Certified Public Accountants, as the Corporation's independent
public accountants for the fiscal year ending December 31, 1996. No firm has
been selected by the Board of Directors to act as the Corporation's independent
public accountants for the current year. The Board will make this decision later
in the year. Representatives of Plott & Walton, P.C. are expected to be present
at the Annual Meeting, will have the opportunity to make a statement if they
desire to do so, and will be available to respond to appropriate questions.
SHAREHOLDER PROPOSALS
Proposals of shareholders intended to be presented at the Corporation's
1998 Annual Meeting of Shareholders must be received by the Corporation at its
executive offices, Boush and Freemason Streets, P. O. Box 1177, Norfolk,
Virginia 23501, no later than December 2, 1997, in order for such proposals to
be included in the Corporation's Proxy Statement and form of Proxy relating to
such meeting.
OTHER MATTERS
The Board of Directors does not intend to present, and knows of no one
who intends to present, to the meeting any matter for action by shareholders
other than as set forth herein. However, the enclosed proxy confers
discretionary authority with respect to transaction of any other business that
may properly come before the meeting, and it is the intention of the persons
named in the proxy to vote in accordance with their judgment on any such matter.
By Order of the Board of Directors
Edward J. Woodard, Jr., CLBB
Chairman of the Board, President and
Chief Executive Officer
Dated in Norfolk, Virginia and
mailed this 9th day of April, 1997
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COMMONWEALTH BANKSHARES, INC.
403 Boush Street
P.O. Box 1177, Norfolk, Virginia 23501-1177
Phone (804) 446-6900
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS
April 29, 1997
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The Undersigned hereby revokes all prior proxies and appoints Richard
J. Tavss and Morton Goldmeier, or any one of them, each with the power of
substitution, as Proxies to vote, as designated below, all the shares of Common
Stock of Commonwealth Bankshares, Inc. held of record by the undersigned on
March 4, 1997 at the Annual Meeting of Shareholders to be held on April 29,
1997, or any adjournment thereof.
(1) Proposal I: Election of three Class 3 Directors set forth below to
serve until the 2000 Annual meeting of Shareholders and until their successors
are elected and qualifed:
William P. Kellam
|_| FOR |_| AGAINST |_| ABSTAIN
Edward J. Woodard, Jr.
|_| FOR |_| AGAINST |_| ABSTAIN
Morton M. Zedd
|_| FOR |_| AGAINST |_| ABSTAIN
(2) Proposal II: Approval of the First Amendment to the Commonwealth
Bankshares, Inc. 1990 Stock Option Plan
|_| FOR |_| AGAINST |_| ABSTAIN
(3) Proposal III: Approval of the First Amendment to the Commonwealth
Bankshares, Inc. Non-Employee Director Stock Compensation Plan
|_| FOR |_| AGAINST |_| ABSTAIN
(4) In their discretion, the Proxies are authorized to vote
upon such other business as may properly come before the meeting.
The proxy when properly executed will be voted in the manner directed
herein by the undersigned shareholder. If no direction is made, this proxy will
be voted by the named Proxies FOR the three nominees listed in Proposal I, FOR
Proposal II, FOR Proposal III, and in their discretion as to other business
properly before the meeting.
Please sign exactly as your name(s) appear below. When shares are held
by joint tenants, both should sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by President or other authorized
officer. If a partnership, please sign in partnership name by authorized person.
DATED: ___________________________, 1997.
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Shareholder Signature Shareholder Signature
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Social Security Number Social Security Number