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:
( ) 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
UNION BANKSHARES CORPORATION
(Name of Registrant as Specified in its Charter)
UNION BANKSHARES CORPORATION
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
(X) No fee required
( ) Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
( ) Fee paid previously with preliminary materials.
( ) Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule, or Registration Statement No.:
3) Filing Party:
4) Date Filed:
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UNION BANKSHARES CORPORATION
211 N. MAIN STREET
POST OFFICE BOX 446
BOWLING GREEN, VIRGINIA 22427-0446
804/633-5031
March 11, 1997
Dear Fellow Shareholder:
You are cordially invited to attend the Annual Meeting of
Shareholders of Union Bankshares Corporation. The meeting will be held on
Tuesday, April 8, 1997 at 7:00 p.m. at the Richmond County Elementary School
located on Maple Street in Warsaw, Virginia.
The primary business of the meeting will be the election of
directors. We also will report to you on the condition and performance of the
Company and its subsidiaries, and you will have ample opportunity to question
management on matters that affect the interests of all shareholders. The meeting
will be followed by a reception that we hope you will be able to attend.
We hope you will be with us on April 8th. Whether you plan to attend
or not, please complete, sign, date and return the enclosed proxy card as soon
as possible in the postage-paid envelope provided.
We appreciate your continued loyalty and support.
Sincerely,
G. William Beale
PRESIDENT
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UNION BANKSHARES CORPORATION
- -------------------------------------------------------------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
- -------------------------------------------------------------------------------
TO BE HELD ON APRIL 8, 1997
The Annual Meeting of Shareholders of Union Bankshares Corporation
will be held at the Richmond County Elementary School located on Maple Street in
Warsaw, Virginia at 7:00 p.m. on April 8, 1997 for the following purposes:
1. To elect three directors to serve for a three year term;
and
2. To transact such other business as may properly come
before the meeting or any adjournments or postponements
thereof.
The Board of Directors has fixed February 26, 1997, as the record
date for determination of shareholders entitled to notice of and to vote at the
meeting and any adjournments thereof.
By Order of the Board of Directors
D. Anthony Peay
VICE PRESIDENT AND CORPORATE SECRETARY
March 11, 1997
PLEASE PROMPTLY COMPLETE AND RETURN THE ENCLOSED PROXY WHETHER OR
NOT YOU PLAN TO ATTEND THE ANNUAL MEETING. IF YOU ATTEND THE MEETING IN PERSON,
YOU MAY WITHDRAW YOUR PROXY AND VOTE YOUR OWN SHARES.
211 N. Main Street, P. O. Box 446, Bowling Green, Virginia 22427
<PAGE>
UNION BANKSHARES CORPORATION
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
APRIL 8, 1997
GENERAL
The enclosed proxy is solicited by the Board of Directors of Union
Bankshares Corporation (the "Company") for the Annual Meeting of Shareholders
(the "Annual Meeting") of the Company to be held on Tuesday, April 8, 1997, at
the time and place and for the purposes set forth in the accompanying Notice of
Annual Meeting of Shareholders or any adjournment thereof. The approximate
mailing date of this Proxy Statement and accompanying proxy is March 11, 1997.
REVOCATION AND VOTING OF PROXIES
Execution of a proxy will not affect a shareholder's right to attend
the Annual Meeting and to vote in person. Any shareholder who has executed and
returned a proxy may revoke it by attending the Annual Meeting and requesting to
vote in person. A shareholder 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 OF SHAREHOLDERS
Only shareholders of record at the close of business on February 26,
1997, are entitled to notice of and to vote at the Annual Meeting or any
adjournment thereof. As of the close of business on the record date, 3,565,415
shares of Company Common Stock were outstanding and entitled to vote at the
Annual Meeting. The Company has no other class of stock outstanding. A majority
of the votes entitled to be cast, represented in person or by proxy, will
constitute a quorum for the transaction of business.
Each share of Company Common Stock entitles the record holder
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.
SOLICITATION OF PROXIES
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 or
by telephone, or special letter by officers and employees of the Company or its
subsidiaries, acting without compensation other than regular compensation.
ELECTION OF DIRECTORS - PROPOSAL ONE
DIRECTORS
The Company's Board is divided into three classes (I, II and III).
The term of office for Class I directors will expire at the Annual Meeting. The
<PAGE>
three persons named immediately below, each of whom currently serves as a
director of the Company, will be nominated to serve as Class I directors. If
elected, the three nominees will serve until the Annual Meeting of Shareholders
held in 2000. 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 SHAREHOLDERS VOTE FOR THE
THREE NOMINEES SET FORTH BELOW. The three nominees receiving the greatest number
of affirmative votes cast at the Annual Meeting will be elected.
<TABLE>
<CAPTION>
SERVED AS PRINCIPAL OCCUPATION
NAME (AGE) DIRECTOR SINCE (1) DURING PAST FIVE YEARS
---------- ------------------ ----------------------
<S> <C>
1997 CLASS (NOMINEES):
Homer L. Hite (57) 1974 Senior Vice President of the Company since 1996
and President and Chief Executive Officer of
King George State Bank since 1974.
M. Raymond Piland, III (63) 1980 President, Williamsburg Millwork Corporation,
Bowling Green, Virginia.
E. Peyton Motley (52) 1978 Executive Vice President of the Company and
President of Northern Neck State Bank.
1998 CLASS (DIRECTORS SERVING UNTIL THE 1998 ANNUAL MEETING):
Ronald L. Hicks (50) 1985 Attorney, Of Counsel to Jarrell, Hicks and
Sasser, Spotsylvania County, Virginia; Chairman
of the Board of Union Bank & Trust Company since
1987.
W. Tayloe Murphy, Jr. (63) 1966 Attorney, Smith, Murphy and Taliaferro, Warsaw,
Virginia; delegate in the House of
Representatives of the Virginia General
Assembly.
A. D. Whittaker (57) 1981 President, A. D. Whittaker, Inc., a commercial
construction firm in Hanover County, Virginia.
1999 CLASS (DIRECTORS SERVING UNTIL THE 1999 ANNUAL MEETING):
G. William Beale (47) 1991 President and Chief Executive Officer of the
Company since its inception; President of Union
Bank & Trust Company since 1991.
2
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<CAPTION>
SERVED AS PRINCIPAL OCCUPATION
NAME (AGE) DIRECTOR SINCE (1) DURING PAST FIVE YEARS
---------- ------------------ ----------------------
<S> <C>
1999 CLASS (DIRECTORS SERVING UNTIL THE 1999 ANNUAL MEETING) (CONT'D):
B. Walton Mahon (68) 1965 Chairman of the Board of the Company; formerly
served as President of Union Bank & Trust
Company from 1965 to 1991
Charles H. Ryland (83) 1940 Vice Chairman of the Board of the Company;
Attorney, Warsaw, Virginia.
</TABLE>
(1) Each director has served on the Board of Directors of the Company since
the consummation of the affiliation of Union Bancorp, Inc. and Northern
Neck Bankshares Corporation in July 1993 which created the Company, with
the exception of Mr. Hite who was appointed to the Board of Directors upon
consummation of the affiliation of King George State Bank with the
Company. The date above refers to the year in which Messrs. Beale, Hicks,
Mahon, Piland, and Whittaker were first elected to the Board of Directors
of Union Bank & Trust Company, Messrs. Motley, Murphy and Ryland were
first elected to the Board of Directors of Northern Neck State Bank, and
Mr. Hite was first elected to the Board of Directors of King George State
Bank.
BOARD OF DIRECTORS AND COMMITTEES
There were five meetings of the Board of Directors in 1996. Each
director attended greater than 75% of the aggregate number of meetings of the
Board of Directors and its committees of which he was a member in 1996.
There are no family relationships among any of the directors or
among any directors and any officer. None of the directors serve as directors of
other publicly-held companies.
The Board of Directors has, among others, a standing Executive
Committee, Audit Committee and Compensation Committee.
EXECUTIVE COMMITTEE. The Executive Committee is composed of G.
William Beale, E. Peyton Motley, Walton Mahon and Charles H. Ryland. The
Committee, which is subject to the supervision and control of the Board of
Directors, has been delegated substantially all of the powers of the Board of
Directors to act between meetings of the Board, except for certain matters
reserved to the Board by law. In 1996, there were no meetings of the Executive
Committee.
AUDIT COMMITTEE. The Audit Committee is composed of A. D. Whittaker
and W. Tayloe Murphy, Jr. The functions of the Committee are to recommend
selection of independent certified public accountants, to approve the scope of
the independent accountants' audit, to review the reports of examination by the
regulatory agencies, the independent accountants and the internal auditor and
to convey their findings to the Board of Directors. The Audit Committee met
once in 1996.
COMPENSATION COMMITTEE. The Compensation Committee consists of
Walton Mahon and Charles H. Ryland. The function of this committee is to
recommend the compensation to be paid to the executive officers of the
Company. It also administers all incentive and stock option plans for the
benefit of such officers and directors eligible to participate in such plans.
The Compensation Committee met once in 1996.
3
<PAGE>
DIRECTORS' FEES
As compensation for their services, each member of the Board of
Directors of the Company receives $375 for each meeting of the Board attended.
In addition, standing committee members receive $200 for each committee meeting
attended. Board members who are also officers do not receive any additional
compensation above their regular salary for any Board or committee meeting.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Pursuant to Section 16(a) of the Securities Exchange Act of 1934, as
amended (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 the Company's equity
securities. 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 the fiscal year ended December 31, 1996.
OWNERSHIP OF COMPANY COMMON STOCK
The following table sets forth, as of February 28, 1997, 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.
As of February 28, 1997, no shareholder of the Company beneficially
owned 5% or more of Company Common Stock.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF BENEFICIAL PERCENT
NAME OWNERSHIP (1) OF CLASS
---------- ---------------------------------- ----------
<S> <C>
G. William Beale..................................................... 5,303 (3)(4) (2)
Ronald L. Hicks...................................................... 6,790 (3) (2)
Homer L. Hite........................................................ 12,238 (2)
B. Walton Mahon...................................................... 50,890 (3) 1.4%
E. Peyton Motley..................................................... 32,638 (3)(4) (2)
W. Tayloe Murphy, Jr................................................. 127,393 (3) 3.6%
M. Raymond Piland, III............................................... 5,040 (3) (2)
Charles H. Ryland.................................................... 132,499 (3) 3.7%
A. D. Whittaker...................................................... 25,158 (3) (2)
All directors and executive officers as a group...................... 398,209 11.1%
</TABLE>
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(1) For purposes of this table, beneficial ownership has been determined in
accordance with the provisions of Rule 13d-3 of the Securities Exchange
Act of 1934 under which, in general, a person is deemed to be the
beneficial owner of a security if he 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) Represents less than 1% of Company Common Stock.
(3) Includes shares held by affiliated corporations, close relatives and
children, and shares held jointly with spouses or as custodians or
trustees, as follows: Mr. Beale, 790 shares; Mr. Hicks, 1,190 shares; Mr.
Mahon, 8,700 shares; Mr. Motley, 4,884 shares; Mr. Murphy, 122,288 shares;
Mr. Piland, 1,440 shares; Mr. Ryland, 54,999 shares; and Mr. Whittaker,
14,509 shares.
(4) Includes shares that may be acquired pursuant to currently exercisable
stock options granted under the Company's Stock Option Plan as
follows: Mr. Beale, 4,000 shares; and Mr. Motley, 12,600 shares.
EXECUTIVE COMPENSATION
During 1996, the only executive officers of the Company who received
annual compensation in excess of $100,000 were G. William Beale, President and
Chief Executive Officer, E. Peyton Motley, Executive Vice President, and Homer
L. Hite, Senior Vice President. The following table shows the cash compensation
paid to Messrs. Beale, Motley and Hite during 1996, 1995 and 1994.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION(2) SECURITIES
NAME AND ----------------------------- UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS (3) COMPENSATION(4)
------------------ ---- ------ ----- ----------- ---------------
<S> <C>
G. William Beale (1) 1996 $ 130,000 $ 3,651 -- $ 19,138
President/Chief 1995 100,000 4,677 10,000 17,967
Executive Officer 1994 91,000 2,335 -- 16,686
E. Peyton Motley (1) 1996 $ 110,000 $ 6,250 -- $ 6,250
Executive Vice 1995 95,000 4,722 -- 4,722
President 1994 89,250 3,553 -- 3,553
Homer L. Hite (1) 1996 $ 95,492 $ 14,488 -- $ 3,600
Senior Vice 1995 90,258 -- -- 3,600
President 1994 89,804 -- -- 3,450
- ------------------
</TABLE>
(1) Messrs. Beale and Motley have served as President and Chief Executive
Officer and Executive Vice President, respectively, of the Company
since inception in July 1993. Mr. Hite has served as Senior Vice
President since September 1996.
(2) The amount of compensation in the form of perquisites or other
personal did not exceed the lesser of $50,000 or 10% of the total annual
salary and bonus reported in each year for Messrs. Beale, Motley and Hite.
(3) While the Company's stock option plan permits the granting of restricted
stock awards, no such awards have been made. This plan is the Company's
only stock-based long term compensation plan currently in effect.
(4) Includes for 1996: (i) $15,860 accrued on behalf of Mr. Beale under the
Profit Sharing and Thrift Plan and the Employee Stock Ownership Plan of
Union Bank & Trust Company; (ii) $3,278 accrued on behalf of Mr. Beale
under a deferred compensation arrangement; (iii) $6,250 accrued on behalf
of Mr. Motley under the Profit Sharing and Thrift Plan; and (iv) $3,000
accrued on behalf of Mr. Hite under a
5
<PAGE>
deferred compensation agreement. See the discussion below in the section
captioned "Employee Benefit Plans" or a description of the Deferred
Compensation Plan and the Employee Stock Ownership Plan.
STOCK OPTION GRANTS IN 1996
The Company's stock option plan provides for the granting of both
incentive and non-qualified stock options and restricted stock awards to
executive officers and key employees of the Company and its subsidiaries. No
restricted stock awards have been granted under the Plan.
No stock options were granted during 1996 to Messrs. Beale, Motley
or Hite.
STOCK OPTION EXERCISES IN 1996 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 1996 by Messrs. Beale or Motley.
<TABLE>
<CAPTION>
NUMBER OF VALUE OF
SHARES UNDERLYING UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY
SHARES ACQUIRED VALUE OPTIONS AT OPTIONS AT
NAME ON EXERCISE REALIZED DECEMBER 31, 1996 DECEMBER 31, 1996 (1)
---- ----------- -------- ----------------- ---------------------
<S> <C>
G. William Beale -- -- 10,000 $ 30,000
E. Peyton Motley -- -- 12,600 221,004
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</TABLE>
(1) Calculated by subtracting the exercise price from the fair market value of
the stock at December 31, 1996
EMPLOYEE BENEFIT PLANS
The Company and its three banking subsidiaries, Union Bank & Trust
Company ("Union Bank"), Northern Neck State Bank ("Northern Neck Bank") and King
George State Bank ("King George Bank"), maintain several tax qualified and
non-qualified employee benefit plans for employees of the Company and the three
banks, which benefit plans are described below.
THE COMPANY'S PLANS
RETIREMENT PLAN. The Company's noncontributory defined benefit
retirement plan (the "Retirement Plan") covers all full time employees and any
part-time employees working greater than 1,000 hours annually. Employees who are
21 years of age and have completed one year of service are eligible to
participate. The normal retirement age is 65, but participants may elect early
retirement at 55 and disability retirement after 10 years of service at reduced
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 Retirement 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.
6
<PAGE>
<TABLE>
<CAPTION>
YEARS OF SERVICE
AVERAGE ----------------------------------------------------------------------------------------------
COMPENSATION 15 20 25 30 35
------------ -- -- -- -- --
<S> <C>
$ 25,000 $ 4,875 $ 6,500 $ 8,125 $ 9,750 $ 11,375
50,000 12,270 16,360 20,450 24,540 28,630
75,000 19,958 26,610 33,263 39,915 46,568
100,000 27,645 36,860 46,075 55,290 64,505
125,000 35,333 47,110 58,888 70,665 82,443
150,000 43,020 57,360 71,700 86,040 100,380
</TABLE>
The remuneration covered by the Retirement Plan is an employee's
"final average earnings" which, under the terms of the Retirement 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 five calendar years prior to his or her date of
retirement, termination, disability or death. No offset for primary social
security benefits received by a pensioner is allowed with respect to the
benefits paid under the Retirement Plan.
Based on current compensation and assuming retirement at the normal
retirement age of 65, it is estimated that the annual retirement benefit for
Messrs. Beale and Motley will be $57,088 and $56,078, respectively. The final
average earnings and the respective years of service as of October 1, 1996, for
Mr. Beale were $98,725 and seven years, respectively, and for Mr. Motley were
$96,993 and twenty-eight years, respectively. For 1996 and 1995, the Company
contributed $248,330 and $107,201, respectively, to the Retirement Plan.
PROFIT SHARING THRIFT PLAN. The Company has adopted a defined
contribution plan, established in accordance with Section 401(k) of the Internal
Revenue Code, as amended (the "401(k) Plan"). The 401(k) Plan, which became
effective on January 1, 1993, is sponsored and administered by the Virginia
Bankers Association. Employees of the Company are eligible to participate after
one year of employment. The 401(k) Plan provides for employee pre-tax unmatched
contributions, not to exceed 15% of the employee's compensation. The Company is
not required to, but may, make contributions to the 401(k) Plan. Employer
contributions, if any, vest 20% after three years of service and increase by 20%
for each of the next four years of service. During 1996, $8,247 was accrued on
behalf of Mr. Beale and $6,250 on behalf of Mr. Motley under this plan.
UNION BANK'S PLANS
PROFIT SHARING PLAN. Union Bank also has contributed to an
employees' profit sharing plan which covers all full time employees who are over
21 years of age and have completed 6 months of service. Contributions are made
annually at the discretion of the Board of Directors of Union Bank. The vesting
7
<PAGE>
under this plan is 20% after 3 years of service, 40% after 4 years, 60% after 5
years, 80% after 6 years, and 100% after 7 years of service. Effective July 1,
1996, the funds held in this Plan were transferred to the Company's Profit
Sharing Thrift Plan, and it was then terminated.
EMPLOYEE STOCK OWNERSHIP PLAN. Union Bank also offers a
Non-Contributory Employee Stock Ownership Plan and Trust (the "Union Bank
ESOP"), under which all salaried employees (the "Participants") who are at least
18 years of age and who have been employed by the Company, Union Bank or Union
Investment Securities, Inc., for at least 6 months are eligible to participate.
Allocations of contributions under the Union Bank ESOP are discretionary at the
election of the Board of Directors, and Participants are not permitted to make
contributions to the Union Bank ESOP. Contributions to a Participant's account
are based on proportionate "covered compensation" of the employee (generally
total pay as an eligible employee and while a participant). These contributions
vest 20% after 3 years, 40% after 4 years, 60% after 5 years, 80% after 6 years
and are fully vested after 7 years. Service before age 18 does not count toward
vesting. During 1996, $7,613 accrued under the ESOP for the benefit of Mr.
Beale.
Distributions under the Union Bank ESOP are made in Common Stock and
any cash allocated to the Participant's account in a lump sum payment.
In-service withdrawals and cash dividend withdrawals are permitted in certain
cases from vested account balances.
DEFERRED COMPENSATION PLAN. Union Bank offers its directors the
option to participate in a deferred supplemental compensation program. All
directors have entered into agreements with Union Bank to participate in the
program. To participate in this plan, a director must elect to forego the
directors fees that would otherwise be payable to him by Union Bank for a period
of twelve consecutive months beginning immediately after his election to
participate. After the twelve month period runs, the director again begins to
receive the full amount of directors fees payable by Union Bank.
While its obligation under each agreement represents an unsecured,
general obligation of Union Bank, a substantial portion of the benefits payable
under the agreements is funded by key-person life insurance owned by Union Bank
on each director. The fees deferred by each participating director are applied
towards the first year's premium expense of a life insurance policy and
thereafter Union Bank pays the premiums for four years, at which time the
dividends paid by the policy are sufficient to cover the premium expense. Each
agreement provides that the director will receive from Union Bank a designated
fixed amount, payable in equal monthly installments over a period of ten years
beginning upon his retirement at age 65. No interest is paid on the
installments. The amount of each director's monthly benefit is actuarially
determined based on, among other factors, the age and health condition of each
director at the time he elects to participate in the program. In the event a
director retires but dies before receiving all the installments due under the
agreement, Union Bank has the option of making one lump sum payment (based on
the discounted present value of the remaining installment obligation) to the
director's designated beneficiary or his estate or continuing the balance of the
installment payments in accordance with the original payment plan. Each
agreement further provides that a reduced fixed amount is payable in the event
of a director's death prior to reaching retirement age.
The agreement with Mr. Beale calls for Union Bank to pay him $26,500
per year for ten years upon his retirement at age 65. The agreements with
certain other directors calls for Union Bank to pay an annual installment in the
following amounts upon their retirement, as follows: Mr. Piland, $13,004; Mr.
Hicks, $55,364; Mr. Whittaker, $16,345; and Mr. Mahon, $5,887. As of December
31, 1996, Union Bank had accrued approximately $283,000 to cover its obligations
under all these agreements.
8
<PAGE>
NORTHERN NECK BANK'S PLANS
SPLIT-DOLLAR INSURANCE PROGRAM. In addition to a group life
insurance plan that is available to all employees, Northern Neck Bank offers all
officers the opportunity to participate in a split-dollar insurance program. The
insurance benefit under this program is equal to four times an officer's annual
salary in effect at the time he becomes eligible to participate in the program.
While Northern Neck Bank covers 80% of the annual premium expense, each
participant is obligated to reimburse, without interest, Northern Neck Bank for
the aggregate amount advanced on his behalf during his participation in the
program. Northern Neck Bank recovers its cost from each participant at
retirement or from the proceeds of the policy if the participant dies before
reaching retirement age.
KING GEORGE STATE BANK PLANS
PROFIT SHARING THRIFT PLAN. King George Bank has adopted a defined
contribution plan, established in accordance with Section 401(k) of the Internal
Revenue Code, as amended (the "401(k) Plan"). The 401(k) Plan, which became
effective on June 1, 1994, is sponsored and administered by the Virginia
Bankers' Association. Employees of King George Bank are eligible to participate
after one year of employment. The 401(k) Plan provides for employee pre-tax
unmatched contributions, not to exceed 6% of the employee's compensation. King
George Bank is not required to, but may, make contributions to the 401(k) Plan.
Employer contributions, if any, vest 20% after three years of service and
increase by 20% for each of the next four years of service.
DEFERRED COMPENSATION PLAN. King George Bank maintains a voluntary
deferred compensation program which permits eligible directors and officers to
defer receipt of a portion of their directors' fees. The Bank has purchased life
insurance on all of the participants in amounts that, in the aggregate,
actuarially fund its future liabilities under this program, and it is the owner
and sole beneficiary of all such insurance. The program has been designed so
that, if assumptions as to mortality experience, policy dividends, tax effects,
and other factors are realized, the compensation deferred by a participant will
cover all premium payments and benefit payments, plus a factor for the use of
funds of the Bank.
While the insurance policies were purchased as a means of funding
the deferred compensation liability created under this plan, there exists no
obligation to use any insurance funds from policy loans or death proceeds to
curtail the deferred compensation liability. Under the terms of the directors'
benefit plan, a participant, or his beneficiary, will receive upon retirement a
monthly retirement payment for life, payable for a minimum of 15 years. The plan
also provides for a reduced payment to a participant's beneficiary in the event
that the participant dies prior to retirement, payable for a period of 15 years
from the date of death. A participant's retirement date is considered to be the
later of the date a participant turns age 65 or completes 10 years of plan
participation. The amount calls for King George Bank to pay Mr. Hite $50,227 per
year for life with a minimum of 15 years upon his retirement at age 65.
EMPLOYMENT ARRANGEMENTS
The Company has employment agreements with Messrs. Beale and Motley
that become effective upon a change in control of the Company. Under the terms
of these agreements, the Company or its successor agrees to continue these
officers in its employ for a term of three years after the date of a change in
control. During the contract term, these officers will retain commensurate
authority and responsibilities and compensation benefits. They will receive base
salaries at least equal to the immediate prior year and bonuses at least equal
to the annual bonus paid prior to the change in control. If the officer's
employment is terminated during the three years other than for cause or
disability as defined in the agreement, or if the officer should terminate
employment because a material term of the contract is breached by the Company,
the officer will be entitled to a lump sum payment, in cash, within thirty days
after the date of termination. This lump sum will be equal to 2.9 times the sum
of the officer's base salary, annual bonus, and equivalent benefits.
The Company also has an employment agreement with Mr. Hite which the
Company assumed in connection with the King George affiliation, that becomes
effective upon a change in control of the Company. Under the terms of this
annual agreement, the Company or its successor agrees to continue Mr. Hite in
9
<PAGE>
its employ for the remaining term of the one year agreement or 90 days,
whichever is greater, after the date of a change in control. During the contract
term, Mr. Hite will retain commensurate authority and responsibilities and
compensation benefits. He will receive a base salary at least equal to the
immediate prior year and a bonus. If the Mr. Hite's employment is terminated
other than for cause or disability as defined in the agreement, or if he should
terminate employment because a material term of the contract is breached by the
Company, Mr. Hite will be entitled to a lump sum payment, in cash, within thirty
days after the date of termination. This lump sum will be equal to twice Mr.
Hite's base salary.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Compensation for the President and Executive Vice President of the
Company is determined by the Board of Directors, excluding the President,
Executive Vice President, and Senior Vice President based on the recommendation
of the Compensation Committee of the Board. The Compensation Committee bases its
recommendation on consideration of various factors, including the financial
performance of the Company, the individual performance of the President and
Executive Vice President and the compensation paid to persons in comparable
positions within the industry.
Compensation for executive officers other than the President,
Executive Vice President and Senior Vice President is determined by the Board of
Directors based on the recommendation of the President and Executive Vice
President. Compensation levels for all executive officers are determined based
on the performance of the Company, performance judgments as to the past and
future contributions of the individual officers and compensation paid to
executives in similar positions in the industry.
The Board and the Compensation Committee use a subjective approach
to the determination of compensation based on the factors noted above. They do
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.
Members of the Compensation Committee
B. Walton Mahon
Charles H. Ryland
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1996 and up to the present time, there were transactions
between Union Bank and Northern Neck State Bank and the members of the
Compensation Committee (Messrs. Mahon and Ryland), or their associates, all
consisting of extensions of credit by either Bank in the ordinary course of its
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.
Until his retirement on March 31, 1991, Mr. Mahon served as
President and Chief Executive Officer of Union Bank.
10
<PAGE>
SHAREHOLDER RETURN
The Company is subject to the rules of the Securities and Exchange
Commission that require all public companies to present a graph of total
investment return in their annual proxy statements. The graph below compares the
yearly percentage change in the Company's cumulative total shareholder return
with the cumulative total return of the NASDAQ Stock Market Index and of the
NASDAQ National Market System ("NASDAQ/NMS") Bank Index, assuming that
investments of $100 were made on December 31, 1991, and that dividends were
reinvested.
<TABLE>
<CAPTION>
1991 1992 1993 1994 1995 1996
---------- --------- ---- ---- ---- ----
<S> <C>
Union Bankshares Performance Index 100 104.02 131.48 138.41 152.37 150.41
NASDAQ Stock Market Index 100 116.38 133.59 130.59 184.67 227.16
NASDAQ/NMS Bank Index 100 137.19 143.89 137.46 199.52 255.15
</TABLE>
The comparative indices used in the performance graph represent
other NASDAQ listed companies and banks. The Company was first listed on NASDAQ
in October 1993. While the Company's total return over this period has lagged
somewhat behind these indices, the Company has, according to other measurements,
outperformed its bank holding company peer group since becoming a holding
company in 1992. A review of certain performance measures for the period from
1993 to September 30, 1996 for Peer Group Holding Companies within the same
asset range as the Company indicates that the Company has performed well. A
comparison of selected annual performance measurements for the Company (UBSH)
and the Peer Group Holding Companies follows:
11
<PAGE>
<TABLE>
<CAPTION>
9/30/96 12/31/95 12/31/94
--------------------------------- --------------------------------- ---------------------------
UBSH Peer UBSH Peer UBSH Peer
<S> <C>
Return on average assets 1.57 % 1.15 % 1.45 % 1.13 % 1.62 1.08
Net interest income 4.94 4.63 4.92 4.76 5.02 4.74
Equity capital to assets 10.58 8.95 10.54 9.15 10.43 8.66
Cash dividends to net income 17.01 (1) 25.61 19.65(1) 22.11 27.00 22.18
</TABLE>
(1) Does not reflect fourth quarter semi-annual dividend which increased annual
dividend ratio to 30.62%.
INTEREST OF DIRECTORS AND OFFICERS IN CERTAIN TRANSACTIONS
Certain directors and officers of the Company, Union Bank, Northern
Neck Bank and King George Bank and members of their immediate families, and
corporations, partnerships and other entities with which such persons are
associated are customers of Union Bank, Northern Neck Bank and King George Bank.
As such, these persons engaged in transactions with the Banks in the ordinary
course of business during 1996, and will have additional transactions with the
Banks in the future. All loans extended and commitments to lend by the Banks to
such persons are 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 unaffiliated persons and do not involve
more than the normal risk of collectibility or present other unfavorable
features.
Union Bank has engaged the law firm of Jarrell, Hicks and Sasser, of
which Mr. Hicks is a principal, to perform certain legal services for Union
Bank. Northern Neck Bank has engaged Mr. Ryland to perform certain legal
services for Northern Neck Bank.
SHAREHOLDER PROPOSALS
In order for a shareholder proposal to be considered for possible
inclusion in the 1997 Proxy Statement, it must be received by the Company's
Corporate Secretary, D. Anthony Peay, Union Bankshares Corporation, 211 N.
Main Street, P. 0. Box 446, Bowling Green, Virginia 22427 on or before November
1, 1997.
ANNUAL REPORT ON FORM 10-K
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR 1996,
EXCLUDING EXHIBITS, TO BE FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
PRIOR TO MARCH 31, 1997, CAN BE OBTAINED WITHOUT CHARGE BY WRITING TO D. ANTHONY
PEAY, VICE PRESIDENT AND CORPORATE SECRETARY, UNION BANKSHARES CORPORATION, P.
O. BOX 446, BOWLING GREEN, VIRGINIA 22427.
12
<PAGE>
PROXY
UNION BANKSHARES CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints G. William Beale, B. Walton Mahon,
and Charles H. Ryland, jointly and severally, proxies, with full power to act
alone and with full power of substitution, to represent the undersigned and vote
all shares of the Company standing in the name of the undersigned at the Annual
Meeting of Shareholders of Union Bankshares Corporation to be held on Tuesday,
April 8, 1997 at 7:00 p.m. at the Richmond County Elementary School, Warsaw,
Virginia, or any adjournment thereof, on each of the following matters:
1. To elect three Class I directors to serve until the Annual Meeting of
Shareholders in 2000.
[ ] FOR all Nominees listed below [ ] WITHHOLD AUTHORITY TO VOTE
FOR THOSE INDICATED BELOW
Homer L. Hite E. Peyton Motley M. Raymond Piland, III
NOTE: You may line through the name of any individual nominee for
whom you wish to withhold your vote.
2. The transaction of any other business which may properly come
before the Meeting. Management at present knows of no other
business to be presented at the Meeting.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER
DIRECTED BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY
WILL BE VOTED FOR EACH PROPOSAL.
When signing as attorney, executor, administrator, trustee or
guardian, please give full title. If more than one fiduciary, all should sign.
All joint owners MUST sign.
Date: ___________, 1997 _____________________________________
Signature
-------------------------------------
Signature if held jointly
The Meeting will be followed by a reception. Please indicate below
whether you will be joining us for the reception.
_____ I plan to attend _____ I do not plan to attend
