SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
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 ss. 240.14 a-11(c) or ss. 240.14a-12
MAINSTREET BANKGROUP INCORPORATED
(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:
.................................................................
(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 was calculated and state how it was determined):
.................................................................
(4) Proposed maximum aggregate value of transaction:
.................................................................
(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
O-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:
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(4) Date Filed:
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<PAGE>
Dear Shareholder:
The Directors of MainStreet BankGroup Incorporated invite you to attend
our Annual Meeting of Shareholders to be held in the Frith Performance Hall of
the Piedmont Arts Association Building, 215 Starling Avenue, Martinsville,
Virginia on Wednesday, April 29, 1998 at 11:00 a.m.
In addition to the election of directors, at this year's meeting we are
asking shareholders to approve an amendment to our Articles of Incorporation,
changing the name of the company to MainStreet Financial Corporation. My staff
and I also will report to our shareholders our progress in moving closer to
realizing the vision we set for our corporation, and we will be available for
your questions and comments.
Whether or not you plan to attend the meeting, after you have reviewed
the Proxy Statement please return the enclosed proxy card, properly completed,
as soon as possible. A postage-paid envelope is enclosed for your convenience.
Your Board of Directors and I look forward to seeing you at our Annual
Meeting.
Sincerely,
/s/Michael R. Brenan
-------------------------
Michael R. Brenan
Chairman, President and
Chief Executive Officer
March 27, 1998
<PAGE>
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON April 29, 1998
To the Holders of Common Stock Of
MainStreet BankGroup Incorporated:
The Annual Meeting of Shareholders of MainStreet BankGroup Incorporated
will be held in the Frith Performance Hall of the Piedmont Arts Association
Building, 215 Starling Avenue, Martinsville, Virginia on Wednesday, April 29,
1998 at 11:00 a.m. The items of business are:
1. To elect a Board of Directors consisting of 11 members for the ensuing
year; and
2. To approve the Amendment to the MainStreet BankGroup Incorporated
Articles of Incorporation, changing the name of the company to
MainStreet Financial Corporation.
3. To transact such other business as may properly be brought before the meeting
or any adjournment thereof.
These items are more fully described in the accompanying Proxy Statement. The
Board of Directors has determined that holders of Common Stock of record at the
close of business on March 12, 1998 will be entitled to notice of and to vote on
all questions at the Annual Meeting or any adjournment thereof.
By Order of the Board of Directors
/s/Rebecca J. Jenkins
-------------------------
Rebecca J. Jenkins
Secretary
March 27, 1998
- -------------------------------------------------------------------------------
YOUR VOTE IS IMPORTANT!
Please mark, sign, and date the enclosed proxy card and
mail it promptly in the enclosed pre-paid envelope.
- -------------------------------------------------------------------------------
<PAGE>
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
April 29, 1998
GENERAL INFORMATION
This proxy statement is furnished in connection with the solicitation
by and on behalf of the Board of Directors of the enclosed proxy to be used at
the 1998 Annual Meeting of Shareholders of MainStreet BankGroup Incorporated
("BankGroup") to be held at the Frith Performance Hall of the Piedmont Arts
Association Building, 215 Starling Avenue, Martinsville, Virginia on Wednesday,
April 29, 1998 at 11:00 a.m.., and at any adjournment thereof. The shares
represented by any proxy will be voted as instructed, and in the absence of
instructions will be voted FOR the election of Directors and approval of the
amendment to BankGroup's Articles of Incorporation.
Any shareholder who has executed a proxy and attends the Annual Meeting
may elect to vote in person rather than by proxy. A shareholder may revoke his
proxy at any time before it is exercised by filing written notice thereof or by
filing a later valid proxy with the Secretary of BankGroup. However, any such
revocation will not affect any vote previously taken. Presence at the Annual
Meeting does not of itself revoke such proxy.
OUTSTANDING COMMON STOCK, RECORD DATE, AND SOLICITATION
The Directors of BankGroup have fixed March 12, 1998, as the record
date for shareholders entitled to notice of and to vote at the Annual Meeting.
Only shareholders of record at the close of business on that date will be
entitled to vote. As of March 12, 1998, 13,314,789 shares of Common Stock were
outstanding. Each share of Common Stock is entitled to one vote on all matters
presented at the meeting. See "Security Ownership of Management and Principal
Shareholders."
The cost of solicitation of proxies will be borne by BankGroup.
Solicitations will be made only by the use of the mail, except that Directors,
officers and regular employees of BankGroup, or its affiliates, may make
solicitations of proxies by telephone, telegraph, or by personal calls.
Brokerage houses and nominees will be requested to forward the proxy soliciting
material to the beneficial owners of the Common Stock held of record by such
persons, and BankGroup will reimburse them for their reasonable charges and
expenses in this connection.
A majority of the votes entitled to be cast on matters to be considered
at the meeting constitutes a quorum. If a share is represented for any purpose
at the meeting, for quorum purposes it is present for all matters considered at
the meeting. Abstentions and shares held of record by a broker or its nominee
("Broker Shares") that are voted on any matter are included in determining the
number of votes present or represented at the meeting. Broker Shares that are
not voted on any matter at the meeting are not included in determining whether a
quorum is present. Votes that are withheld and Broker Shares that are not voted
(commonly referred to as "broker non-votes") are not included in determining the
number of votes cast in the election of directors or on other matters.
<PAGE>
ITEM 1 - ELECTION OF DIRECTORS
At the Annual Meeting, 11 Directors are to be elected to hold office
until the next annual meeting of shareholders or until their respective
successors are duly elected and qualified.
It is the intention of the persons named in the enclosed proxy to vote
for the election of the 11 persons named herein, all of whom currently are
Directors. Proxies will be voted for the election as Directors of the nominees
listed below (or, if unexpectedly unavailable, for such substitutes as the Board
of Directors may designate) to serve until the next annual meeting of
shareholders and until their respective successors have been duly elected and
qualified. The Board of Directors does not anticipate any nominees will be
unavailable for election.
All nominees other than Alfred J. T. Byrne, Esquire and C. Leland
Bassett have been elected by shareholders at previous annual meetings. Mr. Byrne
was elected to the Board by the Directors in August 1997, and Mr. Bassett has
been nominated for election to the Board.
The election of each nominee for director requires the affirmative vote
of the holders of a plurality of the shares of Common Stock cast in the election
of directors. Unless otherwise specified in the accompanying form of proxy, it
is intended that votes will be cast for the election of all of the nominees as
directors.
<TABLE>
<CAPTION>
<S> <C>
Position with BankGroup or Other Director
Nominees (Age) Principal Occupation and Directorships Since
- ------------------------ ------------------------------------------------- -------
C. Leland Bassett President of Fi-Tech, Inc., (a distribution company), Nominee Only
(60) Richmond, Virginia. Mr. Bassett was a Director of Regency
Bank and was Chairman of that Bank at the
time of the merger.
W. Christopher Beeler, Jr. President and Chief Executive Officer, Virginia Mirror 2/92
(46) Company, Inc. and Virginia Glass Products Corporation (mirror
manufacturer), Martinsville, Virginia. Mr Beeler is a
Director of Hooker Furniture Corporation (furniture
manufacturer), Martinsville, Virginia.
Michael R. Brenan Chairman of the Board, President, and Chief Executive Officer 6/94
(45) of MainStreet BankGroup Incorporated since July 1994. Mr.
Brenan was President and Chief Operating Officer of Bank One,
Youngstown, N.A., Youngstown, Ohio from January 1992 to June
1994.
Alfred J. T. Byrne, Esquire Partner, LeClair Ryan, P.C. (attorney), Richmond, Virginia. 8/97
(54) Prior to that Mr. Byrne was a financial services consultant
based in New York City, Senior Vice President and General
Counsel of New York Life Insurance Company, New York, a
Partner at Patton Boggs, LLP, Washington, D.C., and General
Counsel of the Federal Deposit Insurance Corporation,
Washington, D.C.
<PAGE>
William L. Cooper, III President and Chief Executive Officer, Cooper Wood Products 4/92
(43) (furniture component manufacturer), Rocky Mount, Virginia.
Billy P. Craft Chairman, Village Motors, Inc. (franchised automobile dealer) 4/94
(68) Lynchburg, Virginia.
Phillip W. Dean Executive Vice President and CEO, Leadbetter, Inc., (Rental 2/97
(55) Property Management), Ashland, Virginia.
I. Patricia Henry Plant Manager, Eden - Plant, Miller Brewing Company (beverage 2/96
(50) manufacturer), Eden, North Carolina.
Larry E. Hutchens Chairman, Hutchens Petroleum (petroleum marketer), Stuart, 8/86
(52) Virginia.
William O. McCabe, Jr., Physician and retired President, Forest Family Physicians, 8/85
(66) M.D. Inc., Forest, Virginia.
Albert L. Prillaman Chairman, Chief Executive Officer and President, Stanley 4/94
(52) Furniture Company, Inc. (furniture manufacturer), Stanleytown,
Virginia.
</TABLE>
SECURITY OWNERSHIP OF MANAGEMENT AND PRINCIPAL SHAREHOLDERS
The following table sets forth information as of January 31, 1998,
concerning the beneficial ownership, direct or indirect, of Common Stock by
Directors, nominees for Director, the Chief Executive Officer, the four most
highly compensated Executive Officers, all Directors and Executive Officers as a
group, and persons beneficially owning more than 5% of Common Stock.
<TABLE>
<CAPTION>
Sole Voting & Investment Aggregate Aggregate Percentage
Name Power(1) Other (2) Total Owned
- ---- -------- --------- ----- -----
<S> <C> <C> <C> <C>
James E. Adams 21,489(3) --- 21,489 .2
S. Richard Bagby 9,161(4) --- 9,161 .1
W. Christopher Beeler, Jr. 6,073 969 7,042 .1
Thomas B. Bishop 1,900 --- 1,900 *
Michael R. Brenan 69,640(5) 201 69,841 .6
Alfred J. T. Byrne 210 --- 210 *
William L. Cooper, III 6,264 2,827 9,091 .1
Billy P. Craft 97,524 --- 97,524 .8
Phillip W. Dean 10,681 5,388 16,069 .1
I. Patricia Henry 500 --- 500 *
Larry E. Hutchens 8,386 12,225 20,611 .2
<PAGE>
<CAPTION>
Sole Voting & Investment Aggregate Aggregate Percentage
Name Power(1) Other (2) Total Owned
- ---- -------- --------- ----- -----
Rebecca J. Jenkins 19,378(6) 4,012(7) 23,390 .2
George J. Kostel 45,659 40,029 85,688 .7
William McCabe, Jr. M.D. 12,193 --- 12,193 .1
Albert L. Prillaman 5,750 --- 5,750 *
R. Bruce Valley 8,390(8) --- 8,390 .1
Mark J. Wenick 4,377 --- 4,377 *
Directors and Executive Officers as 348,131 85,529 433,660 3.6
a Group
(20 persons)
MainStreet Trust (9) Company, NA 447,562 610,563 1,058,125 8.8
- ------------------------
</TABLE>
* Denotes less than .1% of outstanding shares.
** Mr. Kostel is retiring from the Board at the 1998 annual meeting in
accordance with Bylaw provisions for retirement of directors and Mr.
Bishop chose not to stand for re-election.
(1) Includes 103,686 shares that may be acquired by certain officers and by
Director Phillip W. Dean pursuant to options granted under BankGroup's
stock option plans.
(2) Includes shares owned by relatives and in certain trust relationships,
which shares may be deemed to be beneficially owned under rules and
regulations of the Securities and Exchange Commission. The inclusion of
these shares does not constitute an admission of beneficial ownership.
(3) Includes 1,193 shares of a restricted stock award as to which Mr. Adams
has current voting rights.
(4) Includes 999 shares of a restricted stock award as to which Mr. Bagby
has current voting rights.
(5) Includes 2,333 shares of restricted stock awards as to which Mr. Brenan
has current voting rights.
(6) Includes 923 shares of a restricted stock award as to which Ms. Jenkins
has current voting rights.
(7) Includes 698 shares of a restricted stock award as to which Ms.
Jenkins' spouse, also an Executive Officer of BankGroup, has current
voting rights.
(8) Includes 1,191 shares of a restricted stock award as to which Mr.
Valley has current voting rights.
(9) BankGroup's affiliate, MainStreet Trust Company, NA, 200 East Church
Street, Martinsville, Virginia, held through the normal conduct of its
trust business, 1,058,125 shares of Common Stock as of January 31,
1998. Of these shares, MainStreet Trust Company, NA has sole voting and
investment power as to 447,562 shares, shared voting and investment
power as to 198,291 shares, and sole investment power as to 447,562
shares. Virginia law prohibits MainStreet Trust Company, NA from voting
shares as to which it has sole voting power, but shares as to which it
has shared voting power can be voted by the person with whom it shares
such power. Pursuant to Virginia law, a co-fiduciary may be appointed
for all of the shares held by MainStreet Trust Company, NA with sole
power to vote, in order that such shares may be voted at the Annual
Meeting.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires that
BankGroup's directors and executive officers, and persons who own more than 10%
of a registered class of BankGroup's equity securities, file with the Securities
and Exchange Commission initial reports of ownership and reports of change in
ownership of Common Stock and other equity securities of BankGroup. The same
persons are also required by Securities and Exchange Commission regulation to
furnish BankGroup with copies of all Section 16(a) forms that they file.
<PAGE>
Based solely on its review of the forms required by Section 16(a) of
the Securities Exchange Act of 1934 that have been received by BankGroup or
written representations from certain reporting persons that no annual statements
on Form 5 were required, BankGroup believes that its officers and Directors and
beneficial owners of greater than 10% of its Common Stock complied with all
applicable filing requirements
COMMITTEES OF THE BOARD
The Board of Directors has established an Audit Committee, a
Compensation Committee, a Corporate Governance and Nominating Committee, a
Corporate Responsibility and Compliance Committee, an Executive Committee and a
Corporate Objectives and Finance Committee and has assigned certain
responsibilities to each of those Committees. The Audit Committee recommends to
the Board of Directors, the firm to be employed as its independent accountants
to audit BankGroup's consolidated financial statements; reviews and approves the
scope, purpose and type of audit services to be performed by the internal and
external auditors; reviews the activities and findings of the internal and
external auditors to determine the effectiveness of the audit function; reviews
procedures for ensuring compliance with BankGroup's policies on conflict of
interest; and renders regular reports to the Board of Directors on its
activities and findings. The Compensation Committee recommends, to the Board of
Directors, the compensation to be paid to the executive officers of BankGroup
and its subsidiaries, approves the general salary administration policies for
BankGroup's other officers and employees, and approves the overall structure of
the benefits program. The Compensation Committee also administers BankGroup's
stock option plans. The Audit Committee and the Compensation Committee each
consist of non-employee Directors. The Corporate Governance and Nominating
Committee reviews the qualifications of possible candidates for the Board of
Directors including candidates recommended by shareholders and recommends these
candidates to the Board of Directors, evaluates the performance of the Board of
Directors and evaluates the performance of the Chief Executive Officer at least
annually. Shareholder recommendation of possible candidates must be submitted in
writing to the Secretary of BankGroup, must be accompanied by a statement signed
by the recommended candidates of their willingness to serve, if elected, and
must be received at least 90 days before the date of the annual meeting at which
the recommended candidates, if approved by the Corporate Governance and
Nominating Committee and the Board of Directors, would be nominated for election
by shareholders. The Corporate Objectives and Finance Committee is responsible
for overseeing the strategic planning process, assisting Management with setting
a strategic direction for BankGroup, focusing the attention of the Board of
Directors on long-range objectives, monitoring the operational and financial
results of BankGroup and assessing management's achievement of BankGroup's
long-range objectives. The Executive Committee has all powers of the full Board
not prohibited to it under the Virginia Stock Corporation Act and will be called
to meet in the event of emergencies or when action of the Board of Directors is
necessary between meetings and it is not possible or practicable to call a
special meeting. The Corporate Responsibility and Compliance Committee is
responsible for ensuring that standards of ethical behavior and proper
compliance programs are established and maintained throughout BankGroup.
Executive Committee -- W. Christopher Beeler, Jr., Michael R. Brenan
(Chairman), William L. Cooper, III, Larry E. Hutchens, and Albert L. Prillaman.
Audit Committee -- W. Christopher Beeler, Jr. (Chairman), Albert J.T.
Byrne, Esquire, William L. Cooper, III, Billy P. Craft, Phillip W. Dean, and
George J. Kostel.
Compensation Committee - Alfred J.T. Byrne, William L. Cooper, III
(Chairman), Larry E. Hutchens, William O. McCabe, Jr., M.D., and Albert L.
Prillaman.
Corporate Governance and Nominating Committee -- Thomas B. Bishop,
Michael R. Brenan, Billy P. Craft, Phillip W. Dean, I. Patricia Henry, and
Albert L. Prillaman (Chairman).
<PAGE>
Corporate Objectives & Finance Committee -- W. Christopher Beeler, Jr.,
Alfred J.T. Byrne, William L. Cooper, III, Billy P. Craft, Phillip W. Dean,
Larry E. Hutchens, George J. Kostel, and Albert L. Prillaman (Chairman).
Corporate Responsibility & Compliance Committee -- Thomas B. Bishop, I.
Patricia Henry, Larry E. Hutchens (Chairman), George J. Kostel, and William O.
McCabe, Jr., M.D.
ATTENDANCE
The Board of Directors held six meetings during 1997, the Audit
Committee met five times, the Compensation Committee met twice, the Corporate
Governance and Nominating Committee met twice, the Corporate Objectives &
Finance Committee met four times, the Corporate Responsibility & Compliance
Committee met three times, and the Executive Committee met twice. During 1997,
each director attended more than 75% of the meetings of the Board and of any
committee on which they served.
COMPENSATION OF DIRECTORS
In 1997, Directors who were not also employees of BankGroup were paid
an annual retainer of 300 shares of BankGroup Common Stock plus $3,701 in cash,
a fee of $500 for each Board meeting and $400 for each Committee meeting
attended, with the Committee Chairman paid $500 for each Committee meeting
chaired, and their expenses for attending meetings.
REPORT OF COMPENSATION COMMITTEE
This report by the Compensation Committee is required by rules of the
Securities and Exchange Commission. It is not to be deemed incorporated by
reference by any general statement which incorporates by reference this Proxy
Statement into any filing under the Securities Act of 1933 or the Securities
Exchange Act of 1934, and it is not to be otherwise deemed filed under either
such Act.
In 1997, the Compensation Committee consisted of four members of the
BankGroup Board of Directors who were not officers of BankGroup or a BankGroup
subsidiary bank ("Subsidiary Bank"). Director Alfred J.T. Byrne, who was elected
to the Board in August 1997 and subsequently appointed to this Committee as the
fifth member, attended his first Committee Meeting in January 1998. This
committee considered the recommendations of the Subsidiary Bank Boards and made
final compensation decisions on the Chief Executive Officers of the Subsidiary
Banks and BankGroup Executive Officers.
Compensation Policies and Overall
Objectives of Executive Compensation Programs
The 1997 executive compensation program of BankGroup and of each
Subsidiary Bank was designed to provide each executive the opportunity to earn a
competitive level of compensation consistent with the officer's individual
performance, experience and responsibility and the financial success of the
bank. The following objectives express the fundamental philosophy of BankGroup,
the Subsidiary Bank Boards and the Compensation Committee:
o Provide a competitive compensation package that enables BankGroup
to attract and retain key executives by evaluating comparable
historical and industry information, with emphasis on peer group
bank holding companies and banks.
o Evaluate bonus programs that would be based upon the annual and
long-term performance of BankGroup and the Subsidiary Banks and
individual performance.
<PAGE>
o Provide variable stock compensation opportunities directly linked
with the performance of BankGroup and the Subsidiary Banks,
aligning executive remuneration with the interests of
shareholders.
Compensation Program Components
BankGroups' overall compensation programs have been established with
the objectives of having pay levels and incentive opportunities competitive with
peer group bank holding companies and banks and reflect the performance of
BankGroup and the Subsidiary Banks. The programs consisted of three main
components: base salary, the potential for an executive officer to receive an
annual bonus based on overall performance and stock based incentives. The
particular elements of the compensation program for executive officers are
further explained below.
Salary - The Compensation Committee and Subsidiary Bank Boards
determined salary parameters through comparisons with companies of similar size
and complexity of BankGroup. The Subsidiary Bank Boards and the Compensation
Committee relied on the Watson Wyatt salary information service and survey data
from the Virginia Bankers Association for comparative historical compensation
information and comparative industry information. The objective was to have base
salaries, when considered as part of total compensation, be adequate and
competitive with the Subsidiary Bank's peer group, based on asset size.
BankGroup's salary administration policy and procedures for executive
compensation which were approved by the Compensation Committee permit the Boards
of Directors of the Subsidiary Banks to set the base salaries of their executive
officers in accordance with the salary administration guidelines prepared from
peer group data. The salaries of the Chief Executive Officers of the Subsidiary
Banks are approved by the Compensation Committee in consultation with the
Subsidiary Bank Boards of Directors.
Annual Bonus - In 1995, the Compensation Committee established a Key
Management Incentive Plan (the "Plan") for the Subsidiary Bank Chief Executive
Officers and the principal officers of BankGroup. The Plan is designed to offer
incentives to those employees whose performance directly affects BankGroup's
profitability as determined by the Compensation Committee. Each individual
selected as a Plan participant is assigned a target potential bonus award
computed as a predetermined percentage ranging from 20% to 35% of the
participant's annual base salary based upon achievement of performance goals set
by the Compensation Committee on an annual basis relating to Return On Assets,
Return on Equity, Net Income and Efficiency Ratios. Under the Plan a participant
could receive from a minimum of 50% of the target salary percentage award to a
maximum of 200% of the target salary percentage depending upon the performance
of BankGroup as a whole and that of each individual Subsidiary Bank. The formula
for the Subsidiary Bank Chief Executive Officers was weighted more heavily to
the performance of the individual Subsidiary Bank, while the Plan as applied to
BankGroup principal officers was based entirely upon the consolidated
performance of BankGroup. The 1997 performance of BankGroup resulted in
Executive Vice Presidents Adam and Jenkins receiving 82.6% of their target cash
award, and the other principal officers of BankGroup receiving cash bonus awards
equal to 75.4% of their target salary percentages. The Subsidiary Bank Chief
Executive Officers received bonus awards ranging from 56.7% to 95.4% of their
target salary percentages.
Stock Award Program - The program included the potential for awarding
stock-based incentives to principal officers of BankGroup and its Subsidiary
Banks in an amount equal to 37.5% of each participant's base salary if
BankGroup's performance goals were achieved. The philosophy of the committee is
to award the principal officers of BankGroup and its Subsidiary Banks' chief
executive officers for outstanding performance of BankGroup on a consolidated
basis. For 1997, a total of 8,238 incentive stock options were awarded to
Messrs. Valley and Wenick, and a total of 10,806 non-qualified stock options
with corresponding SARs were awarded to Mr. Adams and Ms. Jenkins, as well as a
grant of 2,400 shares of BankGroup stock to each of them as set forth in the
Summary Compensation Table.
<PAGE>
Compensation of the Chief Executive Officer - In establishing the
salary of the Chief Executive Officer of BankGroup, the Compensation Committee
retained an independent consulting firm which designed a customized peer group
for BankGroup consisting of banks and bank holding companies determined to be
similar in size and complexity to BankGroup. The Compensation Committee also
reviewed data from Watson Wyatt Data Services, Financial Institutions Benchmark
Compensation Report; BAI Foundation, The Bank Key Executive Compensation Survey;
and the Virginia Bankers Association current salary survey data. In 1995, the
Compensation Committee had established a salary range designed with a midpoint
reflecting the median compensation for chief executive officers in the
established peer group and the minimum set at 80% of the midpoint. In June of
1997, the Compensation Committee recommended, and the Board of Directors
approved, a merit increase of 12.2% in Mr. Brenan's annual base salary from
$205,000 to $230,000.
Mr. Brenan participates in the Key Management Incentive Plan both with
regard to cash bonus and stock incentives. Mr. Brenan's target salary percentage
for cash bonus purposes was set by the Compensation Committee for 1997 at 50%
and the stock incentive target percentage at 52.5% of his annual base salary.
The performance benchmarks for Mr. Brenan with regard to ROA, ROE, net income
and efficiency ratios were identical with those set for the other principal
officers of BankGroup and his awards were determined by the consolidated
performance of BankGroup. In 1997, BankGroup achieved record earnings, and the
application of the Plan formula resulted in Mr. Brenan being awarded a cash
bonus equal to 82.6% of his target salary percentage, a grant of 3,000 shares of
BankGroup common stock, and 11,998 Non-Qualified Stock Options with
corresponding SARs.
Compensation Committee
William L. Cooper, III (Chairman)
Alfred J. T. Byrne
Larry E. Hutchens
William O. McCabe, Jr., M.D.
Albert L. Prillaman
SUMMARY COMPENSATION TABLE
The following table presents information relating to total compensation
of the Chief Executive Officer and the four other most highly compensated
executive Officers of BankGroup and its subsidiaries for the fiscal year ended
December 31, 1997.
<PAGE>
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
Long Term
Compensation
Annual Compensation Awards
- --------------------------------------- ------------------------------ --------------------------------------------------------
<S> <C>
Other Restricted Securities
Annual Stock Underlying All Other
Name and Compensation Award(s) Option/ Compensation
Principal Position Year Salary($) Bonus($) $ $ SARS(#) ($)(5)
- ---------------------------------------------------------------------------------------------------------------------------------
Michael R. Brenan 1997 $217,500 $94,988 $134,421(1) --- 11,998/11,998(4) $15,486
Chairman of the 1996 201,000 87,302 50,960(1) --- 10,192 14,975
Board, President 1995 171,309 65,182 41,986(1) 97,125(6) --- 15,179
and Chief Executive
Executive Officer,
MainStreet BankGroup
Incorporated
James E. Adams 1997 $145,002 $44,810 $ 82,990(2) $ --- 5,776/5,776(4) $34,027
Executive Vice 1996 137,150 45,290 --- --- 5,036 35,572
President, Chief 1995 128,249 40,015 --- 49,688 --- 7,561
Financial Officer
and Treasurer
R. Bruce Valley 1997 $139,798 $33,042 $18,639(2) --- $4,100 $26,037
President and Chief 1996 $134,800 41,205 --- --- 4,876 26,306
Executive Officer 1995 131,078 47,123 --- 49,613 --- 9,019
Piedmont Trust Bank
Rebecca J. Jenkins 1997 $130,000 $39,028 $83,346(2) $ --- 5,030/5,030(4) $16,341
Executive Vice 1996 113,750 39,925 --- --- 4,439 17,440
President and 1995 97,871 30,955 --- 38,438 --- 5,783
Secretary
Mark J. Wenick 1997 $117,000 $27,752 $ --- $ --- 4,138 $ 8,251
Chairman and CEO 1996 86,995 30,343 17,291(3) --- --- 4,048
MainStreet Trust
Company, NA
(hired 4/96)
</TABLE>
(1) The Other Annual Compensation paid to Mr. Brenan in 1997 included the
vesting of 1,600 shares of restricted BankGroup Common Stock valued at
$37,200 and $48,921 for "gross-up" of taxes. The Other Annual
Compensation paid to Mr. Brenan in 1996 included the vesting of 1,600
shares of restricted BankGroup Common Stock valued at $26,600 and
$20,231 for "gross-up" of taxes regarding the value of the stock award.
The Other Annual Compensation paid to Mr. Brenan in 1995 included the
vesting of 1,600 shares of restricted BankGroup Common Stock valued at
$20,500 and $15,532 for "gross up" of taxes regarding the value of the
stock award.
(2) Amounts of Other Annual Compensation for Messrs Adams and Valley and
Ms. Jenkins in 1997 consisted of "gross-up" for taxes regarding the
vesting of one-third of a 1995 grant of restricted stock and in the
case of Mr. Adams and Ms. Jenkins, the value of a 1997 grant of 2,400
shares each.
(3) The amount of Other Annual Compensation paid to Mr. Wenick in 1996
included moving and relocation expenses in the amount of $11,214.00.
(4) The non-qualified stock options granted to Messers Brenan and Adams and
Ms. Jenkins for the Company's 1997 performance are coupled with a
corresponding number of SARs.
<PAGE>
(5) Consists of 401(k) matching contributions made by Piedmont Trust Bank,
MainStreet Trust Company, NA, and BankGroup and the portion of life
insurance premiums paid by the Company, MainStreet Trust Company, NA
and Piedmont Trust Bank for the Named Executives under a Split-Dollar
Life Insurance Program provided for senior officers of the Company and
its subsidiary Banks. BankGroup's 401(k) Plan provides for matching
contributions to all Plan participants. The 1997 401(k) matching
contributions for the Named Executives are as follows: Mr. Brenan,
$4,750; Mr. Adams, $3,225; Mr. Valley, $3,127; Ms. Jenkins, $2,888; and
Mr. Wenick, $1,755. The portion of the life insurance premium under the
Split-Dollar Program paid by the Company and Piedmont Trust Bank on
behalf of the Named Executives for 1997 was as follows: Mr. Brenan,
$10,736; Mr. Adams, $30,802; Mr. Valley, $22,901; Ms. Jenkins, $13,453;
and Mr. Wenick, $6,496. The Split-Dollar Life Insurance contract
between the participants and the Company and subsidiary Banks provides
for the recapture over time of 100% of the premiums paid on behalf of
the participants by the Company or the banks and the Company and banks
retain a lien on the proceeds of each policy to ensure repayment of
premium amounts advanced.
(6) Mr. Brenan's initial compensation package in June 1994 included a
restricted award of 8,000 shares of BankGroup Common Stock which shares
are scheduled to vest ratably on his anniversary date over a period of
five years. Mr. Brenan receives dividends on the total number of
awarded shares vested and unvested. The 1,600 shares which vested in
each of June 1994, 1995, 1996 and 1997, are reflected as Other Annual
Compensation. The value of the remaining 1,600 shares of restricted
stock held by Mr. Brenan as of December 31, 1997 was $44,400.
STOCK OPTION PLANS
The following table presents information concerning stock options and
stock appreciation rights ("SARs") for the individuals named in the Summary
Compensation Table(1).
<TABLE>
Aggregated Option/SAR Exercises in Last Fiscal Year
and FY-End Option/SAR Values
<CAPTION>
Number of Shares Value of
Underlying Unexercised Unexercised In-the-Money
Options/SARs at FY-End Options/SARs at FY-End(1)
------------------------------------- -------------------------
Number of
Shares
Acquired on Value
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
---- -------- -------- ----------- ------------- ----------- -------------
<S> <C>
James E. Adams 0 0 1,678 3,358 13,843 27,704
Michael R. Brenan 0 0 19,397 10,795 308,025 126,059
Rebecca J. Jenkins 0 0 1,479 2,960 12,202 24,420
R. Bruce Valley 0 0 5,025 3,251 69.506 26,821
</TABLE>
(1) Computed based upon the difference between aggregate market value at
the exercise date or December 31, 1997, as the case may be, and
aggregate exercise price.
<PAGE>
PENSION PLAN
BankGroup and its subsidiaries have a non-contributory retirement plan
established in 1995 covering substantially all employees who meet certain age,
tenure, and hours worked criteria, and a supplemental executive retirement plan
covering certain key executives, including those in the Summary Compensation
Table. The Summary Compensation Table does not include the amount of the
contribution payment or accrual for any executive officer in these plans, as
these amounts cannot be readily separated or individually calculated and are
based upon actuarial assumptions for the population as a whole.
The retirement plan formula provides 1.5% for each year of service up
to the Social Security covered compensation level for each year of service, and
an additional .65% of compensation above the Social Security covered
compensation level for each year of service not to exceed 35 years, times the
average of the highest five years compensation. Early retirement date is age 60,
with five years of service subsequent to May 1, 1995.
The supplemental retirement plan provides for 65% of highest
compensation in the last five years, provided the executive has completed five
years of total service, subsequent to November 1, 1995 and attained age 65,
offset by any payments received from primary Social Security, the participants"
accrued benefit under the retirement plan, and the participants' defined
contribution offset amount from a prior plan. Normal retirement is age 65.
Benefits are reduced by .42% for each month of early retirement, which may be
elected at age 55 or later, provided the participant has completed at least five
years of service subsequent to November 1, 1995. BankGroup has purchased life
insurance contracts on the participants in the plan, payable to BankGroup.
The maximum annual benefits payable at normal retirement age to
eligible participants in the retirement plan and the supplemental retirement
plan combined, including the executives named in the Summary Compensation Table,
are illustrated in the following table:
<TABLE>
YEARS OF SERVICE
<CAPTION>
Highest Base Salary
Previous 5 Years 15 20 25 30 35
---------------- -- -- -- -- --
<S> <C>
100,000 $65,000 $65,000 $65,000 $65,000 $68,582
125,000 81,250 81,250 81,250 81,250 87,394
150,000 97,500 97,500 97,500 97,500 106,307
175,000 113,750 113,750 113,750 113,750 113,750
200,000 130,000 130,000 130,000 130,000 130,000
250,000 162,500 162,500 162,500 162,500 162,500
</TABLE>
(1) Benefit amounts include benefits from the retirement plan and the
supplemental plan, if participant is eligible for both.
(2) Supplemental retirement benefits amounts listed are offset by payments
received under primary Social Security, the participants' accrued
benefit, and the participants' defined contribution offset amount from
a prior plan.
(3) Retirement plan calculations are based on straight life annuity
assuming full benefit at age 65, and covered compensation of $29,311
for a person age 65 in 1997. Compensation is currently limited to
$160,000 by federal tax law.
<PAGE>
The compensation covered by the retirement plan is base salary and
wages, paid or accrued to the employee (plus any contribution by the employee to
any tax qualified 401(k) plans, excluding overtime pay, bonus, fringe benefits
and any other form of additional compensation).
Ages and credited years of service under the retirement plan for such
persons are as follows: Mr. Brenan (45) -- 4; Mr. Valley (57) -- 20; Mr. Adams
(53) -- 3; Ms. Jenkins (48) -3, and Mr. Wenick (38) - 1.
INTEREST OF MANAGEMENT IN CERTAIN TRANSACTIONS
BankGroup's Officers and Directors, and other corporations, business
organizations, and persons with which some of BankGroup's Officers and Directors
are associated, customarily have banking transactions with Subsidiary Banks. All
such transactions were made in the ordinary course of business on substantially
the same terms, including interest rates and security for loans, as those
prevailing at the time in comparable transactions with others and did not
involve more than the normal risk of collectibility or present other unfavorable
features.
TERMINATION OF EMPLOYMENT AND CHANGE
OF CONTROL ARRANGEMENTS
BankGroup has change of control agreements with Messrs. Brenan and
Adams, and Ms. Jenkins, and slightly different change of control agreements with
Messrs. Valley and Wenick and 12 other Officers of BankGroup and its affiliates.
The agreements for all the officers are substantially the same, except for the
period for which benefits will be paid. These agreements are designed to
solidify employment arrangements.
The agreements provide for certain benefits only in the event of a
"change in control" of BankGroup. Generally, the "change of control" occurs on
the actual effective date of a merger, sale of assets, etc. A limited exception
allows for an acceleration of the vesting of the Executive's rights under the
agreements when the MainStreet Board authorizes the negotiation of a "change in
control" transaction so long as the Executive is employed with MainStreet, both
at that time and at the time of a resulting "change of control" occurring within
two years (unless the Executive's employment during that two year period has
been terminated by the Executive for "Good Reason" as defined or by MainStreet
not for "Cause".) In these latter events, the Executive's employment would be
deemed continuing to the date of the "change of control". Certain specific
transactions do not constitute a "change of control," including a situation in
which a change of control transaction is negotiated without prior approval of
BankGroup's Board.
Once the Executive's change of control agreement becomes effective the
Executive is paid his or her regular salary and receives regular benefits
through the date of termination if employment is terminated either by the
Executive's death or disability; or by MainStreet for "Cause"; or by the
Executive for other than "Good Reason." If during the two year period following
a "change of control", the Executive's employment is terminated by MainStreet
other than for "Cause"; or by the Executive for "Good Reason" including by the
Executive for any reason within a 30 day period commencing on a date one year
from the "change of control", then the Executive will become entitled to change
of control severance payments. In the case of Messrs. Brenan and Adams, and Ms.
Jenkins, the severance benefits include cash compensation equal to 2.99 times
the Executive's annualized includable compensation for the base period within
the meaning of Section 280 G.(d)(i) of the Internal Revenue Code, together with
continued participation in certain other employee benefit plans for a period of
up to three years under certain circumstances. In the case of Messrs. Valley and
Wenick and the 12 other Officers of BankGroup and its affiliates, the severance
benefits include cash compensation equal to the Executive's annualized
includable compensation for the base period within the meaning of Section 280
G.(d)(i) of the Internal Revenue Code, together with continued participation in
certain other employee benefit plans for a period of up to one year under
certain circumstances.
<PAGE>
PERFORMANCE OF BANKGROUP COMMON STOCK
The graph below compares the total returns (assuming reinvestment of
dividends) of BankGroup Common Stock, The Nasdaq US Stocks Index, the SNL
Securities Southeast Bank Index and the SNL Securities Bank ($500 million - $1
billion assets) Index. The graph assumes $100 invested on December 31, 1992 in
BankGroup Common Stock and each of the indices.
The shareholder return graph is not necessarily indicative of future
performance.
(GRAPHIC-GRAPH PLOTTED TO POINTS BELOW)
<TABLE>
<CAPTION>
12/31/92 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97
-------- -------- -------- -------- -------- --------
<S> <C>
MainStreet BkGrp 100.00 110.88 101.60 145.08 218.15 327.62
Nasdaq-Total US 100.00 114.80 112.21 158.70 195.19 239.53
Banks (Southeast) 100.00 105.04 105.27 157.89 216.73 328.55
Banks ($500M - $1B) 100.00 125.46 133.93 177.82 222.29 361.35
</TABLE>
AMENDMENTS TO THE ARTICLES OF INCORPORATION
ITEM 2 - CHANGING THE NAME OF THE COMPANY
The BankGroup Board recommends an amendment to BankGroup's Articles of
Incorporation, changing the name of BankGroup to "MainStreet Financial
Corporation." The Board believes this new name, while retaining the popular
"MainStreet" identity, more clearly represents what the Company is and wants to
be. This company provides a wide variety of financial services, including trust
and investment services. It is much more than a "bank."
The Board wishes to position itself so that as opportunities arise, it
can take advantage of developments in the market to expand financial services
provided by this company's subsidiaries and look for ways to provide its
services in a more consolidated and efficient manner.
Approval of this amendment will require the affirmative vote of
two-thirds of the outstanding shares of BankGroup Common Stock. The Board
unanimously recommends that shareholders VOTE FOR this Item 2.
SUBMISSION OF SHAREHOLDER PROPOSALS
<PAGE>
Proposals of shareholders intended to be presented at the 1999 annual
meeting must be received by BankGroup not later than November 21, 1998 in order
to be included in the proxy statement and form of proxy relating to such Annual
Meeting. Such proposals should be sent to the Secretary at BankGroup's principal
office in Martinsville, Virginia by certified mail, return receipt requested.
In addition to other applicable requirements, the Bylaws establish an
advance notice procedure for the nomination of candidates for election as
directors, other than by the Board of Directors of BankGroup, and for certain
matters to be brought before an annual shareholders' meeting of BankGroup. A
shareholder must give BankGroup notice not less than 90 days prior to a
shareholders' meeting to: (a) nominate persons to be elected directors of
BankGroup at such meeting or (b) propose business matters to be considered at
such meeting. A shareholder must give BankGroup notice, within seven days
following the announcement of a special meeting to elect directors, to nominate
persons to be elected directors at such special meeting. BankGroup expects that
its 1999 Annual Meeting will be on or about April 21, 1999.
BankGroup's bylaws provide that a shareholder of BankGroup entitled to
vote for the election of directors may nominate persons for election to the
Board at any meeting of shareholders by mailing written notice to the Secretary
of BankGroup not later than (i) with respect to an election to be held at an
annual meeting of shareholders, 90 days prior to such meeting, and (ii) with
respect to an election to be held at a special meeting of shareholders for the
election of directors, the close of business on the seventh day following the
date on which notice of such meeting is given to shareholders. Any such
shareholder's notice shall include (i) the name and address of the shareholder
and of each person to be nominated, (ii) a representation that the shareholder
is a holder of record of stock of BankGroup entitled to vote at such meeting and
intends to appear in person or by proxy at the meeting to nominate each person
specified, (iii) a description of all arrangements or understandings between the
shareholder and each nominee and any other person (naming such person) pursuant
to which the nomination is made by the shareholder, (iv) such other information
regarding each nominee as would be required to be included in a proxy statement
filed pursuant to the proxy rules of the Securities and Exchange Commission had
the nominee been nominated by the Board, and (v) the consent of each nominee to
serve as a director of BankGroup if so elected.
1997 ANNUAL REPORT ON FORM 10-K
BankGroup's 1997 Annual Report on Form 10-K, which includes
consolidated balance sheets as of December 31, 1997 and 1996 and the related
consolidated statements of income, changes in shareholders' equity, and cash
flows for each of the years in the three-year period ended December 31, 1997,
together with related notes and the independent auditors' report of Coopers &
Lybrand L.L.P., BankGroup's independent public accountants for 1997, is being
mailed along with this Proxy Statement to shareholders of record as of the close
of business on March 12, 1998.
OTHER BUSINESS
The Board of Directors does not know of any matters which may be
presented for consideration at the meeting other than those specifically set
forth in the Notice of Annual Meeting. However, in the event other proper
matters are presented at the meeting, it is the intention of the proxy holders
named in the enclosed Proxy to take such action as shall be in accordance with
their best judgment with respect to such matters.
<PAGE>
Shareholders are urged to specify choices on the enclosed Proxy and to
date and return it in the enclosed envelope. Your prompt response and
cooperation will be appreciated.
By Order of the Board of Directors
/s/Rebecca J. Jenkins
---------------------
Rebecca J. Jenkins
Secretary
Dated: March 27, 1998
<PAGE>
Exhibit
PROPOSED REPLACEMENT TO ARTICLE I OF THE ARTICLES OF INCORPORATION
Delete Article I of the Articles of Incorporation of MainStreet BankGroup,
Incorporated, in its entirety, and replace it with the following:
I
The name of the Corporation is
MAINSTREET FINANCIAL CORPORATION.
<PAGE>
REVOCABLE PROXY
MAINSTREET BANKGROUP INCORPORATED
[ X ] PLEASE MARK VOTES
AS IN THIS EXAMPLE
ANNUAL MEETING OF STOCKHOLDERS
April 29, 1998
THIS PROXY IS SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS
The undersigned hereby appoints James E. Adams and Michael R. Blevins,
and each of them, with full power of substitution in each, Proxies to vote all
the shares of Common Stock of MainStreet BankGroup Incorporated, which the
undersigned is entitled to vote, at the Annual Meeting of Stockholders of the
Corporation to be held Wednesday, April 29, 1998, at 11:00 a.m., and at any and
all adjournments thereof.
ITEM 1: ELECTION OF DIRECTORS THE NOMINEES FOR DIRECTORS ARE:
C. L. BASSETT, W.C. BEELER, JR.; M. R. BRENAN; A. J. T. BYRNE, W. L.COOPER, III;
B. P. CRAFT; P. W. DEAN; I. P. HENRY; L. E. HUTCHENS; W. O. McCABE, JR., M.D.;
and A. L. PRILLAMAN;
[ ] For [ ] Withhold [ ] For All Except
INSTRUCTION: To withhold authority to vote for any individual nominee, mark "For
All Except" and write that nominee's name in the space provided below.
- --------------------------------------------------------------------------------
ITEM 2: APPROVAL OF CHANGE IN THE CORPORATE NAME:
Approval of change in Corporation's name from Mainstreet BankGroup, Incorporated
to Mainstreet Financial Corporation.
[ ] For [ ] Against [ ] Abstain
<PAGE>
ITEM 3: In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the Meeting.
[ ] For [ ] Against [ ] Abstain
PLEASE CHECK BOX IF YOU PLAN TO ATTEND THE MEETING. [ ]
This Proxy when properly executed will be voted in the manner directed
herein by the undersigned stockholder(s). If no direction is made, this Proxy
will be voted FOR Items 1 and 2.
Please sign exactly as your name appears hereon. Joint owners should
each sign. When signing as Executor, Administrator, Attorney, Trustee or
Guardian, please give full title as such. If a corporation, please sign in full
corporate name by President, or other authorized officer, giving full title. If
a partnership, please sign in partnership name by an authorized person, giving
full title.
Please be sure to sign and date
this Proxy in the box below.
- -------------------
Date
- ----------------------------------------------------
Stockholder sign above
- ----------------------------------------------------
Co-holder (if any) sign above
Detach above card, sign, date and mail in postage paid envelope provided.
MAINSTREET BANKGROUP INCORPORATED
c/o Registrar and Transfer Company, 10 Commerce Drive, Cranford, NJ 07016
PLEASE ACT PROMPTLY
SIGN, DATE & MAIL YOUR PROXY CARD TODAY
