As filed with the Securities and Exchange Commission on August 5, 1999
Registration No.33-_____
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-8
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
Commonwealth Bankshares, Inc.
(Exact Name of Registrant as Specified in Its Charter)
Virginia 54-1460991
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
403 Boush Street
Norfolk, Virginia 23510
(Address of Principal Executive Office) (Zip Code)
Commonwealth Bankshares, Inc.
1999 Stock Incentive Option Plan
(Full Title of the Plan)
Jody M. Wagner, Esq.
Kaufman & Canoles
P. O. Box 3037
Norfolk, VA 23514-3037
(Name and Address of Agent for Service)
(757) 624-3294
(Telephone Number, Including
Area Code, of Agent for Service)
CALCULATION OF REGISTRATION FEE
================================================================================
Proposed
Title of Proposed Maximum
Securities Amount Maximum Aggregate Amount of
to be to be Offering Price Offering Registration
Registered Registered Per Share(1) Price(1) Fee(1)
- --------------------------------------------------------------------------------
Common Stock,
$2.50 par value 225,000 $10.00 $2,250,000 $607.50
(1)Pursuant to rules 457(h), the registration fee was computed using $10.00 per
share of Common Stock, which is the exercise price on granted shares.
- ------------------------
Exhibit Index can be found on page 3.
<PAGE>
PART II
INFORMATION REQUIRED IN REGISTRATION STATEMENT
AND NOT REQUIRED IN PROSPECTUS
Item 3: Incorporation of Documents by Reference.
----------------------------------------
The following documents of Commonwealth Bankshares, Inc., a Virginia corporation
(the "Company"), filed with the Securities and Exchange Commission (the
"Commission"), are incorporated by reference into this Registration Statement:
(a) The Company's Annual Report on Form 10-KSB, for the Company's fiscal
year ended December 31, 1998 filed pursuant to Section 13(a) of the Securities
Exchange Act of 1934, as amended (the "1934 Act").
(b) All reports filed by the Company pursuant to Section 13(a) of the 1934
Act since the end of the Company's fiscal year ended December 31, 1998.
(c) The description of the Company's Common Stock registered under the
1934 Act contained in the Company's Registration Statement on Form 8-B (File No.
0-19492), which became effective in December 1988.
All reports and other documents subsequently filed by the Company pursuant
to Sections 13(a), 13(c), 14 and 15(d) of the 1934 since the Company's fiscal
year ended December 31, 1998.
Any statement contained in a document incorporated in this Registration
Statement by reference shall be deemed to be modified or superseded for the
purposes of this Registration Statement to the extent that a statement contained
in this Registration Statement or in any other subsequently filed document which
also is or is deemed to be incorporated in this Registration Statement by
reference modifies or replaces such statement.
Item 4: Description of Securities.
--------------------------
Not applicable.
Item 5: Interests of the Named Experts and Counsel.
-------------------------------------------
Not applicable.
Item 6: Indemnification of Directors and Officers.
------------------------------------------
Section 13.1-692.1 of the Virginia Stock Corporation Act (the "Act") provides
that in any proceeding brought by or in the right of a corporation or brought by
or on behalf of shareholders of the corporation, the damages assessed against an
officer or director arising out of a single transaction, occurrence or course of
conduct shall not exceed the lesser of (1) the monetary amount, including the
elimination of liability, specified in the articles of incorporation or, if
approved by the shareholders, in the bylaws as a limitation on or elimination of
the liability of the officer or director, or (2) the greater of (i) $100,000 or
(ii) the amount of cash compensation received by the officer or director from
the corporation during the 12 months immediately preceding the act or omission
for which liability was imposed. The liability of an officer or director may not
be limited under this section of the Act if the officer or director engaged in
willful misconduct or a knowing violation of the criminal law or of any federal
or state securities law, including, without limitation, any claim of unlawful
insider trading or manipulation of the market for any security.
2
<PAGE>
Section 13.1-697 of the Act authorizes a Virginia corporation to indemnify an
individual made a party to a proceeding because he is or was a director against
liability incurred in the proceeding. A Virginia corporation may not indemnify a
director under this section in connection with a proceeding by or in the right
of the corporation in which the director was adjudged liable to the corporation
or in connection with any other proceeding charging improper personal benefit to
him, whether or not involving action in his official capacity, in which he was
adjudged liable on the basis that personal benefit was improperly received by
him. Section 13.1-698 provides that, unless limited by its Articles of
Incorporation, a Virginia corporation must indemnify a director who entirely
prevails in the defense of any proceeding to which he was a party because he is
or was a director of the corporation against reasonable expenses incurred by him
in connection with the proceeding. Section 13.1-702 of the Act authorizes a
Virginia corporation to indemnify its officers, employees or agents to the same
extent as directors.
The Company's Articles of Incorporation provide that to the full extent that the
Act permits the limitation or elimination of the liability of directors or
officers, a director or officer of the Company shall not be liable to the
Company or its shareholders for monetary damages. The Company's Articles of
Incorporation also provide that to the full extent permitted and in the manner
prescribed by the Act and any other applicable law, the Company shall indemnify
a director or officer of the Company who is or was a party to any proceeding by
reason of the fact that he is or was such a director or officer or is or was
serving at the request of the Company as a director, officer, employee or agent
of another corporation, partnership, joint venture, trust, employee benefit plan
or other enterprise. Any aforesaid reference to directors, officers, employees
or agents includes former directors, officers, employees and agents and their
respective heirs, executors and administrators.
Officers and directors of the Company are covered by insurance that (with
certain exceptions and within certain limitations) indemnifies them against
losses and liabilities arising from an alleged "harmful act," including any
alleged error or misstatement or misleading statement or wrongful act or
omission or neglect or breach of duty.
Item 7: Exemption from Registration Claimed.
------------------------------------
Not applicable.
Item 8: Exhibits.
---------
Number Description
------ -----------
4.1 1999 Stock Incentive Plan
4.2 1990 Stock Option Plan, as amended
4.3 Non-Employee Director Stock Compensation Plan. Filed on
March 30, 1996 as exhibit 10.13 to the Registrant's Form
10-K, and incorporated herein by reference
4.4 Amendment to the Non-Employee Director Stock Compensation Plan
5 Opinion of Kaufman & Canoles, P.C.
23.1 Consent of Poti, Walton & Associates, P.C.
23.2 Consent of Kaufman & Canoles, P.C.(contained in Exhibit 5)
24 Power of Attorney (included on the signature page of this
Registration Statement)
Item 9: Undertakings.
-------------
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this registration statement to include
3
<PAGE>
any material information with respect to the plan of distribution not previously
disclosed in this registration statement or any material change to such
information in this registration statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof; and
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(b) The registrant hereby undertakes that, for purposes of determining
any liability under the Securities Act of 1933, each filing of the registrant's
annual report pursuant to Section 13(a) or 15(d) of the Securities Exchange Act
of 1934 that is incorporated by reference in this registration statement shall
be deemed to be a new registration statement relating to the securities offered
therein; and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(h) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant, the registrant has been advised that in the opinion
of the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all the
requirements for filing on Form S-8 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Norfolk, Commonwealth of Virginia, on July 29, 1999.
COMMONWEALTH BANKSHARES, INC.
By: /s/ EDWARD J. WOODARD, JR.
----------------------------------
Edward J. Woodard, Jr., Chairman of
the Board & Chief Executive Officer
POWER OF ATTORNEY
Pursuant to the requirements of the Securities Act of 1933, the
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated. Each person in so signing, also makes,
constitutes and appoints Edward J. Woodard, Jr., and Richard J. Tavss, and each
of them individually, his true and lawful attorney-in-fact in this place and
stead, to execute and cause to be filed with the Securities and Exchange
Commission any and all amendments to this Registration Statement.
Signature
- ---------
/s/ EDWARD J. WOODARD, JR.
- ----------------------------------------- July 29, 1999
Edward J. Woodard, Jr., Chairman of the
Board & Chief Executive Officer
/s/ JOHN H. GAYLE
- ----------------------------------------- July 29, 1999
John H. Gayle, Executive Vice President,
Cashier and Chief Financial Officer
/s/ GEORGE H. BURTON, JR.
- ----------------------------------------- July 29, 1999
George H. Burton, Jr., Director
/s/ MORTON GOLDMEIER
- ----------------------------------------- July 29, 1999
Morton Goldmeier, Director
/s/ WILLIAM P. KELLAM
- ----------------------------------------- July 29, 1999
William P. Kellam, Director
<PAGE>
/s/ THOMAS W. MOSS, JR.
- ----------------------------------------- July 29, 1999
Thomas W. Moss, Jr., Director
/s/ WILLIAM D. PAYNE
- ----------------------------------------- July 29, 1999
William D. Payne, M.D., Director
/s/ HERBERT L. PERLIN
- ----------------------------------------- July 29, 1999
Herbert L. Perlin, Director
/s/ RICHARD J. TAVSS
- ----------------------------------------- July 29, 1999
Richard J. Tavss, Director
/s/ KENNETH J. YOUNG
- ----------------------------------------- July 29, 1999
Kenneth J. Young, Director
/s/ MORTON M. ZEDD
- ----------------------------------------- July 29, 1999
Morton M. Zedd, Director
<PAGE>
EXHIBIT INDEX
The following exhibits are filed herewith unless otherwise indicated:
Sequential
Page
Number Description Number
- --------------------------------------------------------------------------------
**4.1 1999 Stock Incentive Plan E-1
**4.2 1990 Stock Option Plan, as amended E-17
*4.3 Non-Employee Director Stock Compensation Plan. Filed on March E-40
30, 1996 as exhibit 10.13 to the Registrant's Form 10-K, and
incorporated herein by reference
**4.4 Amendment to the Non-Employee Director Stock Compensation Plan E-41
**5.1 Opinion of Kaufman & Canoles, P.C. E-42
**23.1 Consent of Poti, Walton & Associates, P.C. E-43
**23.2 Consent of Kaufman & Canoles, P.C. (contained in Exhibit 5)
**24 Power of Attorney (included on the signature page of this
Registration Statement)
- --------------------------------------------------------------------------------
* Not filed herewith. In Accordance with Rule 12b-32 of the General Rules and
Regulations under the Securities Exchange Act of 1934, the exhibit is
incorporated by reference.
** Filed herewith.
Exhibit 4.1
COMMONWEALTH BANKSHARES, INC.
1999 STOCK INCENTIVE PLAN
1. PURPOSE COMMONWEALTH BANKSHARES, INC., a Virginia corporation
(the "Company"), wishes to recruit, reward, and
retain employees and outside directors. To further
these objectives, the Company hereby sets forth the
Commonwealth Bankshares, Inc. 1999 Stock Incentive
Plan (the "Plan") to provide options ("Options" or
"Awards") to employees and outside directors with
respect to shares of the Company's common stock (the
"Common Stock"). The Plan is effective as of
February 19, 1999 (the "Effective Date"), subject to
shareholder approval of the Plan within one year of
the Effective Date.
2. PARTICIPANTS All employees of the Company and any Eligible
Subsidiaries (as defined in Section 16) are eligible
for Options under the Plan, as are the directors of
the Company who are not employees ("Eligible
Directors"). Eligible employees and directors become
"optionees" or "participants" when the Administrator
grants them an Option under the Plan. The term
"participant" also includes, where appropriate, a
person authorized to exercise an Award in place of
the original optionee.
Employee as such term is used in the Plan means any
person employed as a common law employee of the Company
or an Eligible Subsidiary.
3. ADMINISTRATOR The Administrator will be the Board of Directors of
the Company, unless the Board delegates its duties to
a committee of the Board composed solely of two or
more Non-Employee Directors, as "Non-Employee
Director" is defined by Rule 16b-3 promulgated by the
Securities and Exchange Commission pursuant to the
Securities Exchange Act of 1934 (the "Exchange
Act").
The Administrator is responsible for the general
operation and administration of the Plan and for
carrying out its provisions and has full discretion in
interpreting and administering the provisions of the
Plan. Subject to the express provisions of the Plan,
the Administrator may exercise such powers and
authority of the Board as the Administrator may find
necessary or appropriate to carry out its functions.
The Administrator may delegate its functions (other
than those described in Section 4) to officers or
other employees of the Company.
<PAGE>
The Administrator's powers will include, but not be
limited to, the power to amend, waive, or extend any
provision or limitation of any Award. The
Administrator may act through meetings of a majority
of its members or by unanimous consent.
4. GRANTING OF Subject to the terms of the Plan, the
AWARDS Administrator will, in its sole
discretion, determine
the participants who receive Awards,
the terms and restrictions, if any, of such
Awards,
the schedule for exercisability or
nonforfeitability (including any requirements
that the participant or the Company satisfy
performance criteria),
the time and conditions for expiration of the
Award, and
the form of payment due upon exercise of the
Award, if any.
The Administrator's determinations under the Plan need
not be uniform and need not consider whether possible
participants are similarly situated.
Options granted to employees may be nonqualified stock
options ("NQSOs") or "incentive stock options"
("ISOs") within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended from time to
time (the "Code"), or the corresponding provision of
any subsequently enacted tax statute. Options granted
to Eligible Directors must be NQSOs.
SUBSTITUTIONS The Administrator may also grant Awards in
substitution for options held by individuals who
become employees of the Company or of an Eligible
Subsidiary as a result of the Company's acquiring or
merging with the individual's employer or acquiring
its assets. If necessary to conform the Awards to
the interests for which they are substitutes, the
Administrator may grant substitute Awards under terms
and conditions that vary from those the Plan
otherwise requires.
<PAGE>
5. DIRECTOR Each Eligible Director will receive an Option
FORMULA ("Formula Option") as of the Effective Date with
OPTION respect to 250 shares of Common Stock. Each Eligible
Director serving on the Board at each annual meeting
of the Company's shareholders (beginning with the
meeting at least six months after the Effective Date)
will receive a Formula Option as of that meeting with
respect to 250 shares of Common Stock.
EXERCISE Options will not become exercisable until the average
SCHEDULE closing price of a share of Common Stock traded on
NASDAQ Bulletin Board (or any other over-the-counter
automated quotation system or national exchange on
which the Common Stock is traded) for thirty (30)
consecutive trading days has been at least $21.00.
After this requirement has been fulfilled, the Options
may be exercised regardless of the price at which the
Common Stock is trading at the time Optionee elects to
exercise the Options. If Options are granted after
this requirement has been fulfilled, such Options may
be exercised regardless of the price at which the
Common Stock is trading at the time the Optionee
elects to exercise Options. No Option shall be
exercisable before the first anniversary of the Date
of Grant (as defined below) or after the date ten (10)
years from the Date of Grant.
6. DATE OF GRANT The Date of Grant will be the date as of which the
Plan or the Administrator grants an Award to a
participant, as specified in the Plan or in the
Administrator's minutes.
7. EXERCISE PRICE The Exercise Price is the value of the consideration
that a participant must provide in exchange for one
share of Common Stock. The Administrator will
determine the Exercise Price under each Award and may
set the Exercise Price without regard to the Exercise
Price of any other Awards granted at the same or any
other time. The Company may use the consideration it
receives from the participant for general corporate
purposes.
The Exercise Price per share may not be less than 100%
of the Fair Market Value (on the Date of Grant) of a
share of Common Stock covered by the Option; provided,
however, that if the Administrator decides to grant an
ISO to someone covered by Sections 422(b)(6) and
424(d) of the Code (more-than-10% stock owner), the
Exercise Price of the Option must be at least 110% of
the Fair Market Value (on the Date of Grant). In no
event, however, may any Options be granted for an
Exercise Price per share less than the book value per
share of Common Stock as shown on the Company's last
published financial statement prior to the Date of
Grant.
<PAGE>
FAIR MARKET Fair Market Value of a share of Common Stock for
VALUE purposes of the Plan will be determined as follows:
If the Common Stock is traded on a national
securities exchange, the average closing sale
price for the ten (10) trading days ending on
and including such date;
If the Common Stock is not traded on any such
exchange, the closing sale price as reported by
the National Association of Securities Dealers,
Inc. Automated Quotation System ("Nasdaq") for
the ten (10) trading days ending on and
including such date;
If no such closing sale price information is
available, the average of the closing bid and
asked prices as reported by Nasdaq Bulletin for
the ten (10) trading days ending on and
including such date; or
If there are no such closing bid and asked
prices, the average of the closing bid and asked
prices as reported by any other commercial
service for the ten (10) trading days ending on
and including such date.
For any date that is not a trading day, the price of a
share of Common Stock shall be calculated by using the
closing sale price or the average of the closing bid
and asked prices, as appropriate, for the immediately
preceding trading day.
8. EXERCISABILITY The Administrator will determine the times and
conditions for exercise of or purchase under each
Award but may not extend the period for exercise
beyond the tenth anniversary of its Date of Grant (or
five years for ISOs granted to 10% owners covered by
Code Sections 422(b)(6) and 424(d)).
Awards will become exercisable at such times and in
such manner as the Administrator determines and the
Award Agreement, if any, indicates.
Options will not become exercisable until the average
closing price of a share of Common Stock traded on
NASDAQ Bulletin Board (or any other over-the-counter
automated quotation system or national exchange on
which the Common Stock is traded) for thirty (30)
consecutive trading days has been at least $21.00.
After this requirement has been fulfilled, the Options
<PAGE>
may be exercised regardless of the price at which the
Common Stock is trading at the time Optionee elects to
exercise the Options. If Options are granted after
this requirement has been fulfilled, such Options may
be exercised regardless of the price at which the
Common Stock is trading at the time the Optionee
elects to exercise Options. No Option shall be
exercisable before the first anniversary of the Date
of Grant (as defined below) or after the date ten (10)
years from the Date of Grant.
No portion of an Award that is unexercisable at a
participant's termination of employment will
thereafter become exercisable, unless the Award
Agreement provides otherwise, either initially or by
amendment.
CHANGE OF Upon a Change of Control (as defined below), all
CONTROL Options will become fully exercisable; provided,
however, such acceleration will not occur if it would
render unavailable "pooling of interest" accounting
for any reorganization, merger or consolidation of the
Company, unless the Board determines otherwise. A
Change of Control for this purpose means the
occurrence of any one or more of the following events,
unless otherwise determined by the Administrator at or
after grant of Awards, but prior to the occurrence of
such Change in Control:
a) a person, entity, or group (other than the
Company, any Company subsidiary, any Company
benefit plan, or any underwriter temporarily
holding securities for an offering of such
securities) acquires ownership of more than 25% of
the undiluted total voting power of the Company's
then-outstanding securities eligible to vote to
elect members of the Board ("Company Voting
Securities") without the consent of the Board of
Directors;
b) the individuals (A) who constitute the Board of
Directors of the Company on the Effective Date of
the Plan (the "Original Directors") or (B) who
thereafter are elected to the Board and whose
election, or nomination for election, to the Board
was approved by a vote of at least two-thirds
(2/3) of the Original Directors then still in
office (such directors becoming "Additional
Original Directors" immediately following their
<PAGE>
election) or (C) who are elected to the Board and
whose election, or nomination for election, to the
Board was approved by a vote of at least
two-thirds (2/3) of the Original Directors and
Additional Original Directors then still in office
(such directors also becoming "Additional Original
Directors" immediately following their election)
cease for any reason to constitute a majority of
the members of the Board;
c) consummation of a merger or consolidation of the
Company into any other entity, unless the holders
of the Company Voting Securities outstanding
immediately before such consummation, together
with any trustee or other fiduciary holding
securities under a Company benefit plan, hold
securities that represent immediately after such
merger or consolidation at least 75% of the
combined voting power of the then outstanding
voting securities of either the Company or the
other surviving entity or its parent; or
d) the shareholders of the Company approve (i) a plan
of complete liquidation or dissolution of the
Company or (ii) an agreement for the Company's
sale or disposition of all or substantially all
the Company's assets, (i.e., 50% or more of the
total assets of the Company) and such liquidation,
dissolution, sale, or disposition is consummated.
The provisions of Section 15 of the Plan will also
apply if the Change of Control is a Substantial
Corporate Change (as defined in Section 15).
9. LIMITATION ON An Option granted to an employee will be an ISO only
ISOs to the extent that the aggregate Fair Market Value
(determined at the Date of Grant) of the stock with
respect to which ISOs are exercisable for the first
time by the optionee during any calendar year (under
the Plan and all other plans of the Company and its
subsidiary corporations, within the meaning of Code
Section 422(d)), does not exceed $100,000. This
limitation will be applied by taking Options into
account in the order in which such Options were
granted. If, by design or operation, the Option
exceeds this limit, the excess will be treated as an
ISOs
10. METHOD OF To exercise any exercisable portion of an Award, the
EXERCISE participant must:
Deliver a written notice of exercise to the
Secretary of the Company (or to whomever the
Administrator designates), in a form complying
with any rules the Administrator may issue,
signed by the participant, and specifying the
number of shares of Common Stock underlying the
portion of the Award the participant is
exercising;
<PAGE>
Pay the full Exercise Price, if any, by
cashier's or certified check for the shares of
Common Stock with respect to which the Award is
being exercised, unless the Administrator
consents to another form of payment (which could
include Common Stock or other property); and
Deliver to the Administrator such
representations and documents as the
Administrator, in its sole discretion, may
consider necessary or advisable.
Payment in full of the Exercise Price need not
accompany the written notice of exercise provided the
notice directs that the stock certificates for the
shares issued upon the exercise be delivered to a
licensed broker acceptable to the Company as the agent
for the individual exercising the option and at the
time the stock certificates are delivered to the
broker, the broker will tender to the Company cash or
cash equivalents acceptable to the Company and equal
to the Exercise Price.
If the Administrator agrees to payment through the
tender to the Company of shares of Common Stock, the
individual must have held the stock being tendered for
at least six months at the time of surrender. Shares
of stock offered as payment will be valued, for
purposes of determining the extent to which the
participant has paid the Exercise Price, at their Fair
Market Value on the date of exercise.
11. AWARD No one may exercise an Award more than ten years after
EXPIRATION its Date of Grant (or five years, for an ISO granted
to a more-than-10% shareholder). Unless the Award
Agreement provides otherwise, either initially or by
amendment, no one may exercise an Award after the
first to occur of:
EMPLOYMENT The 90th day after the date of termination of
TERMINATION employment (other than for death or disability), where
termination of employment means the time when the
employer-employee or other service-providing
relationship between the employee and the Company ends
for any reason, including retirement. Unless the Award
Agreement provides otherwise, termination of
employment does not include instances in which the
Company immediately rehires a common law employee as
an independent contractor. The Administrator, in its
sole discretion, will determine all questions of
whether particular terminations or leaves of absence
are terminations of employment. Notwithstanding the
foregoing, if the Administrator determines that the
participant's termination of employment was for cause,
<PAGE>
all unexercised Awards held by the participant shall
immediately terminate.
DISABILITY For disability, the earlier of (i) the first
anniversary of the participant's termination of
employment for disability and (ii) thirty (30) days
after the participant no longer has a disability,
where "disability" means the inability to engage in
any substantial gainful activity by reason of any
medically determinable physical or mental impairment
that can be expected to result in death or that has
lasted or can be expected to last for a continuous
period of not less than twelve months; or
DEATH The date twelve months after the participant's death.
If exercise is permitted after termination of
employment, the Award will nevertheless expire as of
the date that the former service provider violates any
covenant not to compete in effect between the Company
and the former employee. In addition, an optionee who
exercises an Option more than 90 days after
termination of employment with the Company and/or the
Eligible Subsidiaries will only receive ISO treatment
to the extent permitted by law, and becoming or
remaining an employee of another related company (that
is not an Eligible Subsidiary) or an independent
contractor to the Company will not prevent loss of ISO
status as a result of the formal termination of
employment.
Nothing in the Plan extends the term of an Award
beyond the tenth anniversary of its Date of Grant, nor
does anything in this Section 11 make an Award
exercisable that has not otherwise become exercisable.
12. AWARD Option Agreements will set forth the terms of each
AGREEMENT Option and will include such terms and conditions,
consistent with the Plan, as the Administrator may
determine are necessary or advisable. To the extent an
Option Agreement is inconsistent with the Plan, the
Plan will govern. The Option Agreements may contain
special rules.
<PAGE>
13. STOCK SUBJECT Except as adjusted pursuant to Section 15, the
TO PLAN aggregate number of shares of Common Stock that may be
issued under Awards may not exceed fifteen percent
(15%) of the Company's outstanding Common Stock, less
the aggregate number of shares subject to issuance
pursuant to options granted or available for grant
under the Corporation's 1990 Stock Option Plan (for
employees) and the Non-Employee Director Stock
Compensation Plan, and shall in no event exceed
350,000 shares. The aggregate number of shares of
Common Stock that may be issued under Awards shall be
allocated 60% for grants to Eligible Directors
pursuant to Section 5 of this Plan, and 40% for grants
to Employees by the Administrator pursuant to Section
4 of this Plan.
The Common Stock will come from either authorized but
unissued shares or from previously issued shares that
the Company reacquires, including shares it purchases
on the open market. If any Award expires, is canceled,
or terminates for any other reason, the shares of
Common Stock available under that Award will again be
available for the granting of new Awards.
No adjustment will be made for a dividend or other
right for which the record date precedes the date of
exercise, except as determined by the Administrator
pursuant to Section 15 of the Plan.
The participant will have no rights of a shareholder
with respect to the shares of stock subject to an
Award except to the extent that the Company has issued
certificates for, or otherwise confirmed ownership of,
such shares upon the exercise of the Award.
The Company will not issue fractional shares pursuant
to the exercise of an Award, but the Administrator
may, in its discretion, direct the Company to make a
cash payment in lieu of fractional shares.
14. PERSON WHO During the participant's lifetime, only the
MAY EXERCISE participant or his duly appointed guardian or personal
representative may exercise the Awards. After his
death, his personal representative or any other person
authorized under a will or under the laws of descent
and distribution may exercise any then exercisable
portion of an Award. If someone other than the
original recipient seeks to exercise any portion of an
Award, the Administrator may request such proof as it
may consider necessary or appropriate of the person's
right to exercise the Award.
<PAGE>
15. ADJUSTMENTS Subject to any required action by the Company (which
UPON CHANGES it shall promptly take) or its shareholders, and
IN CAPITAL STOCK subject to the provisions of applicable corporate law,
if, after the Date of Grant of an Award,
the outstanding shares of Common Stock increase
or decrease or change into or are exchanged for
a different number or kind of security by reason
of any recapitalization, reclassification, stock
split, reverse stock split, combination of
shares, exchange of shares, stock dividend, or
other distribution payable in capital stock, or
some other increase or decrease in such Common
Stock occurs without the Company receiving
consideration,
the Administrator may make a proportionate and
appropriate adjustment in the number of shares of
Common Stock underlying each Award, so that the
proportionate interest of the participant immediately
following such event will, to the extent practicable,
be the same as immediately before such event. In the
event the Company declares a stock dividend in lieu of
a cash dividend in lieu of a cash dividend, then the
Administrator shall make a proportionate and
appropriate adjustment in the number shares of Common
Stock underlying each Award, so that the proportionate
interest of the Participant immediately following such
event will, to the extent practicable, be the same as
immediately before such event. (This adjustment does
not apply to Common Stock that the optionee has
already purchased, except to the extent of similar
treatment for all shareholders.) Unless the
Administrator determines another method would be
appropriate, any such adjustment to an Award will not
change the total price with respect to shares of
Common Stock underlying the unexercised portion of the
Award but will include a corresponding proportionate
adjustment in the Award's Exercise Price.
The Administrator will make a commensurate change to
the maximum number of shares provided in Sections 5
and 13 of the Plan.
The grant of an Award under the Plan will not affect
in any way the right or power of the Company to make
adjustments, reclassifications, reorganizations or
changes of its capital or business structure, or to
merge or to consolidate, or to dissolve, liquidate,
sell, or transfer all or any part of its business or
assets.
<PAGE>
SUBSTANTIAL Upon a Substantial Corporate Change, the Plan and any
CORPORATE unexercised Awards will terminate unless provision is
CHANGE made in writing in connection with such transaction
for
the assumption or continuation of outstanding
Awards, or
the substitution for such options or grants of
any options or grants covering the stock or
securities of a successor employer corporation,
or a parent or subsidiary of such successor,
with appropriate adjustments as to the number
and kind of shares of stock and prices, in which
event the Awards will continue in the manner and
under the terms so provided.
Unless the Board determines otherwise, if an Award
would otherwise terminate pursuant to the preceding
sentence, participants will have the right, at such
time before the consummation of the transaction
causing such termination as the Board reasonably
designates, to exercise any unexercised portions of
the Award, whether or not they had previously become
exercisable. However, unless the Board determines
otherwise, the acceleration will not occur if it would
render unavailable "pooling of interest" accounting
for any reorganization, merger, or consolidation of
the Company.
A Substantial Corporate Change means
a) the dissolution or liquidation of the Company,
b) merger, consolidation, or reorganization of the
Company with one or more corporations in which the
Company is not the surviving corporation,
c) the sale of substantially all of the assets of the
Company to another corporation, or
d) any transaction (including a merger or
reorganization in which the Company survives)
approved by the Board that results in any person
or entity (other than any affiliate of the Company
as defined in Rule 144(a)(1) under the Securities
Act) owning 100% of the combined voting power of
all classes of stock of the Company.
<PAGE>
16. SUBSIDIARY Employees of Company Subsidiaries will be entitled to
EMPLOYEES participate in the Plan, except as otherwise
designated by the Board of Directors.
Eligible Subsidiary means each of the Company's
Subsidiaries, except as the Board otherwise specifies.
For ISO grants, Subsidiary means any corporation
(other than the Company) in an unbroken chain of
corporations beginning with the Company if, at the
time an ISO is granted to a participant under the
Plan, each of the corporations (other than the last
corporation in the unbroken chain) owns stock
possessing 50% or more of the total combined voting
power of all classes of stock in one of the other
corporations in such chain. For ISO purposes,
Subsidiary also includes a single member limited
liability company included within the chain described
in the preceding sentence. For NQSOs, the
Administrator can use a different definition of
Subsidiary in its discretion.
17. LEGAL The Company will not issue any shares of Common Stock
COMPLIANCE under an Award until all applicable requirements
imposed by Federal and state securities and other
laws, rules, and regulations, and by any applicable
regulatory agencies or stock exchanges, have been
fully met. To that end, the Company may require the
participant to take any reasonable action to comply
with such requirements before issuing such shares. No
provision in the Plan or action taken under it
authorizes any action that is otherwise prohibited by
Federal or state laws.
The Plan is intended to conform to the extent
necessary with all provisions of the Securities Act of
1933 ("Securities Act") and the Exchange Act and all
regulations and rules the Securities and Exchange
Commission issues under those laws. Notwithstanding
anything in the Plan to the contrary, the
Administrator must administer the Plan, and Awards
must be granted and exercised, only in a way that
conforms to such laws, rules, and regulations. To the
extent permitted by applicable law, the Plan and any
Awards will be deemed amended to the extent necessary
to conform to such laws, rules, and regulations.
<PAGE>
18. PURCHASE FOR Unless a registration statement under the Securities
INVESTMENT Act covers the shares of Common Stock a participant
AND OTHER receives upon exercise of his Award, the Administrator
RESTRICTIONS may require, at the time of such exercise or receipt
of a grant, that the participant agree in writing to
acquire such shares for investment and not for public
resale or distribution, unless and until the shares
subject to the Award are registered under the
Securities Act. Unless the shares are registered
tinder the Securities Act, the participant must
acknowledge:
that the shares purchased on exercise of the
Award are not so registered,
that the participant may not sell or otherwise
transfer the shares unless the shares have been
registered under the Securities Act in
connection with the sale or transfer thereof, or
counsel satisfactory to the Company has issued
an opinion satisfactory to the Company that the
sale or other transfer of such shares is exempt
from registration under the Securities Act, and
such sale or transfer complies with all other
applicable laws, rules, and regulations,
including all applicable Federal and state
securities laws, rules, and regulations.
Additionally, the Common Stock, when issued upon the
exercise of an Award, will be subject to any other
transfer restrictions, rights of first refusal, and
rights of repurchase set forth in or incorporated by
reference into other applicable documents, including
the Company's certificate of incorporation, by-laws,
or generally applicable shareholders' agreements.
The Administrator may, in its sole discretion, take
whatever additional actions it deems appropriate to
comply with such restrictions and applicable laws,
including placing legends on certificates and issuing
stop-transfer orders to transfer agents and
registrars.
19. TAX WITHHOLDING The participant must satisfy all applicable Federal,
state, and local income and employment tax
withholding requirements before the Company will
deliver stock certificates upon the exercise of an
Award. The Company may decide to satisfy the
withholding obligations through additional
withholding on salary or wages. If the Company does
not or cannot withhold from other compensation, the
participant must pay the Company, with a cashier's
check or certified check, the full amounts required
by withholding. Payment of withholding obligations
is due before the Company issues shares with respect
<PAGE>
to the Award. If the Administrator so determines,
the participant may instead satisfy the withholding
obligations by directing the Company to retain shares
from the Award exercise, by tendering previously
owned shares.
20. TRANSFERS Unless the Administrator otherwise approves in advance
ASSIGNMENTS in writing, an Award may not be assigned, pledged, or
AND PLEDGES otherwise transferred in any way, whether by operation
of law or otherwise or through any legal or equitable
proceedings (including bankruptcy), by the participant
to any person, except by will or by operation of
applicable laws of descent and distribution.
21. AMENDMENT OR The Board may amend, suspend, or terminate the Plan at
TERMINATION any time, without the consent of the participants or
OF PLAN AND their beneficiaries; provided, however, that no
OPTIONS amendment will deprive any participant or beneficiary
of any previously declared Award. Except as required
by law or by Sections 8 or 15, the Administrator may
not, without the participant's or beneficiary's
consent, modify the terms and conditions of an Award
so as to adversely affect the participant. No
amendment, suspension, or termination of the Plan
will, without the participant's or beneficiary's
consent, terminate or adversely affect any right or
obligations under any outstanding Awards.
22. PRIVILEGES OF No participant and no beneficiary or other person
STOCK claiming under or through such participant will have
OWNERSHIP any right, title, or interest in or to any shares of
Common Stock allocated or reserved under the Plan or
subject to any Award except as to such shares of
Common Stock, if any, that have been issued to such
participant.
23. EFFECT ON Whether exercising or receiving an Award causes the
OTHER PLANS participant to accrue or receive additional benefits
under any pension or other plan is governed solely by
the terms of such other plan.
24. LIMITATIONS ON Notwithstanding any other provisions of the Plan, no
LIABILITY individual acting as a director, employee, or agent of
the Company shall be liable to any participant, former
participant, spouse, beneficiary, or any other person
for any claim, loss, liability, or expense incurred in
connection with the Plan, nor shall such individual be
personally liable because of any contract or other
instrument he executes in such other capacity. The
Company will indemnify and hold harmless each
director, employee, or agent of the Company to whom
any duty or power relating to the administration or
interpretation of the Plan has been or will be
delegated, against any cost or expense (including
<PAGE>
attorneys' fees) or liability (including any sum paid
in settlement of a claim with the Board's approval)
arising out of any act or omission to act concerning
the Plan unless arising out of such person's own fraud
or bad faith.
25. NO EMPLOYMENT Nothing contained in the Plan constitutes an
CONTRACT employment contracts between the Company and the
participants. The Plan does not give any participant
any right to be retained in the Company's employ, nor
does it enlarge or diminish the Company's right to
terminate the participant's employment.
26. APPLICABLE LAW The laws of the Commonwealth of Virginia (other than
its choice of law provisions) and applicable federal
law govern the Plan and its interpretation.
27. DURATION OF PLAN Unless the Board extends the Plan's term, the
Administrator may not grant Awards after February
2009. The Plan will then terminate but will continue
to govern unexercised and unexpired Awards.
Adopted by the Board of Directors February 19, 1999, and by the Shareholders
on April 27, 1999.
Exhibit 4.2
FIRST AMENDMENT TO
COMMONWEALTH BANKSHARES, INC.
1990 STOCK OPTION PLAN
Section 5 of the 1990 Stock Option Plan is hereby 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 an), 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.]
<PAGE>
COMMONWEALTH BANKSHARES, INC.
1990 STOCK OPTION PLAN
1. PURPOSE
-------
This Stock Option Plan is intended to assist Commonwealth Bankshares, Inc.
in recruiting and retaining key employees with ability and initiative by
enabling employees who contribute significantly to the Company to participate in
its future success and to associate their interests with those of the Company.
The proceeds received by the Company from the sale of Common Stock pursuant to
this Plan shall be used for general corporate purposes. This Plan is also
intended to assist an Affiliate as hereafter defined in recruiting and retaining
key employees with ability and initiative by enabling such employees who
contribute significantly to the Affiliate and, thereby, the Company to
participate in the Company's future success and to associate their interests
with those of the Company.
2. DEFINITIONS
-----------
For purposes of this Plan, the following terms shall have the following
meanings:
(a) Affiliate means any "subsidiary" or "parent" corporation of the
Company.
(b) Agreement means a written agreement (including any amendment or
supplement thereto) between the Company and a Participant specifying the terms
and conditions of an Option granted to such Participant.
(c) Board means the Board of Directors of the Company.
(d) Common Stock means the common stock of the Company.
(e) Company means Commonwealth Bankshares, Inc.
(f) Fair Market value means, on any given date, the fair market value per
share of Common Stock determined by the Board using any reasonable method in
good faith.
<PAGE>
(g) Option means a stock option that entitles the holder to purchase from
the Company a stated number of shares of Common Stock at the price set forth in
an Agreement.
(h) Participant means an employee of the Company or an employee of an
Affiliate, who satisfies the requirements of Section 4 and is selected by the
Board to receive an Option.
(i) Plan means the Commonwealth Bankshares, Inc. 1989 Stock Option
Plan.
3. ADMINISTRATION
--------------
This Plan shall be administered by the Board. A member of the Board or of
the Board of Directors of an Affiliate who is also an employee of the Company or
an Affiliate shall be eligible to participate in this Plan. The Board shall have
authority to grant options upon such terms (not inconsistent with the provisions
of this Plan) as the Board may consider appropriate. Such terms may include
conditions (in addition to those contained in this Plan) upon the exercisability
of all or any part of an Option. Notwithstanding any such conditions, the Board
may, in its discretion, accelerate the time at which any Option may be
exercised. In addition, the Board 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 this Plan;
and to make all other determinations necessary or advisable for the
administration of this Plan. The express grant in this Plan of any specific
power to the Board shall not be construed as limiting any power or authority of
the Board. Any decision made, or action taken, by the Board in connection with
the administration of this Plan shall be final and conclusive. No member of the
Board shall be liable for any act done in good faith with respect to this Plan
or any Agreement or Option. All expenses of administering this Plan shall be
borne by the Company.
<PAGE>
4. ELIGIBILITY
-----------
(a) General. Any employee of the Company or of an Affiliate who, in the
judgment of the Board has contributed or can be expected to contribute to the
profits or growth of the Company or an Affiliate, as the case may be, may be
granted one or more Options. Directors of the Company or of an Affiliate who are
employees are eligible to participate in this Plan.
(b) Grants. The Board will designate employees to whom Options are to be
granted and will specify the number of shares of Common Stock subject to each
grant. All Options granted under this Plan shall be evidenced by Agreements that
shall be subject to applicable provisions of this Plan and to such other
provisions as the Board may adopt.
5. STOCK SUBJECT TO OPTIONS
------------------------
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.
6. OPTION PRICE
------------
The price per share for Common Stock purchased by the exercise of any
Option granted under this Plan shall be not less than the Fair Market Value on
the date such Option is granted.
<PAGE>
7. EXERCISE OF OPTIONS
-------------------
(a) MAXIMUM OPTION PERIOD. No option shall-be exercisable after the
expiration of ten years from the date the Option was granted. The terms of any
Option may provide that it is exercisable for a period less than such maximum
period.
(b) NONTRANSFERABILITY. Any Option granted under this Plan shall be
nontransferable except by will or by the laws of descent and distribution and,
during the lifetime of the Participant to whom the Option is granted, may be
exercised only by the Participant. No right or interest of a Participant in any
Option shall be liable for, or subject to, any lien, obligation, or liability of
such Participant.
(c) EMPLOYEE STATUS. In the event that the terms of any option provide
that it may be exercised only during employment or within a specified period of
time after termination of employment, the Board may decide in each case to what
extent leaves of absence for governmental or military service, illness,
temporary disability, or other reasons shall not be deemed interruptions of
continuous employment.
(d) VESTING. The terms of any Option may provide that it is exercisable in
whole or in part from time to time over such period of time as the Board shall
consider appropriate; provided, however, that such period of time shall not
exceed the maximum option period as set forth in Section 7(a) hereof.
8. METHOD OF EXERCISE
------------------
(a) EXERCISE. Subject to the provisions of Sections 7 and 10, an Option
may be exercised in whole at any time or in part from time to time at such times
and in compliance with such requirements as the Board shall determine. An Option
<PAGE>
granted under this Plan may be exercised with respect to any number of whole
shares less than the full number for which the Option could be exercised. Such
partial exercise of an option shall not affect the right to exercise the Option
from time to time in accordance with this Plan with respect to remaining shares
subject to the Option.
(b) PAYMENT. Unless otherwise provided by the Agreement or permitted by
the Board, payment of the Option price shall be made in cash (United States
dollars) or a cash equivalent acceptable to the Board. If the Agreement provides
or the Board permits, payment of all or a part of the Option price may be made
by surrendering shares of Common Stock to the Company. If Common Stock is used
to pay all or part of the Option price, the shares surrendered must have a Fair
Market Value (determined as of the date of exercise) that is not less than such
price or part thereof.
The preceding paragraph to the contrary notwithstanding, if the Agreement
provides, payment of all or part of the Option price may be made in
installments. In that event the Company shall lend the Participant an amount
equal to not more than ninety percent of the Option price of the shares acquired
by the exercise of the Option. This amount shall be payable in not more than
five equal annual installments, unless the amount of the loan exceeds the
maximum loan value for the shares purchased which value shall be established
from time to time by regulations of the Board of Governors of the Federal
Reserve System in which event the note shall be payable in equal quarterly
installments over a period of time not to exceed five years. The Participant
shall pay interest on the unpaid balance at the minimum "test rate" established
by the Internal Revenue Service pursuant to Section 483 of the Internal Revenue
Code of 1986 as in effect when the Option is granted. All shares acquired with
cash borrowed from the Company shall be pledged to the Company as security for
<PAGE>
the repayment of the note. Shares of stock will be released from such pledge
proportionately as payments of the note (together with interest) are made,
provided the release of such shares complies with the regulations of the Federal
Reserve System relating to securities credit transactions then applicable. While
shares are so pledged, and so long as there has been no default in the
installment payments, such shares shall remain registered in the name of the
Participant, and he shall have the right to vote such shares and to receive all
dividends paid thereon.
(c) SHAREHOLDER RIGHTS. No Participant shall, as a result of receiving
any Option, have any rights as a shareholder until the date he exercises such
Option.
9. CHANGE IN CAPITAL STRUCTURE
---------------------------
Subject to any required action by the shareholders of the Company, the
number of shares of Common Stock covered by each outstanding Option, and the
price per share thereof in each such Option, shall be proportionately adjusted
for any increase or decrease in the number of issued shares of Common Stock of
the Company resulting from a subdivision or consolidation of shares or the
payment of a stock dividend (but only on the Common Stock), a stock split-up or
any other increase or decrease in the number of such shares effected without
receipt of cash or property or labor or services by the Company.
Subject to any required action by the shareholders of the Company, if the
Company shall be the surviving corporation in any merger or consolidation, each
outstanding Option shall pertain to and apply to the securities to which a
holder of the number of shares of Common Stock subject to this option would have
been entitled. A dissolution or liquidation of the Company or a merger or
consolidation in which the Company is not the surviving corporation, shall cause
each outstanding Option to terminate, provided that each Participant shall, in
<PAGE>
such event, have the right immediately prior to such dissolution or liquidation,
or merger or consolidation in which the Company is not the surviving
corporation, to exercise his option.
In the event of a change in the Common Stock of -the Company as presently
constituted, which is limited to a change of all of its authorized shares with
par value into the same number of shares with a different par value or without
par value, the shares resulting from any such change shall be deemed to be the
Common Stock within the meaning of the Plan.
To the extent that the foregoing adjustments relate to stock or
securities of the Company, such adjustments shall be made by the Board, whose
determination in that respect shall be final, binding and conclusive.
Except as hereinbefore expressly provided in this Section 9 a Participant
shall have no rights by reason of any subdivision or consolidation of shares of
stock of any class or the payment of any stock dividend or any other increase or
decrease in the number of shares of stock of any class or by reason of any
dissolution, liquidation, merger, or consolidation or spin-off of assets or
stock of another corporation, and any issue by the Company of shares of stock of
any class, or securities convertible into shares of stock of any class, shall
not affect, and no adjustment by reason thereof shall be made with respect to,
the number or price of shares of Common Stock subject to this Option.
The grant of an Option pursuant to the Plan shall not affect in any way
the right or power of the Company to make adjustments, reclassifications,
reorganizations or changes of its capital or business structure or to merge or
to consolidate or to dissolve, liquidate or sell, or transfer all or any part of
its business or assets.
<PAGE>
10. COMPLIANCE WITH LAW AND APPROVAL OF REGULATORY BODIES
-----------------------------------------------------
No Option shall be exercisable, no Common Stock shall be issued, no
certificates for shares of Common Stock shall be delivered, and no payment shall
be made under this Plan except in compliance with all applicable federal and
state laws and regulations and rules of all domestic stock exchanges on which
the Company's shares may be listed. The Company shall have the right to rely on
the opinion of its counsel as to such compliance. Any share certificate issued
to evidence Common Stock for which an Option is exercised may bear such legends
and statements as the Board may deem advisable to assure compliance with federal
and state laws and regulations. No Option shall be exercisable, no Common Stock
shall be issued, no certificate for shares shall be delivered, and no payment
shall be made under this Plan until the Company has obtained such consent or
approval as the Board may deem advisable from regulatory bodies having
jurisdiction over such matters.
11. GENERAL PROVISIONS
------------------
(a) EFFECT ON EMPLOYMENT. Neither the adoption of this Plan, its
operation, nor any documents describing or referring to this Plan (or any part
thereof) shall confer upon any employee any right to continue in the employ of
the Company or an Affiliate or in any way affect any right and power of the
Company or an Affiliate, as the case may be, to terminate the employment of any
employee at any time with or without assigning a reason therefor.
(b) UNFUNDED PLAN. This Plan, insofar as it provides for grants, shall be
unfunded, and the Company shall not be required to segregate any assets that may
<PAGE>
at any time be represented by grants under the Plan. Any liability of the
Company to any person with respect to any grant under this Plan shall be based
solely upon any contractual obligations that may be created pursuant to this
Plan. No such obligation of the Company shall be deemed to be secured by any
pledge of, or other encumbrance on, any property of the Company.
(c) RULES OF CONSTRUCTION. Headings are given to the articles and
sections of this Plan solely as a convenience to facilitate reference. The
reference to any statute, regulation, or other provision of law shall be
construed to refer to any amendment to or successor of such provision of law.
12. AMENDMENT
---------
The Board may amend or terminate this Plan from time to time; provided,
however, that no amendment may become effective until shareholder approval is
obtained if the amendment (i) increases the aggregate number of shares that may
be issued under Options or (ii) changes the class of employees eligible to
become Participants. No amendment shall, without a Participant's consent,
adversely affect any rights of such Participant under any Option outstanding at
the time such amendment is made.
13. DURATION OF PLAN
----------------
No Option may be granted under this Plan more than ten years after the
earlier of (i) the date the Plan is adopted by the Board or (ii) the date the
Plan is approved by the Company's shareholders. Options granted before the
expiration of such ten-year period shall remain valid in accordance with
their terms.
14. EFFECTIVE DATE OF PLAN
----------------------
Options may be granted under this Plan upon its adoption by the Board,
provided that no option will be effective unless this Plan is approved by
shareholders holding a majority of the Company's outstanding voting stock within
twelve months of such adoption.
Exhibit 4.3
COMMONWEALTH
BANKSHARES,
INC*
NON-EMPLOYEE
DIRECTOR
STOCK
COMPENSATION
PLAN
<PAGE>
ARTICLE I
DEFINITIONS
1.01 Agreement means a written agreement (including any amendment or
supplement thereto) between the Company and a Participant specifying
the terms and conditions of an Award granted to such Participant.
1.02 Award means an award of Options as provided for hereunder.
1.03 Bank means Bank of the Commonwealth, or its successors.
1.04 Board means the Board of Directors of the Company.
1.05 Code means the Internal Revenue Code of 1986, as amended.
1.06 Common Stock means the common stock of the Company.
1.07 Date of Grant means the date that the Board sets for the grant of
Options to Participants under the Plan.
1.08 Fair Market Value means the average of the five (5) most recent
trades of the Common Stock on the over-the-counter market during the
period, not to exceed thirty (30) calendar days, immediately preceding
an Option's Date of Grant.
1.09 Option means a stock option granted pursuant to Article IV, and that
entities the holder to purchase from the Company a stated number of
shares of Common Stock at the shares' Fair Market Value.
1.10 Participant means a member of the Board who is not an employee of the
Company or the Bank on the applicable Date of Grant.
1.11 Plan means the Commonwealth Bankshares, Inc. Non-Employee Director
Stock Compensation Plan.
1.12 Company means Commonwealth Bankshares, Inc. and its subsidiaries,
or such successors thereto.
ARTICLE II
PURPOSE
The Plan is intended to promote a greater identity of interest between
Participants and the Company's shareholders by increasing the Participants'
proprietary interest in the Company through the receipt of Awards in the form
of Options.
<PAGE>
ARTICLE III
ADMINISTRATION
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.
ARTICLE IV
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.
ARTICLE V
STOCK SUBJECT TO OPTIONS
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
50,000, 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.
ARTICLE VI
OPTION PRICE
The price per share for Common Stock purchased on the exercise of an Option
shall be the share's Fair Market Value.
ARTICLE VII
EXERCISE OF OPTIONS
7.01 Maximum Option Period. No Option shall be exercisable after the
expiration of ten (10) years from its Date of Grant.
<PAGE>
7.02 Nontransferability,. Options granted under this Plan shall be
nontransferable except by will or by the laws of descent and distribution.
During the lifetime of the Participant to whom the Option is granted, the
Option may be exercised only by the Participant. No right or interest of a
Participant in any Option shall be liable for, or subject to, any lien,
obligation, or liability of such Participant.
ARTICLE VIII
METHOD OF EXERCISE OF OPTIONS
8.01 Exercisability of Options. Subject to the provisions of Articles VII and
X, an Option becomes exercisable six (6) months after its Date of Grant.
However, an Option granted to a Participant shall be immediately
exercisable if the Participant's membership on the Board terminates as a
result of the Participant's retirement in accordance with Company policy,
death or permanent and total disability (as such term is defined in
Section 22(e)(3) of the Code). An Option shall be forfeited if, as of the
termination of the Participant's membership on the Board, the Option is
not then exercisable and such termination occurs for any reason other than
the Participant's retirement in accordance with Company policy, death or
disability (as defined above). Options that are exercisable or that become
exercisable upon the Participant's termination of membership on the Board
will remain exercisable until the tenth anniversary of the Option's Date
of Grant. An Option may be exercised with respect to any number of whole
shares less than the full number for which the Option could be exercised.
A partial exercise of an Option shall not affect the right to exercise the
Option from time to time in accordance with this Plan and the applicable
Agreement with respect to the shares remaining subject to the Option.
8.02 Payment. Unless otherwise provided by the Agreement, payment of the Option
price shall be made in cash or a cash equivalent acceptable to the Board.
In addition, all or part of the Option price may be paid by surrendering
shares of Common Stock to the Company. If Common Stock is used to pay all
or part of the Option price, the shares surrendered must have a fair
market value (determined as of the day before the date of exercise and
based on the average of the five [5] most recent trades of the Common
Stock on the over-the-counter market during the period, not to exceed
thirty [30] calendar days, preceding such date) that is not less than such
price or part thereof.
8.03 Shareholder Rights. No Participant shall have any rights as a stockholder
with respect to shares subject to his Option until the date of exercise of
such Option.
ARTICLE IX
ADJUSTMENT UPON CHANGE IN COMMON STOCK
The maximum number of shares to which Awards may be granted under this Plan
shall be proportionately adjusted, and the terms of outstanding Awards shall be
adjusted, as the Employee Directors shall determine to be equitably required in
the event that the Company (i) effects one or more stock dividends, stock
split-ups, subdivisions or consolidations of shares or (ii) engages in a
transaction to which Section 424 of the Code applies. Any determination made
under this Article IX by the Board shall be final and conclusive.
The issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any 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, or upon conversion of shares of obligations of
the Company convertible into such shares or other securities, shall not affect,
and no adjustment by reason thereof shall be made with respect to, outstanding
Awards.
<PAGE>
ARTICLE X
COMPLIANCE WITH LAW AND APPROVAL OF REGULATORY BODIES
No Option shall be exercisable, no Common Stock shall be issued, no
certificates for shares of Common Stock shall be delivered, and no payment shall
be made under this Plan except in compliance with all applicable federal and
state laws and regulations (including, without limitation, withholding tax
requirements), and applicable requirements of any exchange or other market
having authority over the trading of the Company's shares.
ARTICLE XI
GENERAL PROVISIONS
12.01 Effect on Service. Neither the adoption of this Plan, its operation,
documents describing or referring to this Plan (or any part thereof)
shall confer on any Participant any right to continue service as a
member of the Board.
12.02 Unfunded Plan. The Plan, insofar as it provides for grants, shall be
unfunded and the Company shall not be required to segregate any assets
that may be represented at any time by grants under this Plan. Any
liability of the Company to any person with respect to any grant under
this Plan shall be based solely upon any contractual obligations that
are created pursuant to this Plan. No such obligation of the Company
shall be deemed to be secured by any pledge of, or other encumbrance
on, any property of the Company.
12.03 Rules of Construction. Headings are given to the articles and sections
of the Plan solely as a convenience to facilitate reference. The
reference to any statute, regulation, or provision of law shall be
construed to refer to any amendment to or successor of such provision
of law.
ARTICLE, XII
AMENDMENT
The Board may amend this Plan from time to time; provided that no amendment
may become effective until shareholder approval is obtained if the amendment (i)
materially increases the aggregate number of shares of Common Stock that may be
issued under the Plan, except in accordance with the provisions of Article IX,
(ii) materially changes the class of individuals eligible to become Participants
or (iii) materially increases the benefits that may accrue to Participants under
the Plan, and provided further that the Board may not amend the Plan more than
once in any six month period unless such amendment is required to comply with
the Code. No amendment shall, without a Participant's consent, adversely affect
any rights of such Participant under any Option outstanding at the time such
amendment is made.
ARTICLE XIII
TERMINATION
The Board may terminate this Plan at any time. This Plan will terminate
automatically, without any action of the Board, if, on any Date of Grant, there
<PAGE>
are insufficient shares available for the grant of Awards in accordance with the
terms of the Plan. The termination of this Plan shall not affect any rights of a
Participant under any Option outstanding at the time of such termination.
ARTICLE XIV
DURATION OF PLAN
No Award may be granted under this Plan after five (5) years from the date
of the first grant of an Option under the Plan. Options granted on or before
such date shall remain valid in accordance with their terms.
ARTICLE XV
EFFECTIVE DATE OF PL4N
This Plan is subject to approval by a majority of the votes entitled to be
cast by the Company's shareholders, voting either in person or by proxy, at a
duly held shareholders' meeting. No Awards granted shall be exercisable prior to
approval by the Company's shareholders. However, Awards may be granted prior to
approval of the Plan by shareholders, subject to such approval.
Exhibit 4.4
FIRST AMENDMENT TO
COMMONWEALTH BANKSHARES, INC.
NON-EMPLOYEE DIRECTOR STOCK COMPENSATION PLAN
Article III of the Non-Employee Director Stock Compensation Plan is hereby
amended to read as follows:
"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 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."
Article IV of the Non-Employee Director Stock Compensation Plan is hereby
amended to read 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 an Agreement
which shall be subject to the provisions of this Plan and such other
provisions as the Board may adopt."
Article V of the Non Employee Director Stock Compensation Plan is hereby amended
to 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.]
EXHIBIT 5.1
Commonwealth Bankshares, Inc.
403 Boush Street
Norfolk, VA 23 5 10
Dear Sirs:
In connection with the registration on Form S-8 (the "Registration
Statement") under the Securities Act of 1933, as amended (the "Act"), of (i)
225,000 shares of Common Stock, $2.50 par value, of Commonwealth Bankshares,
Inc. (the "Company"), which may be issued pursuant to the terms of the Company's
1999 Stock Incentive Plan (the "Plan"), we hereby advise you that in our opinion
that upon issuance pursuant to the terms of the Plans, the shares of Common
Stock which may be issued pursuant thereto will be validly issued, fully paid
and nonassessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement.
Very truly yours,
Kaufman & Canoles, P.C.
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Commonwealth Bankshares, Inc.:
We consent to the incorporation by reference in the Registration Statement (No.
33__ ) on Form S-8 of Commonwealth Bankshares, Inc. and subsidiaries of our
report dated January 15, 1999, related to the consolidated balance sheets of
Commonwealth Bankshares, Inc. and subsidiaries as of December 31, 1998 and 1997,
and the related consolidated statements of income, comprehensive income and
stockholders' equity and cash flows for each of the years in the three-year
period ended December 31, which report appears in the December 31, 1998 annual
report on Form 10-KSB of Commonwealth Bankshares, Inc.
Poti, Walton & Associates, PC
Richmond, Virginia
July 29, 1999
