SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant (X)
Filed by a Party other than the Registrant ( )
Check the appropriate box:
(X) Preliminary Proxy Statement ( ) Confidential, for Use of the
Commission Only (as permitted
by Rule 14a-6(e)(2))
( ) Definitive Proxy Statement
( ) Definitive Additional Materials
( ) Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
UNITED COMMUNITY BANKSHARES, INC.
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
(X) No fee required
( ) Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
( ) Fee paid previously with preliminary materials.
( ) Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule, or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
UNITED COMMUNITY BANKSHARES, INC.
100 East 4th Avenue
Franklin, Virginia 23851
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 13, 1997
To: SHAREHOLDERS OF UNITED COMMUNITY BANKSHARES, INC.
Notice is hereby given that the Annual Meeting of Shareholders of
United Community Bankshares, Inc. (the "Company") will be held at the Main
Street Eatery, Second Floor, 119 North Main Street, Franklin, Virginia on
Tuesday, May 13, 1997, at 10:00 a.m., local time, for the following purposes:
ITEM 1. To elect three directors of the Company to serve for terms of three
years and until their successors are elected and qualified.
ITEM 2. To approve the Company's 1997 Incentive Stock Plan, the material terms
of which are described in the Proxy Statement accompanying this notice.
ITEM 3. To approve an amendment to the Articles of Incorporation of the
Corporation to provide for removal of directors under certain circumstances, the
terms of which are described in the Proxy Statement accompanying this notice.
ITEM 4. To ratify the appointment of Goodman & Company, L.L.P. as the
Company's independent certified public accountants.
ITEM 5. For the transaction of such other business as may properly be brought
before the meeting.
The Board of Directors has fixed the close of business on April 4, 1997
as the record date for the determination of shareholders entitled to notice of,
and to vote at, the Annual Meeting of Shareholders or any adjournment or
adjournments thereof.
There is included herewith a Proxy Statement to which your attention is
directed together with the Company's Annual Report for 1996. It is the intent of
management to mail this proxy material on April 16, 1997.
By Order of the Board of Directors
April __, 1997 F. Bruce Stewart, Secretary
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE MEETING. PLEASE SIGN,
DATE AND MAIL PROMPTLY THE ENCLOSED PROXY IN THE RETURN ENVELOPE PROVIDED.
SHAREHOLDERS WHO ATTEND THE MEETING MAY REVOKE THEIR PROXIES AND VOTE IN PERSON.
<PAGE>
UNITED COMMUNITY BANKSHARES, INC.
100 East 4th Avenue
Franklin, Virginia 23851
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS MAY 13, 1997
It is the intent of management to mail this Proxy Statement on April
16, 1997. This statement is furnished in connection with the solicitation of
proxies to be used at the Annual Meeting of Shareholders of United Community
Bankshares, Inc. (the "Company") to be held the Main Street Eatery, Second
Floor, 119 North Main Street, Franklin, Virginia on Tuesday, May 13, 1997, at
10:00 a.m., local time.
THE ENCLOSED PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF THE
COMPANY AND THE ENCLOSED PROXY MAY BE REVOKED BY NOTIFYING F. BRUCE STEWART,
SECRETARY OF THE COMPANY, IN WRITING, BEFORE OR AT THE MEETING, AT ANY TIME
BEFORE IT IS VOTED, OR BY FILING ANOTHER PROXY WITH THE SECRETARY/TREASURER,
BEARING A LATER DATE.
If the proxy is validly executed and not revoked, it will be voted at
the meeting as specified therein with respect to the four items set forth. If
any other matters come before the meeting, the proxy will be voted with respect
thereto in the interest of the Company according to the best judgment of the
person or persons voting the proxy.
In addition to solicitations by mail, directors and officers of the
Company may solicit proxies personally or by telephone. The entire cost of the
solicitations will be borne by the Company.
VOTING SECURITIES
The Company currently has only one class of stock, Common, of which
1,829,584 shares were outstanding as of the close of business on April 4, 1997,
the record date for the determination of shareholders entitled to notice of and
to vote at the meeting, and each share is entitled to one vote, there being no
provision for cumulative voting.
<PAGE>
PRINCIPAL SHAREHOLDERS
To the best of management's knowledge, the following own either
beneficially or of record more than 5% of the Company's outstanding shares of
common stock. Additional beneficial ownership information related to the
directors and executive officers of the Company is set forth below in the
section captioned "Election of Directors of the Company".
Name and Address Amount and
of Beneficial Nature of Percent of
Owner Ownership Class (1)
----------------- ----------- ----------
J. P. Bain 98,439 (2)(3) 5.38%
Wakefield, Virginia
Hannah B. Bain 99,996 (4) 5.47%
Wakefield, Virginia
(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 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 has the right to acquire beneficial
ownership of the security within sixty days.
(2) Refer to the beneficial ownership table provided in "Election
of Directors of the Company" below for detailed descriptions
of the nature of the beneficial ownership for the listed
individual.
(3) Amount does not include the 99,996 shares of the Company held
by Mr. Bain's spouse, Hannah B. Bain, listed immediately below
in this table, to which Mr. Bain disclaims beneficial
ownership.
(4) Amount does not include the 98,439 shares of the Holding Company held
by Mrs. Bain's spouse, J. P. Bain, listed immediately above in
this table, to which Mrs. Bain disclaims beneficial ownership. See
also note 2 above for additional information regarding Mr. Bain's
beneficial ownership.
ITEM 1
ELECTION OF DIRECTORS OF THE COMPANY
The Company's Board of Directors is divided into three classes (I, II,
and III). The term of office for Class I directors will expire at the annual
meeting. The three persons named immediately below, all of whom currently serve
as directors of the Company, are nominated to serve as Class I directors. If
elected, the three nominees will serve for terms of three years until the 2000
annual meeting. The persons named in the proxy will vote for the election of the
nominees named below unless authority is withheld. The Board believes that the
nominees will be available and able to serve as directors, but if any of these
persons should not be available or able to serve the proxies may exercise
discretionary authority to vote for substitutes proposed by the Board.
Certain information concerning the nominees for election at the annual
meeting as Class I directors is set forth below as of December 31, 1996, as well
as certain information about Class II and Class III directors, who will continue
in office after the annual meeting until the 1998 and 1999 annual meeting of
shareholders, respectively.
<PAGE>
<TABLE>
<CAPTION>
Amount and Nature of
Served as Principal Beneficial Ownership
Name Director Occupation During as of December 31, 1996
and Age Since (1) Past Five Years (Percent of Class) (2)
-------- ---------- ------------------- ------------------------
CLASS I DIRECTORS (NOMINEES)
To Serve Until 2000, if Elected
<S> <C>
Hunter Darden , Jr. (74) 1971 Retired, Farmer 4,806
*
Gregor O. Huber (77) 1972 Retired CEO, The Bank of Sussex and Surry 13,920 (3)
*
F. Bruce Stewart (57) 1988 Attorney, Stewart & Stewart, attorneys at law 11,630 (4)
*
<CAPTION>
CLASS II DIRECTORS
To Serve Until 1998
<S> <C>
J. Philip Bain, Jr. (33) 1988 Stockbroker - Davenport and Company 65,025
3.6%
Jack P. Bain (73) 1947 Former Chairman, 198,435 (5)
The Bank of Sussex and Surry; 10.8%
Private Investor
Harvey G. Pope (77) 1988 Vice Chairman of the Company; Chairman of 8,881 (6)
The Bank of Franklin; Consultant, Hancock Peanut *
Co. (former President)
<CAPTION>
CLASS III DIRECTORS
To Serve Until 1999
<S> <C>
D. Eugene Brittle (47) 1986 Executive Vice President and Chief Operating 3,000 (7)
Officer of the Company; President and Chief *
Executive Officer, The Bank of Sussex and Surry,
Chief Executive Officer since 1986 & President
1997 - Present
Wenifred O. Pearce (55) 1997 President and Chief Executive Officer 2,624
of the Company and The Bank of Franklin; *
formerly, Regional President, Hampton Roads
Region - First American Bank of Virginia
J. D. Spivey (70) 1991 Retired, Vice President of Southampton 5,122 (8)
Tractor, Co., Inc. *
J. Russell West (71) 1970 Chairman of the Company and 57,975 (9)
The Bank of Sussex and Surry; 3.2%
Owner - Ivor Furniture Company
All directors and executive officers 371,879
as a group (11 persons) 20.3%
</TABLE>
* Represents less than 1% of total outstanding shares
(1) The Company was formed in 1996 and year referenced refers to the year
the director was appointed to the board of one of the Company's
subsidiary banks, The Bank of Franklin ("BOF") or The Bank of Sussex &
Surry ("BSS") (collectively, the "Subsidiary Banks").
(2) See the definition of beneficial ownership set forth in footnote 1 of
"Principal Shareholders" above.
(3) Includes 600 shares held jointly with spouse.
(4) Includes 144 shares owned son living in the household and 6,488 shares
in the estate of Fred C. Stewart.
(5) Includes 99,996 shares held individually by spouse, Hannah B.
Bain, to which Mr. Bain disclaims beneficial ownership; 18,000
shares held in trust for the benefit of his daughter for which Mr. Bain
is trustee; and 23,880 shares held by Mr. Bain as trustee
under-the-will of Robert F. Bain, Jr.
(6) Includes 317 shares owned by spouse.
(7) Includes 600 shares held jointly with spouse.
(8) Includes 3,200 shares owned as joint tenants with spouse.
(9) Includes 600 shares held jointly with spouse.
Committees the Company
Audit Committee. The audit committee consists of the following
non-employee directors: Messrs. Darden, Huber and West and Charles F. Kingery,
Jack Beale, Marion G. Smith and A. Meredith Felts; however, the committee did
not meet in 1996. The audit committee reviews financial reports of the
Company and each of its subsidiary banks and affiliates. The audit committee
also is charged with reporting to the board of directors the results of
internal audit activities and management's response to audit recommendations.
Personnel Committee. The personnel committee met twice during
1996 and consists of the following non-employee directors: Messrs. Spivey,
Stewart, Huber, West and J. P. Bain, Jr. The committee's primary
responsibility is to consider compensation of the executive officers,
employee benefits for employees of the Subsiadiary Banks, well as such other
employment matters as deemed appropriate. The committee considers
management and employee performance on an annual basis and recommends
compensation to the board of directors after considering various factors,
primarily, bank performance, condition of the local economy, response to the
needs of the Company and its subsidiaries, past salary and salary paid to
other officers and employees of institutions of similar size in the region.
EXECUTIVE COMPENSATION
The table below sets forth information concerning the annual compensation
earned by listed executive officers as employees of the Company's subsidiary
banks. The amounts reflected below relates to compensation earned by the named
officer as paid by the officer's respective bank for which he serves as
President and Chief Executive Officer for each of the three years listed. The
individuals' current positions are reflected in the principal positions listed.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation
-------------------
Name and
Principal All Other
Position Year (1) Salary($)(2) Bonus($) Compensation($)(3)(4)
- --------- -------- ------------ -------- ---------------------
<S> <C>
Wenifred O. Pearce 1996 $92,400 $4,579 $9,480
CEO and President of 1995 $82,475 $0 $8,594
the Company and BOF 1994 $80,850 $0 $8,292
D. Eugene Brittle 1996 $88,448 $0 $ 797
Executive Vice President 1995 $76,820 $0 $ 726
and COO of the Company and 1994 $73,300 $0 $ 391
President and CEO of BSS
</TABLE>
(1) Mr. Pearce began his employment with BOF on February 1, 1994.
(2) Amount shown includes for Mr. Pearce directors' fees of $2,400,
$________ and _______, for 1996, 1995 and 1994, respectively; and for
Mr. Brittle, directors' fees of $1,800 in each of the reported years.
(3) Amounts shown for Mr. Pearce includes $7,500 for each of 1996, 1995
and 1994 relating to contributions by BOF on behalf of Mr. Pearce
under the BOF's deferred compensation plan. See "Deferred
Compensation and Profit-Sharing Plans" below.
(4) Consists of premiums paid for life insurance policies with death
benefits over $50,000, as reported for federal income tax purposes.
Employment Contracts
On August 1, 1997, Mr. Pearce and Mr. Brittle each entered into an
employment agreement with the Company. Except as otherwise stated, Mr. Pearce's
and Mr. Brittle's agreements are substantially similar. Mr. Pearce's agreement
provides that he will serve as President, Chief Executive Officer and a director
of the Company and BOF commencing for a period of three years, renewing
annually, unless either party gives the other party at least 90 days' written
notice prior to the end of the original term or any additional period, of the
intention not to renew the agreement. The agreement provides that Mr. Pearce
shall be paid a base salary of $100,000 during the first year of the contract,
with performance based increases for subsequent years, provided that in each
subsequent year he will receive not less than the previous year's base pay. In
the event the Company terminates Mr. Pearce's employment without cause or Mr.
Pearce's terminates his employment for "good reason", such as the assignment of
duties inconsistent with his position, he is entitled to receive in a lump sum
his annual base salary though the date of termination, any approved vacation
pay, and the balance of his annual base salary through the remaining term of the
agreement for a period of or one year from the date of termination which ever is
greater. In the event of disability, Mr. Pearce shall continue to receive his
agreed salary for 90 days after which he shall have been deemed to have
terminated his employment and shall be entitled only to receive disability
benefits as provided under any contract of disability insurance as may be
provided by the Company.
The agreement also provides for certain benefits in the event of a
change in control of the Company followed by termination of Mr. Pearce's
employment without cause, or by Mr. Pearce for certain reasons, including
substantial adverse change in responsibilities, decrease in base pay, change in
principal work location, or substantial decrease in benefits. Cause shall mean
termination for dishonestly, conviction of a felony, or willful unauthorized
disclosure of confidential information of the Company. The agreement
automatically is extended for 24 months or the balance of the term of the
agreement if a change in control occurs.
As noted, Mr. Brittle's employment agreement provides substantially
similar terms as those discussed above for Mr. Pearce. The agreement provides
that Mr. Brittle will serve as President, Chief Executive Officer and director
of BSS and as Executive Vice President, Chief Operating Officer and director of
the Company at a base salary of $90,000 in the first year and that in each
subsequent year he will receive not less than the previous year's base pay.
Employee Benefit Plans
All employee benefit plans in which the executive officers participate
are currently maintained at the bank levels. The descriptions of such bank plans
follow:
Deferred Compensation and Profit-Sharing Plans. BOF maintains deferred
compensation and retirement arrangements with certain officers. The Bank's
current policy is to accrue the estimated amounts to be paid under the
contracts. However, in previous fiscal years, the related expense was not
recorded.
BOF has a profit-sharing plan for all eligible officers and employees,
Requirements for eligibility to participate include reaching the age of 19 and
one year of service. Vesting in the plan begins the second year of participation
and increases annually by 20% until full vesting occurs after six years.
Employer contributions are determined annually and are calculated based on the
participant's annual compensation. The amounts contributed to the plan were
$28,000, $25,000 and $24,000 for 1996, 1995 and 1994, respectively.
Retirement Plan. BSS has a non-contributory defined benefit pension
plan ("BSS Retirement Plan") which covers all employees who are at least twenty
and a half years old, who have at least six months of service, and who worked at
least 1000 hours during the year. The benefits are based on years of service and
employees compensation during the last three years of employment. BSS's funding
policy has been to contribute annually the maximum amount that can be deducted
for federal income tax purposes. Contributions are intended to provide not only
for benefits attributed to services to date but also for those expected to be
earned in the future. Cash benefits under the plan generally commence upon
retirement, death, or other termination of employment and are payable in various
forms, generally at the election of the participant. A participant's benefits
under the plan generally become fully vested only after a participant has
completed five years of service. Based on current compensation and assuming
retirement at the normal retirement age of 65, it is estimated that the annual
retirement benefit for Mr. Brittle would be $36,000.
BSS's retirement plan expense was $59,792, $62,986 and $59,336 in 1996,
1995 and 1994, respectively.
BSS's includes a pre-retirement benefit provision to pay a 50% joint
and survivor annuity to any surviving spouse in the event a terminated vested or
an active participant died before eligibility for early retirement. The annuity
is payable from the date the participant would have been eligible for retirement
under the plan.
Certain Relationships and Related Transactions
Some of the directors and officers of the Company and their families
are at present, as in the past, customers of one of the banking subsidiaries of
the Company, and have had and expect to have transactions with either or both of
the Subsidiary Banks in the ordinary course of business. In addition, some of
the directors and officers of the Company or its subsidiaries are at present, as
in the past, also directors and officers of corporations which are customers of
the Subsidiary Banks and which have had or expect to have transactions with the
Subsidiary Banks in the ordinary course of business. Such transactions were made
in the ordinary course of business on substantially the same terms, including
interest rates and collateral, as those prevailing at the time for comparable
transactions with other persons, and did not involve more than normal risk of
collectibility or present other unfavorable features.
As of December 31, 1996, the amount of loans, direct and indirect, from
the Subsidiary Banks to executive officers, directors of the Company,
shareholders holding more than 5% of the outstanding voting securities and
entities in which they own significant interest, was $408,469.
J. Phillip Bain, Jr., a director of the Company, is the son of J. P.
Bain, who is also a director of the Company.
Directors' Fees and Attendance
Each director of the Company except the Chief Executive Officer and
Chief Operating Officer are compensated for all services rendered throughout the
year in the amount of an annual retainer of $4,000 and $100.00 per committee
meeting attended. The Chief Executive Officer and Chief Operating Officer are
not compensated for Company Board of Directors' meetings or committee meetings,
but they are compensated as a member of their respective board of BOF or BSS.
Mr. Pearce receives $200 for each BOF board meeting attended and Mr. Brittle
receives $150 for each BSS board meeting attended. All incumbent nominee
directors attended at least 75% of the aggregate number of meetings held by the
Company's Board and meetings of committees on which they served
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS
VOTE FOR EACH OF THE NOMINEES.
PROPOSAL TWO
APPROVAL OF THE 1997 INCENTIVE STOCK PLAN
General
The Company's 1997 Incentive Stock Plan (the "Incentive Plan") was
adopted by the Board of Directors on February 5, 1997, subject to the approval
by the holders of a majority of the Company's Common Stock represented at the
Annual Meeting. The Incentive Plan makes available up to 100,000 shares of
Common Stock for awards to key employees of the Company and its subsidiaries in
the form of stock options, stock appreciation rights and restricted stock
(collectively, "Awards"), all as more fully described below.
The following description of the Incentive Plan is qualified in its
entirety by reference to the Incentive Plan, a copy of which may be obtained by
request delivered to the secretary of the Company at the address set forth on
the Notice of this Proxy Statement.
Purpose
The purpose of the Incentive Plan is to promote the success of the
Company and its subsidiaries by providing incentives to key employees that will
promote the identification of their personal interests with the long-term
financial success of the Company and with growth in shareholder value. The Plan
is designed to provide flexibility to the Company in its ability to motivate,
attract, and retain the services of key employees upon whose judgment, interest,
and special effort the successful conduct of its operation is largely dependent.
Administration
Under the terms of the Incentive Plan, the Personnel Committee of the
Company (the "Committee") will be appointed to administer the plan. No director
may serve as a member of the Committee if he is eligible to participate in the
Plan or was at any time within one year prior to his appointment to the
Committee eligible to participate in the Plan. The Committee will have the power
to determine the key employees to whom Awards shall be made.
Each Award under the Incentive Plan will be made pursuant to a written
agreement between the Company and the recipient of the Award (the "Agreement").
In administering the Incentive Plan, the Committee will have the authority to
determine the terms and conditions upon which Awards may be made and exercised,
to determine terms and provisions of each Agreement, to construe and interpret
the Incentive Plan and the Agreements, to establish, amend or waive rules or
regulations for the Incentive Plan's administration, to accelerate the
exercisability of any Award, the end of any performance period or termination of
any period of restriction, and to make all other determinations and take all
other actions necessary or advisable for the administration of the Incentive
Plan.
Subject to the terms, conditions and limitations of the Incentive Plan,
the Committee may modify, extend or renew outstanding Awards, or, if authorized
by the Board of Directors, accept the surrender of outstanding Awards and
authorize new Awards in substitution therefor, including Awards with lower
exercise prices or longer terms than the surrendered Awards. The Board may
terminate, amend or modify the Incentive Plan from time to time in any respect
without shareholder approval, unless the particular amendment or modification
requires shareholder approval under the Internal Revenue Code of 1986, as
amended (the "Code"), or pursuant to any other applicable laws, rules or
regulations.
The Incentive Plan will expire on February 5, 2007, unless sooner
terminated by the Board.
Eligibility
All employees of the Company and its subsidiaries who are deemed to be
key employees ("Key Employees") by the Committee are eligible for Awards under
the Incentive Plan. Key Employees include officers or other employees of the
Company and its subsidiaries who, in the opinion of the Committee, can
contribute significantly to the growth and profitability of, or perform services
of major importance to, the Company and its subsidiaries. Directors who are not
also officers or employees of the Company or its subsidiaries are not eligible
for Awards under the Plan.
Awards granted under the Incentive Plan may not be assigned,
transferred, pledged or otherwise encumbered by a participant, other than by
will or the laws of descent and distribution. Awards may be exercised during the
recipient's lifetime only by the recipient or, in the case of disability, by the
recipient's legal representative. Such Awards also are not exercisable until at
least six months after the grant of the Award. Subject to other applicable
restrictions, shares granted as Restricted Stock may not be transferred or sold
until at least six months after the grant of the Award.
Options
The Incentive Plan authorizes the grant of incentive stock options
within the meaning of Section 422A of the Code ("ISOs") and non-qualified stock
options ("NQSOs") (collectively, "Options"). The Option terms applicable to such
Options will be determined by the Committee, but no Option will be exercisable
in any event until at least six months after its grant (except in cases of death
or disability) or after ten years from its grant. All Options granted as ISOs
shall comply with all applicable provisions of the Code and all other applicable
rules and regulations governing ISOs. All other Option terms will be determined
by the Committee in its sole discretion.
Tandem SARS
The Incentive Plan authorizes the grant of stock appreciation rights
granted in tandem with Options ("Tandem SARs").
A Tandem SAR may be exercised with respect to all or part of the shares
subject to the related Option, and entitles the holder, upon exercise, to
receive, without any payment to the Company (other than required withholding
amounts), cash or Common Stock or a combination thereof equivalent in value to
the excess of the fair market value on the exercise date of the shares of Common
Stock represented by the Tandem SAR over the option exercise price of the
related Option.
A Tandem SAR may be exercised only when the current value of the Tandem
SAR exceeds the exercise price of the related Option. A Tandem SAR shall expire
no later than, and is exercisable and transferable subject to the conditions of,
the related Option. In no event may a Tandem SAR be exercised sooner than six
months from the date of grant (except in the case of death or disability).
If a Tandem SAR is exercised, it will reduce correspondingly the number
of shares of Common Stock represented by the related Option, and exercise of the
related Option will similarly reduce the number of shares represented by the
Tandem SAR. The Committee retains sole discretion to approve or disapprove an
optionee's election to receive cash to the extent required by the Securities
Exchange Act of 1934, Rule 16, or terms of the particular Agreement.
Restricted Stock
The Incentive Plan permits the award of shares of restricted stock
("Restricted Stock"). However, no more than one-third of the shares authorized
to be issued under the Incentive Plan may be granted as Restricted Stock.
Restricted Stock may not be disposed of by the recipient until certain
restrictions established by the Committee lapse. Recipients of Restricted Stock
are not required to provide consideration other than the rendering of services.
The recipient shall have, with respect to the Restricted Stock, all the rights
of a stockholder of the Company, including the right to vote the shares, and the
right to receive any cash dividends on the shares. Upon termination of
employment during the period of restriction for reasons other than death,
disability or retirement, all Restricted Stock will be forfeited subject to such
exceptions, if any, as are authorized by the Committee and set forth in the
Agreement. In all events other than death, or disability of the recipient, the
applicable period of restriction may not be less than six months.
Shares Subject to the Incentive Plan
Up to 100,000 shares of Common Stock may be issued under the Incentive
Plan. Except as set forth below, shares of Common Stock issued in connection
with the exercise of, or as other payment for an Award will be charged against
the total number of shares issuable under the Incentive Plan. If any Award
granted (for which no material benefits of ownership have been received,
including dividends), with respect to a Tandem SAR, terminates, expires or
lapses for any reason other than as a result of being exercised (other than by
exercise of a related Option), or if shares issued (for which no material
benefits of ownership have been received, including dividends) pursuant to an
Award are forfeited, Common Stock subject to such Award will be available for
further Awards.
In order to reflect such events as stock dividends, stock splits,
recapitalizations, mergers, consolidations or reorganizations by the Company,
the Committee will adjust the number of shares subject to each outstanding
Award, the exercise price and the aggregate number of shares from which grants
or awards may be made.
Change in Control
In order to maintain all the participants' rights in the event of a
Change in Control of the Company (as that term is defined in the Incentive
Plan), the Committee, as constituted before such Change in Control, may take in
its sole discretion any one or more of the following actions either at the time
an Award is made or any time thereafter: (i) provide for the acceleration of any
time periods relating to the exercise or realization of any such Award so that
such Award may be exercised or realized in full on or before a date initially
fixed by the Committee; (ii) provide for the purchase or settlement of any such
Award by the Company, upon the participant's request, for an amount of cash
equal to the amount which could have been obtained upon the exercise of such
Award or realization of such participant's rights had such Award been currently
exercisable or payable; (iii) make such adjustment to any such Award then
outstanding as the Committee deems appropriate to reflect such Change in
Control; or (iv) cause any such Award then outstanding to be assumed, or new
rights substituted therefor, by the acquiring or surviving corporation in such
Change in Control.
Certain Federal Income Tax Consequences
Incentive Stock Options. An optionee will not recognize income on the
grant of an ISO, and an optionee generally will not recognize income on the
exercise of an ISO, except as described in the following paragraph. Under these
circumstances, no deduction will be allowable to the Company in connection with
either the grant of such Options or the issuance of shares upon exercise
thereof.
However, if the exercise of an ISO occurs more than three months after
the optionee ceased to be an employee for reasons other than death or disability
(or more than one year thereafter if the optionee ceased to be an employee by
reason of permanent and total disability), the exercise will not be treated as
the exercise of an ISO, and the optionee will be taxed in the same manner as on
the exercise of a NQSO, as described below. For the Option to qualify as an ISO
upon the optionee's death, the optionee must have been employed at the Company
for at least three months before his or her death.
Gain or loss from the sale or exchange of shares acquired upon exercise
of an ISO generally will be treated as capital gain or loss. If, however, shares
acquired pursuant to the exercise of an ISO are disposed of within two years
after the Option was granted or within one year after the shares were
transferred pursuant to the exercise of the Option, the optionee generally will
recognize ordinary income at the time of the disposition equal to the excess
over the exercise price of the lesser of the amount realized or the fair market
value of the shares at the time of exercise (or, in certain circumstances, at
the time such shares became either transferable or not subject to a substantial
risk of forfeiture). The exercise of an ISO may result in a tax to the optionee
under the alternative minimum tax because as a general rule the excess of the
fair market value of stock received on the exercise of an ISO over the exercise
price is defined as an item of "tax preference" for purposes of determining
alternative minimum taxable income.
Non-qualified Options and Tandem SARs. A participant will not recognize
income on the grant of a NQSO or a Tandem SAR, but generally will recognize
income upon the exercise of a NQSO or a Tandem SAR. The amount of income
recognized upon the exercise of a NQSO will be measured by the excess, if any,
of the fair market value of the shares at the time of exercise over the exercise
price, provided that the shares issued are either transferable or not subject to
a substantial risk of forfeiture. The amount of income recognized upon the
exercise of a Tandem SAR will be equal to the amount of cash received and the
fair market value of any shares received at the time of exercise, provided the
shares issued are either transferable or not subject to a substantial risk of
forfeiture, plus the amount of any taxes withheld.
If shares received on the exercise of a NQSO or a Tandem SAR are
nontransferable and subject to a substantial risk of forfeiture then, unless the
optionee elects to recognize income at the time of receipt of such shares, the
optionee will not recognize ordinary income until the shares become either
transferable or are not subject to a substantial risk of forfeiture. For these
purposes, shares will be treated as nontransferable and subject to a substantial
risk of forfeiture for as long as the sale of the shares at a profit could
subject the optionee to suit under Section 16(b) of the Exchange Act. In the
circumstances described in this paragraph, the amount of income recognized is
measured with respect to the fair market value of the shares at the time the
income is recognized.
In the case of ordinary income recognized by an optionee as described
above in connection with the exercise of a NQSO or a Tandem SAR, the Company
will be entitled to a deduction in the amount of ordinary income so recognized
by the optionee, provided the Company satisfies certain federal income tax
withholding requirements.
Restricted Stock. A recipient of Restricted Stock is not required to
include the value of such shares in ordinary income until the first time his
rights in the shares are transferable or are not subject to a substantial risk
of forfeiture, whichever occurs earlier, unless he elects to be taxed on receipt
of the shares. With respect to Awards granted under the Incentive Plan that are
settled either in cash or in stock or other property that is either transferable
or not subject to substantial risk of forfeiture, the recipient will recognize
ordinary income at the time of receipt of the cash, stock or other property. In
the circumstances described in this paragraph, the amount of such income will be
equal to the amount of cash received, or the excess of the fair market value of
the shares or other property received at the time the income is recognized over
the amount (if any) paid for the shares or other property. The Company will be
entitled to a deduction in the amount of the ordinary income recognized by the
recipient for the employer's taxable year which includes the last day of the
recipient's taxable year in which he recognizes such income, provided the
Company satisfies certain federal income tax withholding requirements.
General. The rules governing the tax treatment of Awards that may be
granted under the Incentive Plan are quite technical, so that the above
description of tax consequences is necessarily general in nature and does not
purport to be complete. Moreover, statutory provisions are, of course, subject
to change, as are their interpretations, and their application may vary in
individual circumstances.
Accounting Treatment
Under current accounting principles, neither the grant nor the exercise
of a stock option with an exercise price not less than the fair market value of
the Common Stock at the date of grant would require a charge against earnings.
The Tandem SARs will require a charge to earnings of the Company in an
amount equal to the difference between the current market value of the Common
Stock and the exercise price. Depending upon the specific provisions of any
Restricted Stock granted, a charge to earnings representing the value of the
benefit conferred may be required. Under certain circumstances, this charge may
be spread over any period of restriction applicable to such an Award.
Effective Date
If approved by the shareholders, the Incentive Plan will be treated as
effective as of February 5, 1997.
Vote Required
The affirmative vote of the holders of a majority of the Common Stock
represented in person or by proxy voting at the Annual Meeting, assuming a
quorum is present, is required to ratify and approve the Incentive Plan.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR
ADOPTION OF THE PROPOSED INCENTIVE PLAN.
ITEM 3
PROPOSAL TO APPROVE THE AMENDED AND RESTATED ARTICLES OF INCORPORATION
General. The proposed amendment to the Articles of Incorporation (the
"Amendment") adopted by the Board of Directors on March 27, 1997, and
recommended to the shareholders for adoption at the 1997 Annual Meeting of
Shareholders, provides that, at the discretion of the Board of Directors, a
director who for any reason is absent from four or more consecutive regular
meetings of the Board of Directors may be removed by the Board without action by
the shareholders of the Company. Below is the exact text of the amendment as
proposed and a discussion of the proposal.
The Amendment provides that the fourth paragraph of Article V of the
Articles of Incorporation shall be amended and restated as follows (language
inserted by amendment in italics) :
Directors of the Corporation may be removed by
shareholders of the Corporation only for cause and with the
affirmative vote of at least two-thirds of the outstanding
shares entitled to vote, except that any director who because
of disability or any other reason fails to attend four or more
consecutive regular meetings of the Board of Directors may be
removed at the sole discretion of a majority of the Board of
Directors.
The Board of Directors believes that the proposed amendment
is in the best interest of both the Company and its shareholders and
recommends that the shareholders vote in favor of its adoption. Shareholders
are requested to vote for approval of the amendment as proposed above.
Effective Date of the Restated Articles. The Board of Directors
unanimously approved the amendment by consent on March 28, 1997. The amendment
will be deemed duly approved by shareholders at the Annual Meeting on May 13,
1997, if a quorum is present and the holders of a majority of all votes entitled
to be cast at a meeting vote for the amendment. It is the intent of the Board of
Directors to instruct the appropriate officers of the Company immediately to
file Articles of Amendment with the Virginia State Corporation Commission and
have them declared effective at the earliest possible date (the "Effective
Date"). It is anticipated that the Effective Date will occur prior to June 1,
1997.
Certain Effects of the Restated Articles. If the proposed Amendment is
approved, the shareholders' voting rights, privileges and equity interest in the
Company will not change; however, under the Amendment, any directors may be
removed without shareholder action if such director(s) fails to attend four or
more consecutive regular meetings of the Board of Directors and a majority of
the Board exercises its discretionary authority under the Amendment to remove
the director(s). Under the current Articles of Incorporation, directors may be
removed only for cause and by the affirmative vote of at least two-thirds of the
outstanding shares entitled to vote. Therefore, the Amendment transfers certain
removal powers away from shareholders and directly to the Board of Directors
under the special circumstances of a director's repeated failure, for whatever
reason, to attend regular meetings of the Board. Thus, removal of a director
will be more easily accomplished in these circumstances.
The Board believes that this provision reflects the Company's
commitment of maintaining active participation by board members. The Board is
currently experiencing very little absenteeism by directors. In fact, the
attendance by each member of the board has been exceptional with 100%
participation in most case. The Amendment is recommended as a precautionary
measure to assure continued active participation by members and commitment to
regular representation of shareholder interests by each board member. The
Amendment also will enable the Board to act in those situations where a director
has become disabled and is physically unable to formally execute an instrument
of resignation.
In the event a director is absent from four or more consecutive regular
meetings, the Board of Directors may exercise its discretion not to remove the
director. The Board cannot anticipate all circumstances that may arise which
would explain a director's absence, and therefore, the Board wants to maintain
some flexibility to address extenuating circumstances. The Board will require a
formal explanation of the reasons for absence immediately following any fourth
absence. This requirement will be reflected in the Company's Bylaws, and such
explanation is solely for the Board's consideration in making its removal
determination. If the Amendment is adopted by shareholders, the Board will make
a corresponding amendment to the Bylaws to the Company and insert other
appropriate requirements consistent with the Amendment.
YOUR BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE AMENDMENT AND RECOMMENDS A
VOTE "FOR" APPROVAL OF THIS ITEM.
ITEM 4
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITOR
FOR THE BANK OF FRANKLIN
Goodman & Company, L.L.P. has been selected as independent accountants
for the Company for the fiscal year ending December 31, 1997, subject to
ratification by the shareholders.
If not otherwise specified, proxies will be voted in favor of
ratification of the appointment. Representatives of Goodman & Company, L.L.P.
are expected to be present at the the Company's annual meeting, will have an
opportunity to make a statement if they so desire, and are expected to be
available to respond to appropriate questions.
SHAREHOLDER PROPOSALS
In the event that a shareholder wishes to submit a proposal for
consideration by the shareholders of the Holding Company at the 1998 Annual
Meeting of Shareholders (the "1998 Annual Meeting"), then in order for the
proposal to be includable in the proxy statement for the 1998 Annual Meeting,
such proposal must be received by the Secretary of the Holding Company no later
than November 30, 1997. It is presently anticipated, that, assuming the
Reorganization is consummated, the 1998 Holding Company Annual Meeting will be
held on or around May 12, 1998, although this date may be changed at the
discretion of the Holding Company's Board of Directors.
AVAILABILITY OF FORM 10-K
ON OR ABOUT MARCH 31, 1997, THE COMPANY, WILL FILE WITH THE SECURITIES AND
EXCHANGE COMMISSION AN ANNUAL REPORT (FORM 10-K) FOR THE YEAR 1996. THE COMPANY
WILL PROVIDE A COPY OF THE COMPANY'S FORM 10-K, INCLUDING THE FINANCIAL
STATEMENTS AND THE SCHEDULES THERETO, WITHOUT CHARGE, TO ANY PERSON FROM WHOM
THE BOARD OF DIRECTORS HAS SOLICITED A PROXY FOR USE AT THE ANNUAL MEETING OF
SHAREHOLDERS, UPON THE WRITTEN REQUEST OF SUCH PERSON DIRECTED TO MR. WAYNE
CARRUTHERS, CHIEF FINANCIAL OFFICER, 100 EAST 4TH AVENUE, FRANKLIN, VIRGINIA
23851 (TELEPHONE: (757) 562-5184.)
BY ORDER OF THE BOARD OF DIRECTORS
FRANKLIN, VIRGINIA F. Bruce Stewart
April 16, 1997 Secretary
<PAGE>
PROXY
United Community Bankshares, Inc.
Annual Meeting of Shareholders May 13, 1997
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby appoints Harvey G. Pope, F. Bruce Stewart and J.
Russell West jointly and severally, proxies, with full power to act alone, and
with full power of substitution, to represent the undersigned and to vote, as
designated below and upon any and all other matters which may properly be
brought before such meeting, all shares of Common Stock which the undersigned
would be entitled to vote at an Annual Meeting of Shareholders of United
Community Bankshares, Inc. thereof.
ITEM 1: To elect the three (3) nominees for Directors set forth
below including voting for a lesser number, if a vacancy
occurs among the nominees, and voting in respect to any
substitute nominee or nominees designated by the Board of
Directors.
_____ FOR all nominees listed below _____ WITHHOLD AUTHORITY
(except as marked to the contrary below) to vote for all nominees
listed below
Hunter Darden, Jr.
Gregor O. Huber
F. Bruce Stewart
(INSTRUCTION: To withhold authority to vote for any individual nominee,
write the nominee's name on the space provided below.)
I withhold authority for_________________________________________________
ITEM 2. To approve the Company's 1997 Incentive Stock Plan, the
material terms of which are described in the accompanying
Proxy Statement.
_____ FOR _____ AGAINST _____ ABSTAIN
ITEM 3. To approve an amendment to the Articles of Incorporation of
the Corporation to provide for removal of directors under
certain circumstances, the terms of which are described in the
accompanying Proxy Statement.
_____ FOR _____ AGAINST _____ ABSTAIN
ITEM 4. To ratify the appointment of Goodman & Company, L.L.P. as the
Company's independent certified public accountants.
_____ FOR _____ AGAINST _____ ABSTAIN
ITEM 5. For the transaction of such other business as may properly be
brought before the meeting.
YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ON ITEMS 1, 2, 3 AND 4
LISTED ABOVE, AND YOUR PROXY WILL BE VOTED FOR ITEMS 1, 2, 3 AND 4 IF NO
SPECIFICATION IS MADE. IF ANY OTHER MATTERS COME BEFORE THE MEETING, THIS
PROXY WILL BE VOTED WITH RESPECT THERETO IN THE INTEREST OF THE COMPANY
ACCORDING TO THE BEST JUDGMENT OF THE PERSON OR PERSONS VOTING THE PROXY.
(OVER)
<PAGE>
This proxy is revocable by you at any time prior to the voting of the
shares represented, by notifying the Secretary of the Company in writing
before such vote or by filing another proxy with the Secretary bearing a
later date. Shareholders who are present at the meeting may withdraw their
proxy and vote in person. When signing as attorney, executor, administrator,
trustee or guardian, please give your full title as such. Both joint holders
should sign.
Dated _____________________ , 1997 _________________________________(SEAL)
Number of Shares ___________ _________________________________(SEAL)
_________________________________(SEAL)
Return to:
United Community Bankshares, Inc.
100 East 4th Avenue
Franklin, Virginia 23851
<PAGE>
UNITED COMMUNITY BANKSHARES, INC.
100 East 4th Avenue
Franklin, Virginia 23851
April 16, 1997
Dear Shareholder:
The Annual Meeting of Shareholders of United Community Bankshares, Inc.
will be held Tuesday, May 13, 1997, at 10:00 p.m., local time. The meeting
will be held at Main Street Eatery, Second Floor, 119 North Main Street,
Franklin, Virginia.
Included with this letter are several very important items which you
should take time to review. These items are:
1. Notice of the 1997 Annual Meeting of Shareholders;
2. Proxy Statement for the Annual Meeting;
3. PROXY; and
4. The Company's Annual Report for 1996.
We hope you will attend this meeting; however, if you cannot, we would
appreciate your completing the enclosed PROXY and returning it in the envelope
provided. Even if you plan to attend, it would be helpful, if you would sign and
return the PROXY so that we can be assured of a quorum for the meeting. When
registering, you may revoke your PROXY in order to vote in person.
Your support during 1996 is evidenced in the Company's continued growth.
We appreciate your efforts and look forward to 1997.
Very truly yours,
UNITED COMMUNITY BANKSHARES, INC.
Wenifred O. Pearce
President and Chief Executive Officer
