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EX-31.1 - EX-31.1 - ALLIANCE BANKSHARES CORP | w82603exv31w1.htm |
EX-31.2 - EX-31.2 - ALLIANCE BANKSHARES CORP | w82603exv31w2.htm |
Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Amendment No. 1
(Mark One)
þ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended December 31, 2010
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from _____________to_____________
Commission file number: 000-49976
ALLIANCE BANKSHARES CORPORATION
(Exact name of registrant as specified in its charter)
VIRGINIA (State or other jurisdiction of incorporation or organization) |
46-0488111 (I.R.S. Employer Identification No.) |
14200 Park Meadow Drive, Suite 200 South, Chantilly, Virginia 20151
(Address of principal executive offices) (Zip Code)
(Address of principal executive offices) (Zip Code)
(703) 814-7200
(Registrants telephone number, including area code)
(Registrants telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Common Stock, $4.00 par value per share | The NASDAQ Stock Market LLC | |
Title of each class | Name of each exchange on which registered |
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule
405 of the Securities Act. Yes o No þ
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or
15(d) of the Act. Yes o No þ
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes þ No o
Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months
(or for such shorter period that the registrant was required to submit and post such files).
o Yes o No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§
229.405 of this chapter) is not contained herein, and will not be contained, to the best of
registrants knowledge, in definitive proxy or information statements incorporated by reference in
Part III of this Form 10-K or any amendment to this Form 10-K. o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated
filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.
Large accelerated filer | o | Accelerated filer | o | Non-accelerated filer o | Smaller reporting company | þ | ||||||
(Do not check if a smaller reporting company) |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Act). Yes o No þ
The aggregate market value of Alliance Bankshares Corporation common stock held by non-affiliates
as of June 30, 2010 was $12,854,316 based on the closing sale price of $2.69 per common share.
The number of shares of common stock outstanding as of March 28, 2011 was 5,108,219.
DOCUMENTS INCORPORATED BY REFERENCE
None.
Table of Contents
Explanatory Note
This Amendment No. 1 on Form 10-K/A (the Amendment) amends Alliance Bankshares Corporations
(Bankshares) Annual Report on Form 10-K for the fiscal year ended December 31, 2010, originally
filed with the Securities and Exchange Commission (the SEC) on March 31, 2011 (the Original
Filing). Bankshares is filing the Amendment solely for the purpose of amending and restating Part
III (Items 10, 11, 12, 13 and 14) to provide disclosure that previously was to be incorporated by
reference to Bankshares definitive proxy statement for the 2011 Annual Meeting of Shareholders.
No attempt has been made in this Amendment to modify or update other disclosures presented in the
Original Filing. This Amendment does not reflect events occurring after the date of the filing of
the Original Filing or modify or update disclosures, including the exhibits to the Original Filing,
affected by subsequent events.
In addition, as required by Rule 12b-15 under the Securities Exchange Act of 1934, as amended
(the Exchange Act), new certifications by our principal executive officer and principal financial
officer are filed as exhibits to the Amendment under Item 15 of Part IV hereof.
PART III.
For purposes of this Part III, unless the context indicates otherwise, references to we,
us, our and Alliance refer to Bankshares and Alliance Bank Corporation (the Bank)
collectively, and references to the Board of Directors or Board refer to the Board of Directors
of Bankshares.
Item 10. Directors, Executive Officers and Corporate Governance |
Information About Directors
The table below shows the current members of the Board of Directors of Bankshares, their ages
as of April 15, 2011, the year they first became a director and their business experience during
the past five years. In addition, the table below also shows the specific experience,
qualifications, attributes and skills that led the Board of Directors of Bankshares to conclude
that each person should serve as a director of Bankshares.
Director | ||||||
Name (Age) | Since(1) | Principal Occupation During Past Five Years | ||||
Oliver T. Carr, III
(46)
|
2007 | Mr. Carr has served as President and CEO of Carr Properties, which is the operating group owned by the Commingled Pension Trust Fund of JPMorgan Chase Bank, N.A. since 2007. Carr Properties manages 3.6 million net rental square feet of commercial office properties in the Washington, D.C. metropolitan area. Mr. Carr was also the founder, President and CEO of Columbia Equity Trust, a publicly traded REIT, and served as Chairman of the Board from 2005 to 2007. |
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Director | ||||||
Name (Age) | Since(1) | Principal Occupation During Past Five Years | ||||
Mr. Carr has a long history of community service in the Washington, D.C. area. He holds a Masters degree in Real Estate Development from MIT and a Bachelors degree from Trinity College and resides in Potomac, Maryland. He serves on the nominating and compensation committees. As a result of Mr. Carrs extensive real estate and business experience, Mr. Carr provides the Board of Directors with invaluable insights on local business and commercial property trends. Mr. Carr also leverages his management experience to enhance the Boards decision-making and oversight processes. | ||||||
William E. Doyle,
Jr. (58)
|
2010 | Mr. Doyle became the President and Chief Executive Officer of Bankshares and the Bank in May 2010, after serving as Interim President and Chief Executive Officer of Bankshares and the Bank since January 2010. Mr. Doyle served as President, Chief Executive Officer and an organizing director of Monument Financial Services, LLC from 2008 through 2009, where he led an organizing group in efforts to form a new community bank in the Richmond, Virginia area. Mr. Doyle also served as President, Chief Executive Officer and an organizing director of Frontier Community Bank (In Organization) in Augusta County, Virginia during 2006 and 2007, as Interim President, Chief Executive Officer and as a director of Citizens Bancorp of Virginia, Inc. in 2004 and 2005, and as President, Chief Executive Officer and Director of Guaranty Financial Corporation and Guaranty Bank from 2001 to 2004. Prior to 2001, Mr. Doyle served as Senior Vice President of Retail Banking and Mortgage Banking of the Middleburg Bank and as Corporate Senior Vice President and Director of Marketing of the Consumer Finance Group of Crestar Bank. Mr. Doyle presently serves on the board of directors of the Virginia Bankers Association Management Services Corporation. He has previously served on the boards of the Virginia Bankers Association Benefits Corporation and Bankers Insurance LLC. Mr. Doyle holds a Masters degree in Business Administration from Duke University and earned a Bachelor of Science in Business Administration degree from Old Dominion University. Drawing from his extensive banking and bank organization experience, Mr. Doyle brings comprehensive |
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Director | ||||||
Name (Age) | Since(1) | Principal Occupation During Past Five Years | ||||
knowledge of banking operations and the regulation of depositary institutions to the Board of Directors. Mr. Doyle also contributes his significant corporate governance experience which he has developed serving both banking and nonprofit organizations. | ||||||
William M. Drohan
(57)
|
1997 | Mr. Drohan is a resident of Great Falls, Virginia, and is the President of the Drohan Management Group, an association management and consulting firm. Mr. Drohan served as Chairman of the Board of Directors from 2009 to 2011 and currently serves as Vice-Chairman of the Board of Directors. In addition, he serves on the audit and nominating committees. Mr. Drohan formerly served as Executive Director of the National Association of State Credit Union Supervisors. He also serves on the board of directors of the Consultants Section of American Society of Association Executives and formerly served on the Board of Advisors to the George Washington University School of Business Mr. Drohan holds BS and MBA degrees. Mr. Drohan has an extensive understanding of the financial services industry and provides the Board of Directors key insights for assessing and managing risks and formulating corporate strategy. Mr. Drohans consulting experience offers the Board unique and valuable analytical and problem-solving techniques. | ||||
Donald W. Fisher,
PhD (65)
|
2009 | Dr. Fisher was appointed Chairman of the Board of Directors in February 2011. He has served as the President and Chief Executive Officer of the American Medical Group Association (AMGA) since October 1980. Dr. Fisher also serves as Chairman of the Board of AMGAs subsidiary Anceta, LLC. Dr. Fishers other AMGA-related offices include Secretary/Treasurer of the American Medical Group Foundation, Treasurer of the American Medical Group Association Political Action Committee, and President and Chief Executive Officer of the American Medical Group Corporation. Prior to joining the AMGA, Dr. Fisher served as the Executive Director of the American Academy of Physician Assistants in Alexandria, Virginia. Dr. Fisher serves on the Boards of Directors for the Disease Management Association of America, the Council of Accountable Physician Practices and the American |
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Director | ||||||
Name (Age) | Since(1) | Principal Occupation During Past Five Years | ||||
International Health Alliance. Dr. Fisher earned a BS degree from Millsaps College, MS and PhD degrees from the University of Mississippi School of Medicine, and completed the Group Practice Executive Managers Institute at the Wharton School of Business. Dr. Fisher resides in Alexandria, Virginia. He serves on the nominating committee. Through over 31 years of experience with AMGA, Dr. Fisher has developed extensive executive management knowledge and leadership skills that provide the Board of Directors with a unique perspective on corporate governance and corporate strategy. | ||||||
Lawrence N. Grant,
CLUR, CPCU (72)
|
1996 | Mr. Grant founded the Independent Insurance Center, Inc., which writes property and casualty, bonding, life and health coverage for commercial and personal clients, specializing in contractors, restaurants, auto services, and high tech companies, with offices in Leesburg and Winchester, Virginia. Mr. Grant is also President of Fire Mark Insurance Associates, Inc. and is the Vice-President of Associated Risk Managers of Virginia, Inc. Mr. Grant resides in Leesburg, Virginia. He serves on the nominating committee. Mr. Grant has developed extensive risk assessment and risk management expertise that contributes a vital perspective to the Boards oversight and risk management processes. Mr. Grant has served on the Board of Directors for 15 years and possesses a strong understanding of Bankshares history, business, organization and challenges in the current economic environment. | ||||
Robert C. Kovarik,
Jr. (61)
|
2011 | Mr. Kovarik is a resident of Oakton, Virginia and in 2008 retired as a Partner in the National Professional Practice Group of Ernst & Young, LLP (E&Y). As a Partner of E&Y from 2002 to 2008, Mr. Kovarik managed engagements by a wide range of companies in the Mid-Atlantic for services related to audits of financial statements, assistance with SEC filings, internal control reviews, due diligence on potential acquisitions, and other transactional advice and operational reviews. Mr. Kovarik also regularly assisted E&Y engagement teams with consultations on complex or highly judgmental accounting and auditing matters. Prior to joining E&Y, Mr. Kovarik was a Partner in the Washington and Northern |
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Director | ||||||
Name (Age) | Since(1) | Principal Occupation During Past Five Years | ||||
Virginia audit practice of Arthur Andersen LLP from 1986 to 2002. Mr. Kovarik also teaches undergraduate advanced accounting courses at the University of Maryland. He serves on the nominating and audit committees. Kovarik brings to the Board of Directors significant experience and expertise in accounting and auditing matters, including resolution of complex accounting issues and review of corporate financial statements. Mr. Kovarik also contributes his substantial knowledge of financial reporting processes and internal controls that he developed during his 22 years as a partner with large accounting and audit firms. | ||||||
D. Mark Lowers (52)
|
2010 | Mr. Lowers is a resident of Round Hill, Virginia and, since 2004, has served as President and Chief Executive Officer of Lowers & Associates, LLC, an international risk management, risk mitigation and loss prevention firm that provides services to insurance companies, banks and other financial institutions. Mr. Lowers has over 25 years of experience administering risk management functions including risk assessments, risk mitigation techniques, audits and compliance programs. Mr. Lowers is actively involved in the Loudoun County, Virginia community and currently serves on the Board of Directors of INOVA Health System. Mr. Lowers served as the Chairman of the Board of Directors of Loudoun Healthcare, Inc. from 1998 through 2009, and as a director of Loudoun Healthcare, Inc. starting in 1994. He chairs the compensation and serves on the nominating committees. Mr. Lowers brings significant risk management expertise and substantial information technology, leadership and corporate governance experience to Bankshares. These skills will assist the Board of Directors in managing Bankshares organizational and operational risks. | ||||
Douglas W. McMinn
(63)
|
2010 | Mr. McMinn is a resident of Clifton, Virginia and, since 2004, has served as President and Chief Executive Officer of Kaiser Group Holdings, Inc. (KGHI), a publicly-traded holding company for industrial contracting and insurance subsidiaries. Mr. McMinn also serves as a director of KGHI and is directly responsible for its direction, growth and profitability. Mr. McMinn has served as an executive |
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Director | ||||||
Name (Age) | Since(1) | Principal Occupation During Past Five Years | ||||
officer of various KGHI subsidiaries since 1990, directing significant international business initiatives, mergers and acquisitions. Prior to working for KGHI, Mr. McMinn served the U.S. government in various international trade advisory roles, culminating in service as the Assistant Secretary for Economic and Business Affairs for the U.S. Department of State from 1985 to 1988. Mr. McMinns extensive international business knowledge and federal government experience bring a broad view of the economy and world affairs to the Board. In addition, Mr. McMinns experience as a director of a publicly-traded company and his leadership skills developed in the public and private sectors will contribute important management and oversight abilities to the Board. Mr. McMinn serves on the audit, compensation and nominating committees. (2) | ||||||
Serina Moy (56)
|
1997 | Ms. Moy is a resident of Silver Spring, Maryland and is a principal in Moy, Cheung & Company, a local accounting firm. She became an NTPI Master in Taxation in 2002. Ms. Moy is the chairperson of the audit committee. She also serves on the nominating committee. She has been determined to be the Board of Directors audit committee financial expert. She is a member of an IRS Focus Group working on improving IRS programs and services, a member of the advisory council to the SBA, a member of the AICPA and NAEA Task Force and was an advisor to the Federal Government Single Web Site on the Internet. Ms. Moy serves as advisory council for a number of Chinese trade and non-profit organizations in the United States. Ms. Moy brings to the Board of Directors broad experience and expertise in accounting and auditing matters. Through her experience with IRS programs, Ms. Moy has also developed specialized tax knowledge that serves a critical role in the Boards financial decision making process. | ||||
J. Eric Wagoner (60)
|
2010 | Mr. Wagoner is a resident of Darien, Connecticut and has served as a Managing Director, and Head of the High-Yield & Distressed Securities division of, Source Capital Group since 1995. Mr. Wagoner has over 35 years of investment securities experience and has developed specialized expertise in high yield and |
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Director | ||||||
Name (Age) | Since(1) | Principal Occupation During Past Five Years | ||||
distressed debt instruments. Over the years, Mr. Wagoner has served on a variety of creditor committees for high profile commercial bankruptcies. Mr. Wagoner holds NASD Series 7, 24 and 63 licenses. Mr. Wagoner serves as a member of the board of directors of Argus Research Group, a leading independent equity research firm, and is a member of the Board of Visitors at Wake Forest University. Mr. Wagoners strong understanding of financial markets, investment securities and market analytics will assist the Board in monitoring and managing risks associated with the investments and funding positions of Bankshares and the Bank. Mr. Wagoner serves on the nominating and audit committees. | ||||||
Robert G. Weyers
(75)
|
1996 | Mr. Weyers is the former owner and former President of KBR Corporation, a commercial and industrial renovation company doing business in the Washington, D.C. metropolitan area, which he sold in 2003. He serves on the nominating, compensation and audit committees. Mr. Weyers resides in Fairfax Station, Virginia. Through managing KBR Corporation, Mr. Weyers has developed extensive executive management and entrepreneurial experience that contributes to the Boards strategic business analysis and decision-making. |
(1) | Dates prior to 2003 refer to the year in which the director was first elected to the Board of Directors of Alliance Bank Corporation (a predecessor corporation to Bankshares). | |
(2) | Mr. McMinn currently is a senior officer of Kaiser Netherlands, B.V. (a former subsidiary of Kaiser Group International, Inc.), which in April 2008 filed a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code in the U.S. Bankruptcy Court for the Western District of Pennsylvania. Kaiser Netherlands, B.V. continues to conduct its business as a debtor-in-possession. |
Information About Executive Officers
Information regarding Mr. Doyle, President and Chief Executive Officer is presented in the
table above. The table below shows the other current executive officers of Bankshares, their ages
as of April 15, 2011, and their business experience during the past five years.
Paul M. Harbolick, Jr., CPA, (51), is the Executive Vice President and Chief Financial Officer.
Mr. Harbolick has 29 years of financial management experience. He served as Senior
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Vice President and Chief Financial Officer of Alliance Bank Corporation from October 1999, and
of Alliance Bankshares Corporation since it was formed in May 2003, until September 2003, when he
became Executive Vice President and Chief Financial Officer of both companies. He served as an
Accounting Manager for Freddie Mac from March 1997 to October 1999. He was a Vice President with
George Mason Bank from 1995 to 1997. Mr. Harbolick currently serves on the Board of Directors of
INOVA Health Systems, chairs the Investment Sub-Committee and serves on the Finance and Audit
Committee of INOVA Health Systems. As previously disclosed, Mr. Harbolick has resigned his
positions with Bankshares and the Bank, effective May 18, 2011.
Craig W. Sacknoff, (61), is an Executive Vice President
and a Senior Relationship Manager in Commercial Banking. He has worked for Alliance Bank Corporation since July 1998. He became a Senior Vice
President of Alliance Bank Corporation when it opened in November 1998 and of Alliance Bankshares
Corporation when it was formed in May 2003 and served in that capacity until his promotion in 2007.
Mr. Sacknoff served as Vice President/Commercial Lending of Patriot National Bank from 1991 to
1998. Mr. Sacknoff has over 39 years of experience in banking including commercial, real estate,
construction, mortgage and retail positions.
George F. Cave, (54), is
an Executive Vice President of Commercial Banking. He
joined Bankshares in October 2010. Prior to joining Alliance Bank Corporation, Mr. Cave served as
Senior Vice President, Credit Advisor, Family Office Credit Solutions for SunTrust Bank since July
2008, and prior to that served as Senior Vice President and Manager, Private Wealth Management
Credit Advisory Services from 2002 to 2008. Mr. Cave has over 30 years of commercial banking and
lending experience, including 25 years in the Metropolitan Washington, DC area serving in a variety
of banking leadership roles for SunTrust Bank from 1986-2010, and prior to that as an Assistant
Vice President with United Virginia Bank (now Crestar Bank) from 1982-1985. In addition, he is
active in a number of community leadership roles including serving as Chairman of the Board for the
Alexandria Chamber of Commerce and as a Director of Alexandria Hospital. Mr. Cave is also an
Accredited Wealth Management Advisor.
John B. McKenney, III, (57), is a Senior Vice President and Chief Credit Officer. He joined
Alliance Bank Corporation in February 2004. Prior to joining Alliance Bankshares Corporation, Mr.
McKenney served as Executive Vice President and officer in charge of the Specialized Corporate
Banking Division at Signet Bank in Virginia. Mr. McKenney also served as President and CEO of
Signet Bank for the Washington, D.C. regional area. In addition, he is active in a number of
nonprofit organizations and serves as an advisory board member. Mr. McKenney has over 31 years of
corporate banking experience. As previously disclosed, Mr. McKenney will retire on May 6, 2011.
Legal Proceedings and Family Relationships
The Board of Directors is not aware of any involvement in legal proceedings that would be
material to an evaluation of the ability or integrity of any director or executive officer; nor is
the Board of Directors aware of any family relationship between any director or executive officer.
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Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires directors, executive officers, and any 10% or
greater beneficial owners of Bankshares common stock to file reports concerning their ownership of
and transactions in Bankshares common stock. Based on a review of the reports of changes in
beneficial ownership of common stock, Bankshares believes that its directors and executive officers
complied with all filing requirements under Section 16(a) of the Exchange Act with respect to 2010,
with the following exception: Mr. Frank H. Grace, III, a former executive officer of Bankshares,
filed one late Form 4 reporting two transactions late.
Code of Ethics
Bankshares has adopted a Code of Ethics (Code) that applies to its directors, executives and
employees including the principal executive officer, principal financial officer, principal
accounting officer and controller, or persons performing similar functions. This Code is posted on
the homepage of our Internet website at http://www.alliancebankva.com under Code of Ethics. We
will provide a copy of the Code to any person without charge upon written request to Alliance
Bankshares Corporation, c/o Corporate Secretary, 14200 Park Meadow Drive, Suite 200S, Chantilly,
Virginia 20151. We intend to provide any required disclosure of any amendment to or waiver from the
Code that applies to our principal executive officer, principal financial officer, principal
accounting officer or controller, or persons performing similar functions, on
http://www.alliancebankva.com under Code of Ethics promptly following the amendment or waiver. We
may elect to disclose any such amendment or waiver in a report on Form 8-K filed with the SEC
either in addition to or in lieu of the website disclosure. The information contained on or
connected to our Internet website is not incorporated by reference in this report and should not be
considered part of this or any other report that we file or furnish to the SEC.
Audit Committee
Bankshares has a separately designated standing Audit Committee established in accordance with
the rules and regulations promulgated under the Exchange Act. Current members of the Audit
Committee are Messrs. Drohan, Kovarik, McMinn, Wagoner and Weyers and Ms. Moy. The Board of
Directors has determined that all of the members of the Audit Committee satisfy the independence
and financial literacy requirements for audit committee members under the NASDAQ Stock Market
(Nasdaq) listing standards and applicable SEC regulations. In addition, at least one member of
the Audit Committee has past employment experience in finance or accounting or comparable
experience which results in the individuals financial sophistication. The Board of Directors has
also determined that Ms. Moy, chairperson of the Audit Committee, qualifies as an audit committee
financial expert within the meaning of applicable regulations of the SEC, promulgated pursuant to
the Sarbanes-Oxley Act of 2002.
Item 11. Executive Compensation
EXECUTIVE COMPENSATION
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In this discussion, we give an overview and analysis of our compensation program and policies.
Included in this discussion are certain tables containing specific information about the
compensation earned or paid in 2009 and 2010 to the following named executive officers: (i) the
individuals who served as Chief Executive Officer of Bankshares during 2010, (ii) the individual
who served as Chief Financial Officer during 2010, (iii) the next two most highly compensated
executive officers of Bankshares who received total compensation of $100,000 or more during the
fiscal year ended December 31, 2010, and (iv) one former executive officer who would have been
included in (iii) if he had been employed by Bankshares at the end of the fiscal year. No other
executive officer of Bankshares earned total compensation in excess of $100,000 for the fiscal year
ended December 31, 2010.
During 2010, Thomas A. Young, Jr. served as President and Chief Executive Officer of
Bankshares from the beginning of the year until January 29, 2010. Mr. Doyle served as Interim
President and Chief Executive Officer beginning on January 28, 2010, and was appointed President
and Chief Executive Officer of Bankshares and the Bank effective May 4, 2010. References in the
following discussion to actions of the Chief Executive Officer during 2010 were performed by Mr.
Young and by Mr. Doyle, in the time frames referenced immediately above.
Compensation Objectives
The primary objective of the Compensation Committee of the Board of Directors with respect to
executive compensation is to evaluate and reward senior executives for performance consistent with
improving long-term shareholder value. The committee evaluates each executives individual
performance along with his contribution to the overall organization. The Chief Executive Officer
provides specific information to the committee relative to the performance of the other members of
the senior management team. The committee considers any recommendations by the Chief Executive
Officer; however, the committee determines final compensation for all executives. The core
compensation philosophy maintained by the committee and the full Board of Directors is a reward
system for achievement. Executives that achieve individual goals are eligible for certain financial
rewards. Corporate achievement of organizational goals such as profitability, growth and market
expansion warrant additional rewards.
Compensation Components and Committee Process
The key components of our executive compensation program consist of base salary, annual cash
bonus program, stock option awards, perquisites and employee benefits.
The Compensation Committee recommends the level of compensation for each executive officer of
Bankshares and the Bank the granting of stock options, employment agreements and other remuneration
plans for approval by the Board of Directors. The Compensation Committee is supported by members of
management (Human Resources Director, Chief Financial Officer and Chief Executive Officer). These
executive officers provide supporting information requested by the Compensation Committee. The
Chief Executive Officer regularly attends the
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Compensation Committee meetings as an invited attendee. The Chief Executive Officer is always
excused from the Compensation Committee meetings when his compensation or employment is discussed.
Base Salary
The Compensation Committee believes that base salary for senior executive officers should be
targeted at market competitive levels. Base salaries are reviewed annually and adjusted from time
to time, based on our review of market data and assessment of Bankshares and individual senior
executive performance. In light of Bankshares performance and the difficult conditions in the
financial services industry during 2009, the Compensation Committee determined not award any raises
to the executive officers for 2009 or 2010. The base salaries of the named executive officers
during 2008, 2009 and 2010 were as follows: Mr. Young $291,500, Mr. Harbolick $190,800, Mr. Grace
$195,517, Mr. Sacknoff $172,963 and Mr. McKenney $139,120. In connection with his hiring as Interim
President and Chief Executive Officer, Mr. Doyles monthly salary equated to an annual base salary
of $291,500. In connection with his hiring as President and Chief Executive Officer, his annual
base salary was established at $299,500 in 2010.
In recognition of the fact that they had not received base salary increases since 2007, and their
respective contributions and performance, effective March 7, 2011, the Compensation Committee
increased the base salaries for the named executive officers as follows: Mr. Harbolick $200,340,
Mr. Sacknoff $181,600 and Mr. McKenney $146,076. The Compensation Committee maintained Mr. Doyles
base salary for 2011 at $299,500.
Annual Cash Bonus Program
The goal of the annual cash program in 2010 was to align annual cash bonus incentives with
organizational performance and repositioning contributions. A second portion of the annual cash
bonus program was based on individual performance. The senior executives were measured on
achievement of non financial, individual and department goals. In recognition of their respective
contributions to the organization, repositioning and achievement of certain non financial goals,
Mr. Harbolick received a cash bonus of $35,000, Mr. McKenney received a cash bonus of $25,000 and
Mr. Sacknoff received a cash bonus of $10,000. Each of these bonuses was paid in 2011.
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Perquisites
The Compensation Committee and the Board of Directors believe that reasonable perquisites are
necessary to attract and retain talented executives. These perquisites include use of a
company-provided automobile or a car allowance, grossed-up for income taxes, dining club dues,
country club dues and supplemental insurance as dictated by the employment agreements. In
addition, in connection with his service as Interim President and Chief Executive Officer, Mr.
Doyle was provided with three months of temporary housing reimbursements and reimbursement of
mileage for travel between Charlottesville and Bankshares headquarters, with housing costs grossed up for taxes,
under his interim employment agreement and in connection with his relocation from Charlottesville,
Virginia upon becoming President and Chief Executive Officer, Mr. Doyle was provided with six
months of temporary housing reimbursements and reimbursement of moving expenses, with housing costs grossed-up
for income taxes, under his employment agreement.
General Employee Benefits
Bankshares offers competitive health, dental, disability and life insurance for all employees.
The senior executives are eligible to participate in all of the above programs. In addition, the
senior executives are eligible to receive matching 401(k) plan contributions on the same basis as
other employees.
Summary Compensation Table for 2010 (1)
The following table sets forth the compensation paid to or earned by Bankshares named
executive officers for 2010 and 2009.
Name and | Bonus(2) | Option Awards(3) | All Other | |||||||||||||||||||||
Principal Position | Year | Salary ($) | ($) | ($) | Compensation ($) | Total ($) | ||||||||||||||||||
William E. Doyle,
Jr.(4) President and CEO |
2010 | $ | 268,543 | $ | | $ | 62,000 | $ | 32,933 | (5) | $ | 363,476 | ||||||||||||
Paul M. Harbolick, Jr. Executive Vice President and CFO |
2010 | $ | 196,262 | $ | 35,000 | $ | | $ | 10,885 | (6) | $ | 242,147 | ||||||||||||
2009 | $ | 190,800 | $ | | $ | | $ | 11,022 | $ | 201,822 | ||||||||||||||
Craig W. Sacknoff Executive Vice President |
2010 | $ | 176,895 | $ | 10,000 | $ | | $ | 9,723 | (7) | $ | 196,618 | ||||||||||||
2009 | $ | 172,963 | $ | | $ | | $ | 10,904 | $ | 183,867 |
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Name and | Bonus(2) | Option Awards(3) | All Other | |||||||||||||||||||||
Principal Position | Year | Salary ($) | ($) | ($) | Compensation ($) | Total ($) | ||||||||||||||||||
John B. McKenney, III Senior Vice President and CCO |
2010 | $ | 133,305 | $ | 25,000 | $ | | $ | | (8) | $ | 158,305 | ||||||||||||
2009 | $ | 139,120 | $ | | $ | | $ | | $ | 139,120 | ||||||||||||||
Former Officers |
||||||||||||||||||||||||
Thomas A. Young, Jr. (9) Former President and CEO |
2010 | $ | 24,292 | $ | | $ | | $ | 388,852 | (10) | $ | 413,144 | ||||||||||||
2009 | $ | 291,500 | $ | | $ | | $ | 26,589 | $ | 318,089 | ||||||||||||||
Frank H. Grace, III (11) Former Executive Vice President |
2010 | $ | 157,880 | $ | | $ | | $ | 224,571 | (12) | $ | 382,451 | ||||||||||||
2009 | $ | 195,517 | $ | 10,000 | $ | | $ | 20,428 | $ | 225,945 |
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(1) | Bankshares named executive officers are not eligible for non-equity incentive compensation, pension plan benefits or deferred compensation. As a result, there is no reported compensation for Non-Equity Incentive Plan Compensation or Nonqualified Deferred Compensation Earnings. | |
(2) | Reflects amounts earned under the Annual Cash Bonus Plan. Annual cash bonus awards are paid in the year following the performance year in which they are earned. | |
(3) | The amount in this column reflects the aggregate grant date fair value, computed in accordance with FASB ASC Topic 718, of options awarded to Mr. Doyle during 2010 under the 2007 Incentive Stock Plan pursuant to the terms of his employment agreement. Assumptions used in the calculation of this amount are included in Note 23 to Bankshares audited financial statements for the fiscal year ended December 31, 2010 included in the Original Filing. No options were granted to any other named executive officer during 2010 or to any named executive officer during 2009. | |
(4) | Mr. Doyle was appointed as Interim President and Chief Executive Officer effective January 28, 2010, and President and Chief Executive Officer effective May 4, 2010. Accordingly, no compensation information is presented for 2009. | |
(5) | Represents $1,320 in reimbursement of mileage during his service as Interim President and Chief Executive Officer, $22,581 in reimbursement of rent and related utilities for temporary housing during his service as Interim President and Chief Executive Officer and as President and Chief Executive Officer, and $9,032 in tax gross-ups related to the commuting/temporary housing expenses | |
(6) | Represents $4,200 in automobile expenses(13), $6,204 in club dues, $185 in 401(k) plan matching contributions and $296 in tax gross-ups related to the automobile expenses. | |
(7) | Represents $8,808 in automobile expenses (13), $133 in 401(k) plan matching contributions and $782 in tax gross-ups related to the automobile expenses. | |
(8) | Mr. McKenney did not receive any perquisites in 2010 or 2009. | |
(9) | Effective January 29, 2010, Mr. Young no longer serves as President and Chief Executive Officer of Bankshares and the Bank. | |
(10) | Represents $185 in club dues and $388,667 in severance for 16 months of continued base salary payments in accordance with Mr. Youngs employment agreement. | |
(11) | Mr. Grace resigned as Executive Vice President of the Bank effective October 12, 2010. | |
(12) | Represents $1,925 in club dues, $208 in supplemental insurance costs related to Mr. Graces golf club membership, and $122,188 in severance, $95,000 in cancellation of a note and $5,250 in reimbursement of tax penalties and interest associated with a 401(k) plan loan, in connection with the settlement of his lawsuit with respect to his resignation and other transactions, as more fully described in note 6 on page 29 herein. | |
(13) | Automobile expenses reflect either the amount of the automobile allowance provided to the named executive officer or the aggregate incremental cost to Bankshares of providing an automobile to the named executive officer. The aggregate incremental cost to Bankshares of a named executive officers use of a company-provided automobile was determined based upon the vehicles lease cost. |
Stock Option Awards
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The Compensation Committee, the Board of Directors and senior management believe aligning
the long term interests of key employees, directors and senior management with shareholders is a
key ingredient in the formula for organizational success. Over the years the Board of Directors
and/or the Compensation Committee have granted stock option awards under the 1999 Stock Option Plan
and the 2007 Incentive Stock Plan to align the long-term interests of key employees, directors and
senior management with shareholders. The Compensation Committee has also delegated to the President
and Chief Executive Officer authority to issue stock option awards to non-senior manager employees
of Bankshares to align their respective interests with shareholders. The Chief Executive Officer
may grant options to employees as necessary to recruit potential employees or to retain existing
employees. Although the Chief Executive Officer has authority to grant the options as necessary,
grants of more than 10,000 options are reviewed with the Compensation Committee prior to the grant
issuance.
Stock option awards have traditionally been granted to employees with terms of ten years and a
vesting schedule of four years. The typical vesting schedule is 15% vesting after the first year,
20% vesting after the second year, 25% vesting after the third year and the final 40% vesting after
the fourth year. Stock option awards are granted at fair market value on the date of grant, which
has been determined by the Compensation Committee as the closing market price on the date of grant.
With the exception of option awards granted to new hires and any stock options granted to
non-senior manager employees by the Chief Executive Officer, stock option grants by the
Compensation Committee have traditionally been made at the committees periodic meetings. The
committees schedule is determined in advance, and the proximity of any equity awards to the
release of earnings announcements or other material news events is coincidental.
Outstanding Equity Awards at 2010 Fiscal Year-End
The following table provides information with respect to outstanding option awards held by the
named executive officers at December 31, 2010. Bankshares has not issued any restricted stock.
Option Awards | ||||||||||||||||
Number of | Number of | |||||||||||||||
Securities | Securities | |||||||||||||||
Underlying | Underlying | Option | Option | |||||||||||||
Unexercised Options | Unexercised Options | Exercise | Expiration | |||||||||||||
Name | Exercisable (#) | Unexercisable (#) | Price ($) | Date(1) | ||||||||||||
William E. Doyle, Jr. |
| 50,000 | $ | 2.84 | 5/27/2020 | |||||||||||
Paul M. Harbolick, Jr. |
10,350 | | $ | 4.25 | 3/29/2011 | |||||||||||
8,625 | | $ | 4.64 | 6/26/2012 | ||||||||||||
17,250 | | $ | 9.66 | 5/28/2013 | ||||||||||||
2,588 | | $ | 6.48 | 1/31/2013 | ||||||||||||
27,600 | | $ | 16.49 | 1/2/2014 | ||||||||||||
9,200 | | $ | 14.00 | 12/30/2015 | ||||||||||||
4,200 | 2,800 | $ | 15.38 | 3/26/2017 | ||||||||||||
7,500 | 5,000 | $ | 9.80 | 9/26/2017 | ||||||||||||
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Option Awards | ||||||||||||||||
Number of | Number of | |||||||||||||||
Securities | Securities | |||||||||||||||
Underlying | Underlying | Option | Option | |||||||||||||
Unexercised Options | Unexercised Options | Exercise | Expiration | |||||||||||||
Name | Exercisable (#) | Unexercisable (#) | Price ($) | Date(1) | ||||||||||||
Craig W. Sacknoff |
8,625 | | $ | 4.64 | 6/26/2012 | |||||||||||
17,250 | | $ | 9.66 | 5/28/2013 | ||||||||||||
2,588 | | $ | 6.48 | 1/31/2013 | ||||||||||||
21,275 | | $ | 16.49 | 1/2/2014 | ||||||||||||
4,600 | | $ | 14.00 | 12/30/2015 | ||||||||||||
4,200 | 2,800 | $ | 15.38 | 3/26/2017 | ||||||||||||
7,500 | 5,000 | $ | 9.80 | 9/26/2017 | ||||||||||||
John B. McKenney, III |
11,500 | | $ | 16.13 | 2/24/2014 | |||||||||||
5,750 | | $ | 13.07 | 1/4/2015 | ||||||||||||
7,475 | | $ | 14.00 | 12/30/2015 | ||||||||||||
4,200 | 2,800 | $ | 15.38 | 3/26/2017 | ||||||||||||
7,500 | 5,000 | $ | 9.80 | 9/26/2017 | ||||||||||||
Former Officers |
||||||||||||||||
Thomas A. Young, Jr. (2) |
| | | | ||||||||||||
Frank H. Grace, III (3) |
17,250 | | $ | 9.66 | 5/28/2013 | |||||||||||
3,450 | | $ | 13.16 | 8/29/2013 | ||||||||||||
21,275 | | $ | 16.49 | 1/2/2014 | ||||||||||||
4,600 | | $ | 14.00 | 12/30/2015 | ||||||||||||
4,200 | | $ | 15.38 | 3/26/2017 | ||||||||||||
7,500 | | $ | 9.80 | 9/26/2017 |
(1) | Each of these options expires ten years after the date of grant. The unexercisable options vest on a four year schedule from the date of grant, 15% vesting after first year, 20% after the second year, 25% after the third year and the remaining 40% after the fourth year. | |
(2) | All of Mr. Youngs unexercised options terminated three months after January 29, 2010. | |
(3) | All of Mr. Graces unexercised vested options terminated three months after October 12, 2010. |
Employment and Change of Control Agreements
We have entered into employment agreements with each of the named executive officers. We
believe employment agreements, including providing for reasonable severance in the event a named
executive officers employment is terminated by us without cause, are necessary to allow us to be
competitive in recruiting and retaining talented executive officers in our industry. In addition,
we believe employment agreements with the named executive officers are appropriate because they
clarify the terms of the executives employment and ensure that Bankshares and its subsidiaries are
protected by non-compete, non-solicitation and non-disclosure provisions in the event the
executives leave the organization.
Our senior management has contributed significantly to our organization, and we believe that
it is important to protect them in the event of a change of control. Further, it is Bankshares
belief that the interests of shareholders will be best served if the interests of senior executives
are aligned with the interests of shareholders, and providing change of control benefits should
eliminate or substantially reduce any reluctance on the part of executive officers, because of
the
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risk of losing their employment, to pursue potential change of control transactions that may be
in the best interests of shareholders. Such arrangements also should keep executive officers
focused on operating the business during any period of uncertainty associated with transaction that
would result in a change of control. Each of the employment agreements for the named executive
officers contains change of control provisions. Unlike the accelerated vesting of equity awards
under the 1999 Stock Option Plan and the 2007 Incentive Stock Plan, these change of control
benefits have a double trigger, which means that the benefits under these provisions are payable
only if employment is terminated after consummation of a transaction that constitutes a change of
control.
William E. Doyle, Jr., President and Chief Executive Officer of Bankshares and the Bank, was
appointed President and Chief Executive Officer of Bankshares and the Bank effective May 4, 2010,
after serving as Interim President and Chief Executive Officer of Bankshares and the Bank beginning
January 28, 2010. Mr. Doyle is employed under an agreement with Bankshares and the Bank, dated as
of May 4, 2010. The agreement provides for Mr. Doyles employment as President and Chief Executive
Officer of Bankshares and the Bank for an initial term through May 4, 2012. On May 4, 2012, and on
each May 4 thereafter, the agreement will automatically renew for an additional one year term,
unless a party provides at least 90 days prior notice of nonrenewal. The agreement provides for an
initial annual base salary of $299,500 with an opportunity for base salary increases and bonuses at
the discretion of the Board of Directors. Mr. Doyles current annual base salary is $299,500. Mr.
Doyle is eligible to participate in any employee benefit plans maintained by the company for the
benefit of its senior executives and for which he is or will become eligible, such as medical,
dental and optical insurance, group term life insurance, long term and short term disability
insurance, and the 401(k) retirement plan. Mr. Doyle is also provided with a company-owned
automobile for business and reasonable personal use during his employment. Under the agreement, Mr.
Doyle received a signing grant of 50,000 stock options pursuant to the terms of the 2007 Incentive
Stock Plan. In recognition that Mr. Doyle needed to relocate his personal residence from
Charlottesville, Virginia to Bankshares geographic location, the company agreed to reimburse Mr.
Doyle for the reasonable rent and utilities incurred while living in temporary housing in the
vicinity of the company for up to six months, limited to a maximum of $2,300 per month, grossed up
for taxes. The company also agreed to reimburse Mr. Doyle for necessary and reasonable moving
costs, subject to approval by Bankshares Board of Directors. If Mr. Doyles employment is
terminated for any reason, he is entitled to payment of any vested but not yet paid benefits
provided under the agreement. If Mr. Doyles employment is terminated by the company other than for
cause (as defined in the agreement), or if Mr. Doyle resigns for good reason (as defined in the
agreement), Mr. Doyle will continue to receive his then current monthly base salary for twelve
months following termination, subject to reduction in the event Mr. Doyle receives other income
during that period. If Mr. Doyles employment is terminated by the company other than for cause or
if he resigns for good reason within one year after a change of control (as defined in the
agreement), he will receive 2.99 times his average taxable income from the company for the five
calendar years immediately preceding the calendar year of the change of control (with compensation
for any partial year of employment annualized) (the 5-year average taxable compensation), payable
in equal monthly installments over twelve months following the date of termination, but limited to
the maximum payment which could be made without any payment being considered an excess parachute
payment under Section 280G of the
Internal Revenue Code. The agreement includes noncompetition and nonsolicitation provisions
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that are in effect during the term of the agreement and for a period of twelve months following the
termination of Mr. Doyles employment. The agreement also provides for confidentiality obligations
during and following Mr. Doyles employment. If Mr. Doyle dies while employed, the company will pay
his estate within 60 days of his death all salary and accrued bonus through the end of the month
during which his death occurs. No other termination events result in termination payments under the
agreement.
Paul M. Harbolick, Jr., Executive Vice President & CFO of Bankshares and the Bank, is employed
under an amended and restated employment agreement with the Bank, originally effective March 1,
2003, with a current term ending March 1, 2012. The agreement provides for an automatic one-year
renewal each March 1 subject to a requirement of 60 days prior notice in the event of nonrenewal
by either party. The agreement provides for an initial annual base salary with an opportunity for
base salary increases and bonuses at the discretion of the Board of Directors. Mr. Harbolicks
current annual base salary is $200,340. Mr. Harbolick is eligible for the usual and customary
employee benefits from the company including life and disability insurance as provided to
executive-level employees. In addition, the agreement provides that the company will provide a
country club allowance of up to $457 per month (as subsequently increased by the Board), and will
provide an automobile allowance of $350 per month. If Mr. Harbolicks employment is terminated by
the company other than for cause (as defined in the agreement) or is terminated by Mr. Harbolick
for good reason (as defined in the agreement), Mr. Harbolick will be entitled to continue receiving
his then current monthly base salary for the greater of the remainder of his contract term or
twelve months. If within one year after a change of control (as defined in the agreement), Mr.
Harbolicks employment is terminated by the company other than for cause or is terminated by Mr.
Harbolick for good reason, Mr. Harbolick will receive an amount equal to two years compensation
(defined as annual base salary plus the average of his last three years bonuses) payable in equal
monthly installments over twenty-four months. Additionally, Mr. Harbolick is subject to
non-disclosure commitments and to non-compete commitments within a defined geographic area and
non-solicitation commitments for a period of twelve months following termination of his employment.
If Mr. Harbolick dies while employed, the company will pay his estate within 60 days of his death
all salary and accrued bonus through the end of the month during which his death occurs. No other
termination events result in termination payments under the agreement. As previously disclosed,
Mr. Harbolick has resigned his positions with Bankshares and the Bank, effective May 18, 2011.
Craig W. Sacknoff, Executive Vice President of the Bank, is employed under an amended and
restated employment agreement, originally effective March 1, 2003, and currently in effect until
March 1, 2012. The agreement provides for an automatic one-year renewal each March 1 subject to a
requirement of 60 days prior notice in the event of nonrenewal by either party. The agreement
provides for an initial annual base salary with an opportunity for base salary increases and
bonuses at the discretion of the Board of Directors. Mr. Sacknoffs current annual base salary is
$181,600. Mr. Sacknoff is eligible for the usual and customary employee benefits from the company
including life and disability insurance as provided to executive-level employees. In addition, the
agreement provides that the company will lease a car for Mr. Sacknoff with a lease payment of up to
$734.05 per month (as subsequently increased by the Board) and will pay or reimburse Mr. Sacknoff
for all maintenance, insurance, fuel and taxes on such car. If Mr. Sacknoffs employment is
terminated by the company other than for cause (as
defined in the agreement) or is terminated by Mr. Sacknoff for good reason (as defined in the
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agreement), Mr. Sacknoff will be entitled to continue receiving his then current monthly base
salary for the greater of the remainder of his contract term or twelve months. If within one year
after a change of control (as defined in the agreement), Mr. Sacknoffs employment is terminated by
the company other than for cause or is terminated by Mr. Sacknoff for good reason, Mr. Sacknoff
will receive 1.5 times his 5-year average taxable compensation, payable in equal monthly
installments over eighteen months. Additionally, Mr. Sacknoff is subject to non-disclosure
commitments and to non-compete commitments within a defined geographic area and non-solicitation
commitments for a period of twelve months following termination of his employment. If Mr. Sacknoff
dies while employed, the company will pay his estate within 60 days of his death all salary and
accrued bonus through the end of the month during which his death occurs. No other termination
events result in termination payments under the agreement.
John B. McKenney, III, Senior Vice President and Chief Credit Officer of the Bank, is employed
under a one-year employment agreement, effective March 1, 2007, and currently in effect until March
1, 2012. The agreement provides for an automatic one-year renewal each March 1 subject to a
requirement of 60 days prior notice in the event of nonrenewal by either party. The agreement
provides for an initial annual base salary with an opportunity for base salary increases and
bonuses at the discretion of the Board of Directors. Pursuant to an informal arrangement, Mr.
McKenneys current annual base salary is $146,076. Mr. McKenney is eligible for the usual and
customary employee benefits from the company including life and disability insurance as provided to
executive-level employees. If Mr. McKenneys employment is terminated by the company other than for
cause (as defined in the agreement) or is terminated by Mr. McKenney for good reason (as defined in
the agreement), Mr. McKenney will be entitled to continue receiving his then current monthly base
salary for the greater of the remainder of his contract term or twelve months. If within one year
after a change of control (as defined in the agreement), Mr. McKenneys employment is terminated by
the company other than for cause or is terminated by Mr. McKenney for good reason, Mr. McKenney
will receive 1.5 times his 5-year average taxable compensation, payable in equal monthly
installments over eighteen months. Additionally, Mr. McKenney is subject to non-disclosure
commitments and to non-compete commitments within a defined geographic area and non-solicitation
commitments for a period of twelve months following termination of his employment. If Mr. McKenney
dies while employed, the company will pay his estate within 60 days of his death all salary and
accrued bonus through the end of the month during which his death occurs. No other termination
events result in termination payments under the agreement. As previously disclosed, Mr. McKenney
will retire on May 6, 2011.
George F. Cave, Executive Vice President of the Bank, is employed under a one-year employment
agreement, with a term commencing November 8, 2010, and currently in effect until November 8, 2011.
The agreement provides for an automatic one-year renewal each November 8 subject to a requirement
of 60 days prior notice in the event of nonrenewal by either party. The agreement provides for an
initial annual base salary with an opportunity for base salary increases and bonuses at the
discretion of the Board of Directors. Mr. Caves current annual base salary is $200,000. Mr. Cave
is eligible for the usual and customary employee benefits from the company including life and
disability insurance as provided to executive-level employees. In addition, the agreement provides
that the company will pay to Mr. Cave a monthly automobile allowance of $750 per month, net of
applicable taxes. Under the agreement, Mr.
Cave received a signing bonus of $15,000, which is subject to repayment if Mr. Caves
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employment terminates for any reason prior to November 8, 2011, and a signing grant of 10,000 stock
options pursuant to the terms of the 2007 Incentive Stock Plan. If Mr. Caves employment is
terminated by the company other than for cause (as defined in the agreement) or is terminated by
Mr. Cave for good reason (as defined in the agreement), Mr. Cave will be entitled to continue
receiving his then current monthly base salary for twelve months. If within one year after a change
of control (as defined in the agreement), Mr. Caves employment is terminated by the company other
than for cause or is terminated by Mr. Cave for good reason, Mr. Cave will receive 1.5 times his
5-year average taxable compensation, payable in equal monthly installments over twelve months.
Additionally, Mr. Cave is subject to non-disclosure commitments and to non-compete commitments
within a defined geographic area and non-solicitation commitments for a period of twelve months
following termination of his employment. If Mr. Cave dies while employed, the company will pay his
estate within 60 days of his death all salary and accrued bonus, if any, through the end of the
month during which his death occurs. No other termination events result in termination payments
under the agreement.
Thomas A. Young, Jr., Former President and Chief Executive Officer of Bankshares and the Bank,
was employed under a three-year employment agreement effective as of May 1, 2008, with an initial
term ending May 1, 2011. The agreement terminated on January 29, 2010. The agreement provided for
an automatic one-year renewal at the end of the initial term and each May 1 thereafter subject to a
requirement of 60 days prior notice in the event of nonrenewal by either party. The agreement
provided for an initial annual base salary with an opportunity for base salary increases and
bonuses at the discretion of the Board of Directors. Effective as of May 1, 2008 and continuing
through January 29, 2010, Mr. Youngs annual base salary was $291,500. Under the agreement, Mr.
Young was eligible for the usual and customary employee benefits from the company including life
and disability insurance as provided to executive-level employees, plus payment by the company of
premiums on two additional life insurance policies owned by Mr. Young in the amount of $300,000
each. In addition, under the agreement the company provided him an allowance of up to $1,400 per
month for the lease of a car for Mr. Young and paid or reimbursed Mr. Young for all maintenance,
insurance, fuel and taxes on such car. The agreement provided that if Mr. Youngs employment were
terminated by the company other than for cause (as defined in the agreement) or were terminated by
Mr. Young for good reason (as defined in the agreement), Mr. Young was entitled to continue
receiving his then current monthly base salary for the greater of the remainder of his contract
term or twelve months. If within one year after a change of control (as defined in the agreement),
Mr. Youngs employment were terminated by the company other than for cause or were terminated by
Mr. Young for good reason, Mr. Young was entitled receive up to 2.99 times his 5-year average
taxable compensation, payable in equal monthly installments over thirty-six months, limited to the
maximum payment which could be made without any payment being considered an excess parachute
payment under Section 280G of the Internal Revenue Code. Additionally, Mr. Youngs agreement
contained non-disclosure commitments and non-compete commitments within a defined geographic area
and non-solicitation commitments for a period of twelve months following termination of his
employment. The agreement also provided that if Mr. Young died while employed, the company would
pay his estate within 60 days of his death all salary and accrued bonus through the end of the
month during which his death occurred. No other termination events would have resulted in
termination payments under his agreement.
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Frank H. Grace, III, Former Executive Vice President of the Bank, was employed under an
amended and restated employment agreement, originally effective January 13, 2004, with a term
ending March 1, 2011. The agreement provided for an automatic one-year renewal each March 1 subject
to a requirement of 60 days prior notice in the event of nonrenewal by either party. The agreement
provided for an initial annual base salary with an opportunity for base salary increases and
bonuses at the discretion of the Board of Directors. Effective as of March 1, 2008 and continuing through October 12, 2010, Mr. Graces annual base salary was $195,517.
Under the agreement, Mr. Grace was eligible for the usual and customary employee benefits from the
company including life and disability insurance as provided to executive-level employees. In
addition, the agreement provided that the company would lease a car for Mr. Grace with a lease
payment of up to $786.40 per month and would pay or reimburse Mr. Grace for all maintenance,
insurance, fuel and taxes on such car. The agreement further provided that the company would
provide monthly dues for Mr. Grace for membership in a dining club and a golf club. The agreement
provided that if Mr. Graces employment were terminated by the company other than for cause (as
defined in the agreement) or were terminated by Mr. Grace for good reason (as defined in the
agreement), Mr. Grace was entitled to continue receiving his then current monthly base salary for
the greater of the remainder of his contract term or twelve months. If within one year after a
change of control (as defined in the agreement), Mr. Graces employment were terminated by the
company other than for cause or were terminated by Mr. Grace for good reason, Mr. Grace would
receive 1.5 times his 5-year average taxable compensation, payable in equal monthly installments
over twenty-four months. Additionally, Mr. Graces agreement contained non-disclosure commitments
and non-compete commitments within a defined geographic area and non-solicitation commitments for a
period of twelve months following termination of his employment. The agreement also provided that
if Mr. Grace died while employed, the company would pay his estate within 60 days of his death all
salary and accrued bonus through the end of the month during which his death occurs. No other
termination events would have resulted in termination payments under the agreement.
As previously disclosed, effective January 26, 2011, Alliance and Mr. Grace settled a lawsuit
brought by Mr. Grace with respect to his resignation of employment and other transactions with the
Bank. See note 6 on page 29 herein for a discussion of the terms of the settlement.
In most cases, payment of the termination payments described above (other than the payments
following death) for each executive will be delayed for six months following the executives
termination date to comply with the requirements of Section 409A of the Internal Revenue Code. Any
payments required to be delayed will be paid at the end of the six-month period in one lump sum.
Any payments due after the end of the six-month period will be paid at the normal payment date
provided for under the applicable employment agreement.
The definitions of cause, good reason and change of control under these employment
agreements are discussed under Potential Payments Upon Termination or Change of Control below.
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Potential Payments Upon Termination or Change of Control
Pursuant to the terms of their employment agreements and the terms of their outstanding stock
options under Bankshares stock option plans, the named executive officers are (or were) entitled
to certain payments or benefits upon a change of control or in connection with certain termination
events.
Employment Agreements
Compensation to be Paid Upon Termination For Cause
Under the employment agreements, in the event the company terminates the executives
employment for cause, the executive is not entitled to any compensation from the company following
the date of termination. Termination for cause would require purposeful and/or serious wrongdoing
on the part of the executive which reflected poorly on his integrity or moral character or which
resulted in a breach of certain commitments he had made to the company.
Compensation to be Paid Upon Death
Under the employment agreements, if the executive dies while he is employed by the company,
his employment agreement will terminate but the company will pay to his estate that portion of his
salary which he would have earned through the end of the month in which his death occurs, as well
as that portion of his annual cash bonus, if any, which he had accrued through the end of the month
in which his death occurs. In addition, the company currently pays the premiums on a group life
insurance policy which will entitle the executives beneficiaries to a death benefit equal to twice
the executives base salary, or 2.5 times the executives base salary in the case of Mr. Cave.
Until January 29, 2010, in the case of Mr. Young, the company also paid the premiums on two
additional life insurance policies owned by Mr. Young providing a death benefit equal to $300,000
each.
Compensation to be Paid Upon Disability or Termination Without Cause or For Good Reason
Under certain circumstances, either the executive or the company may desire to end his
employment for a reason which is not set forth above. Among other events in this category, the
company may terminate the executives employment even if he has done nothing wrong, the executive
may resign from the company based on a good reason, or the company may determine that an
executive is unable to continue working for the company due to disability. Under the employment
agreements, if the executive is disabled (as defined in the agreement), the company will terminate
his employment 90 days after notice of termination is provided to the executive. No additional
compensation is payable under the agreements in the case of termination due to disability. Under
the employment agreements, termination of an executive for any reason other than for cause, for
disability or as a result of the executives death will entitle the executive to receive
termination compensation from the company. If the executive decides to terminate his employment,
then he is only entitled to receive termination compensation payments if he does so for good
reason, which means the company has changed certain aspects of his employment in a significant way
that is not acceptable to him or otherwise fails to fulfill a commitment the company had made to
him. In each of these circumstances, for twelve months in the case of Messrs. Doyle and Cave, and
for each month until the end of the term of the executives employment agreement or twelve months
following the date of termination if longer
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in the case of the other executives, the company will pay to the executive an amount equal to
one-twelfth of the annual salary which he was earning immediately before the termination. In the
event that the executive breaches the confidentiality, non-disclosure or non-competition
commitments which he made to the company in his employment agreement, then the company will no
longer be required to make these payments. These commitments generally last for twelve months after
termination of employment.
Compensation to be Paid Upon Change of Control
Under the employment agreements, a change of control is a significant change of the companys
business or management that fits into one of these categories: (1) another party becomes the owner
of enough of the companys securities to control at least 50% of the voting power under certain
circumstances; or (2) as a result of certain transactions, and within two years of the occurrence
of such transactions, the people who formerly constituted a majority of the Board no longer
constitute a majority of the Board. The executives employment agreements provide that any
successor to the company, including an entity that becomes a successor as a result of a change of
control, must assume and agree to perform the companys obligations to the executives under the
individual employment agreements. If a successor does not assume and agree to perform the companys
obligations under the individual employment agreements, then the executives will be entitled to
terminate their employment for good reason and to receive the termination compensation described
above. In the case of Mr. Doyles employment agreement, if within one year after a change of
control (as defined in the agreement) his employment is terminated by the company other than for
cause or he resigns for good reason, Mr. Doyle will be entitled to receive up to 2.99 times his
5-year average taxable compensation, payable in equal monthly installments over twelve months,
limited to the maximum payment which could be made without any payment being considered an excess
parachute payment under Section 280G of the Internal Revenue Code. In the case of Mr. Harbolick,
if within one year after a change of control his employment is terminated by the company without
cause or he resigns for good reason, he will be entitled to an amount equal to two times his
compensation (defined in the agreement as current base salary plus the average of the last three
years bonus payments), payable in equal monthly installments over twenty-four months. In the case
of Messrs. Sacknoff, McKenney and Cave, if within one year after a change of control, the executive
officer is terminated without cause or he resigns for good reason, he will be entitled to an amount
equal to 1.5 times his 5-year average taxable compensation, payable in equal monthly installments
over eighteen months for Messrs. Sacknoff and McKenney and twelve months in the case of Mr. Cave.
In the case of Mr. Youngs former employment agreement, if within one year after a change of
control (as defined in the agreement) his employment had been terminated by the company other than
for cause or he resigned for good reason, Mr. Young would have received up to 2.99 times his 5-year
average taxable compensation, payable in equal monthly installments over thirty-six months, limited
to the maximum payment which could be made without any payment being considered an excess parachute
payment under Section 280G of the Internal Revenue Code. In the case of Mr. Graces former
employment agreement, if within one year after a change of control (as defined in the agreement)
his employment had been terminated by the company other than for cause or he resigned for good
reason, Mr. Grace would have received an amount equal to 1.5 times his 5-year average taxable
compensation, payable in equal monthly installments over twenty-four months.
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Stock Options
The 1999 Stock Option Plan provides for the grant of stock options to our directors,
consultants and key employees. The 2007 Incentive Stock Plan provides for the grant of stock
options, stock appreciation rights, restricted stock, restricted stock units and stock awards to
our key employees, non-employee directors and non-employee service providers. As of April 30, 2011,
only stock options have been granted under the 2007 Incentive Stock Plan.
Once granted under either the 1999 Stock Option Plan or the 2007 Incentive Stock Plan, options
can be exercised to purchase Bankshares common stock only in accordance with a vesting schedule
stated in each option award agreement and with the other terms of the individual grant. The
following summarizes the treatment of stock options upon certain events under the 1999 Stock Option
Plan and the 2007 Incentive Stock Plan.
Treatment of Stock Options Upon Termination For Cause
Under both the 1999 Stock Option Plan and the 2007 Incentive Stock Plan, if a persons
employment or service is terminated by the company for cause, all of his stock options which have
not been exercised will immediately be forfeited. The definition of cause under the 1999 Stock
Option Plan is substantially similar to the definition of cause in the employment agreements
described above. The definition of cause under the 2007 Incentive Stock Plan is substantially the
same as the definition of cause in the 1999 Stock Option Plan, with the exception that the
definition of cause under the 2007 Incentive Stock Plan expressly refers to Bankshares
subsidiaries.
Treatment of Stock Options Upon Death or Incapacity
Under both the 1999 Stock Option Plan and the 2007 Incentive Stock Plan, if a participant who
has received stock options dies while he is working for or providing services to the company or one
of its subsidiaries, his legal representative (usually his executor or administrator) has twelve
months to exercise those vested options which the deceased person could have exercised as of the
date of his death. Under both the 1999 Stock Option Plan and the 2007 Incentive Stock Plan, if a
participant who has received stock options becomes incapacitated while he is working for or
providing services to the company or one of its subsidiaries, his guardian or legal representative
also has twelve months following the date of incapacity to exercise those vested options which the
incapacitated person could have exercised as of the date of his incapacitation. After the 12-month
period, any options that have not been exercised will be forfeited.
Treatment of Stock Options Upon Termination For Any Other Reason
The employment or service of a person may end for a reason other than those set forth above.
Under both the 1999 Stock Option Plan and the 2007 Incentive Stock Plan, if termination occurs for
any other reason, such as retirement or resignation, a participant who has received stock options
has three months to exercise those vested options which he could have exercised as of the date his
employment or service ended. After the three-month period, any options which have not been
exercised will be forfeited.
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Treatment of Stock Options Upon Change of Control
Under the 1999 Stock Option Plan, a change of control is a significant change in our business
that fits into one of these categories: (1) Bankshares transfers all or almost all of its assets to
another party; (2) another party becomes the owner of more than 50% of Bankshares stock; or (3)
Bankshares is involved in a reorganization, a consolidation, or a merger with another party. If a
change of control occurs, then, regardless of the usual vesting schedule, an employee who has
received stock options may exercise all of his options, as long as the parties who own Bankshares
common stock immediately before the change of control are not the same parties who hold, either
directly or indirectly, a majority of the common stock of the acquiring party involved in the
change of control. If a change of control occurs, the committee appointed by the Board to
administer the 1999 Stock Option Plan may also take steps to protect those people who have received
options, including (i) changing the exercise dates or termination dates of the options so that a
person may exercise his options before the change of control; (ii) canceling the options a person
has received and instead paying him cash in an amount equal to the fair market value of the stock
on the day the change of control occurs, minus the exercise price he would have had to pay to
exercise the options; or (iii) canceling the options a person has received and arranging for him to
receive equivalent options to purchase the stock of the acquiring party involved in the change of
control, so long as he receives substantially the same treatment under the substituted options that
he would have received under the original options. The Board may also take other steps in addition
to or instead of the steps set forth above to protect those people who have received options under
the 1999 Stock Option Plan.
Under the 2007 Incentive Stock Plan, a change of control is a significant change in our
business that fits into one of these categories: (1) another party becomes the owner of 25% or more
of Bankshares stock; (2) within any two-year period, the composition of the Board changes so that
the directors who formerly constituted the Board no longer constitute a majority of the Board and
the new directors were not approved by a sufficient number of former directors; (3) as a result of
a merger or consolidation, Bankshares ceases to exist or Bankshares stock is converted into other
property; (4) as a result of a merger or consolidation, we continue to exist but the holders of
Bankshares stock immediately prior to the transaction do not own at least 51% of Bankshares stock
immediately following the transaction; (5) Bankshares transfers all or almost all of its assets to
another party; or (6) Bankshares shareholders approve the liquidation or dissolution of the
company. If a change of control occurs, then, regardless of the usual vesting schedule, a
participant who has received stock options may exercise all of his options. If a change of control
occurs, the committee appointed by the Board to administer the 2007 Incentive Stock Plan may also
take steps to protect those people who have received options, including (i) changing the exercise
dates or termination dates of the options so that a person may exercise his options before the
change of control; (ii) canceling the options a person has received and instead paying him cash in
an amount which could have been obtained upon the exercise of the option, had the option been
currently exercisable; (iii) adjusting the option in an appropriate way to reflect the change of
control; or (iv) causing the outstanding options to be assumed, or new rights substituted for those
options, by the acquiring or surviving party involved in the change of control.
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Except in the case of Mr. Young and Mr. Grace, the table below reflects potential
payments to each of our named executive officers in the event of a termination of the named
executive officers employment with us, whether due to retirement, death, disability, termination
for cause, termination with good reason, or termination in connection with a change of control. The
amounts shown assume in each case that the change of control or termination occurred on December
31, 2010, and that the relevant stock price was $3.89, which was the closing price of Bankshares
common stock on December 31, 2010. Because Mr. Young and Mr. Grace were no longer serving as
executive officers of the company on December 31, 2010, the information provided in the table below
for them reflects the actual payments they received in connection with their departures.
Involuntary | ||||||||||||||||||||||||||||
Termination | ||||||||||||||||||||||||||||
Without | ||||||||||||||||||||||||||||
Involuntary | Cause or | Involuntary | ||||||||||||||||||||||||||
Termination | Voluntary | Termination | ||||||||||||||||||||||||||
Without | Termination | for Cause or | ||||||||||||||||||||||||||
Cause or | for Good | Voluntary | ||||||||||||||||||||||||||
Voluntary Termination | Reason after | Termination | ||||||||||||||||||||||||||
for Good | Change of | Normal | Without | |||||||||||||||||||||||||
Name | Benefit | Reason | Control | Retirement | Good Reason | Death | Disability | |||||||||||||||||||||
William E.
Doyle, Jr. |
Severance Payments | $ | 299,500 | (1) | $ | 861,386 | (2) | $ | | $ | | $ | | (3) | $ | | ||||||||||||
Stock Option Vesting(4) | $ | | $ | | $ | | $ | | $ | | $ | | ||||||||||||||||
Total Value | $ | 299,500 | $ | 861,386 | (2) | $ | | $ | | $ | | $ | | |||||||||||||||
Paul M. Harbolick,
Jr. |
Severance Payments | $ | 190,800 | (1) | $ | 404,933 | $ | | $ | | $ | | (3) | $ | | |||||||||||||
Stock Option Vesting(4) | $ | | $ | | $ | | $ | | $ | | $ | | ||||||||||||||||
Total Value | $ | 190,800 | $ | 404,933 | $ | | $ | | $ | | $ | | ||||||||||||||||
Craig W. Sacknoff |
Severance Payments | $ | 172,963 | (1) | $ | 240,718 | $ | | $ | | $ | | (3) | $ | | |||||||||||||
Stock Option Vesting(4) | $ | | $ | | $ | | $ | | $ | | $ | | ||||||||||||||||
Total Value | $ | 172,963 | $ | 240,718 | $ | | $ | | $ | | $ | |
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Involuntary | ||||||||||||||||||||||||||||
Termination | ||||||||||||||||||||||||||||
Without | ||||||||||||||||||||||||||||
Involuntary | Cause or | Involuntary | ||||||||||||||||||||||||||
Termination | Voluntary | Termination | ||||||||||||||||||||||||||
Without | Termination | for Cause or | ||||||||||||||||||||||||||
Cause or | for Good | Voluntary | ||||||||||||||||||||||||||
Voluntary Termination | Reason after | Termination | ||||||||||||||||||||||||||
for Good | Change of | Normal | Without | |||||||||||||||||||||||||
Name | Benefit | Reason | Control | Retirement | Good Reason | Death | Disability | |||||||||||||||||||||
John B. McKenney,
III |
Severance Payments | $ | 139,120 | (1) | $ | 220,704 | $ | | $ | | $ | | (3) | $ | | |||||||||||||
Stock Option Vesting(4) | $ | | $ | | $ | | $ | | $ | | $ | | ||||||||||||||||
Total Value | $ | 139,120 | $ | 220,704 | $ | | $ | | $ | | $ | | ||||||||||||||||
Former Officers |
||||||||||||||||||||||||||||
Thomas A.
Young, Jr.
(5) |
Severance Payments | $ | 388,667 | (1) | ||||||||||||||||||||||||
Stock Option Vesting(4) | $ | | ||||||||||||||||||||||||||
Supplemental Life | ||||||||||||||||||||||||||||
Insurance | $ | | ||||||||||||||||||||||||||
Total Value | $ | 388,667 | ||||||||||||||||||||||||||
Frank H. Grace, III
(6) |
Severance Payments | $ | 285,965 | |||||||||||||||||||||||||
Stock Option Vesting(4) | $ | | ||||||||||||||||||||||||||
Total Value | $ | 285,965 |
(1) | The continuation of monthly salary payments for 12 months, or the remainder of the named executive officers employment agreement term in the case of Mr. Young, is reflected as a lump sum payment. | |
(2) | This amount may be reduced in order to avoid excess parachute payments under Section 280G of the Internal Revenue Code, in accordance with the named executive officers employment agreement. | |
(3) | Because the table assumes termination as of December 31, 2010, no amounts are reflected for payment of base salary earned through the end of the month in which death occurs. | |
(4) | No amounts are reflected related to the accelerated vesting of unvested stock options because all unvested stock options were out of the money as of December 31, 2010, and as of January 29, 2010, in the case of Mr. Young, and as of October 12, 2010, in the case of Mr. Grace. | |
(5) | Mr. Young ceased to serve as President and Chief Executive Officer of Bankshares and the Bank effective January 29, 2010. In accordance with the terms of his employment agreement, in connection with his departure without cause, Mr. Young will continue to receive his current base salary through May 1, 2011, subject to a 6-month payment delay as required by Section 409A of the Internal Revenue Code. Mr. Young received no other severance in connection with his departure. | |
(6) | Mr. Grace resigned as Executive Vice President of the Bank effective October 12, 2010. As previously disclosed, on November 10, 2010, Mr. Grace filed suit against Bankshares, the Bank, the |
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Chairman of the Board of Directors and the President and Chief Executive Officer of the organizations. In the suit, Mr. Grace sought to void the non-compete and non-solicitation provisions of his employment agreement with the Bank, and to collect compensatory, pecuniary and punitive damages of up to $2.85 million plus attorney fees and costs in connection with his resignation of employment and other transactions with the Bank, including forgiveness of certain loans and salary advances made to him during his employment. Pursuant to a January 26, 2011 settlement of the lawsuit brought by Mr. Grace, Alliance paid Mr. Grace $122,188 in severance and $5,250 in reimbursement of claimed tax penalties and interest associated with a 401(k) plan loan, cancelled a $95,000 promissory note made by Mr. Grace in favor of the Bank, paid $60,000 toward Mr. Graces attorneys fees and paid $3,527 for Mr. Graces portion of the mediation fees in connection with the settlement. In addition, pursuant to the terms of the settlement agreement, the provision of Mr. Graces employment agreement requiring a post-resignation period of non-competition was terminated and the provisions requiring post-resignation periods of non-solicitation of customers and employees were shortened to six months and nine months, respectively. As part of the settlement, Mr. Grace withdrew his lawsuit and the parties mutually released each other from any and all related claims. An independent committee of the Board of Directors approved the settlement. |
The above table does not include benefits to which all salaried employees are entitled
(such as life insurance) or the companys 401(k) plan benefits that would be paid to a named
executive officer, except to the extent that the named executive officer is entitled to an
additional or accelerated benefit as a result of the termination or change of control. In addition,
the table does not include the value of vested but unexercised stock options as of December 31,
2010. The footnotes to the table describe the assumptions used in estimating the amounts set forth
in the table. Because the payments to be made to a named executive officer depend on several
factors, the actual amounts to be paid out upon a named executive officers termination of
employment can only be determined at the time of the executives separation from Alliance.
DIRECTOR COMPENSATION
The Budget Committee and the Compensation Committee jointly annually recommend to the full
Board of Directors the compensation to be paid to Bankshares non-employee directors. Employee
directors do not receive additional compensation for their board service.
During 2010, each non-employee director received an annual retainer of $7,650, with the
Chairman of the Board receiving an additional annual retainer of $7,650 and the Chairman of each of
the Audit Committee, Loan Committee, ALCO Committee (which is no longer a Board committee in 2011)
and Compensation Committee receiving an additional annual retainer of $2,975. The annual retainer
fees are paid on an annual basis in January of the year to which the fee is applicable. Each
non-employee director also received a monthly fee of $850.
In light of the economic conditions and corporate performance the Board of Directors decided
to reduce the annual retainer and monthly compensation for 2010 to a level which represents 85% of
the director compensation paid during 2009. Directors will receive the same reduced level of
annual retainer and monthly compensation for 2011 as in 2010.
Each non-employee director is also eligible to receive non-qualified stock option awards
pursuant to the Alliance Bankshares Corporation 2007 Incentive Stock Plan in the discretion of
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the Compensation Committee. No stock options were granted to the non-employee directors during
2010.
Director Compensation Table for 2010 (1)
The following table provides compensation information for 2010, for each member of the Board
of Directors.
Fees Earned or | All Other | |||||||||||||||
Name(2) | Paid in Cash | Option Awards(3) | Compensation | Total | ||||||||||||
($) | ($) | ($) | ($) | |||||||||||||
Oliver T. Carr, III |
$ | 18,000 | $ | | $ | | $ | 18,000 | ||||||||
William M. Drohan |
$ | 25,650 | $ | | $ | | $ | 25,650 | ||||||||
Donald W. Fisher |
$ | 18,000 | $ | | $ | | $ | 18,000 | ||||||||
Lawrence N. Grant |
$ | 18,000 | $ | | $ | | $ | 18,000 | ||||||||
D. Mark Lowers |
$ | 8,925 | $ | | $ | | $ | 8,925 | ||||||||
Douglas W. McMinn |
$ | 8,925 | $ | | $ | | $ | 8,925 | ||||||||
Serina Moy |
$ | 20,975 | $ | | $ | | $ | 20,975 | ||||||||
J. Eric Wagoner |
$ | 8,925 | $ | | $ | | $ | 8,925 | ||||||||
George S. Webb (4) |
$ | 20,975 | $ | | $ | | $ | 20,975 | ||||||||
Robert G. Weyers |
$ | 20,975 | $ | | $ | | $ | 20,975 | ||||||||
William E. Doyle, Jr. | Not eligible for compensation as a director. | |||||||||||||||
Employee Director |
||||||||||||||||
Thomas A. Young, Jr. | Not eligible for compensation as a director. | |||||||||||||||
Former Employee |
||||||||||||||||
Director (5) |
(1) | Bankshares non-employee directors are not eligible for non-equity incentive compensation, pension plan benefits or deferred compensation. As a result there is no reported compensation for Non-Equity Incentive Plan Compensation or Nonqualified Deferred Compensation Earnings. | |
(2) | Mr. Robert C. Kovarik joined the Board of Directors on February 1, 2011, and thus did not receive any compensation for serving as a director during 2010. | |
(3) | No options were granted to any of the non-employee directors during 2010. As of December 31, 2010, the non-employee directors held the following options to purchase shares of common stock: Mr. Carr: 12,500, of which 7,500 were vested; Mr. Drohan: 18,541, of which 16,541 were vested; Dr. Fisher: none; Mr. Grant: 18,541, of which 16,541 were vested; Mr. Kovarik: none; Mr. Lowers: none; Mr. McMinn: none; Ms. Moy: 18,541, of which 16,541 were vested; Mr. Wagoner: none; and Mr. Weyers: 18,541, of which 16,541 were vested. | |
(4) | Mr. Webb retired as a director of Bankshares effective December 15, 2010. | |
(5) | Effective January 29, 2010, Mr. Young no longer serves as a director of Bankshares. |
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Table of Contents
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Security Ownership of Certain Beneficial Owners and Management
The following table shows as of April 15, 2011, the beneficial ownership of Bankshares
common stock of the shareholders known to Bankshares to be the beneficial owners of more than 5% of
Bankshares common stock and who are not also directors or executive officers of Bankshares.
Name and Address of | Amount and Nature of | |||||
Beneficial Owner | Beneficial Ownership | Percent of Class (1) | ||||
John W. Edgemond, IV (2)
|
383,287(2) | 7.50 | % | |||
Wellington Management Company, LLP (3)
|
365,305(3) | 7.15 | % | |||
Grace & White, Inc. (4)
|
355,755(4) | 6.96 | % |
(1) | Based on 5,108,219 shares of common stock outstanding as of April 15, 2011. For purposes of this table, beneficial ownership has been determined in accordance with the provisions of Rule 13d-3 of the Securities Exchange Act of 1934 under which, in general, a person is deemed to be the beneficial owner of a security if he or she has or shares the power to vote or direct the voting of the security or the power to dispose of or direct the disposition of the security, or if he or she has the right to acquire beneficial ownership of the security within sixty days. | |
(2) | Based on Schedule 13D/A filed with the SEC on January 7, 2011 by John W. Edgemond, IV. According to this Schedule 13D/A, as of January 7, 2011, Mr. Edgemond has sole voting power with respect to all 383,287 of these shares and sole investment power with respect to all 383,287 of these shares. Mr. Edgemond disclaims beneficial ownership of 14,219 additional shares owned by his spouse. Mr. Edgemonds business address is 42660 John Mosby Highway, Chantilly, Virginia 20152. | |
(3) | Based on Schedule 13G/A filed with the SEC on February 17, 2009 by Wellington Management Company, LLP (Wellington). According to this Schedule 13G/A, as of December 31, 2008, in its capacity as investment advisor, Wellington has shared voting power with respect to 292,215 of these shares and shared investment power with respect to all 365,305 of these shares. The business address of Wellington is 75 State Street, Boston, Massachusetts 02109. | |
(4) | Based on Schedule 13G/A filed with the SEC on January 31, 2011 by Grace & White, Inc. According to this Schedule 13G/A, as of December 31, 2010, in its capacity as investment advisor, Grace & White, Inc. has sole voting power with respect to 31,800 of these shares, has no shared voting power with respect to any of these shares, and has shared investment power with respect to all 355,755 of these shares. The business address of Grace & White, Inc. is 515 Madison Ave. Suite 1700, New York, New York 10022. |
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Table of Contents
The following table shows as of April 15, 2011 the beneficial ownership of Bankshares
common stock of each director, each named executive officer and of all directors and executive
officers of Bankshares as a group.
Amount and Nature of Beneficial Ownership
Name of | Options Exercisable by | Percent | ||||||||||
Beneficial Owner | Shares(1) | June 14, 2011 | of Class (2) | |||||||||
Oliver T. Carr, III |
550 | 7,500 | .16 | % | ||||||||
William E. Doyle, Jr. |
2,300 | 7,500 | .19 | % | ||||||||
William M. Drohan (3) |
25,993 | 16,541 | .83 | % | ||||||||
Donald W. Fisher |
1,000 | | .02 | % | ||||||||
Frank H. Grace, III (4) |
3,000 | | .06 | % | ||||||||
Lawrence N. Grant (5) |
49,268 | 16,541 | 1.28 | % | ||||||||
Paul M. Harbolick, Jr. |
3,806 | 79,763 | 1.61 | % | ||||||||
Robert C. Kovarik, Jr. |
1,000 | | .02 | % | ||||||||
D. Mark Lowers |
1,000 | | .02 | % | ||||||||
John B. McKenney, III |
13,000 | 39,225 | 1.01 | % | ||||||||
Douglas W. McMinn (6) |
2,000 | | .04 | % | ||||||||
Serina Moy (7) |
71,277 | 16,541 | 1.71 | % | ||||||||
Craig W. Sacknoff (8) |
22,724 | 8,838 | 1.77 | % | ||||||||
J. Eric Wagoner (9) |
11,400 | | .22 | % | ||||||||
Robert G. Weyers (10) |
69,000 | 16,541 | 1.67 | % | ||||||||
Thomas A. Young, Jr. (11) |
5,000 | | .10 | % | ||||||||
All directors & executive officers
as a group (15) |
274,318 | 268,990 | 10.10 | % |
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(1) | For purposes of this table, beneficial ownership has been determined in accordance with the provisions of Rule 13d-3 of the Securities Exchange Act of 1934 under which, in general, a person is deemed to be the beneficial owner of a security if he or she has or shares the power to vote or direct the voting of the security or the power to dispose of or direct the disposition of the security, or if he or she has the right to acquire beneficial ownership of the security within sixty days. Beneficial ownership also includes any shares held in the name of an individuals spouse, minor children or other relatives living in the individuals home. Except as otherwise indicated, each director or executive officer has sole voting and investment power with respect to the shares shown. | |
(2) | The ownership percentage of each individual is calculated based on the total of 5,108,219 shares of common stock that were outstanding as of April 15, 2011, plus the number of shares that can be issued to the individual within sixty days of April 15, 2011 upon the exercise of stock options held by the individual, whether or not such options are in the money. Shares of common stock that are subject to exercisable stock options are deemed to be outstanding for the purpose of computing the percentage of outstanding common stock owned by any person or group but are not deemed outstanding for the purpose of computing the percentage of common stock owned by any other person or group. | |
(3) | Includes 880 shares held by Mr. Drohans spouse. | |
(4) | As of February 23, 2010, the date of the most recent Form 4 filed by Mr. Grace regarding his ownership of Bankshares common stock. Mr. Grace resigned as Executive Vice President of the Bank effective October 12, 2010. All of Mr. Graces unexercised options terminated three months after October 12, 2010. | |
(5) | Includes 6,469shares Mr. Grant holds jointly with his spouse; 8,810 shares held by Mr. Grants spouse; 738 shares held by the Grant Revocable Family Trust with respect to which Mr. Grant has shared voting and shared investment power; and 1,294 shares held by Independent Insurance Center, Inc. with respect to which Mr. Grant has shared voting and shared investment power. | |
(6) | Mr. McMinn holds these shares jointly with his spouse. | |
(7) | Includes 11,954 shares Ms. Moy holds jointly with her spouse, 1,800 shares held by Ms. Moys spouse and 1,187 shares held as custodian on behalf of or by Ms. Moys children. | |
(8) | Includes 1,150 shares Mr. Sacknoff holds jointly with his spouse, 58 shares held jointly with Mr. Sacknoffs children and 29 shares held as custodian for Mr. Sacknoffs son. | |
(9) | Includes 8,000 shares held by Compass Point Partners, L.P. with respect to which Mr. Wagoner has shared voting and investment power. | |
(10) | Includes 67,706 shares Mr. Weyers holds jointly with his spouse. | |
(11) | Based on information provided by Mr. Young. Effective January 29, 2010, Mr. Young no longer serves as President and Chief Executive Officer. All of Mr. Youngs unexercised options terminated three months after January 29, 2010. |
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Securities Authorized for Issuance Under Equity Compensation Plans
The following table sets forth information as of December 31, 2010 about the shares that may
be issued under all of our existing equity compensation plans.
Equity Compensation Plan Information | ||||||||||||
Weighted-average | Number of securities remaining | |||||||||||
Number of securities to | exercise price of | available for future issuance | ||||||||||
be issued upon exercise | outstanding | under equity compensation plans | ||||||||||
of outstanding options, | options, warrants | (excluding securities reflected in | ||||||||||
Plan category | warrants and rights (a) | and rights (b) | column (a)) (c) | |||||||||
Equity compensation
plans approved by
security holders
(1) |
500,210 | $ | 10.26 | 520,756 | ||||||||
Equity compensation
plans not approved by
security holders |
| | | |||||||||
Total |
500,210 | $ | 10.26 | 520,756 |
(1) | All shares relate to the 1999 Stock Option Plan and the 2007 Incentive Stock Plan. |
Item 13. Certain Relationships and Related Transactions, and Director Independence
Director Independence
The Board of Directors is comprised of a majority of independent directors, as defined by
the Nasdaq listing standards as currently in effect and applicable to Bankshares. Independent
directors do not receive consulting, legal or other fees from Bankshares or the Bank, other than
Board and committee compensation. Although companies affiliated with certain of these directors
provide goods and services to Bankshares and the Bank, the Board of Directors has determined in
accordance with the Nasdaq listing standards that these independent directors have no relationships
with Bankshares or the Bank that would interfere with the exercise of their independent judgment in
carrying out the responsibilities of a director. The Board has determined that all current
directors are independent with the exception of Mr. Doyle. In determining each directors
independence, the Board considered the fact that Carr Properties, of which Mr. Carr serves as
President and CEO, leases the corporate headquarters to Bankshares under a lease that expires in
July 2016, but determined that this relationship does not interfere with Mr. Carrs ability to
exercise independent judgment as a director of Bankshares, and also considered the fact that Lowers
& Associates, LLC, of which Mr. Lowers serves as President and CEO, and Proforma Screening
Services, of which Mr. Lowers is an owner and director, periodically provide information technology
risk management and pre-employment background screening services, respectively, to the Bank, but
determined that these relationships will not interfere with Mr. Lowerss ability to exercise
independent judgment as a director of Bankshares.
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Interest of Management in Certain Transactions
The Bank grants loans and letters of credit to its executive officers, directors and their
affiliated entities. These loans are made in the ordinary course of business on substantially the
same terms and conditions, including interest rates and collateral, as those prevailing at the same
time for comparable transactions with unrelated persons, and, in the opinion of management, do not
involve more than normal risk of collectability or present other unfavorable features. The
aggregate amount of such loans outstanding at December 31, 2010 and 2009 was approximately $2.3
million and $2.5 million, respectively. During 2010, new loans and line of credit advances to such
related parties amounted to $150 thousand in the aggregate and payments amounted to $360 thousand
in the aggregate.
The Bank also maintains deposit accounts with some of its executive officers, directors and
their affiliated entities. The aggregate amount of these deposit accounts at December 31, 2010 and
2009 amounted to $1.1 million and $2.1 million, respectively.
As noted above, effective January 26, 2011, Alliance and former Executive Vice President Frank
H. Grace, III settled a lawsuit brought by Mr. Grace with respect to his resignation of employment
and other transactions with the Bank. See note 6 on page 29 herein for a discussion of the terms
of the settlement.
Under Bankshares Code of Ethics, all directors and employees (including the executive
officers) are prohibited from having any direct or indirect financial or other participation in any
business that competes with, supplies goods or services to, or is a customer of Bankshares.
Bankshares President, Chief Financial Officer and Chairman of the Audit Committee are the
Compliance Officers as identified in the Code of Ethics and are responsible for overseeing
compliance with the Code of Ethics. These kinds of transactions are sometimes referred to as
related person transactions.
In addition, the Audit Committee is responsible for reviewing, approving and/or ratifying all
related person transactions, other than related person transactions with respect to routine banking
matters, which are reviewed in accordance with Regulation O and are not reviewed by the Audit
Committee. The Audit Committees decision whether or not to approve or ratify a related person
transaction will be made in light of the committees determination as to whether the transaction is
or is not in the best interests of Bankshares. Where such transactions involve a director, the
committee may also take into account the effect of the transaction on the directors status as an
independent member of the Board and eligibility to serve on Board committees under SEC and Nasdaq
rules and regulations.
The term related person generally means any of Bankshares directors or executive officers,
nominees for director, persons known to own 5% or more of Bankshares common stock, and any member
of the immediate family of such person.
A related person transaction is generally an existing or proposed transaction in which
Bankshares was or is to be a participant and the amount involved exceeds $120,000, and in which the
related person had or will have a direct or indirect material interest. A related person
transaction does not include:
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| the payment of compensation by Bankshares to its executive officers or directors; or | ||
| a transaction if the interest of the related person rises solely from the ownership of Bankshares common stock and all shareholders receive the same benefit on a pro-rata basis. |
Item 14. Principal Accountant Fees and Services
Principal Accountant Fees and Services
The following table presents the fees for professional audit services rendered by Yount, Hyde
& Barbour, P.C. for the audit of Bankshares consolidated financial statements for the fiscal years
ended December 31, 2010 and 2009, and fees billed for other services rendered by Yount, Hyde &
Barbour, P.C. during those periods. All services reflected in the following table for 2010 and 2009
were pre-approved in accordance with the policy of the Audit Committee of the Board of Directors.
Year Ended December 31, | 2010 | 2009 | ||||||
Audit Fees (1) |
$ | 121,500 | $ | 110,000 | ||||
Audit-Related Fees (2) |
9,470 | 5,893 | ||||||
Tax Fees (3) |
9,700 | 12,850 | ||||||
All Other Fees |
| | ||||||
Total |
$ | 140,670 | $ | 128,743 |
(1) | Audit fees consist of audit and review services and review of documents filed with the SEC. | |
(2) | Audit-related fees consist of pre-approved consultation concerning financial accounting and reporting standards, public funds agreed upon procedures and agreed upon procedures for ACH compliance. | |
(3) | Tax fees consist of preparation of Federal and State income tax returns, statutory trust return, and consultation regarding tax compliance issues. In addition during 2009, a net operating loss carry back return was completed. |
The Audit Committee has determined that the provision by Yount, Hyde & Barbour, P.C. of
the non-audit services referred to above is compatible with the maintenance of that firms
independence.
Pre-Approval Policies
Pursuant to the terms of its charter, the Audit Committee is responsible for the appointment,
compensation and oversight of the work performed by Bankshares independent accountants. The Audit
Committee, or a designated member of the Audit Committee, must pre-approve all audit (including
audit-related) and non-audit services performed by the independent accountants in order to ensure
that the provisions of such services does not impair the accountants independence. The Audit
Committee has delegated interim pre-approval authority
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to Ms. Moy, chairperson of the Audit Committee. Any interim pre-approval of permitted non-audit
services is required to be reported to the Audit Committee at its next scheduled meeting. In
addition, pre-approved research and consultation fees requested by management may be performed
throughout the engagement year not to exceed $5,000.
PART IV.
Item 15. Exhibits, Financial Statement Schedules
(a) | Exhibits |
31.1 | Certification of CEO pursuant to Rule 13a-14(a). | ||
31.2 | Certification of CFO pursuant to Rule 13a-14(a). |
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
ALLIANCE BANKSHARES CORPORATION (Registrant) |
||||
May 2, 2011 | /s/ William E. Doyle, Jr. | |||
Date | William E. Doyle, Jr. | |||
President & Chief Executive Officer
(principal executive officer) |
||||
May 2, 2011 | /s/ Paul M. Harbolick, Jr. | |||
Date | Paul M. Harbolick, Jr. | |||
Executive Vice President & Chief Financial Officer
(principal financial and accounting officer) |
40