SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential of Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 240.14a-12
CHESAPEAKE FINANCIAL SHARES, INC.
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(Name of Registrant as Specified in Its Charter)
CHESAPEAKE FINANCIAL SHARES, INC.
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(Name of Person(s) Filing Proxy Statement)
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:
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2) Aggregate number of securities to which transaction applies
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:*
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] 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>
Chesapeake Financial Shares, Inc.
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
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To Our Shareholders:
The Annual Meeting of Shareholders of Chesapeake Financial Shares, Inc.
will be held on Friday, April 2, 1999, at 4:00 p.m. in the auditorium at
Rappahannock Westminster-Canterbury, Irvington, Virginia, for the following
purposes:
1. To elect seven (7) directors to serve for the ensuing year; and
2. To transact such other business as may properly come before the
Annual Meeting or any adjournments thereof.
Shareholders of record at the close of business on January 29, 1999 will
be entitled to notice of and to vote at the Annual Meeting or any adjournment
thereof.
By Order of the Board of Directors
John H. Hunt, II
Secretary
March 10, 1999
Even if you plan to attend the Annual Meeting, please sign, date and
return the enclosed proxy in the postpaid envelope provided. If you attend the
Annual Meeting, you may withdraw your proxy and vote your own shares.
<PAGE>
Chesapeake Financial Shares, Inc.
1 North Main Street
Kilmarnock, Virginia 22482
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
APRIL 2, 1999
GENERAL
The enclosed proxy is solicited by the Board of Directors of Chesapeake
Financial Shares, Inc. (the "Company") for the Annual Meeting of Shareholders of
the Company to be held on Friday, April 2, 1999, at the time and place and for
the purposes set forth in the accompanying Notice of Annual Meeting of
Shareholders. The approximate mailing date of this Proxy Statement and
accompanying proxy is March 10, 1999.
Revocation and Voting of Proxies
Execution of a proxy will not affect a shareholder's right to attend the
Annual Meeting and to vote in person. Any shareholder who has executed and
returned a proxy may revoke it by attending the Annual Meeting and requesting to
vote in person. A shareholder may also revoke his proxy at any time before it is
exercised by filing a written notice with the Company or by submitting a proxy
bearing a later date. Proxies will extend to, and will be voted at, any
adjourned session of the Annual Meeting.
Voting Rights of Shareholders
Only shareholders of record at the close of business on January 29, 1999,
the record date, are entitled to notice of and to vote at the Annual Meeting or
any adjournment thereof. As of the close of business on January 29, 1999,
1,229,599 shares of the Company's common stock, par value $5.00 per share, were
outstanding and entitled to vote at the Annual Meeting. The Company has no other
class of stock outstanding. A majority of the votes entitled to be cast,
represented in person or by proxy, will constitute a quorum for the transaction
of business. Shares for which the holder has elected to abstain or to withhold
the proxies' authority to vote (including broker non-votes) on a matter will
count toward a quorum, but will not be included in determining the number of
votes cast with respect to such matter.
Each share of the Company's common stock entitles the record holder
thereof to one vote upon each matter to be voted upon at the Annual Meeting,
except with respect to the election of directors for which shareholders have
cumulative voting rights. Cumulative voting entitles a shareholder to give one
nominee as many votes as is equal to the number of directors to be elected,
multiplied by the number of shares owned by such shareholder, or in the
alternative, to distribute his or her votes on the same principle between two or
more nominees as he or she sees fit.
Solicitation of Proxies
The cost of solicitation of proxies will be borne by the Company.
Solicitation is being made by mail, and if necessary, may be made in person or
<PAGE>
by telephone, or special letter by officers and regular employees of the Company
or its subsidiaries, acting without compensation other than regular
compensation.
Principal Shareholders
Mr. Douglas D. Monroe, Jr., who is a director and executive officer of the
Company and its wholly-owned subsidiary bank, Chesapeake Bank (the "Bank"), is
the only individual who beneficially owns 5% or more of the common stock of the
Company. His ownership as of January 29, 1999 is shown in the table below. The
address of Mr. Monroe is the same as the Company's principal offices.
As of January 29, 1999, the directors of the Company and the principal
officers of the Company and the Bank beneficially owned as a group 531,051
shares (or approximately 41.0%) of the Company's common stock (including shares
for which they hold presently exercisable stock options).
ELECTION OF DIRECTORS - PROPOSAL ONE
The Bylaws of the Company provide that the Board shall consist of not less
than three nor more than nine directors, with the exact number within such
limits to be fixed according to the number elected by the shareholders. The
Board is nominating seven persons as directors of the Company for 1999. The
persons named below, all but one of whom are members of the present Board of
Directors of the Company, will be nominated for election to serve until the next
annual meeting and until their successors have been duly elected and have
qualified.
It is the intention of the persons named in the proxy to vote for the
election of the seven nominees named below. The election of each nominee
requires the affirmative vote of the holders of a plurality of the shares of
common stock cast in the election of directors. If for any reason any of the
persons named below should become unavailable to serve, then the proxies will be
voted for such substitute nominees as the Board of Directors may designate.
Management has no reason to believe that any of the nominees will be
unavailable.
<TABLE>
<CAPTION>
Number of Shares
Director Principal Occupation Beneficially Owned as
Nominee & Age Since For the Last Five Years of January 29, 1999 (1)
- ------------- ----- ----------------------- -----------------------
<S> <C> <C> <C>
T. Nash Broaddus (80) 1988 Chairman of the Board 24,932(2.0%)
& Chief Executive
Officer, Prodesco,
Inc., a textile
manufacturer,
Perkasie, Pennsylvania
Eugene S. Hudnall, Jr. 1983 President, George 8,677*
(60) Noblett, Inc., a major
appliance dealer,
mechanical contractor,
and propane gas
dealer, Kilmarnock,
Virginia
Douglas D. Monroe, Jr. 1982 Chairman of the Board 309,626(24.6%)
(65) & Chief Executive (2)(3)
Officer of the Company
and the Bank
</TABLE>
2
<PAGE>
<TABLE>
<S> <C> <C> <C>
Katherine W. Monroe (65) 1985 A licensed real estate 56,932(4.6%)
agent; Treasurer of (3)
the Company
Bruce P. Robertson (53) (4) President, Shirley 0
Pewter Shops, Inc. and
The Porcelain
Collector of
Williamsburg, Ltd.,
Williamsburg, Virginia
William F. Shumadine, Jr. 1997 Senior Vice President 8,877*
(54) of Lowe, Brockenbrough
& Tattersall, Inc., a
registered investment
advisor, Richmond,
Virginia
Robert L. Stephens (66) 1985 Owner, The Tides Inn, 15,015(1.2%)
Inc. a resort &
conference center in
Irvington, Virginia
</TABLE>
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* Represents less than 1.0% of the total outstanding shares of common
stock.
(1) For purposes of this table, a person is deemed to be the beneficial owner
of shares of the Company's common stock if he or she has or shares the
power to vote or to direct the voting of the security or the power to
dispose of or to direct the disposition of the security, or if he has the
right to acquire beneficial ownership of the security within 60 days.
(2) Includes: (i) 47,884 shares which are held jointly with his wife Katherine
W. Monroe (see Note 3 below); (ii) 28,080 shares that may be acquired
pursuant to presently exercisable stock options; and (iii) 15,840 shares
held in trust for which he serves as joint trustee.
(3) Douglas D. Monroe, Jr., and Katherine W. Monroe are husband and wife. Mr.
Monroe has sole voting power over 245,902 shares of common stock. Mrs.
Monroe has sole voting power over 56,932 shares. Mr. and Mrs. Monroe share
voting power over 47,884 shares, which are reflected in Mr. Monroe's stock
ownership information in order to avoid double counting. In the aggregate,
Mr. and Mrs. Monroe beneficially own 366,558 shares of common stock.
(4) Bruce P. Robertson is a first-time director nominee and is not a member of
the present Board of Directors of the Company.
The Employee Stock Ownership Plan adopted by the Company holds 28,176
shares of common stock for the benefit of the employees participating in the
plan. The trustees of the plan are Douglas D. Monroe, Jr., John H. Hunt, II and
Jeffrey M. Szyperski, all of whom are executive officers of the Bank. They have
no voting rights nor any investment or dispositive power with respect to the
shares other than as directed by plan participants.
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<PAGE>
Except as set forth below, there are no family relationships among any
of the directors or principal officers. Douglas D. Monroe, Jr. and Katherine
W. Monroe are husband and wife and Mr. Szyperski is the son-in-law of Mr. and
Mrs. Monroe. None of the directors currently serves as a director of any
other company with a class of securities registered pursuant to Section 12 of
the Securities Exchange Act of 1934.
Board Committees and Attendance
During 1998 the Board of Directors of the Company met four times. All
directors attended at least 75% of the total Board meetings. The Company has no
standing committees.
The Bank's Audit Committee is comprised of Messrs. Albert C. Pollard,
Chairman, C. Irwin Clark, III, James M. Holmes, Jr., Harvey B. Morgan, Harry
M. Ward and Thomas B. Denegre, Jr. The Audit Committee reviews on a regular
basis the work of the internal audit department. It also reviews and
approves the scope and detail of the continuous audit program which is
conducted by the internal audit staff to protect against improper and unsound
practices and to furnish adequate protection of all assets and records.
During 1998, the Audit Committee met nine times.
Compensation of Directors
Directors of the Company received an annual retainer fee of $4,500 in
1998. During 1998, 1997 and 1996, the Company issued 3,510, 4,334 and 3,115
shares, respectively, of common stock to its directors for partial compensation
in lieu of cash for the annual retainer fees due.
EXECUTIVE COMPENSATION AND OTHER INFORMATION
Cash Compensation
During 1998, no executive officer of the Company, with the exception of
Douglas D. Monroe, Jr., who is the President and Chief Executive Officer of
Company, received compensation in excess of $100,000. The following table shows
the cash compensation paid to Mr. Monroe during 1998, 1997 and 1996. The
principal officers of the Company do not receive any compensation in their
capacities as such, but are paid by the Bank for their services as officers of
the Bank.
Summary Compensation Table
<TABLE>
<CAPTION>
Long-term
Compensation
Name and Annual Compensation(1) Securities
---------------------- Underlying All Other
Principal Position Year Salary (2) Bonus (3) Options Compensation(4)(5)
------------------ ---- ---------- --------- ------- ------------------
<S> <C> <C> <C> <C> <C>
Douglas D. Monroe, Jr. 1998 $160,538 $15,000 2,880 $40,812
President/Chief 1997 153,593 15,000 2,400 54,778
Executive Officer 1996 142,700 -- 4,800 96,338
</TABLE>
4
<PAGE>
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(1) Mr. Monroe received certain perquisites and other personal benefits, the
amounts of which are not shown because the aggregate amount of such
compensation during the year did not exceed the lesser of $50,000 or 10%
of his total salary and bonus.
(2) Includes directors' fees paid by the Company and the Bank.
(3) No amount of Mr. Monroe's compensation for 1996 was designated as a bonus.
In each of 1998 and 1997, a bonus of $15,000 was paid for 1997 and 1996
results, respectively.
(4) In 1998, 1997 and 1996, the taxable portions of the group life insurance
premiums paid by the Bank on behalf of Mr. Monroe were $5,195 for each of
the three years.
(5) In 1998, 1997 and 1996, the taxable portions of a key man life insurance
policy paid by the Bank on behalf of Mr. Monroe were $16,000, $32,600, and
$16,000 respectively. The amount accrued by the Bank under a deferred
compensation agreement with Mr. Monroe was $19,617, $17,583, and $75,143
in 1998, 1997 and 1996, respectively. See "Employee Benefit Plans -
Deferred Compensation Arrangement" for further information.
Employee Benefit Plans
Pension Plan. The Bank has a noncontributory defined benefit pension plan
for all full-time employees over 21 years of age. The pension plan is designed
to assist employees in providing for their retirement income security. All
employees who complete at least 1,000 hours of service each year are
automatically eligible to participate. The Bank funds pension costs in
accordance with the funding provisions of the Employee Retirement Income
Security Act. All contributions to the pension plan are made by the Bank.
Employees become fully vested after seven years of credited service.
Upon retiring at normal retirement age, pension plan participants will
receive an annual pension based on their years of service. The normal retirement
age under the pension plan is 65. Reduced benefits are available as early as age
55 if at least ten years of credited service have been completed. Cash benefits
under the pension plan generally commence on retirement, death, or other
termination of employment and are payable in various forms, generally at the
election of the participant.
Employee Stock Ownership Plan. The Bank has adopted a tax-credit employee
stock ownership plan (the "ESOP"). Every officer and employee of the Bank (other
than straight-time hourly paid employees) is eligible to participate in the ESOP
beginning on any January 1 after he or she completes one year of service and
reaches the age of 21.
Contributions each year are at the discretion of the Board of Directors,
within certain limitations prescribed by federal tax regulations. Compensation
expense related to the ESOP was $19,993 in 1998, $20,000 in 1997 and $19,992 in
1996. The ESOP intends to invest contributions received in shares of the
Company's common stock.
Under the ESOP, the Bank will make contributions in cash necessary to
service loans to the ESOP and may make additional discretionary contributions in
cash or stock of the Company (the "ESOP Contribution"). In addition, the Bank
will make further contributions designed to satisfy certain nondiscrimination
requirements of the Internal Revenue Service, if such requirements should ever
become applicable (the "Top-Heavy Contribution"). Participants in the ESOP are
neither required nor permitted to make contributions.
5
<PAGE>
ESOP and Top-Heavy Contributions become fully vested when a participant
reaches age 65, whether or not he retires at that time, when a participant has
completed 7 years of service, becomes permanently or totally disabled, or dies
while employed by the Bank. If a participant leaves before the occurrence of one
of these events, the ESOP and Top-Heavy Contributions allocated to his account
will become 30% vested after 3 years of service, 40% vested after 4 years of
service, 60% vested after 5 years of service, 80% vested after 6 years of
service, and 100% vested after 7 years of service.
Distribution of benefits under the ESOP to a participant or beneficiary is
made after death, retirement, or termination of employment in a single payment
consisting of cash and to the extent allocated to his account, common stock of
the Company. Each participant or beneficiary may direct that all distributions
be made in the form of common stock of the Company or, conversely, may direct
that all distributions be made in the form of cash.
Stock Options. As of January 29, 1999, the Company had options outstanding
covering 110,928 shares of common stock, of which options covering 73,008 shares
are currently exercisable. Options are generally not exercisable until after
three years from the date of issuance and require continuous employment during
the period prior to exercise. The table below sets forth certain additional
information concerning the stock option grants made to Mr. Monroe during 1998.
Number of
Securities % of Total
Underlying Options Granted
Options To Employees Exercise Expiration
Name Granted In 1998 Price Date
---- ------- ------- ----- ----
Douglas D. Monroe, Jr. 2,880 24.0% $18.33 2003
The following table shows certain information with respect to the number
and value of unexercised options at year-end. No stock options were exercised
during 1998 by Mr. Monroe.
Number of Value of
Shares Underlying Unexercised
Unexercised In-the-Money
Options at Options at
December 31, 1998 December 31, 1998 (1)
----------------- ---------------------
Name Exercisable/Unexercisable Exercisable/Unexercisable
---- ------------------------- -------------------------
Douglas D. Monroe, Jr. 28,080/11,520 $383,430/$100,460
(1)Calculated by subtracting the exercise price from the market value of the
stock at December 31, 1998.
Deferred Compensation Arrangement. In 1984, the Company entered into a
deferred compensation agreement with Mr. Monroe under the terms of which Mr.
Monroe was required to work through April of 1994 in order to earn the right to
receive payments from the Company of $3,042 per month for 180 months beginning
at the date of his retirement from the Company, but in no event prior to his
reaching age 70. The Company has funded its deferred compensation commitment
through a life insurance policy on Mr. Monroe.
6
<PAGE>
Section 16(a) Beneficial Ownership Reporting Compliance
Pursuant to Section 16(a) of the Securities Exchange Act of 1934,
directors and executive officers of the Company are required to file reports
with the Securities and Exchange Commission indicating their holdings of and
transactions in the Company's equity securities. To the Company's knowledge,
based solely on a review of the copies of such reports furnished to the Company
and written representations that no other reports were required, insiders of the
Company complied with all filing requirements during the fiscal year ended
December 31, 1998.
INDEBTEDNESS AND CERTAIN TRANSACTIONS
In calendar year 1998 and up to the present time, there were transactions
between the Bank and certain of the officers and directors of the Company and
the Bank and their known associates, all consisting of extensions of credit by
the Bank in the ordinary course of its business. Each transaction was made on
substantially the same terms, including interest rates, collateral, and
repayment terms, as those prevailing at the time for comparable transactions
with the general public. In the opinion of management, none of the transactions
involves more than the normal risk of collectibility or presents other
unfavorable features. Thus, the Bank has had, and the Bank expects to have in
the future, banking transactions in the ordinary course of its business with the
officers and directors of the Company and the Bank and their associates on the
same terms, including interest rate, collateral and repayment terms on loans, as
those prevailing at the same time for comparable transactions with others.
2000 ANNUAL MEETING OF SHAREHOLDERS
It is contemplated that the 2000 Annual Meeting of Shareholders will be
held on or about Friday, April 7, 2000. In order for any appropriate shareholder
proposal to be included in the proxy materials of the Company for the 2000
Annual Meeting of Shareholders, it must be received by the Secretary at the
Company's principal place of business on or before November 11, 1999.
OTHER MATTERS
As of the date of this Proxy Statement, the management of the Company has
no knowledge of any matters to be presented for consideration at the Annual
Meeting other than those referred to above. If any other matters properly come
before the Annual Meeting, the persons named in the accompanying proxy intend to
vote such proxy, to the extent entitled, in accordance with the recommendation
of the Board of Directors.
By Order of the Board of Directors
John H. Hunt, II
Secretary
A COPY OF THE COMPANY'S 1998 ANNUAL REPORT ON FORM 10-KSB TO THE
SECURITIES AND EXCHANGE COMMISSION MAY BE OBTAINED WITHOUT CHARGE BY ANY
SHAREHOLDER OF RECORD ON JANUARY 29, 1999. ALL REQUESTS MUST BE IN WRITING,
ADDRESSED TO DOUGLAS D. MONROE, JR., PRESIDENT, CHESAPEAKE FINANCIAL SHARES,
INC., POST OFFICE BOX 1419, KILMARNOCK, VIRGINIA 22482.
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PROXY
Chesapeake Financial Shares, Inc.
MANAGEMENT PROXY: Solicited on Behalf of the Board of Directors
The undersigned hereby appoints T. Nash Broaddus and Eugene S. Hudnall,
Jr., jointly and severally, proxies, with full power to act alone and with full
power of substitution to represent the undersigned and vote all shares of the
Company standing in the name of the undersigned at the Annual Meeting of
Shareholders of Chesapeake Financial Shares, Inc. to be held on Friday, April 2,
1999 at 4:00 p.m. in the auditorium at Rappahannock Westminster-Canterbury,
Irvington, Virginia, or any adjournment thereof, on each of the following
matters:
1. Election of directors.
[ ] FOR all Nominees listed below [ ] WITHHOLD AUTHORITY TO VOTE
FOR THOSE INDICATED BELOW
T. Nash Broaddus, Eugene S. Hudnall, Jr., Douglas D. Monroe, Jr.,
Katherine W. Monroe, Bruce P. Robertson, William F. Shumadine, Jr., and
Robert L. Stephens.
(Instructions: To withhold authority to vote for any individual nominee,
place a line through that nominee's name. Cumulative voting is permitted.
See page 1 of the accompanying Proxy Statement for an explanation of
cumulative voting.)
2. In their discretion, the proxies are authorized to vote upon any other
business that may properly come before the meeting or any adjournment
thereof. The Board of Directors at present knows of no other business to
be presented.
This proxy, when properly executed, will be voted in the manner directed
by the undersigned shareholder. If no direction is made, this proxy will be
voted "FOR" each proposal. All joint owners MUST sign.
Dated: ____________________, 1999
- ---------------------------------
Signature*
- ---------------------------------
Signature if held jointly
*NOTE: When signing as attorney, executor, administrator, trustee or guardian,
please give full title. If more than one fiduciary, all should sign.
All joint owners MUST sign.
I [ ] will / [ ] will not attend the Annual Meeting.
The shares represented hereby will be voted in accordance with any choice
specified by the shareholders and, where there is no choice, such shares will be
voted IN FAVOR OF each proposal. This Proxy further provides authority to
accumulate such votes as the proxies may deem appropriate in the election of
directors.
