--SCHEDULE 14A TEMPLATE--
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
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 (S) 240.14a-11(c) or (S) 240.14a-12
HAMPTON ROADS BANKSHARES, INC
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
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Notes:
Reg. (S) 240.14a-101.
SEC 1913 (3-99)
HAMPTON ROADS BANKSHARES, INC.
201 Volvo Parkway
Chesapeake, Virginia 23320
NOTICE OF 2002 ANNUAL MEETING OF SHAREHOLDERS
---------------------------------------------
To be Held April 23, 2002
To Our Shareholders:
NOTICE IS HEREBY GIVEN that the 2002 Annual Meeting of Shareholders of
Hampton Roads Bankshares, Inc. (the "Company") will be held at the Company's
Portsmouth Boulevard branch office located at 4108 Portsmouth Blvd., Chesapeake,
Virginia 23321, on April 23, 2002, at 5:30 p.m., for the following purposes:
1. To consider and vote upon the election of three incumbent directors
to serve a three year term and until their successors are duly elected and
qualify.
2. To consider and vote upon the ratification of the appointment of
KPMG LLP as independent auditors for the 2002 fiscal year.
3. To transact such other business as may properly come before the
meeting.
Shareholders of record at the close of business on March 4, 2002, will
be entitled to notice of and to vote at the Annual Meeting and any adjournments
thereof.
The Board of Directors unanimously recommends that shareholders vote
FOR approval of each of the above items.
By Order of the Board of Directors,
/s/ Tiffany K. Glenn
--------------------
Tiffany K. Glenn
Secretary of the Board
March 15, 2002
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE ANNUAL MEETING. WHETHER
OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE SIGN, DATE AND RETURN THE ENCLOSED
PROXY CARD IN THE ACCOMPANYING POSTAGE-PAID ENVELOPE BY APRIL 8, 2002. IF YOU
ATTEND THE MEETING, YOU MAY VOTE YOUR SHARES IN PERSON, EVEN THOUGH YOU HAVE
PREVIOULSY SIGNED AND RETURNED YOUR PROXY.
HAMPTON ROADS BANKSHARES, INC.
201 Volvo Parkway
Chesapeake, Virginia 23320
PROXY STATEMENT
This Proxy Statement is furnished to the shareholders of Hampton Roads
Bankshares, Inc. (the "Company") in connection with the solicitation of proxies
by the Board of Directors of the Company for use at its 2002 Annual Meeting of
Shareholders to be held on April 23, 2002, at the time and place set forth in
the accompanying Notice of 2002 Annual Meeting of Shareholders and at any
adjournment thereof (the "Annual Meeting"). This Proxy Statement and the
enclosed Proxy are being mailed to the shareholders of the Company on or about
March 15, 2002.
Use and Revocation of Proxies
If the enclosed Proxy is properly executed and returned in time for
voting at the Annual Meeting, the shares represented thereby will be voted in
accordance with such instructions. If no instructions are given in a returned,
executed Proxy, the Proxy will be voted in favor of the two matters for
consideration at the Annual Meeting, and in the discretion of the proxy holders
as to any other matters which may properly come before the meeting. Proxies will
extend to, and will be voted at, any properly adjourned session of the Annual
Meeting, unless otherwise revoked.
Execution of a Proxy will not affect a shareholder's right to attend
the Annual Meeting and to vote in person. Any shareholder who has executed and
returned a Proxy but for any reason desires to revoke it may do so at any time
before the Proxy is exercised by filing with the Secretary of the Company an
instrument revoking it or a duly exercised Proxy bearing a later date, or by
attending the Annual Meeting and voting in person.
Solicitation of Proxies
The Company will bear its own expenses incident to soliciting proxies.
Directors, officers, and employees of the Company, acting without commission or
other special compensation, may solicit proxies in person, by telephone or by
mail.
Shareholders Entitled to Vote and Vote Required
Only holders of record of Company Common Stock at the close of business
on March 4, 2002 (the "Record Date") are entitled to vote at the Annual Meeting.
On the Record Date, there were 7,476,490 shares of Company Common Stock, par
value $0.625 per share, outstanding and entitled to vote. Each share of
outstanding Common Stock is entitled to one vote on all matters presented at the
Annual Meeting. A majority of the outstanding shares of Common Stock, present in
person or by proxy, constitutes a quorum for the transaction of business at the
Annual Meeting. Directors are elected by a plurality of the votes cast. The
affirmative vote of a majority of votes cast by Company shareholders is required
to ratify the appointment of auditors.
Although abstentions and broker non-votes (shares held by customers
which may not be voted on certain matters because the broker has not received
specific instructions from the customer) are counted for purposes of determining
the presence or absence of a quorum for the transaction of business, they are
generally not counted for purposes of determining whether such proposals have
been approved and therefore have no effect.
PROPOSAL ONE
ELECTION OF DIRECTORS
OF HAMPTON ROADS BANKSHARES, INC.
Nominees for Election
The Company's Articles of Incorporation provide that the Company will
have no less than eight and no more than eighteen members of the Board of
Directors. The Articles of Incorporation also divide the Company's Board of
Directors into three classes as nearly equal in number as possible. Members of
each class are elected for a term of three years and until their successors are
elected and qualified. The Company's Bylaws require all directors to be
shareholders of the Company and require a majority of directors to be citizens
of Virginia. Three persons, Robert H. Powell III, Bobby L. Ralph, and Emil A.
Viola, have been nominated by the Company Board to serve as directors until the
2005 Annual Meeting of Shareholders, and until their successors have been
elected and duly qualified. Henry P. Barham, DDS, a director whose term expires
at the Annual Meeting, has decided not to stand for re-election. Accordingly,
after the Annual Meeting, the Company will have ten members of its Board of
Directors.
Proxies received from Company shareholders will be voted for the
election of such nominees unless marked to the contrary. A shareholder of the
Company who desires to withhold voting of the proxy for all or one or more
nominees may so indicate on his or her proxy. All of the nominees are currently
members of the Company's Board of Directors and all have consented to be named
and have indicated their intent to serve if elected. If any nominee becomes
unable to serve, an event which is not anticipated, the proxy will be voted for
a substitute nominee to be designated by the Company's Board of Directors, or
the number of directors will be reduced. The Company Board does not have a
separate Nominating Committee, and the Board does not actively solicit
shareholder nominations for directors. Shareholder nominations for directors can
be submitted, however, provided such nominations comply with the notice and
disclosure requirements set forth in the Company's Articles of Incorporation.
2
The name, age, and principal occupation during the past five years of
each nominee and director of the Company are set forth in the chart below.
Name Age Principal Occupation Director Since (1)
Warren L. Aleck 60 Consultant; President, Earl's Markets from 1976 to 1989 1987
Term Expires 2003
Robert G. Bagley 71 Senior Vice President, Bank of Hampton Roads from 1991 until 1987
Term Expires 2003 present
Jack W. Gibson 51 President and Chief Executive Officer, Bank of Hampton Roads 1987
Term Expires 2003 from 1987 until present
Durwood S. Curling 68 Retired; Executive Director, Southeastern Public Service 1987
Term Expires 2004 Authority of Virginia
Herman A. Hall, III 53 Secretary/Treasurer, Hall Farms, Inc. 1987
Term Expires 2004
W. Lewis Witt 59 Owner-President, Inner-View, Ltd. 1992
Term Expires 2004
William J. Hearring 61 President, Hearndon Construction Corporation 1999
Term Expires 2004
Henry P. Barham, DDS 70 Retired; Family Dentistry Practice 1990
Term Expires 2002
Robert H. Powell, III 60 Attorney at Law, Kaufman & Canoles, P.C. 1990
Term Expires 2002 Dec. 99 to present; Attorney at Law, Williams, Kelly & Greer,
1968 to Nov. 99
Bobby L. Ralph 62 Director of Social Services, City of Suffolk 1997
Term Expires 2002
Emil A. Viola 67 President, Vico Construction Corporation 1987
Term Expires 2002
(1) At the 2001 Annual Meeting of Bank of Hampton Roads (the "Bank"), the
shareholders of the Bank approved a Plan of Reorganization pursuant to which
each share of Bank Common Stock was exchanged for a share of the Company's
Common Stock and the Bank became a wholly owned banking subsidiary of the
Company ("Plan of Reorganization"). The effective date of the Plan of
Reorganization was July 1, 2001. Prior to the effective date of the Plan of
Reorganization, the director-nominees served on the Board of Directors of the
Bank. Since the effective date of the Plan of Reorganization, the
director-nominees have served on the Company's Board of Directors and have
continued to serve on the Bank's Board of Directors. The dates set forth above
indicate the dates on which the director-nominees first served on the Bank's
Board or Directors.
3
BENEFICIAL OWNERSHIP OF DIRECTORS, EXECUTIVE OFFICERS
AND PRINCIPAL SHAREHOLDERS OF THE COMPANY
The following table sets forth for (1) each director-nominee, director
and named officer of the Company, and (2) all director-nominees, directors,
executive officers, and named officer of the Company as a group: (i) the number
of shares of Company Common Stock beneficially owned on March 4, 2002, and (ii)
such person's or group's percentage ownership of outstanding shares of Company
Common Stock on such date. Except as set forth below, the Company is not aware
of any shareholder that beneficially owns 5% or more of the outstanding shares
of Company Common Stock. All of the Company's directors and executive officers
receive mail at the Company's principal executive office at 201 Volvo Parkway,
Chesapeake, Virginia 23320.
Number of Shares Percent of
Name Beneficially Owned Outstanding Shares
- ---- ------------------ ------------------
Directors:
Warren L. Aleck 117,379.80 (1) 1.56%
Robert G. Bagley 205,990.11 (2) 2.70%
Jack W. Gibson 349,996.11 (3) 4.52%
Durwood S. Curling 89,501.66 (4) 1.19%
Herman A. Hall, III 159,870.07 (5) 2.12%
W. Lewis Witt 81,997.24 (6) 1.09%
William J. Hearring 86,143.02 (7) 1.15%
Henry P. Barham, DDS 81,572.75 (8) 1.08%
Robert H. Powell, III 93,714.68 (9) 1.25%
Bobby L. Ralph 19,729.89 (10) 0.26%
Emil A. Viola 287,921.93 (11) 3.82%
Non-Director Named Officer (not included above):
M. Ann Wright 17,889.43 (12) 0.24%
Directors, Nominees, Executive Officers, and named officer as a 1,695,671.72 20.31%
group (17 persons):
____________________
(1) Includes 50,545 options to purchase shares, 21,202.45 shares owned by Helen
G. Aleck (wife) and 7,668.96 shares owned jointly by Warren L. Aleck and
Helen G. Aleck.
(2) Includes 154,062 options to purchase shares, 8,182.44 shares held in the
Company's 401(k) Profit Sharing Plan and Trust, 799.05 shares owned by
Peggy P. Bagley (wife), and 33,946.95 shares owned jointly by Robert G.
Bagley and Peggy P. Bagley.
(3) Includes 264,449 options to purchase shares, 10,079.11 shares held in the
Company's 401(k) Profit Sharing Plan and Trust, 5,474.49 shares owned by
Charlotte M. Gibson (daughter),
4
3,719.30 shares owned by M. Joyce Gibson (wife), 3,225.24 shares owned by
Jacqueline A. Gibson (daughter), and 23,217.13 shares held in an IRA for
Jack W. Gibson.
(4) Includes 42,732 options to purchase shares, 20,377.00 shares owned by
Virginia S. Curling (wife), 6,360.20 shares held in an IRA for Durwood S.
Curling, and 3,428.46 shares held in an IRA for Virginia S. Curling.
(5) Includes 50,450 options to purchase shares, 21,071.92 shares owned by
Herman A. Hall, IV (son), 21,071.92 shares owned by Robert S. Hall (son),
and 55,134.54 shares held in an IRA for Herman A. Hall, III.
(6) Includes 35,927 options to purchase shares, 419.46 shares owned jointly by
W. Lewis Witt and Judith W. Witt (wife), 1,485.63 shares held in an IRA for
W. Lewis Witt, 5,351.54 shares held in an IRA for Judith W. Witt, 62.80
shares owned by Inner-View, Ltd., a company owned by W. Lewis Witt, and
35,552.52 shares held by Inner-View, Ltd. in a profit sharing plan for W.
Lewis Witt.
(7) Includes 16,306 options to purchase shares, 7,782.25 shares held in an IRA
for William J. Hearring, and 19,808.17 shares owned by Hearndon
Construction Corp., Inc., a company owned by William J. Hearring.
(8) Includes 43,997 options to purchase shares and 14,642.92 shares owned by
Stella R. Barham (wife).
(9) Includes 44,304 options to purchase shares, 1,910.16 shares owned by Elayne
P. Powell (wife), 24,270.11 shares owned jointly by Robert H. Powell and
Elayne P. Powell, and 4,395.72 shares held in an IRA for Robert H. Powell.
(10) Includes 17,688 options to purchase shares.
(11) Includes 52,764 options to purchase shares, 120,663.82 shares held in an
IRA for Emil A. Viola, 3,344.56 shares held in an IRA for Phyllis K. Viola
(wife), and 1,056.57 shares owned jointly by Emil A. Viola and Phyllis K.
Viola.
(12) Includes 16,976 options to purchase shares and 831.91 shares held in the
Company's 401(k) Profit Sharing Plan and Trust.
5
Executive Officers
The following sets forth the names, ages and business experience of the
Company's Executive Officers and the date each Executive Officer became employed
by the Company.
. Jack W. Gibson, 51, has been President, Chief Executive Officer and
a director of the Company since the Company's inception in 1987.
. Renee' R. McKinney, 37, has been employed by the Company since its
inception. She initially served as Office Manager. She was subsequently
appointed Assistant Vice President in 1991, Vice President and Branch
Administrator in 1993, and Senior Vice President and Branch Administrator in
1998.
. Stephen G. Fields, 38, began his employment with the Company in
September 1995 as Vice President and Commercial Loan Executive. He was promoted
to Senior Vice President in 1998. Prior to his employment with the Company, he
was an Examiner with the Federal Reserve Bank of Richmond.
. Tiffany K. Glenn, 32, has worked for the Company since 1993 in
various positions, including accounting, stock transfers, and marketing. She was
promoted to Senior Vice President, Marketing Officer and Secretary in 1999.
. Julie R. Anderson, 43, has been employed by the Company since 1999.
She was promoted from Vice President and Area Loan Executive to Senior Vice
President and Commercial Loan Officer in April 2001. She has worked in
practically all facets of the banking industry, including twenty years
experience in commercial, consumer, dealer and construction lending.
. Gregory P. Marshall, 43, began his employment with the Company in
October 2001 as Senior Vice President and Commercial Loan Officer. Prior to
joining the Company, he worked in the banking industry for twelve years with 8
years of prior experience in the certified public accounting industry.
Board and Committee Meetings
The business of the Company is managed under the direction of the
Company's Board of Directors. The Company Board generally meets twice a month to
review significant developments affecting the Company and to act on matters
requiring approval by the Company Board. The Company Board held 24 meetings in
2001. During 2001, each member of the Company Board participated in at least 75%
of all meetings of the Company Board and at least 75% of all applicable
committee meetings. Set forth below is certain information on the members and
duties of the Company's various Board committees.
The Board of Directors has established an Audit Committee, Personnel
Committee, Loan Committee, Education Committee, Investment Committee, and
Executive Committee. All committee meetings are scheduled by the Board of
Directors as deemed necessary. Mr. Gibson serves as an ex-officio, non-voting
member of all such committees except the executive committee wherein he does
have voting power. Because Dr. Barham has elected not to stand for re-election
as a director at the Annual Meeting, his term on the Board committees of which
he currently is a member will expire at the Annual Meeting.
6
The present Audit Committee consists of Durwood S. Curling, Henry P.
Barham, Robert H. Powell, III, and Warren L. Aleck. Each year the Audit
Committee recommends to the Board of Directors the firm of independent
accountants for appointment as the independent auditor of the Company. The
Committee acts as the intermediary between the Company and the independent
auditor and reviews the reports of the independent auditor. The Audit Committee
held two meetings in 2000. See "Audit Committee Report" below.
The Personnel Committee consists of Emil A. Viola and W. Lewis Witt.
The Committee reviews the compensation of all executive officers and makes
recommendations on compensation programs to the Board of Directors. The
Personnel Committee held one meeting in 2001.
The Loan Committee consists of Robert G. Bagley, Herman A. Hall, III,
Robert H. Powell, III, and Warren L. Aleck. The Committee acts to approve loan
requests between scheduled meetings when necessary. The Loan Committee did not
meet in 2001.
The Education Committee consists of W. Lewis Witt, Robert G. Bagley,
and William J. Hearring. The Committee reviews and approves requests from
employees for education reimbursement and specialized training. The Education
Committee did not meet in 2001.
The Investment Committee consists of Henry P. Barham and Robert H.
Powell, III. The Committee was established to recommend the investment vehicles
to be used by the Company's 401(k) Profit Sharing Plan and Trust and to monitor
the Plan's investments. The Investment Committee did not meet in 2001.
The Executive Committee, which meets informally if necessary, consists
of Emil A. Viola, Herman A. Hall, III, and Jack W. Gibson. The Committee is
charged with setting the format and guidelines for the meetings of the Company's
Board of Directors and the meetings of committees of the Board of Directors. The
Executive Committee had one meeting in 2001.
Audit Committee Report
The Audit Committee of the Board of Directors is composed of four
non-employee directors. Each of these directors is an "independent director" as
that term is defined under the NASDAQ Stock Market's listing standards. To be an
independent director under this definition, a director may not be an officer or
employee of the Company or have any other relationship with the Company that
interferes with the exercise of independent judgment. The Audit Committee held
two meetings during 2001. The Audit Committee does not have a separate Charter.
The Audit Committee reviews the Company's financial reporting process
on behalf of the Board of Directors. Management has the primary responsibility
of the financial statements and the reporting process, including the system of
internal controls. In this context, the Committee has met and held discussions
with management and the independent auditors. Management represented to the
Committee that the Company's financial statements were prepared in accordance
with generally accepted accounting principles, and the Committee has reviewed
and discussed the financial statements with management and the independent
auditors. The Committee discussed with the independent auditors matters required
to be discussed by Statement of Auditing Standards No. 61 (Communication with
Audit Committees). In addition, the Committee has discussed with the independent
auditors the auditors' independence from the Company and its management,
including the matters in the written disclosures required by the Independence
Standards Board Standards No. 1 (Independence Discussions with Audit
Committees).
7
The Committee discussed with the Company's internal and independent auditors the
overall scope and specific plans for their respective audits.
The Audit Committee meets with the internal and independent auditors to
discuss the results of their examinations, the evaluations of the Company's
internal controls, and the overall quality of the Company's financial reporting.
The meetings also are designed to facilitate any private communications with the
Committee desired by the internal auditors or independent accountants. In
reliance on the reviews and discussions referred to above, the Committee
recommended to the Board of Directors, and the Board has approved, that the
audited financial statements of the Company be included in the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 2001, for filing with
the Securities and Exchange Commission (SEC). The Committee and the Board also
have recommended, subject to shareholder approval, the selection of the
Company's independent auditors, KPMG LLP.
Warren L. Aleck
Henry P. Barham
Durwood S. Curling
Robert H. Powell, III
Section 16(a) Beneficial Ownership Reporting Compliance
Section l6(a) of the Securities Exchange Act of 1934, as amended,
requires directors, officers and persons who beneficially own more than 10% of
Company Common Stock to file initial reports of ownership and reports of changes
in beneficial ownership with the SEC. Such persons are also required to furnish
the Company with copies of all Section 16(a) forms they file.
Based solely on a review of the copies of such forms furnished to the
Company, the Company believes that all Section 16(a) filing requirements
applicable to its directors, officers and greater than 10% beneficial owners
were complied with in 2001.
Certain Relationships and Related Transactions
During 2001, Robert H. Powell, III, a director, was an attorney in the
law firm Kaufman & Canoles, P.C., which provided legal services for the Company.
The fees paid by the Company to Kaufman & Canoles, P.C. in calendar year 2001
did not exceed 5% of the law firm's gross revenues for the year.
During 2001 some nominees, directors and executive officers of the
Company, their affiliates and members of their immediate families were customers
of and had loan transactions with the Company in the normal course of business
and are expected to continue to have customer relationships with the Company in
the future. All outstanding loans and commitments included in such transactions
were made on substantially the same terms, including interest rates and
collateral, as those prevailing at the time for comparable transactions with
unrelated persons, and did not involve more than a normal risk of collectibility
or present other unfavorable features. As of December 31, 2001 and 2000, loans
to executive officers, directors and their affiliates amounted to $12,217,607
and $12,133,040, respectively. During 2001, additional loans and repayments of
loans by executive officers, directors and their affiliates were $9,623,574 and
$9,539,007, respectively. There were no loans made to directors, or to entities
of which directors are material shareholders or equity owners, which were in
excess of 15% of the Company's equity capital account.
8
Director Compensation
During fiscal year 2001, each director of the Company received a
director's fee of $550 per board meeting attended, $100 per committee meeting
attended, and $100 per advisory board meeting attended. Total director,
committee, and advisory board fees of $222,050 were expensed during the fiscal
year ending December 31, 2001. During 2001, the Company authorized the grants of
options to directors for 28,872 shares of the Company's Common Stock under its
Stock Option Plan.
Directors' Deferred Compensation Agreement
During 1997, the Company amended its Directors' Deferred Compensation
Agreement to allow directors to purchase options for the Company's Common Stock
where the directors' fees reduce the exercise price for shares up to 50% of an
amount that represents the fair market value of the stock. The directors
purchased 27,909 options in 2001 under this agreement.
Executive Compensation
The following table sets forth, for the years ended December 31, 2001,
2000 and 1999, the annual and long-term compensation for the Company's Chief
Executive Officer and other named officers whose combined salary and bonus
exceeded $100,000 in 2001.
SUMMARY COMPENSATION TABLE
Long Term
Annual Compensation Compensation
-------------------------------------- ----------------------
All Other
Name and Securities Underlying Compensation
Principal Position Year Salary ($) Bonus ($)(2) Options (#)(2) ($)(3)
------------------ ---- ---------- ------------ -------------- ------
Jack W. Gibson 2001 255,000 57,375 24,232 15,315
President and Chief 2000 230,000 126,500 32,370 16,199
Executive Officer 1999 215,000 118,250 31,952 15,521
Robert G. Bagley 2001 145,050/1/ 29,250 11,474 14,193
Senior V.P. 2000 130,275/1/ 63,250 15,293 16,199
1999 125,900/1/ 60,500 18,467 15,521
M. Ann Wright 2001 100,000 11,250 3,488 8,826
Senior V.P. 2000 80,000 22,000 4,485 8,834
1999 75,000 20,625 4,683 5,519
__________________
(1) Mr. Bagley's salary includes cash director fees of $15,050, $15,275 and
$15,900 paid in 2001, 2000 and 1999, respectively.
(2) Bonuses and stock options are predetermined by compensation plans
previously approved by the Board of Directors and shareholders of the
Company.
(3) Consists of the Company's discretionary and matching contributions to the
401(K) plan made on behalf of the above officers.
9
The following table provides information on stock options granted to Mr.
Gibson, Mr. Bagley and Ms. Wright in 2001:
OPTION GRANTS IN LAST FISCAL YEAR
% of Total
Options Options Granted Grant Date
- to Employees in Exercise or Base Expiration Present
Name Granted (#) Fiscal Year Price ($/Share) Date Value ($)(4)
---- ----------- ----------- --------------- --------------- ------------
Jack W. Gibson 17,788/1/ 23.66% $8.00 12/31/11 $ 6,622
2,406/2/ $7.03 12/31/11 $ 2,684
4,038/3/ $4.00 01/01/11 $13,878
Robert G. Bagley 9,068/1/ 12.06% $8.00 12/31/11 $ 3,376
2,406/2/ $7.03 12/31/11 $ 2,684
M. Ann Wright 3,488/1/ 4.64% $7.03 12/31/11 $ 3,891
________________
(1) Options granted as part of employee incentive award.
(2) Options granted as part of director incentive award.
(3) Options issued under Directors' Deferred Compensation Agreement.
(4) Value of options are calculated using the Minimum Value Method with a
risk-free interest rate of 4.36%, dividends of $0.25 per year, and an
estimated life of seven years.
The following table provides information concerning the value of options
held as of December 31, 2001 by Mr. Gibson, Mr. Bagley, and Ms. Wright. None of
these individuals exercised any options during 2001.
FISCAL YEAR END OPTION VALUES
Number of Unexercised Options at Value of Unexercised In-the-
FY-End (#) Money-Options at FY-end ($)
Name Exercisable/Unexercisable Exercisable/Unexercisable(1)
---- ------------------------- ----------------------------
Jack W. Gibson 259,611/-- $628,628/--
Robert G. Bagley 154,062/-- $392,086/--
M. Ann Wright 16,976/-- $ 3,383/--
________________
(1) Based on a value of $8.00 per share for the Company's Common Stock as of
December 31, 2001.
10
Employment Agreements
The Company has entered into an employment agreement with Jack W.
Gibson, the Company's President and Chief Executive Officer, which was renewed
in 1997. Under the agreement, Mr. Gibson's salary is determined each year by the
Board of Directors, but in no event will be less than $50,000. Mr. Gibson's
employment agreement also provides that Mr. Gibson may receive other
compensation and benefits as the Board of Directors elects to provide to all
Company employees. The employment agreement between the Company and Mr. Gibson
is for a five year term and is renewed automatically for additional five year
terms, unless the Company notifies Mr. Gibson at the end of the fourth year of a
five-year term of the Company's intention not to renew the employment agreement.
The Company has also entered into employment agreements with seven
other officers of the Company. The terms and conditions of these employment
agreements are virtually the same as those of Mr. Gibson's employment agreement
described above, except that there are no provisions regarding salary.
Supplemental Retirement Agreement
The Company entered into a Supplemental Retirement Agreement with Mr.
Gibson on January 1, 1993. Under this agreement, Mr. Gibson is eligible to
receive an annual benefit payable in fifteen (15) installments equal to fifty
percent (50%) of his Benefit Computation Base following the attainment of his
Plan Retirement Date of November 9, 2015. The Benefit Computation Base is
calculated as his average compensation including bonuses from the Company over
the three consecutive completed calendar years just prior to the year of
retirement or termination. Partial vesting began on January 1, 1998 and will
continue until the Plan Retirement Date. The Company has funded this agreement
with a life insurance policy which names the Company as beneficiary.
Compensation Committee Interlocks and Insider Participation
No member of the Company's Personnel Committee was an officer or
employee of the Company during 2001. During 2001, no executive officer of the
Company served as a member of the Compensation Committee of another entity, nor
did any executive officer of the Company serve as a director of another entity,
one of whose executive officers served on the Company's Personnel Committee. All
members of the Company's Personnel Committee have outstanding loans with the
Company. Each of these loans was made in the ordinary course of business on
substantially the same terms, including interest rates, collateral and repayment
terms, as those prevailing at the time for comparable transactions with
unrelated parties and did not involve more than the normal risk of
collectibility or present other unfavorable features. See "Certain Relationships
and Related Transactions" above.
Personnel Committee Report on Executive Compensation
The Personnel Committee assists the Board of Directors in
administering the policies governing the annual compensation paid to executive
officers, including the Chief Executive Officer. The goal of the Committee is to
motivate executives to achieve a range of performance consistent with a business
plan approved by the Board of Directors while insuring that the financial costs
of current or proposed compensation and benefit programs are reasonable and
consistent with industry standards and shareholders' interests. The Personnel
Committee is made up of two directors who are not officers or employees of the
Company.
11
The Committee considers the following criteria in recommending to the
Board the compensation of the Chief Executive Officer and the other executive
officers of the Company:
1. The overall financial, market and competitive performance of the
Company during the fiscal year under consideration.
2. The level of and/or increases in return on assets and return on
equity without encouraging short-term profitability through unreasonable
risk-taking or a deterioration of long-term asset quality.
3. Consideration of individual as well as combined measures of
progress of the Company including the quality of the loan and investment
portfolio, desirable changes in capital ratios, the overall growth of the
Company, the improvement in market share, the improvement in book value per
share, the improvement in earnings per share, the level of non-performing loans
and real estate owned, and other objectives as may be established by the Board
of Directors.
4. The State Corporation Commission and Federal Reserve Bank's CAMELS
ratings.
5. The compensation and benefit levels of comparable positions to peer
group institutions within the financial services industry operating within
Virginia.
The compensation arrangements and recommendations of the Committee
include a base salary component and an incentive component made up of cash and
stock options.
Mr. Gibson does not make recommendations or participate in the review
of his compensation. With respect to the Company's other executive officers, the
Committee considers salary and incentive recommendations prepared by the Chief
Executive Officer to establish compensation. Following extensive review and
approval by the Committee, all issues pertaining to executive compensation are
submitted to the full Board of Directors for its approval.
12
Stock Performance Graph
The graph below presents five-year cumulative total return comparisons
through December 31, 2001, in stock price appreciation and dividends for the
Company's Common Stock, the Standard & Poor's 500 Stock Index (S & P 500) and
the Keefe, Bruyette & Woods 50 Total Return Index (KBW 50). Returns assume an
initial investment of $100 at the market close on December 31, 1996 and
reinvestment of dividends. The KBW 50 is a published industry index providing a
market capitalization weighted measure of the total return of 50 money center
and major regional U.S. banking companies. Values as of each year-end of the
$100 initial investment are shown in the table and graph below.
[PERFORMANCE GRAPH]
Index 1996 1997 1998 1999 2000 2001
- ----- ---- ---- ---- ---- ---- ----
Hampton Roads Bankshares, Inc. $100 $116 $269 $177 $144 $122
KBW 50 100 146 158 153 184 176
S&P 500 100 133 172 208 189 166
Profit Sharing Plan
The Company has a defined contribution 401(k) plan for all full-time
employees who are 21 years of age and have completed one year of service. Under
the plan, employees may annually contribute up to the lesser of $10,500 or 20%
of their annual salary. The Company will match 25% of the employees' yearly
contributions up to 10% of their annual salary. The Company may also make an
additional discretionary contribution; however, contributions by the Company
will not exceed the maximum amount deductible annually for federal income tax
purposes. In 2001, the Company authorized a $143,381 discretionary contribution
and a $38,765 matching contribution. The 2001 discretionary contribution made on
behalf of the executive officers, as a group, was $30,920.
13
Stock Options Issued
As of December 31, 2001, the Company had 1,016,244 stock options
outstanding to employees and directors under the Company's Stock Option Plan
(the "Plan"). The options, when granted, have a maximum term of ten years.
A summary of activity in the Plan follows:
Options Outstanding Weighted-Average Exercise Price
------------------- -------------------------------
Balance at January 1, 1999 698,454 $4.8323
Granted 128,285 7.8379
Exercised (51,717) 3.5760
---------
Balance at December 31, 1999 775,022 5.4137
Granted 135,639 6.7821
Exercised (10,227) 4.0859
---------
Balance at December 31, 2000 900,434 5.6349
Granted 131,962 6.7670
Exercised (13,250) 4.2826
Expired (2,902) 6.4426
---------
Balance at December 31, 2001 1,016,244 $5.7972
=========
THE COMPANY BOARD UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS
VOTE "FOR" ALL NOMINEES PROPOSED FOR DIRECTORS.
PROPOSAL TWO
APPOINTMENT OF AUDITORS
The Company's Board of Directors, upon recommendation of its Audit
Committee, intends to appoint KPMG LLP as the firm of independent certified
public accountants to audit the Company's financial statements for the year
2002, and the Company Board desires that such appointment be ratified by the
Company's shareholders at the Annual Meeting. KPMG LLP has audited the financial
statements of the Company for 2001. A representative of KPMG LLP will be present
at the Annual Meeting, will be available to respond to appropriate questions and
will have the opportunity to make a statement if he or she desires.
On October 12, 2001, our former Certified Public Accounting firm,
PricewaterhouseCoopers LLP, resigned in conjunction with the announcement that
they had sold their local Virginia Beach office to KPMG LLP.
PricewaterhouseCoopers LLP, or one of its predecessor firms, has audited the
financial statements of the Company since 1987.
The reports of PricewaterhouseCoopers LLP on the financial statements
of the Company for each of the past two fiscal years in the period ended
December 31, 2000 did not contain any adverse opinion or disclaimer of opinion
and were not qualified or modified as to uncertainty, audit scope or accounting
principles. In conjunction with its audits for the two most recent fiscal years
and through October 12, 2001, there have been no disagreements with
PricewaterhouseCoopers LLP on any matter of accounting
14
principles or practices, financial statement disclosure, or auditing scope or
procedure, which disagreements if not resolved to the satisfaction of
PricewaterhouseCoopers LLP would have caused them to make reference thereto in
their reports on the financial statements for such years.
The Company engaged KPMG LLP as its new independent accountants as of
October 18, 2001. The individual accountants who had performed the Company's
audit in the past, had been offered positions with the local KPMG LLP office and
the Company's engagement had been transferred to the local KPMG LLP office.
Since the audit professionals would remain in place, the Company decided to
allow the transfer of its audit engagement to take place without pursuing the
services of a new Certified Public Accounting firm.
Audit Fees. KPMG has billed the Company $14,970 for the audit of the
Company's annual financial statements for 2001 with an additional $24,480
expected to be billed during 2002 to make up the entire amount of $39,450 per
the contractual agreement. PricewaterhouseCoopers LLP billed the Company $2,700
during 2001 for reviews of the financial statements included in the Company's
first and second quarter Forms 10-Q. KPMG LLP billed the Company $1,350 during
2001 for a review of the financial statements included in the Company's third
quarter Form 10-Q.
All Other Fees. PricewaterhouseCoopers LLP billed the Company $1,200
during 2001 for assisting the Company with the preparation of its tax return.
THE COMPANY BOARD UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE
"FOR" THE RATIFICATION OF KPMG LLP
OTHER MATTERS
The Board of Directors does not know of any matters that will be
presented for action at the Annual Meeting other than those described above or
matters incident to the conduct of the Annual Meeting. If, however, any other
matters not presently known to management should come before the Annual Meeting,
it is intended that the shares represented by a shareholder's proxy will be
voted on such matters in accordance with the discretion of the holders of such
proxy.
SUBMISSION OF PROPOSALS AND OTHER MATTERS
RELATED TO 2003 ANNUAL MEETING
The next Annual Meeting of Shareholders will be held by the Company on
or about April 22, 2003. Any shareholder who wishes to submit a proposal for
consideration at that meeting, and who wishes to have such proposal included in
the Company's proxy statement, must comply with SEC Rule 14a-8 and must submit
the proposal in writing no later than November 15, 2002. The deadline for
shareholders to notify the Company of non-Rule 14a-8 matters that may be raised
for consideration at the next Annual Meeting and the deadline under the
Company's bylaws for submission of shareholder nominations of Company directors
is January 30, 2003. All such proposals and notifications should be sent to Jack
W. Gibson, President and Chief Executive Officer, at 201 Volvo Parkway,
Chesapeake, Virginia 23320.
15
GENERAL
The Company's 2001 Annual Report to Shareholders accompanies this Proxy
Statement. Upon written request, the Company will provide shareholders with a
copy of its Annual Report on Form 10-K for the year ended December 31, 2001 (the
"Form 10-K"), as filed with the SEC, without charge. Please direct written
requests for a copy of the Form 10-K to: Cynthia A. Sabol, Senior Vice President
and Chief Financial Officer, The Bank of Hampton Roads, 201 Volvo Parkway,
Chesapeake, Virginia 23320.
BY ORDER OF THE BOARD OF DIRECTORS
OF THE COMPANY
Chesapeake, Virginia /s/ Tiffany K. Glenn
March 15, 2002 ---------------------------
Tiffany K. Glenn, Secretary
16
[LOGO]
HAMPTON ROADS
BANKSHARES
Proxy solicited on behalf of the Board of Directors for Annual Meeting of
Shareholders to be held April 23, 2002.
The undersigned, having received the Annual Report to Shareholders and the
accompanying Notice of Annual Meeting Of Shareholders and Proxy Statement dated
March 15, 2002, hereby appoints Emil A. Viola, Jack W. Gibson and Robert G.
Bagley (each with power to act alone) as proxies, with full power of
substitution, and hereby authorizes them to represent and vote, as directed
below, all the shares of the Common Stock of Hampton Roads Bankshares, Inc.
held of record by the undersigned on March 4, 2002, at the Annual Meeting of
Shareholders to be held on April 23, 2002 and at any adjournment thereof.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" ALL PROPOSALS
1. To elect the following Directors to serve for a three year term: Robert H.
Powell III, Bobby L. Ralph, and Emil A. Viola.
[_] FOR all nominees listed (except as indicated below to the contrary)
[_] WITHHOLD AUTHORITY to vote for all nominees listed
(INSTRUCTIONS: To withhold authority to vote for any individual nominee write
the nominee's name on the line provided below.)
--------------------------------------------
2. TO RATIFY the appointment by the Board of Directors of KPMG LLP as the
Company's independent auditors for the year ending December 31, 2002.
[_] FOR [_] AGAINST [_] ABSTAIN(OVER)
3. IN THEIR DISCRETION, on such other matters as may properly come before the
meeting, or, if any nominee listed in Proposal 1 above is unable to serve
for any reason, to vote or refrain from voting for a substitute nominee or
nominees.
This proxy is revocable at any time prior to its exercise. This proxy, when
properly executed, will be voted as directed. Where no direction is given,
this proxy will be voted for Proposals 1 and 2.
Please sign your name(s) exactly as they appear in the label below. If
signer is a corporation please sign the full corporate name by duly
authorized officer. If an attorney, guardian, administrator, executor, or
trustee, please give full title as such. If a limited liability company or
partnership, sign in limited liability company or partnership name by
authorized person. If any stock is held jointly, both shareholders must sign
this proxy.
Date: ______________________, 2002
Signature: ____________________________________________________________________
Printed Name: _________________________________________________________________
Signature: ____________________________________________________________________
Printed Name: _________________________________________________________________
Please complete, date, sign and return this proxy at your earliest convenience
in the envelope provided. Thank you.
We plan to attend the Annual Meeting of Shareholders to be held on April 23,
2002. YES ____ NO ____