SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Registrant [ X ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Confidential, for Use of the
[ X ] Preliminary Proxy Statement Commission Only (as permitted
by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
FIRST CHESAPEAKE FINANCIAL CORPORATION
(Name of Registrant as Specified in its Charter)
N/A
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (check the appropriate box):
[ X ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14-a6(i)(1), or 14a-6(i)(2),
or Item 22(a)(2)
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
<PAGE>
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount of which the filing
fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the form or
schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, schedule, or registration statement no.:
(3) Filing party:
(4) Date filed:
<PAGE>
PRELIMINARY
FIRST CHESAPEAKE FINANCIAL CORPORATION
9100 Arboretum Parkway, Suite 160
Richmond, Virginia 23236
Notice of Annual Meeting of Shareholders
To Be Held on June 28, 1996
TO THE SHAREHOLDERS OF FIRST CHESAPEAKE FINANCIAL CORPORATION:
The annual meeting of shareholders of First Chesapeake
Financial Corporation (the "Company") will be held at the 21st
Floor, One James Center, Richmond, Virginia 23219 on June 28,
1996, at 10:00 A.M., local time, for the following purposes:
1. To elect four Directors for the ensuing year;
2. To vote on amendments to the Company's Restated
Articles of Incorporation and Bylaws authorizing
the creation of classes of Directors in order to
provide for a classified Board of Directors;
3. To vote on an amendment to increase in the amount
of shares reserved for the Company's 1992 Stock
Option Plan from 500,000 to 750,000 shares;
4. To ratify the selection by the Board of Directors
of BDO Seidman to serve as the Company's
independent certified public accountants for the
fiscal year ending December 31, 1996; and
5. To transact such other business as may properly
come before the meeting or any adjournments
thereof.
The close of business on May 30, 1996, has been fixed
as the record date for the annual meeting. All shareholders of
record as of that date are entitled to notice of and to vote at
the meeting and any adjournment thereof.
By Order of the Board of Directors
C. Harril Whitehurst, Jr.
Secretary
June 5, 1996
PLEASE SIGN, DATE AND RETURN THE ENCLOSED PROXY. YOU MAY
WITHDRAW THIS PROXY AT ANY TIME BEFORE YOUR SHARES ARE ACTUALLY
VOTED AND MAY VOTE YOUR OWN SHARES IF YOU ATTEND THE MEETING IN
PERSON.
<PAGE>
PRELIMINARY
FIRST CHESAPEAKE FINANCIAL CORPORATION
9100 Arboretum Parkway, Suite 160
Richmond, Virginia 23236
PROXY STATEMENT
TO BE MAILED ON OR ABOUT JUNE 5, 1996
FOR
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 28, 1996
The enclosed proxy is solicited by and on behalf of the
Board of Directors of First Chesapeake Financial Corporation (the
"Company") for use at the Annual Meeting of Shareholders of the
Company to be held June 28, 1996, or any adjournments thereof,
for the purposes set forth in this Proxy Statement and the
attached Notice of Annual Meeting of Shareholders. If sufficient
proxies are not returned in response to this solicitation,
supplementary solicitations may be made by mail or by telephone
or personal interview by directors, officers, and regular
employees of the Company, none of whom will receive additional
compensation for these services. The Company reserves the right
to retain an outside proxy solicitation firm to assist in the
solicitation of proxies, but at this time does not have plans to
do so. Costs of solicitation of proxies will be borne by the
Company, which will reimburse banks, brokerage firms, and other
custodians, nominees, and fiduciaries for reasonable out-of-
pocket expenses incurred by them in forwarding proxy materials to
the beneficial owners of stock held by them.
The stock represented by all properly executed proxies
received by the Secretary of the Company and not revoked will be
voted for the election of all the directors nominated, unless the
shareholder directs otherwise in the proxy, in which event such
stock will be voted in accordance with such directions. Any
proxy may be revoked at any time before the shares to which it
relates are voted either by giving written notice (which may be
in the form of a substitute proxy delivered to the secretary of
the meeting) or by attending the meeting and voting in person.
A majority of the votes entitled to be cast on matters
to be considered at the meeting constitutes a quorum. If a share
is represented for any purpose at the meeting, it is deemed to be
present for quorum purposes and for all other matters as well.
Abstentions and shares held of record by a broker or its nominee
("Broker Shares") that are voted on any matter are included in
determining the number of votes present or represented at the
meeting. Broker Shares that are not voted on any matter at the
meeting will not be included in determining whether a quorum is
present at such meeting.
<PAGE>
The election of each nominee for director requires the
affirmative vote of the holders of a plurality of the shares of
common stock cast in the election of directors at a meeting at
which a quorum is present. Votes that are withheld and Broker
Shares that are not voted in the election of directors will not
be included in determining the number of votes cast and,
therefore, will have no effect on the election of directors. The
affirmative vote of the holders of a majority of the outstanding
shares of the Company's common stock shall be required for
approval of the amendment of the Company's Articles of
Incorporation and Bylaws and the amendment of the Company's 1992
Stock Option Plan. The affirmative vote of the holders of a
majority of the votes cast will be required to act on
ratification of the selection of BDO Seidman as the Company's
independent certified public accountants and on all other matters
to come before the Annual Meeting.
VOTING SECURITIES AND PRINCIPAL SHAREHOLDERS
Record Date
The Board of Directors has fixed the close of business
on May 30, 1996, as the record date for the determination of
shareholders entitled to notice of and to vote at the annual
meeting and any adjournment thereof. As of the close of business
on the record date, 4,621,550 shares were outstanding and
entitled to vote at the annual meeting. All of such shares were
of one class, with equal voting rights, and each holder thereof
is entitled to one vote on all matters voted on at the Annual
Meeting for each share registered under such holder's name.
Stock Ownership of Certain Beneficial Owners and Management
The table below sets forth information regarding:
beneficial ownership of the Company's common stock as of May 30,
1996 by (a) each person known by the Company to own beneficially
more than 5 percent of such stock, (b) each director or nominee
of the Company, (c) each executive officer of the Company named
in the Summary Compensation Table individually and (d) all
directors and executive officers of the Company as a group.
Unless otherwise indicated, the address for each of the listed
individuals is: First Chesapeake Financial Corporation, 9100
Arboretum Parkway, Suite 160, Richmond, Virginia 23236.
<PAGE>
<TABLE>
<CAPTION>
Percent
Name and Address of Amount and Nature of of
Beneficial Owner (1) Beneficial Ownership Total (2)
- -------------------- -------------------- ---------
<S> <C> <C>
Mark Mendelson (3) 1,081,000 22.8%
John E. Dell (3)(4) 450,000 9.7%
Max E. Gray (4) 1,025,000 21.8%
C. Harril Whitehurst, Jr. (5) 575,000 12.2%
L. Anthony Bottoms, III 500,000 10.8%
John D. Mazzuto (6) 50,000 1.1%
Janet W. Stagg (7) 10,000 *
Robert L. Suthard (6) 50,000 1.1%
804 Moorefield Park, Suite 200
Richmond, Virginia 23236
All Directors and Officers
as a group (5 persons) 1,710,000 35.0%
<FN>
* Less than 1% of the Company's outstanding stock.
(1) Unless otherwise indicated, each person has sole voting and investment
powers with respect to the shares specified opposite his name.
(2) Does not include 2,500,000 shares of common stock issuable upon exercise of
the Class A and Class B Warrants included in the Units sold in the initial
public offering.
(3) Pursuant to a Trust Agreement dated March 9, 1994, Mr. Dell conveyed
550,000 shares of common stock and a common stock purchase warrant to
acquire 300,000 shares of common stock to John E. Dell Liquidating Trust
(the "Trust"). Wallace L. Timmeny, 1627 Eye Street, N.W., Washington, D.C.,
is trustee. The Trust Agreement remained in effect until all shares and
warrants subject to the Trust were sold. The Trustee has authority to sell
the shares and warrants subject to the Trust. All common shares and
warrants held in the Trust were acquired by Mr. Mendelson in December, 1994.
Mr. Mendelson has purchased additional shares of common stock in the open
market. Mr. Mendelson's holdings include 100,000 shares of common stock
issuable upon the exercise of stock options granted to him in 1995.
(4) Mr. Gray's beneficial ownership consists of 500,000 shares of common stock
and 75,000 shares issuable upon the exercise of stock options directly owned
by Mr. Gray and 450,000 shares of common stock as to which Mr. Gray has
voting power pursuant to a proxy granted to Mr. Gray by John E. Dell.
(5) Includes 75,000 shares of common stock issuable upon the exercise of stock
options to Mr. Whitehurst.
(6) Includes 50,000 shares of common stock issuable upon the exercise of stock
options.
(7) Represents 10,000 shares of common stock issuable upon the exercise of stock
options.
</TABLE>
<PAGE>
PROPOSAL 1
ELECTION OF DIRECTORS
The Company's Board of Directors presently consists of
four directors. The terms of the current Directors, Messrs.
Gray, Whitehurst, Mazzuto, and Suthard will expire at the time of
the annual meeting of shareholders.
Unless otherwise instructed on the proxy, the shares
represented by proxies will be voted for the election as
directors of all of the nominees named below. Each of the
nominees has consented to being named as a nominee in the Proxy
Statement and has agreed that, if elected, he will serve on the
Board of Directors for his one-, two-, or three-year term, as the
case may be, and until his successor has been elected. If any
nominee becomes unavailable for any reason, the shares
represented by proxies may be voted for a substitute nominee
designated by the Board of Directors. The Company is not aware
of any family relationship among any of the directors, executive
officers or nominees to become directors or executive officers of
the Company.
Assuming that Proposal 2, which will create a
classified Board of Directors, is approved by the shareholders,
Mr. Mazzuto will stand for reelection as a Class I Director for a
one-year term, Mr. Suthard will stand for reelection as a
Class II Director for a two-year term, and Messrs. Gray and
Whitehurst will stand for reelection as Class III Directors for
three-year terms. If the amendment is defeated, Messrs. Mazzuto,
Suthard, Gray and Whitehurst will each stand for reelection for
one-year terms.
<PAGE>
The names, positions, ages and backgrounds of nominees
for director of the Company are set forth below.
Name Age Position
Max E. Gray 46 Chairman of the Board, President,
and Chief Executive Officer.
Mr. Gray is also Chairman of the
Board of Directors of First
Chesapeake Mortgage Corporation,
American Mortgage Express, Inc., and
First Chesapeake Funding
Corporation, subsidiaries of the
Company. He served as an Executive
Vice President of Pioneer Federal
Savings Bank from January 1984 until
May 1992. Mr. Gray has been a
director of the Company since 1992.
C. Harril Whitehurst 45 Executive Vice President, Chief
Financial Officer, and Secretary.
Mr. Whitehurst is also an Executive
Vice President, Secretary and
Director of First Chesapeake
Mortgage Corporation, American
Mortgage Express, Inc., and First
Chesapeake Funding Corporation,
subsidiaries of the Company. He was
an audit partner with BDO Seidman
from 1984 until 1992. He has been a
director of the Company since 1992.
Robert L. Suthard 64 Since 1992 Colonel Suthard has been
the President of Suthard Associates,
Inc., a consulting and lobbying firm
to government and major
corporations. From 1990 to 1992,
Mr. Suthard served as Secretary of
Public Safety in the Governor's
Cabinet of the Commonwealth of
Virginia and from 1984 to 1990 as
Superintendent of the Virginia State
Police. Mr. Suthard has been a
director of the Company since May
1994.
<PAGE>
John D. Mazzuto 47 Mr. Mazzuto currently serves as a
financial consultant for several
companies. From 1989 to 1991, Mr.
Mazzuto was President and Chief
Executive Officer of the North
American operations of the
international merchant bank, Asian
Oceanic Group. Prior to 1989,
Mr. Mazzuto was a Managing Director
of Corporate Finance at Chemical
Bank. Mr. Mazzuto serves on the
Board of Directors of Texfi
Industries, Inc. (NYSE), an apparel
and textiles enterprise; Weldotron
(AMEX), a manufacturer of packaging
equipment; CPT Holdings (OTC), a
steel and foundries company; and as
Chairman of the Board of CTI Group
(Holdings) Inc. (OTC), a service
bureau and software provider to the
telecommunications industry. Mr.
Mazzuto was appointed to the Board
of Directors to fill the vacancy
created by the resignation Robert L.
Nichols. Mr. Mazzuto has been a
director of the Company since May,
1996.
PROXIES RECEIVED IN RESPONSE TO THIS SOLICITATION WILL BE VOTED
FOR THE ELECTION OF THE NOMINEES NAMED ABOVE IN ALL EVENTS UNLESS
OTHERWISE SPECIFIED IN THE PROXY.
<PAGE>
PROPOSAL 2
AMENDMENT OF RESTATED ARTICLES OF INCORPORATION AND
BYLAWS TO PROVIDE FOR A CLASSIFIED BOARD OF DIRECTORS
Under the Company's current Bylaws, directors are
elected for one-year terms. At a May 29, 1996 meeting of the
Board of Directors, the Directors approved amendments to the
Company's Restated Articles of Incorporation and Bylaws which
effectuate staggered terms for directors (referred to as a
"classified" Board of Directors). The proposed amendment to the
Restated Articles of Incorporation and Bylaws is set out in
Annex 1 to this Proxy Statement. Other than with respect to the
amendment, the Restated Articles of Incorporation and Bylaws
would remain unchanged.
Virginia law permits, but does not require, the
adoption of a classified Board of Directors pursuant to which the
directors can be divided into as many as three classes with
staggered terms of office and with only one class of directors
coming up for election each year. The Company's Restated
Articles of Incorporation and Bylaws do not currently provide for
a classified Board. Virginia law allows the future
classification of the Board of Directors upon a vote of the
stockholders.
The Board has unanimously approved, subject to
stockholder approval, adoption of amendments to the Restated
Articles of Incorporation and Bylaws to provide for a
classification of the Board into three classes of directors
(designated Class I, Class II, and Class III), each class serving
a staggered three-year term, and each class being as nearly equal
in number as possible. As a result of having a classified board,
approximately one-half to one-quarter of a four-member Board
would be elected each year. Initially, each class will have one
member, except Class III shall have two members. Members of all
three classes will be elected at this meeting pursuant to the
designation and nominations submitted in Proposal 1 above.
Directors elected to Class I will serve until the next annual
meeting of stockholders (or until their respective successors are
duly elected and qualified or until their earliest death,
resignation, or removal). Directors initially elected to Classes
II and III will serve until the annual meetings of stockholders
to be held in 1998 and 1999, respectively (or until their
respective successors are duly elected and qualified or until
their earlier death, resignation, or removal). Commencing with
the election of directors to Class I at the next annual meeting
of stockholders, each class of directors elected at an annual
meeting of stockholders would be elected to three-year terms.
<PAGE>
Advantages of the Amendments
The amendments will stagger the term of directors so
that only approximately one-quarter to one-half of a four-member
Board's composition may change from year to year. (Currently,
the entire composition of the Board may change from year to
year.) The Board of Directors believes that staggering the terms
of the Directors will allow for greater continuity and stability
in the management of the Company. At least one-half of the
Directors at any given time will have prior experience as
Directors of the Company and be knowledgeable about the Company's
business and development. Although the Company has had no
difficulty in the past in maintaining continuity, the Board of
Directors considers it advisable to provide the additional
assurance of continuity that is afforded by the classification of
Directors at this stage of the Company's development and to
ensure implementation of the Company's goal to diversify with new
businesses. Additionally, a classified board could moderate the
pace of any change in control of the Board of Directors by
extending generally the overall time required to elect a majority
of the directors. At least two (and possibly three) stockholder
meetings, instead of one, would generally be required to effect a
change in control of the Board of Directors. Further, although
the Company's management knows of no specific effort or plan to
accumulate the Company's securities or to obtain control of the
Company, the staggered terms will make it more difficult for a
hostile acquirer of the Company to gain control of the Board of
Directors. At any one annual shareholder meeting, only one half
to one-quarter of the four Directors will stand for reelection.
Disadvantages of a Classified Board
The effect of a classified Board of Directors will
limit the Shareholder's ability to significantly change the
composition of the Board of Directors at any single election of
directors, whether or not such a change in members comprising the
Board of Directors would be beneficial to the Company and its
stockholders. Furthermore, even if a majority of the Company's
stockholders believe that such a change in the composition of the
Board of Directors would be desirable, they could not effect the
change at a single meeting to elect directors. Rather, such
change would most likely require successive meetings to elect
directors, unless a sufficient number of stockholders voted in
favor of removing a particular Director or amending the Restated
Articles of Incorporation to eliminate the classified board
provisions. Therefore, adoption of the amendment to the Restated
Articles of Incorporation may have significant effects on the
ability of the stockholders of the Company to change the
composition of the incumbent Board of Directors. The overall
effect of the proposal is to render more difficult the
accomplishment of the assumption of control by a principal
stockholder, and thus, make the removal of management more
difficult, even when performance of the present board is the
reason for seeking the change. Additionally, the Restated
Articles of Incorporation do not provide for shareholders to
accumulate their votes; hence, cumulative voting for directors is
not permitted under the Virginia Stock Corporation Act.
Cumulative voting would enhance shareholder's ability to remove
management.
<PAGE>
Vote Required
Approval of the classified board proposal (Proposal 2)
will require the affirmative vote of the holders of at least a
majority of the outstanding shares of the Company's common stock.
The amendments have been unanimously approved by the Board of
Directors and, assuming requisite stockholder approval, will
become effective upon the filing of an Amended and Restated
Articles of Incorporation with the Virginia State Corporation
Commission.
In the event a vacancy occurs on the Board during the
year, the remaining members of the Board of Directors may fill
such vacancy and the Director so elected shall serve until the
next annual shareholders' meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF THE PROPOSAL
TO AMEND THE COMPANY'S RESTATED ARTICLES OF INCORPORATION AND
BYLAWS. PROXIES RECEIVED IN RESPONSE TO THIS SOLICITATION WILL
BE VOTED FOR THE PROPOSAL TO AMEND THE COMPANY'S RESTATED
ARTICLES OF INCORPORATION AND BYLAWS UNLESS OTHERWISE SPECIFIED
IN THE PROXY.
MEETINGS AND COMMITTEES OF THE BOARD
The Board of Directors held six meetings during 1995.
Other than Mr. Mazzuto, each incumbent director standing for
reelection attended all of such meetings of the Board of
Directors. In 1995, the Board of Directors created the
Nominating Committee, the members of which are Messrs. Gray and
Whitehurst. The purpose of the Nominating Committee is to
recommend to the Board of Directors candidates for election to
the Board. The Nominating Committee met on April 30, 1996.
The Nominating Committee considers nominees for the
Board recommended by the Company's shareholders. A shareholder
who is interested in nominating a person to the Board should
submit to the Secretary of the Company written notice of his or
her intent to make such nomination. Such notice must be given
either by personal delivery or by United States mail, postage
prepaid, not later than 120 days in advance of the annual
meeting, or with respect to a special meeting of shareholders for
the election of directors, the close of business on the seventh
day following the date on which notice of such meeting is first
given to shareholders. Such notice should include biographical
information about the candidate and his or her qualifications for
office.
<PAGE>
Section 16(a) Compliance
Section 16(a) of the Securities Exchange Act requires
the Company's officers and directors, and persons who own more
than ten percent (10%) of a registered class of the Company's
equity securities, to file reports of ownership and changes in
ownership on Forms 3, 4, and 5 with the Securities and Exchange
Commission ("SEC") and the National Association of Security
Dealers. Officers, directors, and greater than ten percent (10%)
beneficial owners are required by SEC regulation to furnish the
Company with copies of all Forms 3, 4, and 5 they file.
Based solely on the Company's review of the copies of
such forms it has received, the Company believes that all its
officers, directors, and greater than ten percent (10%)
beneficial owners complied with all filing requirements
applicable to them with respect to transactions during the fiscal
year ended December 31, 1995.
Resignation of Richard L. Nichols
Robert L. Nichols resigned as a Director of the
Company. His resignation was accepted by the Company's Board of
Directors effective as of April 22, 1996. In his resignation,
Mr. Nichols complained that he did not receive timely notice of
Board of Directors' meetings and, as a consequence, he was
prevented from fulfilling his responsibilities as a member of the
Board of Directors. Management's review of the Company's records
indicated that Mr. Nichols had been given proper notice of all
Board meetings and the opportunity to participate in such
meetings. However, he failed to attend such meetings.
Compensation of Directors
Directors who are not executive officers of the Company
receive $300 per meeting of the Board of Directors or a committee
thereof attended by the Director. All directors are reimbursed
for travel expenses incurred as a result of service on the Board
of Directors. Mr. Suthard has deferred payment of his director
fees until the Company is profitable.
<PAGE>
Compensation of Executive Officers
Summary Compensation Table
The following table sets forth, for the three year
period ending December 31, 1995, certain information as to the
total remuneration paid to each of the Company's executive
officers whose total annual salary and bonus exceeded $100,000
for services in all capacities:
<TABLE>
<CAPTION>
Annual Compensation
(a) (b) (c) (d) (e)
Other
Name and Annual
Principal Compen-
Position (2) Year Salary (1) Bonus sation (3)
- ----------------- ---- ---------- ------- ----------
<S> <C> <C> <C> <C>
May E. Gray 1995 $100,000 $25,000 $ 7,200
President and CEO 1994 100,000 -- 7,200
1993 100,000 -- 7,200
L. Anthony Bottoms, III 1995(6) 57,267 -- 3,600
Executive Vice 1994 100,000 -- 7,200
President and COO 1993 100,000 -- 7,200
C. Harril Whitehurst, Jr. 1995 100,000 $25,000 7,200
Executive Vice 1994 100,000 -- 7,200
President and CFO 1993 100,000 -- 7,200
John J. Morrissey 1995(6) 100,000 -- 3,000
Senior Vice President 1994 100,000 47,000 3,000
1993 -- -- --
Robert L. Nichols 1995(6) 100,000 -- 3,000
Senior Vice President 1994 100,000 47,000 3,000
1993 -- -- --
<PAGE>
<CAPTION>
Long-Term Compensation
--------------------------------
Awards Payouts
(a) (b) (f) (g) (h) (i)
All
Name and Restricted Underlying Other
Principal Stock Option/ LTIP Compen-
Position (2) Years Award(s) SARs Payouts(4) sation (5)
- ----------------- ----- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
May E. Gray 1995 $ -- -- $ -- $9,144
President and CEO 1994 -- -- -- 8,174
1993 -- -- -- 8,707
L. Anthony Bottoms,
III 1995(6) -- -- -- 1,336
Executive Vice 1994 -- -- -- 6,786
President and COO 1993 -- -- -- 8,196
C. Harril Whitehurst,
Jr. 1995 -- -- -- 8,898
Executive Vice 1994 -- -- -- 8,039
President and CFO 1993 -- -- -- 10,770
John J. Morrissey 1995(6) -- -- -- --
Senior Vice President 1994 -- -- -- --
1993 -- 50,000 -- --
Robert L. Nichols 1995(6) -- -- -- 3,735
Senior Vice President 1994 -- -- -- 4,897
1993 -- 50,000 -- --
<FN>
(1) Messrs. Gray's and Whitehurst's salaries commenced on June 1, 1992.
(2) No other executive officer had compensation whose salary and bonus exceeded
$100,000.
(3) Includes perquisites, including automobile insurance.
(4) The Company does not presently sponsor any long-term incentive plans nor did
it make any awards or payments under such plans to any executive officer
during the year ended December 31, 1995.
(5) Includes premiums paid for health, disability, and life (where the spouse is
the beneficiary) insurance.
(6) Mr. Bottoms resigned effective July 19, 1995 and Messrs. Morrissey's and
Nichols' employment was terminated effective September 1, 1995.
</TABLE>
<PAGE>
Options/SAR Grants Table
The Company did not during the year ended December 31, 1995,
award individual grants of stock options or SARs to the executive
officers named in the Summary Compensation Table.
Options/SAR Exercises and Year-End Value Table
In May, 1992, the Board of Directors adopted an Incentive Stock
Option Plan (the "Plan"). Pursuant to the Plan, 500,000 shares of the
Company's common stock were made available for rewards. In June, 1992,
incentive stock options to purchase 300,000 shares were granted to the
three principal officers with an exercise price of $2.20 per share. Also
in June, 1992, nonqualified options to purchaser 50,000 shares were
granted under the Plan to individuals providing professional services to
the Company, exercisable at $2.50 per share. All options granted in 1992
are currently exercisable and must be exercised on or before June 1,
1997. Stock options for 100,000 shares granted to Mr. Bottoms, a
principal officer, in June, 1992 were cancelled in connection with his
voluntary resignation as an officer in 1995.
In September, 1993, incentive stock options to purchase 50,000
shares of the Company's common stock and non-qualified options to
purchase 50,000 shares were granted under the Plan to two individuals who
became officers of the Company as part of the merger with Waterford
Mortgage Corporation. All options granted in 1993 were exercisable at a
price of $8.00 per share. Options to purchase 50,000 shares expired on
September 28, 1998, and the remaining options to purchase 50,000 shares
expired on September 28, 1999. These options expired and were cancelled
in connection with such individuals' termination of employment with the
Company in 1995.
In May, 1994, incentive stock options to purchase 30,760 shares
of the Company's common stock and non-qualified options to purchase
19,240 shares were granted under the Plan to an executive officer of the
Company's wholly owned subsidiary, Waterford Mortgage Corporation. These
options had an exercise price of $6.50 per share. Of the total grant of
options to purchase 50,000 shares, options to purchase 25,000 shares were
exercisable and must be exercised on or before May 3, 1999 and the
remaining options to purchase 25,000 shares became exercisable on May 4,
1994 and must be exercised on or before May 3, 2000. These options were
cancelled in connection with such individual's termination of employment
with the Company in 1995.
<PAGE>
In July, 1995, nonqualified options to purchase 50,000 shares of
the Company's common stock were granted under the Plan to a director of
the Company. These options have an exercise price of $0.25 per share.
Incentive stock options to purchase 10,000 shares of the Company's common
stock were granted under the Plan to an executive officer of the Company.
These options have an exercise price of $0.25 per share. Additionally,
nonqualified options to purchase 100,000 shares at an exercise price of
$0.275 per share were granted to an existing shareholder who provided
services to the Company. Options to purchase 50,000 shares of the
Company's common stock also were granted to an individual providing
professional services to the Company. Such options are exercisable at
$0.25 per share. All options granted in 1995 are currently exercisable
and must be exercised on or before July 24, 2000.
No options have been exercised as of December 31, 1995.
The following table presents information concerning individual
grants of stock options made during the fiscal year ended December 31,
1995 to each of the named executive officers:
<TABLE>
<CAPTION>
Option/SAR Grants in Last Fiscal Year
(a) (b) (c) (d) (e)
Number of % of Total
Shares Under- Options/SARs
lying Options/ Granted to
SARs Employees in Exercise or Expiration
Name Granted Fiscal Year Base Price Date
- -------------- ------------- ------------ ----------- -------------
<S> <C> <C> <C> <C>
Janet W. Stagg 10,000 100% $0.25 July 24, 2000
</TABLE>
<PAGE>
The following table presents information concerning each exercise
of stock options during the year ended December 31, 1995 by each of the named
executive officers and the value of unexercised options at December 31, 1995:
<TABLE>
<CAPTION>
Aggregated Option/SAR Exercises in
Last Fiscal Year and FY-End Option/SAR Values
Value of
Number of Shares Unexercised
Underlying In-the-Money
Unexercised Options Options/SARs
Shares SARs at FY-End at FY-End
Acquired on Value Exercisable/ Exercisable/
Name Exercise Realized Unexercisable Unexercisable(1)
- ----------------- ----------- -------- ------------------- ----------------
<S> <C> <C> <C> <C>
Max E. Gray 0 0 100,000 (2)
C. Harril
Whitehurst, Jr. 0 0 100,000 (2)
Janet W. Stagg 0 0 10,000 (2)
<FN>
(1) Represents the difference between the exercise price of the options and
the closing price of the Company's common stock at December 31, 1995 of
$0.25 per share.
(2) None of the options are in-the-money at December 31, 1995 as the exercise
price is equal to or higher than the closing price of the Company's common
stock at December 31, 1995 of $0.25 per share.
</TABLE>
<PAGE>
Long-Term Incentive Plan Awards In Last Fiscal Year
The Company does not sponsor any long-term incentive
plan. Accordingly, the Company did not grant (nor has it ever
granted) any stock appreciation rights or long-term incentives to
any executive officers.
Employment Agreements
The Company entered into employment agreements with
five of its executive officers. Each employment agreement may be
terminated by the Board of Directors or the executive officer at
any time. If the employee is terminated by the Board of
Directors other than for cause (as defined in each agreement),
the executive officer will be entitled to a continuation of
salary and benefits that would otherwise be due to him for a
period of one (1) year from the date of termination of
employment. During 1995, one of the executives covered by an
employment agreement resigned from the Company with no obligation
for payment under the employment agreement. Additionally during
1995, two other executives covered by employment agreements were
terminated by the Company other than for cause as part of the
closure of its mortgage origination subsidiaries. In accordance
with their employment agreements, the Company is obligated to
continue their salary through August 31, 1996. At December 31,
1995, the Company owed these two executives approximately
$137,000 under the agreements, which has been provided for as
part of the restructuring charges recorded in 1995. At December
31, 1995, the Company's potential obligation under the contracts
with the remaining two executives aggregates approximately
$231,000.
In addition, pursuant to the employment agreements, the
Company agreed to grant Messrs. Gray and Whitehurst incentive
stock options, effective June 1, 1992, entitling each of them to
purchase 100,000 shares of the Company's common stock at a
purchase price of $2.20 per share. Messrs. Gray and Whitehurst
each surrendered in May, 1996 options entitling each of them to
purchase 25,000 shares of the Company's common stock. The
current base salary of each of Messrs. Gray and Whitehurst under
his respective employment agreement is $100,000.
<PAGE>
PROPOSAL 3
AMENDMENT TO 1992 STOCK OPTION PLAN
Introduction
The Company's 1992 Stock Option Plan (the "Plan") was
adopted by the Board of Directors and approved by the Company's
stockholders in May 1992. The Plan became effective June 1,
1992. Unless sooner terminated by the Board of Directors, the
Plan will terminate on June 1, 2002. No awards may be made under
the Plan after its termination. The Plan is intended to provide
a means to attract and retain experienced, knowledgeable, and
qualified personnel for positions of substantial responsibility
with the Company and to provide employees with additional
incentive to promote the success of the Company (references to
the "Company" in this section will include any parent and
subsidiary corporations).
The Plan authorizes the reservation of 500,000 shares
(after giving effect to the 1-for-2 reverse stock split that
occurred in July, 1993) of Common Stock for issuance pursuant to
options granted under the Plan. The Board of Directors has
approved an amendment increasing the number of shares reserved
for issuance under the Plan from 500,000 to 750,000 shares. A
copy of the proposed amendment is set out in Annex 2. Currently,
460,000 shares are issuable upon exercise of options granted
under the Plan. The Board recommends an increase in the
aggregate number of shares that may be subject to options to
afford the Company the flexibility to make awards deemed
necessary during the coming years. Other than with respect to
the amendment, the Plan would remain unchanged.
Adjustments will be made in the number of shares which
may be issued under the Plan and in the exercise price of
outstanding options in the event of a future stock dividend,
stock split or other increase or decrease in the number of
outstanding shares of common stock without receipt of
consideration by the Company. In addition, any distribution of
assets by the Company except for cash dividends is considered to
be a stock dividend for purposes of the foregoing adjustments.
The Company's common stock is not listed on any
exchange. However, market quotes for the Common Stock (under the
symbol "FCFN") may be obtained from the National Association of
Securities Dealers through the NASD OTC Bulletin Board, its
automated system for reporting non-NASDAQ quotes. As of May 17,
1996 the high bid price was $0.625. The low offer price was
$0.8125, as reported on the NASD OTC Bulletin Board.
<PAGE>
The Plan permits the issuance of Incentive Stock
Options intended to qualify under Section 422 of the Internal
Revenue Code of 1986, and for Nonqualified Stock Options not
intended to qualify as Incentive Stock Options. Incentive Stock
Options may be granted only to employees of the Company.
Nonqualified Stock Options may be granted to employees as well as
nonemployee directors and consultants to the Company. Exercise
prices under the Plan must be at fair market value per share at
date of grant or, in the case of Incentive Stock Options granted
to employees who own more than 10% of the voting power of all
classes of stock of the Company, at 110% of the fair market value
per share at date of grant. Option activity is summarized
following:
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------
1995 1994 1993
------- ------- -------
<S> <C> <C> <C>
Outstanding Options at 500,000 450,000 350,000
beginning of year
Options granted 210,000 50,000 100,000
Options cancelled (250,000)
------- ------- -------
Outstanding options at
beginning of year 460,000 500,000 450,000
======= ======= =======
Exercise prices
Low $0.25 $2.20 $2.20
High $2.50 $8.00 $2.50
Latest expiration date 7/24/2000 5/3/2000 6/1/97
</TABLE>
<PAGE>
The value of incentive stock options, based on the
exercise price, that can be exercisable for the first time in any
calendar year under the Plan is limited to $100,000.
Each option is exercisable after the period or periods,
or the satisfaction of any conditions, specified in the stock
option agreement between the Company and the recipient; provided,
however, that incentive stock options may not be exercised after
the first to occur of (i) 10 years (or, in the case of an
incentive stock option granted to a 10 percent shareholder, five
years) from the date on which the incentive stock option was
granted, (ii) 30 days (or such other period not exceeding three
months as determined by the Board or committee administering the
Plan) from the optionee's termination of employment with the
Company for reasons other than death or disability, (iii) three
months (or such other period not exceeding 12 months as
determined by the Board or committee administering the Plan) from
the optionee's termination of employment on account of
disability, (iv) 12 months from the optionees' termination of
employment on account of death, and (v) if death occurs within
the period specified in clause (ii), three months following the
date of death. The Board, or committee administering the Plan,
may accelerate or defer (with the optionee's consent) the
exercise date of an option.
Upon exercise of an option, the exercise price shall be
paid in a manner determined by the Board of Directors, or
committee administering the Plan, and may consist entirely of
cash, check, promissory note, shares of common stock having a
fair market value equal to the option price or a combination
thereof.
Administration
The Plan is administered by the Board of Directors or,
if appointed by the Board, a committee comprised of at least
three directors of the Company. The Board, or the committee
administering the Plan, has the power and complete discretion to
determine when to grant awards, which employees and other
eligible participants will receive awards, whether the award will
be an incentive or nonqualified stock option, and the number of
shares to be allocated to each option. The Board, or the
committee administering the Plan, may impose conditions on the
exercise of options, and may impose such other restrictions and
requirements as it may deem appropriate.
<PAGE>
Transferability of Awards
An incentive option awarded under the Plan may not be
sold, transferred, pledged, or otherwise disposed of, other than
by will or by the laws of descent and distribution. All incentive
options granted to a participant under the Plan shall be
exercisable during his lifetime only by such participant. Upon
the death of a participant, his personal representative or
beneficiary may exercise his rights under the Plan. Under the
Plan nonqualified options may be transferred; however, in each
stock option agreement relating to nonqualified options granted
under the Plan, an officer or director has provided that such
options may not be sold, transferred, pledged, or otherwise
disposed of, other than by will or the laws of descent and
distribution.
Amendment of the Plan and Awards
The Board of Directors may amend the Plan in such
respects as it deems advisable; provided that the shareholders of
the Company must approve any amendment that would (i) increase
the number of shares of Common Stock that are reserved for
issuance under the Plan (other than adjustments upon changes in
capitalization or merger), (ii) change the class of persons
eligible to be granted options, or (iii) materially increase the
benefits accruing to participants under the Plan. Options granted
under the Plan may be amended with the consent of the recipient
so long as the amended award is consistent with the terms of the
Plan.
The foregoing summary of the Plan is qualified by
reference to the complete text of the Plan, a copy of which is
available upon request from the Secretary of the Company, 9100
Arboretum Parkway, Suite 160, Richmond, Virginia 23226.
The Board of Directors recommends approval of the
amendment of the Plan. Although the exercise of the options
subject to the amendment may have a dilutive effect on existing
shareholders, the amendment will permit the issuance of
additional options to attract and retain experienced and
knowledgeable employees and to furnish additional incentives to
those employees upon whose judgment, initiative, and effort the
Company largely depends.
PROXIES RECEIVED IN RESPONSE TO SOLICITATION WILL BE VOTED FOR
THE PROPOSAL TO AMEND THE 1992 STOCK OPTION PLAN UNLESS OTHERWISE
SPECIFIED IN THE PROXY.
<PAGE>
CERTAIN RELATED PARTY TRANSACTIONS
On March 9, 1994, John E. Dell, Wallace L. Timmeny, as
Trustee, and the Company entered into a Liquidating Trust
Agreement (the "Trust Agreement") pursuant to which Mr. Dell
transferred 550,000 shares of the Company's common stock and
300,000 warrants to purchase 300,000 shares of the Company's
common stock to the Trustee (the shares and warrants transferred
to the Trustee shall be collectively referred to as "Trust
Securities"). The Trustee was obligated to use his best efforts
to sell the Trust Securities prior to the second anniversary of
the Trust Agreement. Mr. Dell continues to directly own 450,000
shares of the Company's common stock outside the Trust Agreement.
In connection with the establishment of the Trust Agreement,
Mr. Dell granted an irrevocable proxy to vote all of his shares
and the Trust Securities to Max E. Gray, the president and chief
executive officer of the Company.
In December, 1994, the Trust Securities were sold by
the Trustee to Mark Mendelson, an individual unrelated to the
Company as an officer or director. Mr. Dell continues to own
450,000 shares of the Company's common stock and Mr. Gray
continues to have voting power over such stock.
All of the transactions described above give
retroactive effect to the 1-for-2 reverse stock split that
occurred in July, 1993.
There were no related party or interested party
transactions involving the Company for the year ending
December 31, 1995. In May, 1996, Messrs. Gray and Whitehurst
each surrendered options entitling each of them to purchase
25,000 shares of the Company's common stock. The Company granted
John D. Mazzuto options entitling him to purchase 50,000 shares
of the Company's common stock at a purchase price of $0.25 per
share.
All future transactions with officers, directors, or
five percent (5%) stockholders of the Company will be approved by
the independent members of the Company's Board of Directors and
be on terms no less favorable to the Company than could otherwise
be obtained from unaffiliated third parties.
<PAGE>
PROPOSAL 4
RATIFICATION OF APPOINTMENT OF
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
BDO Seidman served during the Company's year ended
December 31, 1995, as its independent certified public
accountants and has been selected by the Board of Directors to
serve as the Company's independent certified public accountants
for the current fiscal year. The Board requests the
shareholders' ratification of such selection. Representatives
from BDO Seidman will be present at the annual meeting of
shareholders. Such representatives will have the opportunity to
make a statement if they so desire and will be available to
respond to appropriate questions.
PROXIES RECEIVED IN RESPONSE TO THIS SOLICITATION SHALL BE VOTED
FOR RATIFICATION UNLESS OTHERWISE SPECIFIED IN THE PROXY.
OTHER MATTERS
The Board of Directors knows of no other matters to be
brought before the meeting. If any other matters are properly
presented, however, or if any question arises as to whether any
matter has been properly presented and is a proper subject for
shareholder action, the persons named as proxies in the
accompanying proxy intend to vote the share represented by such
proxy in accordance with their best judgment.
SHAREHOLDER PROPOSALS
The shareholders may present proposals for
consideration at the 1997 annual meeting of shareholders of the
Company for the inclusion in its proxy materials for such
meeting. Any such proposal should be submitted in writing in
accordance with Securities and Exchange Commission rules to First
Chesapeake Financial Corporation, 9100 Arboretum Parkway, Suite
160, Richmond, Virginia 23236, Attention: C. Harril Whitehurst,
Jr., Chief Financial Officer. Shareholder proposals must be
received by December 1, 1996, to be included in the proxy
materials for the 1997 annual meeting.
<PAGE>
ANNUAL REPORT TO SHAREHOLDERS
The Annual Report to shareholders of the Company for
the year ended December 31, 1995, including audited consolidated
financial statements, has been mailed to the shareholders
concurrently herewith, but such report is not incorporated in
this Proxy Statement and is not deemed to be a part of the proxy
solicitation material.
FURTHER INFORMATION
THE COMPANY WILL PROVIDE WITHOUT CHARGE TO EACH PERSON
FROM WHOM A PROXY IS SOLICITED BY THE BOARD OF DIRECTORS, UPON
THE WRITTEN REQUEST OF ANY SUCH PERSON, A COPY OF THE COMPANY'S
ANNUAL REPORT ON FORM 10-KSB, INCLUDING THE FINANCIAL STATEMENTS
AND SCHEDULES THERETO, REQUIRED TO BE FILED WITH THE SECURITIES
AND EXCHANGE COMMISSION PURSUANT TO THE SECURITIES EXCHANGE ACT
OF 1934 FOR THE COMPANY'S YEAR ENDED DECEMBER 31, 1995. SUCH
WRITTEN REQUEST SHOULD BE SENT TO FIRST CHESAPEAKE FINANCIAL
CORPORATION, 9100 ARBORETUM PARKWAY, SUITE 160, RICHMOND,
VIRGINIA 23236, ATTENTION: C. HARRIL WHITEHURST, JR., CHIEF
FINANCIAL OFFICER.
By Order of the Board of Directors
C. Harril Whitehurst, Jr.
Secretary
June 5, 1996
<PAGE>
ANNEX 1
Article VII of the Restated Articles of Incorporation is
deleted in its entirety and replaced with the following:
The number of Directors constituting the Board of
Directors shall be not less than four nor greater
than seven, as set forth in the Bylaws from time
to time. The terms of the Directors shall be
staggered by dividing the total number of
Directors into three classes, as nearly equal in
number as the total number of Directors
constituting the Board then permits, with any
Director or Directors in excess of the number
divisible by three being assigned to Class III and
Class II, as the case may be. The terms of
Directors in Class I shall expire at the first
annual shareholders' meeting after their initial
election (or until their respective successors are
duly elected and qualified or until their earliest
death, resignation, or removal); the terms of the
Directors in Class II shall expire at the second
annual shareholders' meeting after their initial
election (or until their respective successors are
duly elected and qualified or until their earliest
death, resignation, or removal); and the terms of
the Directors in Class III shall expire at the
third annual shareholders' meeting after their
initial election (or until their respective
successors are duly elected and qualified or until
their earliest death, resignation, or removal).
At each annual shareholders' meeting held
thereafter, directors shall be chosen for a term
of three years to succeed those whose terms
expire.
<PAGE>
Section 2.3.2 of the Bylaws is deleted in its entirety and
replaced with the following:
The terms of the directors shall be staggered by
dividing the total number of directors into three
classes, as nearly in equal in number as the total
number of Directors constituting the Board then
permits, with any Director or Directors in excess
of the number divisible by three being assigned to
Class III and Class II, as the case may be. The
terms of Directors in Class I shall expire at the
first annual shareholders' meeting after their
initial election (or until their respective
successors or duly elected and qualified or until
their earlier death, resignation, or removal); the
terms of the directors in Class II shall expire at
the second annual shareholders' meeting after
their initial election; and the terms of the
directors in Class III shall expire at the third
annual shareholders' meeting after their initial
election (or until their respective successors or
duly elected and qualified or until their earlier
death, resignation, or removal). At each annual
shareholders' meeting held thereafter, directors
shall be chosen for a term of three years. Any
Director may be removed from office at a meeting
called expressly for that purpose by the vote of
shareholders holding not less than majority of the
shares entitled to vote at an election of
Directors.
<PAGE>
ANNEX 2
The 1992 Stock Option Plan (the "Plan") is amended by
deleting in its entirety Section 3 and substitution in its stead
the following:
"3. STOCK. Subject to the provisions of Section 12 of
the Plan, the maximum aggregate number of shares which may
be optioned and sold under the Plan is Seven Hundred Fifty
Thousand (750,000) shares of authorized, but unissued, or
reacquired without par value Common Stock.
If an Option should expire or become unexercisable for
any reason without having been exercised in full, the
unpurchased Shares which were subject thereto shall, unless
the Plan shall have been terminated, become available for
further grant under the Plan."
<PAGE>
FIRST CHESAPEAKE FINANCIAL CORPORATION
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD
JUNE 28, 1996
The undersigned, having received the Annual Report to
the Shareholders and the accompanying Notice of Annual Meeting of
Shareholders and Proxy Statement, dated June 5, 1996, hereby
appoints Max E. Gray and C. Harril Whitehurst, Jr., or either of
them, proxies, with full power of substitution, and hereby
authorizes them to represent and vote the shares of Common Stock
of First Chesapeake Financial Corporation (the "Company") which
the undersigned would be entitled to vote if personally present
at the Annual Meeting of Shareholders of the Company to be held
on Friday, June 28 1996, at 10:00 a.m., local time, and any
adjournment thereof, and especially to vote as set forth below:
1. ELECTION OF DIRECTORS
[ ] FOR all nominees listed [ ] WITHHOLD AUTHORITY
below for the terms to vote for all
set forth in the Proxy nominees listed
Statement below
Max E. Gray, C. Harril Whitehurst, Jr., Robert L. Suthard, and John D.
Mazzuto.
TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, WRITE
THAT NOMINEE'S NAME ON THE SPACE PROVIDED BELOW:
________________________________________________________________
2. AMENDMENT OF ARTICLES OF INCORPORATION AND BYLAWS
Approval of the amendment of the Company's Articles of
Incorporation and Bylaws to create a classified Board of Directors.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. AMENDMENT OF 1992 STOCK OPTION PLAN
Approval of the amendment of the Company's 1992 Stock Option
Plan to increase the number of shares issued upon exercise of options
under the Plan from 500,000 to 750,000 shares.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
<PAGE>
4. INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
FOR [ ] AGAINST [ ] ABSTAIN [ ]
Ratification of the selection by the Board of Directors of BDO
Seidman to serve as the Company's independent certified public
accountants for the fiscal year ending December 31, 1996.
5. IN THEIR DISCRETION, the proxies are authorized to vote upon
such other business as may properly come before the meeting and
any adjournments thereof.
If you specify a choice as to the action to be taken, this
proxy will be voted in accordance with such choice. If you do not
specify a choice, it will be voted FOR the named nominees in the
Proxy Statement, FOR the amendment of the Company's Articles of
Incorporation and Bylaws, FOR the amendment of the Company's 1992
Stock Option Plan, and in the discretion of the proxies for any other
matter that is presented.
Any proxy or proxies previously given for the meeting are
revoked.
PLEASE MARK, SIGN, DATE, AND RETURN THE PROXY CARD PROMPTLY, USING
THE ENCLOSED ENVELOPE.
When shares are held by joint tenants, both should sign.
When signing as attorney, executor, administrator, trustee, or
guardian, please give full title as such. If a corporation, please
sign in full corporate name by president or other authorized officer.
If a partnership, please sign in partnership name by authorized
person.
DATED: ______________________, 1996
________________________________________
(signature)
________________________________________
(signature if held jointly)
Please sign exactly as the name appears
hereon.
I plan to attend the meeting. [ ]
