<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
BAY BANKS OF VIRGINIA, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[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:
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(2) Aggregate number of securities to which transaction applies:
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(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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE>
[use Bay Banks letterhead]
April 14, 2000
Dear Fellow Stockholders:
You are cordially invited to attend the Annual Meeting of Stockholders of
Bay Banks of Virginia, Inc. on May 15, 2000, at 1:00 p.m., at Indian Creek Yacht
& Country Club, Kilmarnock, Virginia. We would be pleased to have you as our
guest for a buffet luncheon starting at 12:00 p.m. If you wish to attend,
please indicate this on the luncheon reservation card that is enclosed. This
will allow us to have an accurate count of those joining us for the luncheon.
The primary business of the meeting will be the re-election of two
directors of the Company and the ratification of the appointment of independent
auditors, as more fully explained in the accompanying proxy statement.
During the meeting, we also will report to you on the condition and
performance of the Company and its subsidiary, the Bank of Lancaster. You will
have an opportunity to question management on matters that affect the interests
of all stockholders.
We hope you can join us for the luncheon and attend the Annual Meeting on
May 15. Whether or not you plan to attend, please complete, sign and date the
enclosed proxy and return it promptly in the enclosed envelope. Your vote is
important.
Thank you for your interest in the Company's affairs. As always, we are
most grateful for your continuing support of the Company and the Bank of
Lancaster.
Sincerely,
/s/ Ammon G. Dunton, Jr. /s/ Austin L. Roberts, III
------------------------ -------------------------------------
Ammon G. Dunton, Jr. Austin L. Roberts, III
Chairman of the Board President and Chief Executive Officer
<PAGE>
Bay Banks of Virginia, Inc.
100 South Main Street
Kilmarnock, Virginia 22482
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
May 15, 2000
To Our Stockholders:
The Annual Meeting of Stockholders of Bay Banks of Virginia, Inc. (the
"Company") will be held at Indian Creek Yacht & Country Club, Kilmarnock,
Virginia, on May 15, 2000 at 1:00 p.m. for the following purposes:
1. To elect two directors to serve for a three-year term and until their
successors are elected and qualified;
2. To ratify the selection of Eggleston Smith P.C., independent certified
public accountants, as auditors of the Company for the year ending
December 31, 2000; and
3. To transact such other business as may properly come before the
meeting or any adjournment thereof.
Only stockholders of record at the close of business on April 3, 2000 will
be entitled to notice of and to vote at the Annual Meeting and any adjournments
thereof.
By Order of the Board of Directors
/s/ Hazel S. Pittman
---------------------
Hazel S. Pittman
Corporate Secretary
April 14, 2000
PLEASE MARK, SIGN, DATE AND RETURN YOUR PROXY PROMPTLY, WHETHER OR
NOT YOU PLAN TO ATTEND THE ANNUAL MEETING.
<PAGE>
Bay Banks of Virginia, Inc.
100 S. Main Street
Kilmarnock, Virginia 22482
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
May 15, 2000
GENERAL
The enclosed proxy is solicited by the Board of Directors of Bay Banks of
Virginia, Inc. (the "Company") for its Annual Meeting of Stockholders to be held
on Monday, May 15, 2000, at the time and place and for the purpose set forth in
the accompanying Notice of the Annual Meeting or any adjournment thereof. The
approximate mailing date of this Proxy Statement and accompanying proxy is April
14, 2000.
Revocation and Voting of Proxies
Execution of a proxy will not affect a stockholder's right to attend the
Annual Meeting and to vote in person. Any stockholder who has executed and
returned a proxy may revoke it by attending the Annual Meeting and requesting to
vote in person. A stockholder may also revoke his proxy at any time before it
is exercised by filing a written notice with the Company or by submitting a
proxy bearing a later date. Proxies will extend to, and will be voted at, any
adjourned session of the Annual Meeting.
Voting Rights and Solicitation
Only stockholders of record at the close of business on April 3, 2000 are
entitled to notice of and to vote at the Annual Meeting or any adjournments
thereof. The number of shares of common stock of the Company outstanding and
entitled to vote on April 3, 2000 was 1,164,713. The Company has no other class
of stock outstanding. A 60% majority of the shares entitled to vote,
represented in person or by proxy, will constitute a quorum for the transaction
of business.
Each share of common stock entitles the recordholder thereof to one vote
upon each matter to be voted upon at the Annual Meeting. Shares for which the
holder has elected to abstain or to withhold the proxies' authority to vote
(including broker non-votes) on a matter will count toward a quorum, but will
not be included in determining the number of votes cast with respect to such
matter.
The cost of solicitation of proxies will be borne by the Company.
Solicitation is being made by mail, and if necessary may be made in person, by
telephone, or special letter by officers and regular employees of the Company,
acting without compensation other than regular compensation.
Principal Stockholders
The only beneficial owner of 5% or more of the common stock of the Company
is the Bank of Lancaster Employee Stock Ownership Trust (the "Trust") which owns
62,502 shares, or 5.37%, of the outstanding common stock. The Trust was
established pursuant to the Bank of Lancaster Employee Stock Ownership Plan
("ESOP"). Four members of the Board of Directors of the Bank of Lancaster (the
"Bank") are trustees of the ESOP. As of April 3, 2000, all shares held in the
Trust had been allocated to the accounts of participating employees. Under the
<PAGE>
terms of the ESOP, the trustees must vote all allocated shares held in the ESOP
in accordance with the instructions of the participating employees, and
allocated shares for which employees do not give instructions will be voted in
the same ratio on any matter as to those shares for which instructions are
given.
On April 3, 2000, the directors, including those nominated for re-election,
and executive officers of the Company beneficially owned as a group 149,441
shares, or 12.8%, of the Company's common stock, including shares for which they
hold currently exercisable stock options.
PROPOSAL ONE - ELECTION OF DIRECTORS
The Company's Board is divided into three classes (I, II and III). The
term of office for Class II directors will expire at the Annual Meeting. The
two persons named immediately below, each of whom currently serves as a director
of the Company, will be nominated to serve as Class II directors. If elected,
the two nominees will serve until the Annual Meeting of Stockholders held in
2003. The persons named in the proxy will vote for the election of the nominees
named below unless authority is withheld. If for any reason any of the persons
named as nominees below should become unavailable to serve, an event which
management does not anticipate, proxies will be voted for the remaining nominees
and such other person or persons as the Board of Directors may designate.
The Board of Directors recommends that stockholders vote for the two
nominees set forth below. The two nominees receiving the greatest number of
affirmative votes cast at the Annual Meeting will be elected.
<TABLE>
<CAPTION>
Bank Company
Director Director Principal Occupation
Name (Age) Since Since During Past Five Years
------------ ----- ----- ----------------------
<S> <C>
2000 Class (Nominees for Election):
Weston F. Conley, Jr. (65) 1979 1997 President and Manager of RCV Seafood
Corporation (seafood processor and
wholesaler), Morattico, VA
Thomas A. Gosse (53) 1994 1997 President and Chief Executive Officer since
1997 of Northern Neck Insurance Company,
Irvington, VA; formerly a principal in the
accounting firm of Braun, Dehnert, Clarke &
Co., P.C., Irvington, VA
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
Other Directors Not Standing For Re-election At This Time:
2001 Class (Directors Serving Until the 2001 Annual Meeting):
<S> <C>
William A. Creager (67) 1994 1997 Retired, was founder and formerly served as
President and Chairman of Capital Systems
Group (a professional services and
information systems company), Rockville, MD
Ammon G. Dunton, Jr. (64) 1977 1997 Chairman of the Board of the Company and
the Bank; Attorney, Senior Partner of
Dunton, Simmons & Dunton, White Stone, VA
2002 Class (Directors Serving Until the 2002 Annual Meeting):
Austin L. Roberts, III (53) 1990 1997 President and Chief Executive Officer of
the Company and the Bank
W. Bruce Sanders (49) 1983 1997 Owner and President of Rappahannock Yachts
(marina), Irvington, VA
</TABLE>
Board Committees and Attendance
During 1999 there were four meetings of the Board of Directors. Each
director attended at least 75% of all meetings of the Board and applicable
committee meetings. The entire Board of Directors serves as the Audit and
Nominating Committees.
Directors' Compensation
Non-officer directors of the Company receive $200 for each meeting of the
Company's Board of Directors. Directors who are employees of the Company and
Bank are not compensated for attendance at Board meetings and do not receive any
fees for attendance at committee meetings. The Chairman of the Board, Mr. Ammon
G. Dunton, Jr., is a Company and Bank officer. As an officer, he received
$32,000 in compensation in 1999, but received no annual retainer or Board or
committee attendance fees.
In accordance with the 1998 Non-Employee Directors Stock Option Plan
approved by stockholders at the 1998 annual meeting, each of the ten non-
employee directors of the Company and the Bank were granted in May of 1998 and
1999 stock options for 250 shares of the Company's common stock at its then fair
market value. This plan, which reserves a total of 25,000 shares of common
stock of the Company, provides that each non-employee director of the Company
and its subsidiaries is eligible to receive a stock option grant for 250 shares
in May of each year during the term of the plan.
3
<PAGE>
Certain Relationships and Related Transactions
Some of the Company directors, executive officers, and members of their
immediate families, and corporations, partnerships and other entities of which
such persons are officers, directors, partners, trustees, executors or
beneficiaries, are customers of the Bank. All loans and loan commitments to
them were made in the ordinary course of business, upon 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. It is the
policy of the Bank to provide loans to officers who are not executive officers
and to employees at more favorable rates than those prevailing at the time for
comparable transactions with other persons. These loans do not involve more
than the normal risk of collectibility or present other unfavorable features.
The law firm of Dunton, Simmons & Dunton serves as legal counsel to the
Company and the Bank. Mr. Ammon G. Dunton, Jr., is a senior member of the firm.
None of the directors serves as a director of any other publicly held
company.
Section 16(a) Beneficial Ownership Reporting Compliance
Pursuant to Section 16(a) of the Securities Exchange Act of 1934 (the
"Exchange Act"), directors and executive officers of the Company are required to
file reports with the Securities and Exchange Commission indicating their
holdings of and transactions in Company common stock. To the Company's
knowledge, based solely on a review of the copies of such reports furnished to
the Company and written representations that no other reports were required,
insiders of the Company complied with all filing requirements during 1999.
Ownership Of Company Common Stock
The following table sets forth, as of April 3, 2000, certain information
with respect to the beneficial ownership of Company common stock held by each
director and nominee and each executive officer named in the Summary
Compensation Table below, and by the directors and all executive officers as a
group.
<TABLE>
<CAPTION>
Amount and Nature of Percent
Name Beneficial Ownership (1) of Class
---- ------------------------ --------
<S> <C>
William A. Creager.................................. 2,400 (2) (3) (4)
Weston F. Conley, Jr................................ 27,439 (2) (3) 2.4%
Ammon G. Dunton, Jr................................. 34,706 (2) (5) 3.0%
Thomas A. Gosse..................................... 2,100 (2) (3) (4)
Austin L. Roberts, III.............................. 13,371 (2) (5) 1.0%
W. Bruce Sanders.................................... 2,023 (3) (4)
Paul T. Sciacchitano................................ 6,587 (5) (4)
All directors and executive officers as a group..... 149,441 (5) 12.8%
</TABLE>
- ----------------
(1) For purposes of this table, beneficial ownership has been determined in
accordance with the provisions of Rule 13d-3 of the Exchange Act 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.
4
<PAGE>
(2) Includes shares held by affiliated corporations, close relatives and
children, and shares held jointly with spouses or as custodians or trustees,
as follows: Mr. Creager, 400 shares, Mr. Conley, 4,886 shares; Mr. Dunton,
17,764 shares; Mr. Gosse, 1,200 shares; and Mr. Roberts, 1,000 shares.
(3) Includes 500 shares that may be acquired pursuant to currently exercisable
stock options granted under the 1998 Non-Employee Directors Stock Option
Plan.
(4) Represents less than 1% of Company common stock.
(5) Includes shares that may be acquired pursuant to currently exercisable stock
options, as follows: 253 shares by Mr. Dunton; 11,294 shares by Mr. Roberts;
4,594 shares by Mr. Sciacchitano; and 26,891 shares that may be acquired by
all executive officers and non-employee directors of the Company as a group.
Executive Compensation
No officer receives compensation from the Company. All compensation is paid
through the Bank.
The following table presents compensation information on the President and
Chief Executive Officer of the Company and the Bank, and the Treasurer of the
Company and Executive Vice President of the Bank. No other executive officers
of the Company or Bank earned over $100,000 in 1999.
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term
Compensation
--------------
Annual Compensation (1) Securities
Name and ----------------------- Underlying All Other
Principal Position Year Salary Bonus Options (2) Compensation (3)
------------------- ---- ------ ----- ----------- ----------------
<S> <C>
Austin L. Roberts, III 1999 $135,000 -- 3,000 $8,006
President/Chief 1998 135,000 -- 2,500 8,242
Executive Officer 1997 122,000 -- -- 9,247
Paul T. Sciacchitano 1999 $111,500 -- 1,500 $6,328
Treasurer of the 1998 105,000 -- 1,500 6,282
Company/Executive 1997 96,000 -- -- 6,994
Vice President of
the Bank
</TABLE>
__________________
(1) The named officers did not receive perquisites or other personal benefits
in excess of the lesser of $50,000 or 10% of the total of their respective
salaries and bonuses.
(2) The Company's stock option plan does not permit the granting of restricted
stock awards or stock appreciation rights, and it is the Company's only
stock-based long-term compensation plan currently in effect in which
employees may participate. During 1998, 2,500 shares were granted to Mr.
Roberts, of which 844 were earned. Mr. Sciacchitano was granted 1,500
shares in 1998, and earned 844 of the granted shares.
(3) These amounts represent Company contributions allocated under the Bank's
401(k) plan and the ESOP, respectively, to the named officers for 1999 in
the following amounts: Austin L. Roberts, III, $3,037 and $4,969; and Paul
T. Sciacchitano, $2,228 and $4,100.
Stock Option Grants in 1999
5
<PAGE>
The Company's stock option plan provides for the granting of incentive stock
options to executive officers and key employees of the Company and its
subsidiaries. The following table provides certain information concerning stock
options granted during 1999 to Messrs. Roberts and Sciacchitano.
<TABLE>
<CAPTION>
Individual Grants
----------------------------------------------------------
Percent of
Number of Total
Shares Options Potential
Underlying Granted to Exercise Realizable Value (2)
Options Employees Price per Expiration --------------------
Name Granted (1) in 1999 Share Date 5% 10%
---- ----------- ------- ----- ---- -- ---
<S> <C>
Austin L. Roberts, III 3,000 21% $31.25 4/19/09 $58,959 $149,413
Paul T. Sciacchitano 1,500 11% $31.25 4/19/09 $29,479 $ 74,707
</TABLE>
- ----------------
(1) The option grant is subject to certain performance criteria being achieved.
As of this date, there has not been a determination whether the granted
options have been earned.
(2) Potential realizable value at the assumed annual rates of stock price
appreciation based on actual option term (10 years) and annual compounding.
Stock Option Exercises in 1999 and Year-end Option Values
The following table shows certain information with respect to the number and
value of unexercised options at year-end. No stock options were exercised
during 1999 by Messrs. Roberts or Sciacchitano.
<TABLE>
<CAPTION>
Number of Value of
Shares Underlying Unexercised
Number of Unexercised In-the-Money
Shares Options at Options at
Acquired December 31, 1999 December 31, 1999 (1)
on Value ---------------------------- --------------------------------
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
---- -------- ------- ----------- ------------- -------------- ----------------
<S> <C>
Austin L. Roberts, III None -- 11,294 3,000 $253,087 $20,250
Paul T. Sciacchitano None -- 4,594 1,500 $ 87,737 $10,125
</TABLE>
__________________
(1) Calculated by subtracting the exercise price from the fair market value of
the stock at December 31, 1999.
6
<PAGE>
Benefit Plans
Pension Plan. The Bank has a non-contributory defined benefit pension plan
(the "Pension Plan") which covers substantially all salaried employees who have
reached the age of twenty-one and who have completed one year of service. The
normal retirement age is 65, but participants may elect early retirement at 55
after 10 years of service at reduced levels of benefits and disability
retirement after 10 years of service at full levels of benefits. Vesting is
100% after 5 years of service.
The following table provides information concerning estimated annual benefits
that are payable to covered employees at normal retirement age under the terms
of the Pension Plan, based on the compensation and years of service
classifications specified below. The plan benefits shown in the table are
computed on the basis of a straight life annuity beginning at age 65.
<TABLE>
<CAPTION>
Years of Service
Average --------------------------------------------------------------------
Compensation 15 20 25 30 35
------------ -- -- -- -- --
<S> <C>
$ 25,000 $ 3,750 $ 5,000 $ 6,250 $ 6,250 $ 6,250
50,000 9,413 12,550 15,688 15,688 15,688
75,000 15,975 21,300 26,625 26,625 26,625
100,000 22,538 30,050 37,563 37,563 37,563
125,000 29,100 38,800 48,500 48,500 48,500
150,000 35,663 47,550 59,438 59,438 59,438
160,000 38,288 51,050 63,813 63,813 63,813
</TABLE>
The remuneration covered by the Pension Plan is an employee's "final
average earnings" which, under the terms of the Pension Plan is defined to be
the average of the highest five consecutive calendar years of base salary
(reported as "Salary" in the Summary Compensation Table above) earned by the
employee during the ten calendar years prior to his or her date of retirement,
termination, disability or death. A participant's monthly retirement benefit
(if they have twenty-five years of credited service at their normal retirement
date) is 25% of their final average pay, plus an additional 18.75% if their pay
is in excess of the participant's Social Security covered pay. The Social
Security covered pay is the average pay of the participant's working lifetime
prior to the year the participant attains his or her Social Security retirement
age. Cash benefits under the plan generally commence on retirement, death or
other termination of employment and are payable in various forms at the election
of the participant.
Based on current compensation and assuming retirement at the normal
retirement age of 65, it is estimated that the annual retirement benefit for
Messrs. Roberts and Sciacchitano will be $39,640 and $32,184, respectively. The
final average earnings and the respective years of service as of October 1, 1999
for Mr. Roberts were $123,800 and nine years, respectively, and for Mr.
Sciacchitano were $98,400 and six years, respectively.
401(k) Plan. The Bank has a contributory 401(k) plan. All salaried
employees are eligible to participate after having worked six months
consecutively, and there is no age requirement. Participants may elect to defer
between 1% to 15% of their base compensation which will be contributed to the
plan, providing the amount deferred does not exceed the dollar maximum election
deferral for each year. The Bank's match is 100% up to a 2% deferral; the Bank
will provide a 25% match on employee contributions between 2% and 4% of salary.
Under the plan, an employee is vested 20% after three years and 20% each year
thereafter for the next four years of service. If an employee leaves prior to
the three-year period, he or she forfeits any accrued Bank match contribution.
7
<PAGE>
Distributions to participants are made at death, retirement or other
termination of employment in a lump sum payment. The plan permits certain in-
service withdrawals. Normal retirement age is considered sixty-five; early
retirement is considered at fifty-five with ten years of vested service;
disability retirement has no age requirements but a service requirement of ten
years of vested service.
Stock Option Plan. The Company has two incentive stock option plans for
employees, the 1985 plan (which has expired, but options granted thereunder are
still exercisable) and the 1994 plan. The 1994 plan provides for the award of
incentive stock options to key employees of the Bank as selected by the Board of
Directors. The Board of Directors makes awards under the plan and fixes the
terms and conditions of each award pursuant to a separate agreement entered into
with each optionee. The price of shares of stock to be issued upon the exercise
of options is 100% of the fair market value on the date of the award. The
option is not exercisable after the expiration of ten years from the date such
option is granted. An option is not transferable by a person to whom it is
granted other than by will or the laws of descent and distribution.
Under the 1985 plan, accounting for two 10% stock dividends and a 2-for-1
split, 31,080 shares were reserved and options covering all such shares have
been granted or exercised. Under the 1994 plan, 75,000 shares have been
reserved, and options covering 41,365 shares have been granted.
Employee Stock Ownership Plan (ESOP). The ESOP is a non-contributory
plan supported by annual contributions made at the discretion of the Board of
Directors. The ESOP is a stock bonus plan qualified under Section 401(a) of the
Internal Revenue Code and an employee ownership plan under Section 4975(E)(7) of
the Internal Revenue Code. The ESOP is administered by trustees and an
administrative committee elected by the Board of Directors for the exclusive
benefit of participants. The ESOP is eligible to each Bank employee over the
age of twenty-one and credited with at least 1,000 hours of service for the plan
year.
Report of the Board of Directors on Executive Compensation
The following Report of the Board of Directors on Executive Compensation
and the Performance Graph which follows shall not be deemed incorporated by
reference by any general statement incorporating this Proxy Statement into any
filing under the Securities Act of 1933 or under the Securities Exchange Act of
1934, except to the extent the Company specifically incorporates this
information by reference, and shall not otherwise by deemed filed under such
acts.
This report is submitted by the Board of Directors of the Company, which is
responsible for establishing and administering the Company's compensation
policies and its incentive stock option plan.
General Compensation Policy
---------------------------
The Company's compensation policy for executive officers is designed to
achieve the following objectives: (a) to enhance profitability of the Company
and increase stockholder value by aligning closely the financial interests of
its senior officers with those of its stockholders; (b) to reward executive
officers consistent with the Company's annual and long-term performance goals;
(c) to recognize individual initiative, leadership and achievement; and (d) to
provide competitive compensation that will attract and retain qualified
corporate officers and key employees.
8
<PAGE>
Executive Officer Compensation Program
---------------------------------------
The compensation program for executive officers consists of two elements:
(1) base salary, which is set on an annual basis; and (2) long-term incentive
compensation, in the form of stock options, granted with the objective of
aligning the executive officers' long-term interests with those of the
stockholders and encouraging the achievement of superior results over an
extended period.
The Board determines general salary and benefit policies and procedures.
The Board uses market studies and published compensation data to review
competitive rates of pay, to establish salary ranges, and to arrive at base
salary levels. The Board of Directors approves base salaries at levels
competitive with amounts paid to senior executives with comparable
qualifications, experience and responsibilities after comparing salary
information of similar sized banks as provided by the VBA Salary Survey of
Virginia Banks and other compensation surveys. In addition, the Board considers
the recent performance of the Company and assesses the officer's past
performance and its expectation as to future contributions in leading the
Company.
Compensation for executive officers other than the Chairman and the
President and Chief Executive Officer is determined by the Board of Directors
based on the recommendation of the President and Chief Executive Officer.
The Board uses a subjective approach to the determination of compensation
based on the factors noted above. It does not rely on formulas or weights of
specific factors and neither the profitability of the Company nor the market
value of its stock are directly utilized in computing the executive officer base
compensation. The Company's executive compensation program has relied almost
exclusively on base salary as its primary component.
Stock option grants with deferred vesting provide the basis for a long-
term incentive program. The objective of these options is to create a link
between officer compensation and long-term Company performance. In determining
the appropriate level of stock-based allotments, the Board considers the
officer's contribution toward Company and Bank performance. To encourage growth
in stockholder value, stock options are granted to all officers who are in a
position and have the responsibility to make a substantial contribution to the
long-term success of the Company. The Board believes this focuses attention on
managing the Company from the perspective of an owner with an equity stake in
the business.
Option grants are made each April contingent upon the respective officer
achieving identified goals. Goal attainment is reviewed after March 31 of the
following year. A determination is then made as to the level of goal attainment
and the final award is then made. During 1998, 2,500 shares were granted to Mr.
Roberts, of which 844 were earned. Mr. Sciacchitano was granted 1,500 shares in
1998, and earned 844 of the granted shares.
Chief Executive Officer Compensation
------------------------------------
The compensation paid for 1999 to the Chief Executive Officer of the
Company and the Bank, Austin L. Roberts, III, reflects the considered judgment
of the Board embracing the policy and process described previously. The Board
reviews and fixes the base salary of the Chief Executive Officer based on
similar competitive compensation data to other community bank's senior
executives and the Board's assessment of his past performance and its
expectation as to his future contributions in leading the Company. No salary
increase was recommended for 1999.
9
<PAGE>
Although the 1999 salary and option grants were not measured upon the
attainment of any specific goals by the Company, the Board, in its discretion
and judgment in making these decisions, took into consideration his individual
contribution to the Company's performance for the prior fiscal year reflected by
increases in total assets, stockholders' equity, book value per share and cash
dividends per share. The Board reviewed and considered 11 month operating data
in connection with its assessment. In establishing the Chief Executive
Officer's salary, the Board also considered Mr. Roberts' contribution to the
community through his involvement with various charitable and civic groups.
Although the Board, in establishing salary, uses a subjective approach and does
not rely on a formula or weights of specific factors, it carefully considers all
the factors listed above.
Respectfully submitted:
William A. Creager Weston F. Conley, Jr.
Ammon G. Dunton, Jr. Thomas A. Gosse
Austin L. Roberts, III W. Bruce Sanders
Compensation Committee Interlocks and Insider Participation
During 1999 and up to the present time, there were transactions between
the Bank and certain members of the Board of Directors, or their associates, all
consisting of extensions of credit by the Bank in the ordinary course of
business. Each transaction was made on substantially the same terms, including
interest rates, collateral and repayment terms, as those prevailing at the time
for comparable transactions with the general public. In the opinion of
management, none of the transactions involve more than the normal risk of
collectibility or present other unfavorable features.
The only members of the Board who served as an officer or employee of the
Company or any of its affiliates during 1999 are: Ammon G. Dunton, Jr., Chairman
of the Board of the Company and the Bank; and Austin L. Roberts, III, President
and Chief Executive Officer of the Company and the Bank.
10
<PAGE>
STOCK PERFORMANCE GRAPH
The graph below compares the cumulative total stockholder return on the
Company's common stock with the cumulative total return on the Nasdaq Stock
Market Index and the Carson Medlin Independent Bank Index for the five year
period ended December 31, 1999, assuming that an investment of $100 was made on
December 31, 1994 and that dividends were reinvested. The Independent Bank
Index is published by the Carson Medlin Company. The comparisons in the graph
below are based upon historical data and are not indicative of, nor intended to
forecast, future performance of the Company's common stock.
[GRAPH]
<TABLE>
<CAPTION>
1994 1995 1996 1997 1998 1999
---- ---- ---- ---- ---- ----
<S> <C>
Bay Banks of Virginia 100 110 147 181 228 273
Independent Bank Index 100 122 155 235 246 222
Nasdaq Index 100 141 174 213 300 542
</TABLE>
PROPOSAL TWO - RATIFICATION OF SELECTION OF ACCOUNTANTS
On the recommendation of the Audit Committee, the Board of Directors has
appointed Eggleston Smith P.C., certified public accountants, as the Company's
independent auditors for 2000, subject to ratification of the stockholders.
Eggleston Smith P.C. rendered audit services to the Company during 1999. These
services consisted primarily of the examination and audit of the institution's
financial statements, tax reporting assistance, and other audit and accounting
matters. Stockholders are requested to ratify the selection by vote at the
Annual Meeting.
Representatives of Eggleston Smith P.C. are expected to be present at the
Annual Meeting and are expected to be available to respond to your questions
during and after the meeting.
11
<PAGE>
OTHER MATTERS
General
Management knows of no other business to be brought before the Annual
Meeting. Should any other business properly be presented for action at the
meeting, the shares represented by the enclosed proxy shall be voted by the
persons named therein in accordance with their best judgment and in the best
interests of the Company.
By-Law Amendment
On September 21, 1999, the Board of Directors, acting pursuant to the
authority granted to it by Article VIII of the Company's By-Laws, approved an
amendment to Article V, Section 3, Audit Committee of the Bylaws. Article V,
Section 3 was amended in its entirety as follows:
Section 3. Audit Committee. There shall be an Audit Committee composed of
the Internal Auditor (if one shall be appointed), who shall not have a
vote, and not less than three (3) Directors, elected by the Board of
Directors, who shall have the responsibility of seeing that the Corporation
and its active subsidiaries are audited regularly. The majority of the
voting members of the Committee shall consist of non-employee Directors.
The non-employee Directors of the Committee must be free from any
relationship that, in the opinion of the Board of Directors, would
interfere with the exercise of independent judgment as a committee member.
It shall make periodic reports to the Board of Directors. Such reports
shall state whether adequate internal audit controls and procedures are
being maintained and shall recommend to the Board of Directors such changes
in the manner of audit controls and procedures as the Committee deems
advisable.
Before the amendment, the section read as follows:
Section 3. Audit Committee. There shall be an Audit Committee composed of
the Auditor (if one shall be elected) and not less than three (3)
directors, elected by the Board of Directors, who shall have the
responsibility of seeing that the Corporation and its subsidiaries are
audited regularly. It shall make periodic reports to the Board of
Directors. Such report shall state whether adequate internal audit
controls and procedures are being maintained and shall recommend to the
Board of Directors such changes in the manner of audit controls and
procedures as the Committee deems advisable.
STOCKHOLDER PROPOSALS
The Company's By-Laws provide that, in addition to any other applicable
requirements, for business (including stockholder nominations of Director
candidates) to be properly brought before an annual meeting by a stockholder,
the stockholder must give timely notice in writing to the Secretary of the
Company no later than 120 days before the date of the anniversary of the
immediately preceding annual meeting. As to each matter, the notice must comply
with certain informational requirements set forth in the By-Laws. These
requirements are separate and apart from and in addition to the Securities and
Exchange Commission's requirements that a stockholder must meet to have a
proposal included in the Company's proxy materials. To be considered for
inclusion in the Company's proxy materials relating to the 2001 Annual Meeting
of Stockholders under SEC rules, stockholder proposals must be received by the
Secretary of the Company no later than December 15, 2000. Stockholder proposals
should be addressed to Corporate Secretary, Bay Banks of Virginia, Inc., 100 S.
Main Street, P.O. Box 1869, Kilmarnock, Virginia 22482.
12
<PAGE>
The 2001 Annual Meeting of Stockholders is scheduled for May 21, 2001.
ANNUAL REPORT ON FORM 10-K
A copy of the Company's Annual Report on Form 10-K for 1999, excluding
exhibits, as filed with the Securities and Exchange Commission can be obtained
without charge by writing to Mr. Paul T. Sciacchitano, Treasurer, Bay Banks of
Virginia, Inc., P. O. Box 1869, Kilmarnock, Virginia 22482.
13
<PAGE>
BAY BANKS OF VIRGINIA, INC
This Proxy is solicited on behalf of the Board of Directors
The undersigned, revoking all prior proxies, hereby appoints Ammon G. Dunton,
Jr. and Austin L. Roberts, III, or either of them, as proxies with full power of
substitution to represent the undersigned and vote, as designated below, all the
shares of Common Stock of Bay Banks of Virginia, Inc. held of record by the
undersigned on April 3, 2000, at the Annual Meeting of Stockholders to be held
on May 15, 2000, at 1:00 p.m. at the Indian Creek Yacht and Country Club,
Kilmarnock, Virginia, or any adjournment thereof, on each of the following
matters:
1. Election of directors.
[ ] FOR all Nominees listed below [ ] WITHHOLD AUTHORITY to vote for
those indicated below
Weston F. Conley, Jr. Thomas A. Gosse
NOTE: You may line through the name of any individual nominee for whom you
wish to withhold your vote.
2. To ratify the selection by the Board of Directors of Eggleston, Smith,
P.C., independent certified public accountants, as auditors of the Company
for 2000.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the Meeting. The Board of Directors
has not been notified of any such matters.
This proxy, when properly executed, will be voted in the manner directed by
the undersigned stockholder. If no direction is made, this proxy will be voted
"FOR" each proposal. All joint owners MUST sign.
Please sign exactly as your name appears below. When signing as attorney,
executor, administrator, trustee or guardian, please give full title as such.
--------------------------------
Signature
Signature (if jointly owned)
Dated:____________________, 2000
Please mark, sign, date and return this Proxy promptly in the enclosed
envelope.
