SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant (X)
Filed by a Party other than the Registrant ( )
Check the appropriate box:
( ) Preliminary Proxy Statement ( ) Confidential, for Use of the
Commission Only (as permitted
by Rule 14a-6(e)(2))
(X) Definitive Proxy Statement
( ) Definitive Additional Materials
( ) Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
FIRST CHESAPEAKE FINANCIAL CORPORATION
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
(X) No fee required
( ) Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
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pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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( ) Fee paid previously with preliminary materials.
( ) Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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4) Date Filed:
<PAGE>
First Chesapeake Financial Corporation
Letter to Stockholders
Dear Fellow Stockholders,
There is no question that we have accomplished a great deal following the
cessation of First Chesapeake's former operations and removal of management in
late 1997. Since that time, our new Directors and management have worked hard to
carry out various strategic initiatives to re-establish First Chesapeake as a
provider of financial services and achieve profitability for our shareholders.
Our operations now consist of retail and wholesale mortgage banking as conducted
through First Chesapeake Funding, Collateral One Mortgage and First Prime
Funding. At this time we have 12 retail offices in seven states, with
applications pending in 5 additional states.
Achievements in 1998
After closing the previous operations and several months of planned dormancy, in
mid-1998 we installed a new management team and elected a new Board of
Directors. The new management team assessed its various business options and
adopted a new strategic plan. The first priority has been to build a wholesale
and retail mortgage operation through acquisition and internal growth. Our
ultimate goal is to vertically integrate First Chesapeake's operations by
providing a range of financial services, including various insurance and other
products and services to our customers.
As part of our new business strategy, we decided to exit all non-financial
services businesses and refocus on building a financial services company. Three
of the unrelated businesses have been closed or sold, and we expect to divest of
the fourth by year-end 1999.
Armed with a fresh management team and new strategy, First Chesapeake completed
its first round of financing to re-capitalize the Company in July 1998, raising
$635,000 under a subordinated debenture offering. We used the proceeds to
re-establish S.E.C. and regulatory compliance and build the foundation for our
new mortgage banking operations. First Chesapeake Funding was formed as a
wholly-owned subsidiary in August 1998 to perform wholesale mortgage banking
operations and to serve as the administrative arm for the Company's planned
national retail mortgage banking operations. During the later half of 1998, we
began a comprehensive search, analysis, and due diligence review of prospective
acquisition candidates and reached a letter of intent to acquire our first
operation.
Achievements to Date in 1999
We continued to make advances in our goal of building a national wholesale and
retail mortgage operation in the first half of 1999. In February we completed a
second round of financing, borrowing $1,500,000 under a bank credit facility
secured by the personal guarantees of several officers and directors of the
Company. The majority of the proceeds were used to establish our first retail
mortgage banking operation through the acquisition of Mortgage Concepts, Inc., a
Kentucky based mortgage banking firm. Mortgage Concepts, which was renamed
Collateral One Mortgage, is an established originator of primarily sub-prime and
alternate documentation residential mortgage loans operating in five states,
including Kentucky, Indiana, Missouri, North Carolina and Tennessee (since
expanding into three additional states). In line with our acquisition strategy,
the company is a well-managed and profitable operation with over $100 million in
annual closed loan volume.
We further expanded our retail presence in July with the launch of a new retail
mortgage banking brand, First Prime Funding, and the opening of its initial
location in Coral Gables, Florida which will be used as the template for future
regional consumer direct operations. The Coral Gables location, staffed with ten
loan officers with extensive experience in retail mortgage lending, already has
a strong pipeline and profitable operations. This model has since been applied
to our Sunrise, Florida branch, with continued roll-out in selected geographic
regions.
Through acquisition and internal growth, and with all of the effort put into
rebuilding First Chesapeake and re-establishing a financial services company, we
were pleased to recently announce the first profits in our mortgage operations
just over a year after new management took control of the Company. The mortgage
banking segment reported revenues of $3.1 million for the first nine months of
1999 and an operating profit of $149,000 for the first time in many years.
In the fourth quarter of 1999 we entered the growing market of Internet mortgage
loan originations, and expect to see this segment become a meaningful part of
our mortgage banking business as well as an important component of longer term
plans.
In the fourth quarter of 1999 we are also undertaking a private placement of the
Company's common stock and have successfully raised $485,000 of additional
capital at this writing. This additional capital will enable the Company to
continue to implement its strategic plan.
<PAGE>
Looking Forward
Your Company has moved closer to accomplishing its goal of developing a
nationwide mortgage banking operation and leveraging its consumer relationships
and national presence to expand into a full-service financial services company.
Consistent with this strategic plan, the Company will continue to aggressively
seek out and pursue other synergistic business opportunities and investments
within the mortgage banking and related financial services industries through
acquisition and internal growth.
Our success to date reinforces our commitment to First Chesapeake and begins to
validate our strategic plan, a plan focusing on creating ever-higher levels of
customer service and a broader portfolio of products and services. It is our
belief that future growth can only be built on a solid foundation, one we
believe we have significantly enhanced over the past year. On behalf of the new
management team, I would like to express our excitement about the prospects we
see before us and look forward to sharing with all our shareholders the growth
of our business. It is important to note that none of this could have been
possible without the hard work and commitment of all our employees. Our loan
officers and staff are the key to the Company's success, and it is only through
the efforts and loyalty of our employees that First Chesapeake will succeed in
its mission.
Since removal of former management in late 1997, our stock price has increased
by approximately 400%, a far better return than major comparative indices such
as Dow Jones, the S&P 500, or the Russell 2000 (all of which have shown a
roughly 100% return in the same period). Despite this strong performance for our
shareholders, we are far from being satisfied. Our new management team is
working diligently to build a strong, profitable business that will provide our
shareholders with meaningful earnings and value over the long-term. I firmly
believe that we are on the right path to maximizing the value to you, our
shareholders, and look forward to announcing further exciting events as we grow
this company into a national financial services provider.
Mark Mendelson
Chairman and Chief Executive Officer
<PAGE>
FIRST CHESAPEAKE FINANCIAL CORPORATION
Notice of Annual Meeting of Shareholders
To Be Held on December 29, 1999
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 Philadelphia Marriott West,
Matsonford at Front Street, 111 Crawford Avenue, West Conshohocken, PA 19428, on
December 29, 1999, at 10:00 A.M., local time, for the following purposes:
1. To elect eight Directors for the ensuing year and until their
successors are duly elected and qualified;
2. To approve the 1999 Incentive Stock Option Plan which has been
adopted by the Board of Directors; and
3. To transact such other business as may properly come before the
meeting or any adjournments thereof.
The close of business on November 24, 1999 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
James J. Greenfield
Secretary
November 30, 1999
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
PROXY STATEMENT
TO BE MAILED ON OR ABOUT NOVEMBER 30, 1999
FOR THE ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON DECEMBER 29, 1999
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 on December 29,
1999, at 10:00 a.m. local time at the Philadelphia Marriott West, Matsonford at
Front Street, 111 Crawford Avenue, West Conshohocken, PA 19428 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.
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. Any other matters submitted to a vote of
the Shareholders will be determined by a majority of the votes cast.
Revocability of Proxies
Any proxy given pursuant to this solicitation may be revoked by the
person giving it at any time before its use by delivering to the Secretary of
the Company a written notice of revocation or a duly executed proxy bearing a
later date or by attending the Annual Meeting and voting in person. If you are
the beneficial owner of shares of the common stock of the Company which are not
registered in your name, you will need appropriate documentation from the holder
of record of your shares to vote personally at the meeting.
1
<PAGE>
VOTING SECURITIES AND PRINCIPAL SHAREHOLDERS
Record Date
The Board of Directors has fixed the close of business on November 24,
1999, 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, 6,341,000 shares of common stock of
the Company were outstanding and entitled to vote at the annual meeting. (An
additional 646,667 shares have been subscribed to under an ongoing private
placement of common stock, although these shares have yet to be issued and are
not entitled to vote on all matters voted on 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.
The Company's common stock is not listed on any exchange. However,
market quotes for the Common Stock (under the symbol "FCFK") 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
November 24, 1999 the high bid price was $1-5/8. The low offer price was
$1-9/16, as reported on the NASD OTC Bulletin Board.
Stock Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information regarding the
beneficial ownership of the Company's common stock as of September 30, 1999 by
i) each person known by the Company to own beneficially 5% of such stock, ii)
each Director of the Company, iii) each executive officer of the Company, and
iv) all Directors and executive officers of the Company as a group. Other than
as listed below, the address for each of the listed individuals is: 12 E. Oregon
Avenue, Philadelphia, Pennsylvania 19148.
<TABLE>
<CAPTION>
Number of Shares Percent
Name of Beneficial Owner <F1> Beneficially Owned of Total
----------------------------- ------------------ --------
<S> <C> <C>
Mark Mendelson <F2>, <F4>, <F8>...................... 3,041,000 42.1%
John E. Dell <F2> .................................. 450,000 6.2%
Richard N. Chakejian, Jr. <F5>, <F9>................. 841,500 11.7%
Mark E. Glatz <F3>, <F6>, <F9>....................... 645,000 8.9%
Matthew Coppolino <F7>............................... 10,000 0.1%
James Greenfield <F7>................................ 100,000 1.4%
John Papandon <F7>................................... 100,000 1.4%
Jay Vederman <F10>................................... -0- -
Pasquale Nestico <F10>............................... -0- -
---------------------- --------- ------
All Directors and officers as a group at 9/30/99..... 5,052,500 70.0%
Total number of (fully diluted) shares at 9/30/99.... 7,219,500 100.0%
</TABLE>
NOTES:
<F1> Unless otherwise indicated, each person has sole voting and investment
powers with respect to the shares
<F2> Consists of 450,000 shares of common stock owned by Mr. Dell subject to
an irrevocable voting trust which is voted by Mr. Mendelson.
<F3> Consists of 500,000 shares of common stock privately purchased by Mr.
Glatz and to be re-allocated among certain executive officers of the
Company.
<F4> Includes options to purchase 20,000 shares under the conversion rights
associated with subordinated debenture subscriptions.
<F5> Includes options to purchase 10,000 shares under the conversion rights
associated with subordinated debenture subscriptions.
<F6> Includes options to purchase 5,000 shares under the conversion rights
associated with subordinated debenture subscriptions.
2
<PAGE>
<F7> Includes options to purchase 10,000 shares under the Company's 1998
Non-Qualified Stock Option Plan (the "1998 Plan")
<F8> Includes options to purchase 300,000 shares under the 1998 Plan
<F9> Includes options to purchase 100,000 shares under the 1998 Plan
<F10> Messrs. Vederman and Nestico have each subscribed to 66,667 shares under
an ongoing private placement of common stock, although these shares have
yet to be issued by the Company
Legal Proceedings
No director, officer, affiliate or 5% shareholder is a party adverse to
the Company or has a material interest adverse to the Company in any material
proceeding.
PROPOSAL 1
----------
Election of Directors
The Company's Board of Directors presently consists of eight directors.
The terms of all Directors will expire at the time of the Annual Meeting.
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 term 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.
The names, positions, ages and backgrounds of nominees for director of the
Company are set forth below.
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
Mark Mendelson 42 Chairman of the Board of Directors and Chief Executive Officer. Mr.
Mendelson has been a Director of the Company since August 1996.
Since 1984, Mr. Mendelson has served as Chairman and Chief Executive
Officer of Hampton Real Estate Group, Inc., a diversified
professional real estate brokerage, development, and management firm
specializing in commercial and residential properties throughout the
United States. Mr. Mendelson is a former director and past chairman
of the Audit Committee of Equimark Bank Corporation (currently known
as Integra) and sits on the boards of a variety of civic and
philanthropic institutions.
Richard Chakejian, Jr. 37 Director and President. Mr. Chakejian is experienced in the food,
laundry products and chemical industries. Mr. Chakejian has an
extensive background in field management, sales, marketing and
research.
Mark Glatz 37 Director and Chief Financial Officer. Mr. Glatz is experienced
in finance, banking, and a wide array of other industries, and holds
a degree in accounting and an MBA in financial management.
3
<PAGE>
<CAPTION>
Name Age Position
- ---- --- --------
Matthew Coppolino 70 Director. Mr. Coppolino is the senior Judge in the Court of Common
Pleas of the Commonwealth of Pennsylvania.
James Greenfield 48 Director and Secretary. Mr. Greenfield is an attorney with
experience in private practice, emphasizing municipal law, real
estate matters, and complex commercial litigation and arbitration.
Pasquale Nestico, M.D. 54 Director (appointed November 1999). Dr. Nestico is a practicing
physician certified in cardiology and internal medicine as well as an
extensively published clinical professor of medicine at both
Allegheny Hospital (formerly Hahnemann University) and Jefferson
Medical College.
John Papandon 37 Director. Mr. Papandon is an attorney and Certified Public
Accountant with a Masters degree in taxation with 15 years experience
in the accounting industry.
Jay Vederman 33 Director (appointed November 1999). Mr. Vederman has experience
in real estate development and management, retail and manufacturing.
Mr. Vederman also brings valuable experience and background in the
management of growth-oriented publicly-traded entities.
</TABLE>
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.
Meetings And Committees Of The Board
The Board of Directors held four meetings during 1998. Excluding the
newly appointed directors, each director who is standing for election attended
all of such meetings of the Board of Directors during which he was a director.
The Nominating Committee considers nominees for the Board recommended
by the Company's shareholders. The Nominating Committee consists of John
Papandon, Mark Mendelson, and Richard Chakejian, Jr. 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.
The Audit Committee consists of John Papandon and James Greenfield. The
Audit Committee met three times during 1998. The committee's primary function is
to oversee and maintain adequate financial and operating policies, safeguards
and procedures exist and are followed to assure integrity of the Company's books
and records and to protect its shareholders.
The Compensation Committee consists of Matthew Coppolino, John
Papandon, and James Greenfield. The Compensation Committee met once during 1998.
The committee is responsible for recommending to the Board of Directors the
amount and nature of compensation paid to executive officers and key employees
of the Company. The principal objective in designing and recommending
compensation policies is to develop and administer a comprehensive program
designed to attract, motivate and retain outstanding managers who are likely to
enhance the profitability of the Company and create value for its shareholders.
4
<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 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, 1998; however, certain filings of forms 3, 4, and/or 5 for Messrs.
Chakejian, Mendelson and Papandon which were due in 1999 have yet to be filed.
Resignation of Board Members
Pasquale Nestico, M.D. resigned as director of the Company effective
April 14, 1998. (As noted above, Dr. Nestico has rejoined the Board of Directors
effective November 17, 1999.)
Compensation of Directors
Directors who are not executive officers of the Company ("Outside
Directors"), namely Messrs. Coppolino, Greenfield, Papandon, Vederman and
Nestico, are entitled to receive compensation of $2,000 per calendar quarter
served. As of July 9, 1998, each of the Outside Directors serving at that time,
namely, Messrs. Coppolino, Greenfield and Papandon, were awarded stock options
to purchase 10,000 shares at $0.60 per share expiring July 9, 2003.
Compensation of Executive Officers
The following table sets forth, for the three years ended December 31,
1998, 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>
Summary Compensation Schedule
<CAPTION>
Annual Compensation
------------------- Other All Other
Name Salary Other Reimb. Compensation
Principal Position <F1> Year <F2> <F3> <F4> <F5>
----------------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Mark Mendelson 1998 $ 75,000 $100,000 $ 9,000 $ 12,000
Chairman and CEO 1997 $ 0 $ 0 $ 0 $ 0
1996 $ 0 $ 0 $ 0 $ 0
Richard N. Chakejian, Jr. 1998 $ 50,000 $100,000 $ 9,000 $ 12,000
President 1997 $ 0 $ 0 $ 0 $125,000 <F6>
1996 $ 0 $ 0 $ 0 $ 0
Mark E. Glatz 1998 $ 50,000 $ 50,000 $ 9,000 $ 12,000
Chief Financial Officer 1997 $ 0 $ 0 $ 0 $ 0
1996 $ 0 $ 0 $ 0 $ 0
</TABLE>
5
<PAGE>
<F1> No other executive officer had compensation whose salary and bonus
exceeded $100,000.
<F2> All 1998 salaries to the three executive officers, Messrs. Mendelson,
Chakejian, Jr. and Glatz, have been deferred.
<F3> Includes amounts converted to subordinated debentures in 1998.
<F4> Includes perquisites, including automobile and incidental expense
allowance.
<F5> Includes premiums paid or reimbursed for health, disability and life
(where the spouse is the beneficiary) insurance.
<F6> Richard Chakejian, Jr. received 500,000 shares of common stock in
exchange for his transfer of all rights, title and interest in all
proprietary formulas, processes, materials, know-how, and methods of
manufacture of a soap detergent and related product. The stock
consideration for the transaction with Mr. Chakejian was recognized as
compensation by the Company at $0.25 per share, the market price of the
stock at that date.
Employment Agreements
There are no employment agreements with the above-named executive
officers.
Option/SAR Grants in Last Fiscal Year
In July 1998, the Board of Directors adopted a Non-Qualified Stock
Option Plan (the "1998 Plan"). Pursuant to the 1998 Plan, 1,000,000 shares of
the Company's common stock were made available for awards. The 1998 Plan allows
for Nonqualified Stock Options not intended to qualify as Incentive Stock
Options within the meaning of Section 422 of the Internal Revenue Code of 1986.
Non-qualified Stock Options may be granted to employees as well as non-employee
directors and consultants to the Company. Exercise prices under the Plan must be
at fair market value per share at date of grant.
In July 1998, the Executive Compensation Committee awarded 500,000
option shares to three executive officers of the Company.
In July 1998, the Board of Directors awarded 30,000 option shares to
three outside directors of the Company.
In 1998, the Company issued $635,000 of convertible subordinated
debentures. Up to 20% of the subordinated debenture notes are convertible, at
any time at option of the holder, into the Company's common stock at a price of
$2.00 per share (for a total of 63,500 option shares of common stock). The
$635,000 includes $350,000 of subordinated debentures issued to certain officers
of the Company in exchange for a similar reduction in amounts due officers.
No 1998 Plan options or Subordinated Debenture options have been
exercised as of June 30, 1999.
6
<PAGE>
The following table sets forth, for the period ended December 31, 1998,
certain information as to the Option/SAR grants to the above-named executive
officers in the last fiscal year:
<TABLE>
<CAPTION>
Number of
Securities % of Total
Underlying Options/SARs to Exercise or Latest
Options/SARs Employees in Base Price Expiration
Granted Fiscal Year ($/share) Date
------- ----------- --------- ----
<S> <C> <C> <C> <C>
Mark Mendelson 300,000 50.5% $0.60 July 9, 2003
20,000 3.4% $2.00 July 9, 2001
Richard Chakejian, Jr. 100,000 16.8% $0.60 July 9, 2003
10,000 1.7% $2.00 July 9, 2001
Mark E. Glatz 100,000 16.8% $0.60 July 9, 2003
5,000 0.8% $2.00 July 9, 2001
Subsequently, in 1999, the Company issued 100,000 option shares at an
exercise price of $2.00 per share and 100,000 option shares at an exercise price
of $5.00 per share as partial compensation to seven individuals, including three
executive officers, one subsidiary officer, two Outside Directors of the Company
and one unaffiliated individual, for personally guaranteeing a $1,500,000 bank
loan to the Company.
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.
Options/SAR Exercises and Year-End Value Table
No stock options were exercised in the fiscal year ending
December 31, 1998.
The following table presents information concerning each exercise of
stock options during the fiscal year ended December 31, 1998 by each of the
named executive officers and the value of unexercised options at December 31,
1998:
<CAPTION>
Number of Shares Value of
Underlying Unexercised
Shares Unexercised In-the-Money
Acquired Options at FY-End Options at FY-End
on Value Exercisable/ Exercisable/
Name Exercise Realized Unexercisable Unexercisable
- ---- -------- -------- ------------- -------------
Mark Mendelson 0 0 420,000/-0- $ 267,500/-0-
Richard N. Chakejian, Jr. 0 0 110,000/-0- $ 58,750/-0-
Mark E. Glatz 0 0 105,000/-0- $ 58,750/-0-
</TABLE>
Defined Benefit Plans
The Company does not sponsor any defined benefit plan.
Repricing of Options/SAR
The Company did not reprice any options or SAR's in 1998.
7
<PAGE>
Related Party or Interested Party Transactions
In October 1997, 500,000 shares of common stock were issued to Mr.
Chakejian, Jr. in consideration of the transfer of his rights, title, and
interests in all proprietary formulas, processes, materials, know-how, and
methods of manufacture of a soap detergent and related product.
In October 1997, 500,000 shares of common stock were issued to Mr.
Mendelson and a cash payment of $135,000 was made to Mr. Mendelson in
consideration for the 50% interest in Fedeoliva International, Ltd. which Mr.
Mendelson, through Hampton Financial Services, Inc., transferred to the Company.
Richard Chakejian, Sr., the father of the President, was manager and
sole employee of Premiere Chemical Products, and was the purchaser of the stock
of this subsidiary upon its divestiture as of January 1, 1999. Mr. Chakejian,
Sr. formerly owned and operated businesses engaged in several aspects of
laundering, dry cleaning, and institutional linen services, and was responsible
for product introduction, sales, marketing and general management of the
wholly-owned subsidiary prior to divestiture of the business.
In January 1999, the Company issued 200,000 shares of common stock,
options to purchase 100,000 shares at $2.00 per share, and options to purchase
100,000 shares at $5.00 per share as compensation to certain individuals for
personally guaranteeing a $1,500,000 bank loan to the Company. The guarantors
included the three executive officers of the Company and two Outside Directors
of the Company, as well as Lester W. Salzman, President of First Chesapeake
Funding, a wholly-owned subsidiary of the Company, as follows:
<TABLE>
<CAPTION>
Number of Number of Option Number of Option
Shares Shares at $2.00 Shares at $5.00
Issued Issued Issued
------ ------ ------
<S> <C> <C> <C>
Mark Mendelson 50,000 25,000 25,000
Richard N. Chakejian, Jr. 20,000 10,000 10,000
Mark E. Glatz 20,000 10,000 10,000
John Papandon 20,000 10,000 10,000
James Greenfield 20,000 10,000 10,000
Lester W. Salzman 20,000 10,000 10,000
(Unrelated party) 50,000 25,000 25,000
----------------- ------- ------- -------
Totals 200,000 100,000 100,000
</TABLE>
In January 1999, the Company issued 50,000 shares of common stock to
James Greenfield and 50,000 shares of common stock to John Papandon, both
Directors of the Company, for prior services rendered in lieu of cash payments.
All future transactions with officers, Directors or five percent (5%)
stockholders of the Company will be approved by the independent disinterested
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 2
----------
Approval of the Company's 1999 ISO Plan
At the Meeting there will be presented to the shareholders for their
approval an Incentive Stock Option Plan (the "1999 ISO Plan"), which was adopted
by the Board of Directors on November 17, 1999, in order to attract officers and
8
<PAGE>
employees whose interests are the same as those of the shareholders, and to
provide an additional incentive to employees to whom options are granted to
perform at levels that will expand and improve the profits and prosperity of the
Company and its subsidiaries, thereby enhancing shareholder value. A proposal to
approve the plan will be presented for action by the shareholders at the
Meeting.
The administration of the 1999 ISO Plan shall be by the Board of
Directors, provided, however, that the Board of Directors may appoint a
committee to administer the Plan, which shall at all times consist of two (2) or
more persons, each of whom shall be members of the Board of Directors.
The complete text of the 1999 ISO Plan appears as Exhibit A to the
Proxy Statement. While several of its features are summarized below, such
summary is in all respects subject to the complete text of the 1999 ISO Plan set
forth in Exhibit A.
Type and Amount of Option Grants
The maximum number of shares for which options may be granted under the
1999 ISO Plan is 1,500,000 shares of the Company's Common Stock. At the
discretion of the Board of Directors or Committee, as the case may be, Options
granted under the 1999 ISO Plan may be Incentive Stock Options ("ISOs") pursuant
to Section 422A of the Internal Revenue Code of 1986, as amended (the "Code"),
or they may be Non-Qualified Stock Options ("NSOs"). Among other things, the
Board of Directors or the Committee, as the case may be, is authorized to make
all determinations regarding the persons to whom and numbers of shares for which
Options will be granted, to specify certain of the terms of Options granted, and
to interpret and establish rules and to make all determinations and take all
other actions relating to and reasonable or advisable in administering the 1999
ISO Plan. To the extent permitted by applicable law, members of the Board of
Directors or the Committee, as the case may be, will be indemnified by the
Company for any legal expenses and liability incurred in connection with the
administration and interpretation of the 1999 ISO Plan.
Eligibility
Under the 1999 ISO Plan, grants of Options may be made to those persons
who the Board of Directors or a Committee appointed by the Board of Directors
(the "Committee"), determines have the capacity to make a substantial
contribution to the success of the Company.
Terms of Option Grants
The 1999 ISO Plan contemplates that options may be granted by the Board
of Directors or by the Committee in accordance with the provisions of the 1999
ISO Plan, which includes:
(a) Each grant must state the number of shares of Common Stock which
may be purchased upon the exercise thereof.
(b) Each grant in respect of Common Stock shall be at an option price
determined by the Board of Directors or by the Committee, as the case may be,
but in no event shall be less than market value on the date of grant.
(c) No options shall be exercised more than 5 years from the date of
grant.
(d) Options shall vest as determined by the Board of Directors or the
Committee, as the case may be.
Agreements evidencing options may contain such investment
representation and other terms and provisions, consistent with the 1999 ISO
Plan, as the Board of Directors or the Committee, as the case may be, may from
time to time determine. Shares covered by options which are terminated for any
reason or expire unexercised may be made the subject of new options.
9
<PAGE>
Tax Consequences
The Company's obligations under the 1999 ISO Plan shall be subject to
applicable federal, state and local tax withholding requirements.
Amendments
The Board of Directors may, from time to time, amend, modify, suspend,
terminate or reinstate the 1999 ISO Plan without notice. However, no such action
will adversely affect any Optionee's rights under any then outstanding option
without such person's prior consent, and, except as required to comport with
changes in the Code, any modification or amendment of the 1999 ISO Plan that (i)
increases the aggregate number of shares of Common Stock that may be issued upon
the exercise of options, (ii) extends the term of the 1999 ISO Plan, (iii)
increases the period during which options may be exercised beyond five (5) years
from the date of grant, (iv) materially modifies the provisions of the 1999 ISO
Plan with respect to the eligibility for participation in the 1999 ISO Plan, or
(v) otherwise materially increases the benefits accruing to Optionees under the
1999 ISO Plan, or (vi) changes the maximum number of shares of Common Stock for
which options may be granted to any participant during any year (a consecutive
twelve (12) month period), will be subject to the approval of the Company's
shareholders. Consistent with the terms of the 1999 ISO Plan, the Board of
Directors or the Committee, as the case may be, may modify, extend or renew any
outstanding Option pursuant to a written agreement with the Optionee. The 1999
ISO Plan will expire on the date five years after the date of its adoption by
the Board of Directors, but Options granted prior to such expiration will
continue to exist and may be exercised in accordance with their terms until they
have expired by their own separate terms, even if after the expiration date of
the 1999 ISO Plan itself.
ISOs granted under the 1999 ISO Plan are intended to qualify for
certain favorable income tax treatment. Under the Code, an Optionee is not taxed
in the year in which an ISO is exercised. If an Optionee holds stock purchased
upon the exercise of an ISO for a period of at least two years following the
date of grant and at least one year from the date the ISO is exercised (or dies
while owning the stock) then, upon disposition of the stock (or upon death while
owning the stock), he or she will realize capital gain equal to the excess of
the sale price of the stock over the Exercise Price. If the Optionee disposes of
the stock before the holding periods have expired, the excess of the fair market
value of the stock at the time the option was exercised over the Exercise Price
will be treated as ordinary income. The Company will not be permitted to take a
tax deduction at any time in connection with ISOs unless stock purchased upon
exercise is disposed of prior to expiration of the two holding periods. In the
year in which an ISO is exercised, the Optionee will realize ordinary income
equal to the excess of the fair market value of the stock at the time of
exercise over the Exercise Price, and the Company is allowed to take a deduction
for the same amount. At its discretion, the Company may withhold from an
Optionee's salary or any other amount due to such Optionee (or from shares being
purchased upon the exercise of any Option), or, as a condition of exercising the
Option, require the Optionee to pay to it in cash, the amount of any required
tax withholdings for which the Company is responsible.
General
The maximum numbers or shares of Common Stock that may be sold under
the 1999 ISO Plan, and the number of shares and prices, are subject to
adjustment to reflect stock splits, stock consolidation, recapitalization,
reclassification, mergers, consolidations, spin-offs, reorganizations,
liquidations, issuances of rights or warrants and similar events.
Approval of Shareholders
The 1999 ISO Plan requires for its adoption the favorable vote of a
majority of all the shares present at the Meeting in person or by Proxy.
10
<PAGE>
THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY RECOMMENDS THAT
SHAREHOLDERS VOTE FOR APPROVAL OF THE 1999 ISO PLAN.
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 2000
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. Shareholder proposals must be received by March 1, 2000,
to be included in the proxy materials for the 2000 annual meeting.
Annual Report to Shareholders
The Annual Report to shareholders of the Company for the year ended
December 31, 1998, 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, 1998 AND/OR THE COMPANY'S FORM
10-QSB FOR PERIODS ENDED MARCH 31, 1999 AND JUNE 30, 1999. SUCH WRITTEN REQUEST
SHOULD BE SENT TO FIRST CHESAPEAKE FINANCIAL CORPORATION, 12 EAST OREGON AVENUE,
PHILADELPHIA, PA 19148, ATTENTION: JAMES J. GREENFIELD, SECRETARY.
By Order of the Board of Directors
James J. Greenfield
Secretary
November 30, 1999
<PAGE>
Exhibit A
FIRST CHESAPEAKE FINANCIAL CORPORATION
1999 STOCK OPTION PLAN
TABLE OF CONTENTS
Page
----
1. PURPOSES OF THE PLAN................................................2
2. GENERAL PROVISIONS..................................................2
2.1 Definitions.................................................2
2.2 Administration of the Plan..................................3
2.3 Effective Date..............................................4
2.4 Duration....................................................4
2.5 Shares Subject to the Plan..................................4
2.6 Amendments..................................................4
2.7 Participants and Grants.....................................5
3. STOCK OPTIONS.......................................................5
3.1 General.....................................................5
3.2 Price.......................................................5
3.3 Period......................................................5
3.4 Exercise....................................................5
3.5 Payment.....................................................6
3.6 Special Rules for Incentive Stock Options...................6
3.7 Termination of Employment or Relationship...................7
3.8 Effect of Leaves of Absence.................................8
3.9 Acceleration and Redemption.................................8
4. MISCELLANEOUS PROVISIONS............................................9
4.1 Adjustments Upon Changes in Capitalization..................9
4.2 Non-Transferability.........................................9
4.3 Withholding.................................................9
4.4 Compliance with Law and Approval of Regulatory Bodies.......9
4.5 No Right to Employment.....................................10
4.6 Exclusion from Pension Computations........................10
4.7 Abandonment of Options.....................................10
4.8 Interpretation of the Plan.................................10
4.9 Use of Proceeds............................................10
4.10 Construction of Plan.......................................10
<PAGE>
FIRST CHESAPEAKE FINANCIAL CORPORATION
1999 STOCK OPTION PLAN
1. PURPOSES OF THE PLAN
The purposes of this 1999 Stock Option Plan are to enable First
Chesapeake Financial Corporation (the "Company") and its
Subsidiaries to attract and retain the services of key employees
and persons with managerial, professional or supervisory
responsibilities, including, but not limited to, members of the
Board of Directors, officers of, investors in, consultants to,
and business partners and affiliates the Company and its
Subsidiaries, responsible for the past and continued success of
the Company and its Subsidiaries, and to provide them with
increased motivation and incentive to exert their best efforts
on behalf of the Company and its Subsidiaries by enlarging their
personal stake in their success.
2. GENERAL PROVISIONS
2.1 Definitions
As used in the Plan:
(a) "Act" means the Securities Exchange Act of 1934,
including any and all amendments thereto.
(b) "Board of Directors" means the Board of
Directors of the Company.
(c) "Code" means the Internal Revenue Code of 1986,
including any and all amendments thereto.
(d) "Committee" means the committee, if any,
appointed by the Board of Directors from time to
time to administer the Plan pursuant to Section
2.2.
(e) "Common Stock" means the Company's Common Stock.
(f) "Company" means First Chesapeake Financial
Corporation, a Virginia corporation.
(g) "Fair Market Value" means, with respect to a
specific date, the last reported sale price of
the Common Stock in the over-the-counter market,
as reported by NASDAQ if the Common Stock is
trading on the NASDAQ National Market; or, if
the Common Stock is listed or traded on a
national securities exchange in the event that
the Fair Market Value is not on the date Fair
Market Value is being determined, Fair Market
Value means the last reported sale price of
Common Stock on such exchange; in the event that
the Fair Market Value is not determinable by any
of the foregoing means, then the Fair Market
Value shall be determined in good faith by the
Board of Directors or the Committee, as the case
may be, on the basis of such methods and
considerations as the Board of Directors or the
Committee, as the case may be, shall deem
appropriate, including, but not limited to the
last sale price by the Company of its Common
Stock or any securities convertible into Common
Stock.
(h) "Incentive Stock Option" means an option granted
under the Plan which is intended to qualify as
an incentive stock option under Section 422 of
the Code.
(i) Non-Qualified Stock Option" means an option
granted under the Plan which is not an Incentive
Stock Option
2
<PAGE>
(j) "Option Event" means the date upon which
beneficial ownership (determined in accordance
with Rule 13d-3 under the Act) of shares of the
Company's Common Stock are acquired (other than
directly from the Company in exchange for cash
or property) by any Person (as used in Sections
13 or 14 of the Act), other than any persons who
is an officer or director of the Company on
January 1, 1999, who thereby becomes the
beneficial owner (as defined in Rule 13d-3 under
the Act) of more than 20% of the issued and
outstanding share of the Company's Common Stock.
(k) "Participant" means a person to whom a Stock
Option has been granted under the Plan.
(l) "Plan" means this 1999 Stock Option Plan.
(m) "Stock Option" means an Incentive Stock Option
or a Non-Qualified Stock Option granted under
the Plan.
(n) "Subsidiary" means any corporation (other than
the Company) in an unbroken chain of
corporations beginning with the Company if, at
the time of the granting of the Stock Option,
each of the corporations other than the last
corporation in the unbroken chain owns 50% or
more of the total voting power of all classes of
stock in one of the other corporations in such
chain.
2.2 Administration of the Plan
(a) The Plan shall be administered by the Board of
Directors, provided, however that the Board of
Directors may appoint a Committee to administer
the Plan, which shall at all times consist of
two (2) or more persons, each of whom shall be
members of the Board of Directors. The Board of
Directors may from time to time remove members
from, or add members to, the Committee.
Vacancies on the Committee, howsoever caused,
shall be filled by the Board of Directors. The
Committee shall select one of its members as
Chairperson, and shall hold meetings at such
times and places as it may determine.
(b) The Board of Directors or the Committee, as the
case may be, shall have the full power, subject
to and within the limits of the Plan, to: (i)
interpret and administer the Plan, and Stock
Options granted under it; (ii) make and
interpret rules and regulations for the
administration of the Plan and to make changes
in and revoke such rules and regulations (and in
the exercise of this power, shall generally
determine all questions of policy and expediency
that may arise and may correct any defect,
omission, or inconsistency in the Plan or any
agreement evidencing the grant of any Stock
Option in a manner and to the extent it shall
deem necessary to make the Plan fully
effective); (iii) determine those persons to
whom Stock Options shall be granted and the
number of Stock Options to be granted to any
person; (iv) determine the terms of Stock
Options granted under the Plan, consistent with
the provisions of the Plan; and (v) generally,
exercise such powers and perform such acts in
connection with the Plan as are deemed necessary
or expedient to promote the best interests of
the Company. The interpretation and construction
by the Board of Directors or the Committee, as
the case may be, of any provision of the Plan or
of any Stock Option shall be final, binding and
conclusive.
(c) The Board of Directors or the Committee, as the
case may be, may act only by a majority of its
members then in office; however, the Board of
Directors or the Committee, as the case may be,
may authorize any one (1) or more of its members
or any officer of the Company to execute and
deliver documents on behalf of the Board of
Directors or the Committee, as the case may be.
3
<PAGE>
(d) No member of the Board of Directors or the
Committee, as the case may be, shall be liable
for any action taken or omitted to be taken or
for any determination made by him or her in good
faith with respect to the Plan, and the Company
shall indemnify and hold harmless each member of
the Board of Directors or the Committee, as the
case may be, against any cost or expense
(including counsel fees) or liability (including
any sum paid in settlement of a claim with the
approval of the Board of Directors or the
Committee, as the case may be) arising out of
any act or omission in connection with the
administration or interpretation of the Plan,
unless arising out of such person's own fraud or
bad faith.
2.3 Effective Date
The Plan is and shall be effective upon its approval by
the shareholders of the Company, and Stock Options may
be granted from time to time thereafter.
2.4 Duration
Unless sooner terminated by the Board of Directors, the
Plan shall remain in effect until December 31, 2004.
2.5 Shares Subject to the Plan
The maximum number of shares of Common Stock which may
be subject to Stock Options granted under the Plan shall
be 1,500,000. The maximum number of shares of Common
Stock and the Stock Options shall be subject to
adjustment in accordance with Section 4.1, and shares to
be issued upon exercise of Stock Options may be either
authorized and unissued shares of Common Stock or
authorized and issued shares of Common Stock purchased
or acquired by the Company for any purpose. If a Stock
Option or portion thereof shall expire or is terminated,
canceled or surrendered for any reason without being
exercised in full, the unpurchased shares of Common
Stock which were subject to such Stock Option or portion
thereof shall be available for future grants of Stock
Options under the Plan.
2.6 Amendments
The Plan may be suspended, terminated or reinstated, in
whole or in part, at any time by the Board of Directors.
The Board of Directors may from time to time make such
amendments to the Plan as it may deem advisable,
including, with respect to Incentive Stock Options,
amendments deemed necessary or desirable to comply with
Section 422 of the Code and any regulations issued
thereunder; provided, however, that without the approval
of the Company's shareholders no amendment shall be made
which:
(a) Increases the maximum number of shares of Common
Stock which may be subject to Stock Options
granted under the Plan (other than as provided
in Section 4.1); or
(b) Extends the term of the Plan; or
(c) Increases the period during which a Stock Option
may be exercised beyond five (5) years from the
date of grant; or
(d) Otherwise materially increases the benefits
accruing to Participants under the Plan; or
4
<PAGE>
(e) Materially modifies the requirements as to
eligibility for participation in the Plan; or
(f) Changes the maximum number of shares of Common
Stock for which options may be granted to any
Participant during any year (a consecutive
twelve (12) month period) (other than as
provided in Section 4.1).
Except as otherwise provided herein, termination or
amendment of the Plan shall not, without the consent of
a Participant, affect such Participant's rights under
any Stock Option previously granted to such Participant.
2.7 Participants and Grants
Stock Options may be granted by the Board of Directors
or the Committee, as the case may be, to those persons
who the Board of Directors or the Committee, as the case
may be, determines have the capacity to make a
substantial contribution to the success of the Company.
The Board of Directors or the Committee, as the case may
be, may grant Stock Options to purchase such number of
shares of Common Stock (subject to the limitation of
Section 2.5) as the Board of Directors or the Committee,
as the case may be, may, in its sole discretion,
determine. Notwithstanding the foregoing, no Participant
shall be granted Stock Options in any calendar year to
purchase in excess of 300,000 shares of Common Stock. In
granting Stock Options, the Board of Directors or the
Committee, as the case may be, on an individual basis,
may vary the number of Incentive Stock Options or
Non-Qualified Stock Options as between Participants and
may grant Incentive Stock Options and/or Non-Qualified
Stock Options to a Participant in such amounts as the
Board of Directors or the Committee, as the case may be,
may determine in its sole discretion.
3. STOCK OPTIONS
3.1 General
All Stock Options granted under the Plan shall be
evidenced by written agreements executed by the Company
and the Participant to whom granted and dated as of the
applicable date of grant, which agreement shall state
the number of shares of Common Stock which may be
purchased upon the exercise thereof and shall contain
such investment representation and other terms and
conditions as the Board of Directors or the Committee,
as the case may be, may from time to time determine, or,
in the case of Incentive Stock Options, as may be
required by Section 422 of the Code, or any other
applicable law. Each such grant shall be signed on
behalf of the Company by a member of the Board of
Directors or the Committee, as the case may be, or by an
officer delegated such authority by the Board of
Directors or the Committee, as the case may be.
3.2 Price
Subject to the provisions of Sections 3.6(d) and 4.1,
the purchase price per share of Common Stock subject to
a Stock Option shall, in no case, be less than one
hundred percent (100%) of the Fair Market Value of a
share of Common Stock on the date the Stock Option is
granted.
3.3 Period
The duration or term of each Stock Option granted under
the Plan shall be for such period as the Committee shall
determine but in no event more than ten (10) years from
the date of grant thereof.
5
<PAGE>
3.4 Exercise
Subject to Section 4.4, Stock Options may be exercisable
immediately upon the grant of the Stock Option or at
such other time or times as the Board of Directors or
the Committee, as the case may be, shall specify when
granting the Stock Option. Once exercisable, a Stock
Option shall be exercisable, in whole or in part, by
delivery of a written notice of exercise to the
Secretary of the Company or to a named administrator at
the principal office of the Company specifying the
number of whole shares of Common Stock as to which the
Stock Option is then being exercised together with
payment of the full purchase price for the shares being
purchased upon such exercise. Until the shares of Common
Stock as to which a Stock Option is exercised are
issued, the Participant shall have none of the rights of
a shareholder of the Company with respect to such
shares.
3.5 Payment
The purchase price for shares of Common Stock as to
which a Stock Option has been exercised and any amount
required to be withheld, as contemplated by Section 4.3,
may be paid:
(a) In United States dollars in cash, or by check,
bank draft or money order payable in United
States dollars to the order of the Company; or
(b) By the delivery by the Participant to the
Company of whole shares of Common Stock having
an aggregate Fair Market Value on the date of
payment equal to the aggregate of the purchase
price of Common Stock as to which the Stock
Option is then being exercised or by the
withholding of whole shares of Common Stock
having such Fair Market Value upon the exercise
of such Stock Option; or
(c) By a combination of both (a) and (b) above.
The Board of Directors or the Committee, as the case may
be, may, in its discretion, impose limitations.
conditions and prohibitions on the use by a Participant
of shares of Common Stock to pay the purchase price
payable by such Participant upon the exercise of a Stock
Option.
3.6 Special Rules for Incentive Stock Options
Notwithstanding any other provision of the Plan, the
following provisions shall apply to Incentive Stock
Options granted under the Plan:
(a) Incentive Stock Options shall only be granted to
Participants who are employees of the Company or
a Subsidiary.
(b) To the extent that the aggregate Fair Market
Value of Common Stock, with respect to which
Incentive Stock Options are exercisable for the
first time by a Participant during any calendar
year under the Plan and any other Stock Option
Plan of the Company, exceeds $100,000, such
Stock Options shall be treated as Non-Qualified
Stock Options.
(c) Any Participant who disposes of shares of Common
Stock acquired upon the exercise of an Incentive
Stock Option by sale or exchange either within
two (2) years after the date of the grant of the
Incentive Stock Option under which the shares
were acquired or within one (1) year of the
acquisition of such shares, shall promptly
notify the Secretary of the Company at the
principal office of the Company of such
disposition, the amount realized, the purchase
price per share paid upon exercise and the date
of disposition.
6
<PAGE>
(d) No Incentive Stock Option shall be granted to a
Participant who, at the time of the grant, owns
stock representing more than ten percent (10%)
of the total combined voting power of all
classes of stock either of the Company or any
parent or Subsidiary of the Company, unless the
purchase price of the shares of Common Stock
purchasable upon exercise of such Incentive
Stock Option is at least one hundred ten percent
(110%) of the Fair Market Value (at the time the
Incentive Stock Option is granted) of the Common
Stock and the Incentive Stock Option is not
exercisable more than five (5) years from the
date it is granted.
3.7 Termination of Employment or Relationship
(a) In the event a Participant's employment by, or
relationship with, the Company or its
Subsidiaries shall terminate for any reason
other than those reasons specified in Sections
3.7(b), (c), (d), (e) or (f) while such
Participant holds Stock Options, then all rights
of any kind under any outstanding Stock Option
held by such Participant which shall not have
previously lapsed or terminated shall expire
immediately.
(b) If a Participant's employment by, or
relationship with, the Company or its
Subsidiaries shall terminate as a result of such
Participant's total disability, each Stock
Option held by such Participant (which has not
previously lapsed or terminated) shall
immediately become fully exercisable as to the
total number of shares of Common Stock subject
thereto (whether or not exercisable to that
extent at the time of such termination) and
shall remain so exercisable by such Participant
for a period of six (6) months after termination
unless such Stock Option expires earlier by its
terms. For purposes of the Plan, "total
disability" shall mean permanent mental or
physical disability as determined by the Board
of Directors or the Committee, as the case may
be.
(c) In the event of the death of a Participant, each
Stock Option held by such Participant (which has
not previously lapsed or terminated) shall
immediately become fully exercisable as to the
total number of shares of Common Stock subject
thereto (whether or not exercisable to that
extent at the time of death) by the executor or
administrator of the Participant's estate or by
the person or persons to whom the deceased
Participant's rights thereunder shall have
passed by will or by the laws of descent or
distribution, and shall remain so exercisable
for a period of six (6) months after such
Participant's death unless such Stock Option
expires earlier by its terms.
(d) If a Participant's employment by the Company or
a Subsidiary shall terminate by reason of such
Participant's retirement in accordance with
Company policies, each Stock Option held by such
Participant at the date of termination (which
has not previously lapsed or terminated) shall
immediately become fully exercisable as to the
total number of shares of Common Stock subject
hereto (whether or not exercisable to that
extent at the time of such termination) and
shall remain so exercisable by such Participant
for a period of three (3) months after
termination, unless such Stock Option expires
earlier by its terms.
(e) In the event the Company or a Subsidiary
terminates the employment of a Participant who
at the time of such termination had been
continuously employed by the Company or a
Subsidiary during the five (5) year period
immediately preceding such termination, for any
reason except "good cause" (hereafter defined)
and except upon such Participant's death, total
disability or retirement in accordance with
Company policies, each Stock Option held by such
Participant (which has not previously lapsed or
terminated and which has been held by such
Participant for more than six (6) months prior
to such termination) shall immediately become
fully exercisable as to the total number of
shares of Common Stock subject thereto (whether
or not exercisable to that extent at the time of
such termination) and shall remain so
exercisable for a period of three (3) months
after such termination unless such Stock Option
expires earlier by its terms. A termination for
"good cause" shall have occurred only if the
Participant in question is terminated, by
written notice (i) because of his or her
conviction of a felony for a crime involving an
act of fraud or dishonesty, (ii) intentional
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acts or omissions on such Participant's part
causing material injury to the property or
business of the Company or any Subsidiary, or
(iii) because such Participant shall have
breached any material term of any employment
agreement in place between such Participant and
the Company or any Subsidiary and shall have
failed to correct such breach within any grace
period provided for in such agreement. "Good
cause" for termination shall not include bad
judgment or any act or omission reasonably
believed by such Participant, in good faith, to
have been in, or not opposed to, the best
interests of the Company and its Subsidiaries.
(f) In the event of the termination of a
Participant's service as a Director of the
Company, who at the time of such termination had
continuously served as a Director of the Company
during the five (5) year period immediately
preceding such termination, and such termination
is for any reason except for such Participant's
death or total disability or the removal of such
Participant as Director (by the shareholders,
the Board of Directors or otherwise) for "good
cause" (as defined in Section 3.7(e)(i) and
(ii)), each Stock Option held by such
Participant (which has not previously lapsed or
terminated and which has been held by such
Participant for more than six (6) months prior
to such termination) shall immediately become
fully exercisable as to the total number of
shares of Common Stock subject thereto (whether
or not exercisable to that extent at the time of
such termination) and shall remain so
exercisable for a period of three (3) months
after such termination unless such Stock Option
expires earlier by its terms.
3.8 Effect of Leaves of Absence
It shall not be considered a termination of employment
when a Participant is on military or sick leave or such
other type of leave of absence which is considered a
continuing intact the employment relationship of the
Participant with the Company or any of its Subsidiaries.
In case of such leave of absence, the employment
relationship shall be deemed to have continued until the
later of (i) the date when such leave shall have lasted
ninety (90) days in duration, or (ii) the date as of
which the Participant's right to re-employment shall
have no longer been guaranteed either by statute or
contract.
3.9 Acceleration and Redemption
Upon the occurrence of an Option Event, (a) all Stock
Options granted and outstanding under the Plan shall
become immediately exercisable in full regardless of any
terms of said Stock Option to the contrary: and (b)
until the earlier to occur of the stated expiration date
of the Stock Option and the expiration of the ninety
(90) day period following written notice from the
Company to all Participants of the occurrence of the
Option Event, all Participants shall have the right to
demand that the Company cancel and redeem any and all
Stock Options held by the Participants by paying with
respect to each such Stock Option a price equal to the
difference between the purchase price per share of
Common Stock subject to such Stock Option and the
highest price that can be determined to have been paid
by any Person (as that word is used in Section
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2.1(j)) for any share or shares of the Company's Common
Stock prior to the earlier to occur of the stated
expiration date of the Stock Option and the expiration
of the aforementioned ninety (90) day demand period.
4. MISCELLANEOUS PROVISIONS
4.1 Adjustments Upon Changes in Capitalization
In the event of changes to the outstanding shares of
Common Stock of the Company through reorganization,
merger, consolidation, recapitalization,
reclassification, stock split-up, stock dividend, stock
consolidation or otherwise, or in the event of a sale of
all or substantially all of the assets of the Company,
an appropriate and proportionate adjustment shall be
made in the number and class of shares as to which Stock
Options may be granted and the maximum number of Stock
Options which may be granted to any Participant in any
calendar year. A corresponding adjustment changing the
number or class of shares and/or the exercise price per
share of unexercised Stock Options or portions thereof
which shall have been granted prior to any such change
shall likewise be made. Notwithstanding the foregoing,
in the case of a reorganization, merger or
consolidation, or sale of all or substantially all of
the assets of the Company, in lieu of adjustments as
aforesaid, the Board of Directors or the Committee, as
the case may be, may in is discretion accelerate the
date after which a Stock Option may or may not be
exercised or the stated expiration date thereof.
Adjustments or changes under this Section 4.1 shall be
made by the Board of Directors or the Committee, as the
case may be, whose determination as to what adjustments
or changes shall be made, and the extent thereof, shall
be final, binding and conclusive.
4.2 Non-Transferability
No Stock Option shall be transferable except by will or
the laws of descent and distribution, nor shall any
Stock Option be exercisable during the Participant's
lifetime by any person other than the Participant or his
or her guardian or legal representative.
4.3 Withholding
The Company's obligations under the Plan shall be
subject to applicable federal, state and local tax
withholding requirements. Federal, state and local
withholding tax due at the time of a grant or upon the
exercise of any Stock Option may, in the discretion of
the Board of Directors or the Committee, as the case may
be, be paid in shares of Common Stock already owned by
the Participant or through the withholding of shares
otherwise issuable to such Participant, upon such terms
and conditions as the Board of Directors or the
Committee, as the case may be, shall determine. If the
Participant shall fail to pay, or make arrangements
satisfactory to the Board of Directors or the Committee,
as the case may be, for the payment, to the Company of
all such federal, state and local taxes required to be
withheld by the Company, then the Company shall, to the
extent permitted by law, have the right to deduct from
any payment of any kind otherwise due to such
Participant an amount equal to any federal, state or
local taxes of any kind required to be withheld by the
Company.
4.4 Compliance with Law and Approval of Regulatory Bodies
No Stock Option shall be exercisable and no shares will
be delivered under the Plan except in compliance with
all applicable federal and state laws and regulations
including, without limitation, compliance with all
federal and state securities laws and withholding tax
requirements and with the rules of NASDAQ, if the Common
Stock is listed on the NASDAQ National Market, and of
all domestic stock exchanges on which the Common Stock
may be listed. Any share certificate issued to evidence
shares for which a Stock Option is exercised may bear
legends and statements the Board of Directors or the
Committee, as the case may be, shall deem advisable to
assure compliance with federal and state laws and
regulations. No Stock Option shall be exercisable and no
shares will be delivered under the Plan, until the
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Company has obtained the consent or approval from
regulatory bodies, federal or state, having jurisdiction
over such matters as the Board of Directors or the
Committee, as the case may be, may deem advisable. In
the case of the exercise of a Stock Option by a person
or estate acquiring the right to exercise the Stock
Option as a result of the death of the Participant, the
Board of Directors or the Committee, as the case may be,
may require reasonable evidence as to the ownership of
the Stock Option and may require consents and releases
of taxing authorities that it may deem advisable.
4.5 No Right to Employment
Neither the adoption of the Plan nor its operation, nor
any document describing or referring to the Plan, or any
part thereof, nor the granting of any Stock Options
hereunder, shall confer upon any Participant under the
Plan any right to continue in the employ of the Company
or any Subsidiary, or shall in any way affect the right
and power of the Company or any Subsidiary to terminate
the employment of any Participant at any time with or
without assigning a reason therefor, to the same extent
as might have been done if the Plan had not been
adopted.
4.6 Exclusion from Pension Computations
By acceptance of a grant of a Stock Option under the
Plan, the recipient shall be deemed to agree that any
income realized upon the receipt or exercise thereof or
upon the disposition of the shares received upon
exercise will not be taken into account as "base
remuneration", "wages", "salary" or "compensation" in
determining the amount of any contribution to or payment
or any other benefit under any pension, retirement,
incentive, profit-sharing or deferred compensation plan
of the Company or any Subsidiary.
4.7 Abandonment of Options
A Participant or Eligible Director may at any time
abandon a Stock Option prior to its expiration date. The
abandonment shall be evidenced in writing, in such form
as the Board of Directors or the Committee, as the case
may be, may from time to time prescribe. A Participant
or Eligible Director shall have no further rights with
respect to any Stock Option so abandoned.
4.8 Interpretation of the Plan
Headings are given to the Sections of the Plan solely as
a convenience to facilitate reference, such headings,
numbering and paragraphing shall not in any case be
deemed in any way material or relevant to the
construction of the Plan or any provision hereof. The
use of the masculine gender shall also include within
its meaning the feminine. The use of the singular shall
also include within Its meaning the plural and vice
versa.
4.9 Use of Proceeds
Funds received by the Company upon the exercise of Stock
Options shall be used for the general corporate purposes
of the Company.
4.10 Construction of Plan
The place of administration of the Plan shall be in the
Commonwealth of Pennsylvania, and the validity,
construction, interpretation, administration and effect
of the Plan and of its rules and regulations, and rights
relating to the Plan, shall be determined solely in
accordance with the laws of the Commonwealth of
Virginia.
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FIRST CHESAPEAKE FINANCIAL CORPORATION
The undersigned hereby appoints James J. Greenfield and Mark Mendelson,
and each of them, the attorneys and proxies of the undersigned, with full power
of substitution, to vote on behalf of the undersigned all of the shares of
Common Stock of First Chesapeake Financial Corporation which the undersigned is
entitled to vote at the Annual Meeting of Shareholders thereof to be held on
December 29, 1999 and at any and all postponements and adjournments thereof,
upon the following matters:
1. For the election of Richard N. Chakejian, Jr., Mark
Mendelson, Matthew Coppolino, Mark E. Glatz, James
Greenfield, John Papandon, Jay Vederman and Pasquale Nestico
to serve as Directors until the Annual Meeting of
Shareholders of the Company to be held in the year 2000 and
until their successors are elected and qualified:
_____For All Nominees _____Against All Nominees
(INSTRUCTIONS: TO VOTE AGAINST ANY INDIVIDUAL NOMINEE,
STRIKE A LINE THROUGH THE NOMINEES NAME BELOW):
Richard N. Chakejian, Jr., Mark Mendelson, Matthew
Coppolino, Mark E. Glatz, James Greenfield, John Papandon,
Jay Vederman, and Pasquale Nestico.
2. For the approval of the 1999 ISO Plan. The Board requests
the shareholders' approval of the 1999 ISO Plan.
_____For Approval _____Against Approval
3. In their discretion, the Proxies are authorized to vote upon
such other business as may properly come before the meeting
including matters incident to its conduct.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ITEMS NO. 1 AND NO. 2.
IF NO SPECIFICATION IS MADE, SUCH PROXY WILL BE VOTED "FOR" SUCH ITEM.
Dated _______________, 1999
_______________________________________ Please sign as name appears on stock
Signature certificate. If stock is jointly
owned, both parties must sign.
_______________________________________
Signature
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
PLEASE DATE, SIGN AND RETURN THIS PROXY IMMEDIATELY.
