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
[ ] Preliminary Proxy Statement Commission Only (as permitted
by Rule 14a-6(e)(2))
[ X ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
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):
[ ] $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:
(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):
<PAGE>
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ X ] 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>
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 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>
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 amendments 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>
Name and Address of Amount and Nature of Percent
Beneficial Owner (1) Beneficial Ownership of Total (2)
- -------------------- -------------------- ------------
<S> <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%
</TABLE>
- ---------------------------
* 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., was 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
<PAGE>
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) Includes 10,000 shares of common stock issuable upon the exercise of
stock options.
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.
The names, positions, ages and backgrounds of nominees for
director of the Company are set forth below.
<PAGE>
<TABLE>
<CAPTION>
NAME AGE POSITION
<S> <C>
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.
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
<PAGE>
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 OF 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.
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 30, 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 amendments to
the Restated Articles of Incorporation and Bylaws is set out in Annex 1 to this
Proxy Statement. Other than with respect to the amendments, 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 will 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
<PAGE>
(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.
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
<PAGE>
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 shareholders' ability to remove management.
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 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
<PAGE>
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.
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, other than late filings by Janet W. Stagg and
Robert L. Suthard with respect to the receipt of options under the Plan.
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 some 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.
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>
<TABLE>
<CAPTION>
Long-Term Compensation
Annual Compensation Awards Payouts
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Other All
Name and Annual Restricted Underlying Other
Principal Compen- Stock Option/ LTIP Compen-
Position (2) Year Salary (1) Bonus sation (3) Award(s) SARs Payouts(4) sation (5)
- --------------- ---- ---------- ----- ---------- ---------- ---------- ---------- ----------
<S> <S>
May E. Gray 1995 $100,000 $25,000 $ 7,200 $ -- -- $ -- $9,144
President and CEO 1994 100,000 -- 7,200 -- -- -- 8,174
1993 100,000 -- 7,200 -- -- -- 8,707
L. Anthony Bottoms, III 1995(6) 57,267 -- 3,600 -- -- -- 1,336
Executive Vice 1994 100,000 -- 7,200 -- -- -- 6,786
President and COO 1993 100,000 -- 7,200 -- -- -- 8,196
C. Harril Whitehurst, Jr. 1995 100,000 $25,000 7,200 -- -- -- 8,898
Executive Vice 1994 100,000 -- 7,200 -- -- -- 8,039
President and CFO 1993 100,000 -- 7,200 -- -- -- 10,770
John J. Morrissey 1995(6) 100,000 -- 3,000 -- -- -- --
Senior Vice President 1994 100,000 47,000 3,000 -- -- -- --
1993 -- -- -- -- 50,000 -- --
Robert L. Nichols 1995(6) 100,000 -- 3,000 -- -- -- 3,735
Senior Vice President 1994 100,000 47,000 3,000 -- -- -- 4,897
1993 -- -- -- -- 50,000 -- --
</TABLE>
- ------------------------
(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.
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
<PAGE>
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.
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:
<PAGE>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
(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>
Janet W. Stagg 10,000 100% $0.25 July 24, 2000
</TABLE>
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:
AGGREGATED OPTION/SAR EXERCISES IN
LAST FISCAL YEAR AND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
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>
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)
- --------------------------
</TABLE>
(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.
<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.
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
<PAGE>
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.
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:
<PAGE>
Year Ended December 31,
1995 1994 1993
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
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.
<PAGE>
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.
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.
<PAGE>
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.
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.
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
<PAGE>
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 shares 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.
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
<PAGE>
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.
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
<PAGE>
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:
<TABLE>
<S> <C>
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
</TABLE>
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 amendments 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 [ ]
4. INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
FOR [ ] AGAINST [ ] ABSTAIN [ ]
<PAGE>
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. [ ]
