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)
Payment of Filing Fee (Check the appropriate box):
(X) No fee required
( ) Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
( ) Fee paid previously with preliminary materials.
( ) Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule, or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
UNION BANKSHARES CORPORATION
211 N. MAIN STREET
POST OFFICE BOX 446
BOWLING GREEN, VIRGINIA 22427-0446
804/633-5031
March 15, 1999
Dear Fellow Shareholders:
You are cordially invited to attend the Annual Meeting of
Shareholders of Union Bankshares Corporation. The meeting will be held on
Tuesday, April 20, 1999 at 6:30 p.m. at the Caroline County High School located
near the intersection of Route 676 and Highway 207, approximately 5 miles west
of Bowling Green, 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 20. 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,
/s/ G. William Beale
----------------------
G. William Beale
President
<PAGE>
UNION BANKSHARES CORPORATION
- --------------------------------------------------------------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
- --------------------------------------------------------------------------------
To be Held on April 20, 1999
The Annual Meeting of Shareholders of Union Bankshares Corporation
will be held at the Caroline County High School located near the intersection of
Route 676 and Highway 207, approximately 5 miles west of Bowling Green,
Virginia, at 6:30 p.m. on April 20, 1999 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 March 1, 1999, 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 15, 1999
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 20, 1999
GENERAL
The enclosed proxy is solicited by the Board of Directors of Union
Bankshares Corporation (the "Company") for the Annual Meeting of Shareholders of
the Company to be held on Tuesday, April 20, 1999, 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 15, 1999.
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 March 1,
1999, are entitled to notice of and to vote at the Annual Meeting or any
adjournment thereof. As of the close of business on March 1, 1999, 7,478,994
shares of the Company's 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 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
<PAGE>
Directors
The Company's Board is divided into three classes (I, II and III).
The term of office for Class III directors will expire at the Annual Meeting.
The three persons named immediately below, each of whom currently serves as a
director of the Company, will be nominated to serve as Class III directors. If
elected, the three nominees will serve until the Annual Meeting of Shareholders
held in 2002. 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> <C> <C>
1999 Class (Nominees):
G. William Beale (49) 1990 President and Chief Executive Officer of the Company since its
inception; President of Union Bank & Trust Company since 1991.
B. Walton Mahon (70) 1965 Investor; Formerly served as Chairman of the Board of the
Company from 1993 to 1998 and as President of Union Bank &
Trust Company from 1965 to 1991.
Charles H. Ryland (85) 1940 Attorney, Warsaw, Virginia; Vice Chairman of the Board of the
Company.
2000 Class (Directors Serving Until the 2000 Annual Meeting):
M. Raymond Piland, III (65) 1980 President, Williamsburg Millwork Corporation, Bowling Green,
Virginia.
E. Peyton Motley (54) 1978 Executive Vice President of the Company and President of
Northern Neck State Bank.
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
2001 Class (Directors Serving Until the 2001 Annual Meeting):
Ronald L. Hicks (52) 1985 Chairman of the Board of the Company since 1998; 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. (65) 1966 Attorney, Smith, Murphy and Taliaferro, Warsaw, Virginia;
delegate in the House of Delegates of the Virginia General
Assembly.
A. D. Whittaker (59) 1981 President, A. D. Whittaker, Inc., a commercial construction
firm in Hanover County, 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. 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, and Messrs. Motley, Murphy and Ryland were
first elected to the Board of Directors of Northern Neck State Bank.
Board of Directors and Committees
There were seven meetings of the Board of Directors in 1998. 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 1998.
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, Ronald L. Hicks 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 1998, 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 twice
in 1998.
Compensation Committee. The Compensation Committee consists of Ronald
L. Hicks 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 twice in 1998.
Directors' Fees
As compensation for their services, each member of the Board of
Directors of the Company receives $400 for each meeting of the Board attended.
In addition, standing committee members receive $200 for each committee meeting
attended. Additionally, an annual retainer of 100 shares of the Company's common
stock is paid to each director attending 75% of all Board meetings. Board
members who are also officers do not receive any additional compensation above
their regular salary for any Board or committee meeting.
<PAGE>
Section 16(a) Beneficial Ownership Reporting Compliance
Pursuant to Section 16(a) of the Securities Exchange Act of 1934,
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 1998 with the exception of
Mr. Ryland for whom, on one occasion with respect to one transaction, a report
was not timely filed.
OWNERSHIP OF COMPANY COMMON STOCK
The following table sets forth, as of March 1, 1999, certain
information with respect to the beneficial ownership of the Company's 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 March 1, 1999, no shareholder of the Company beneficially owned
5% or more of the Company's common stock.
<TABLE>
<CAPTION>
Amount and Nature of Percent
Name Beneficial Ownership (1) of Class
---- ------------------------ --------
<S> <C> <C>
G. William Beale........................................... 22,238 (3)(4) (2)
Ronald L. Hicks............................................ 17,534 (3) (2)
B. Walton Mahon............................................ 101,465 (3) 1.34%
E. Peyton Motley........................................... 61,053 (3)(4) (2)
W. Tayloe Murphy, Jr....................................... 171,332 (3) 2.27%
M. Raymond Piland, III..................................... 10,280 (3) (2)
Charles H. Ryland.......................................... 268,048 (3) 3.55%
A. D. Whittaker............................................ 47,066 (3) (2)
All directors and executive officers as a group............ 702,596 9.3%
</TABLE>
- ------------------
(1) For purposes of this table, beneficial ownership has been determined in
accordance with the provisions of Rule 13d-3 of the Securities Exchange
Act of 1934 under which, in general, a person is deemed to be the
beneficial owner of a security if he has or shares the power to vote or
direct the voting of the security or the power to dispose of or direct the
disposition of the security, or if he has the right to acquire beneficial
ownership of the security within sixty days.
(2) Represents less than 1% of the Company's 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, 1,901 shares; Mr. Hicks, 4,485 shares;
Mr. Mahon, 21,765 shares; Mr. Motley, 19,940 shares; Mr. Murphy, 77,010
shares; Mr. Piland, 2,880 shares; Mr. Ryland, 116,360 shares; and Mr.
Whittaker, 29,218 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, 18,000 shares; and Mr. Motley, 800 shares.
<PAGE>
EXECUTIVE COMPENSATION
During 1998, 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, who served as Senior Vice President of the Company until his retirement
on December 31, 1998. The following table shows the cash compensation paid to
Messrs. Beale, Motley and Hite during 1998, 1997 and 1996.
Summary Compensation Table
<TABLE>
<CAPTION>
Long-term
Annual Compensation(2 Compensation
Name and ----------------------------------- Securities Underlying All Other
Principal Position Year Salary Bonus Options(3) Compensation(4)
------------------ ---- ------ ----- ------------------- ---------------
<S> <C> <C> <C> <C> <C>
G. William Beale (1) 1998 $ 155,000 $ 2,805 10,000 $ 27,250
President/Chief 1997 135,000 3,561 -- 24,399
Executive Officer 1996 130,000 3,651 -- 19,138
E. Peyton Motley (1) 1998 $ 122,325 $ 5,995 4,000 $ 5,995
Executive Vice 1997 116,600 7,189 -- 7,189
President 1996 110,000 6,250 -- 6,250
Homer L. Hite (1) 1998 $ 99,750 $ 24,034 4,000 $ 25,917
Senior Vice 1997 98,280 18,618 -- 26,546
President 1996 95,492 14,488 -- 3,600
</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 served as Senior Vice President from
September 1996 until his retirement in December 1998.
(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 1998: (i) $23,250 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) $4,000 accrued on behalf of Mr. Beale
under a deferred compensation arrangement; (iii) $5,995 accrued on behalf
of Mr. Motley under the Profit Sharing and Thrift Plan; (iv) $19,932
accrued on behalf of Mr. Hite under a deferred compensation agreement; and
(v) $5,985 accrued on behalf of Mr. Hite under the Profit Sharing and
Thrift Plan. 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.
<PAGE>
Stock Option Grants in 1998
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.
The following table provides certain information concerning stock
options granted during 1998 to Messrs. Beale, Motley and Hite.
<TABLE>
<CAPTION>
Individual Grants
------------------------------------------------------------------------
Percent of
Number of Total
Shares Options Potential
Underlying Granted to Exercise Realizable Value (2)
Options Employees Price per Expiration --------------------
Name Granted (1) in 1998 Share Date 5% 10%
---- ----------- ------- ----- ---- -- ---
<S> <C> <C> <C> <C> <C> <C>
G. William Beale 10,000 20.2% $20.125 1/22/08 $ 83,807 $ 252,655
E. Peyton Motley 4,000 8.1 20.125 1/22/08 33,523 101,462
Homer L. Hite (1) 4,000 8.1 20.125 1/22/08 33,523 101,462
</TABLE>
- -----------------
(1) The stock options were granted on January 22, 1998 and become exercisable
at a rate of 20% per year from the date of grant. As a result of Mr.
Hite's retirement in December 1998 prior to the vesting of any of his
options, Mr. Hite's 4,000 share option grant was forfeited upon his
retirement.
(2) Potential realizable value at the assumed annual rates of stock price
appreciation based on actual option term (10 years) and annual
compounding.
Stock Option Exercises in 1998 and Year-end Option Values
The following table shows certain information with respect to the
number and value of unexercised options at year-end for Messrs. Beale, Motley
and Hite.
<TABLE>
<CAPTION>
Number of Value of
Shares Underlying Unexercised
Unexercised In-the-Money
Options at Options at
Number of December 31, 1998 December 31, 1998 (2)
Shares Acquired Value ------------------------------- ------------------------------
Name on Exercise Realized (1) Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
G. William Beale -- -- 12,000 18,000 $78,000 $52,000
E. Peyton Motley 12,600 $230,202 -- -- -- --
Homer L. Hite -- -- -- -- -- --
</TABLE>
- ----------------
(1) Calculated by subtracting the exercise price from the fair market value of
the stock as of the exercise date.
(2) Calculated by subtracting the exercise price from the fair market value of
the stock at December 31, 1998.
Employee Benefit Plans
The Company and its banking subsidiaries, Union Bank & Trust Company
("Union Bank"), Northern Neck State Bank ("Northern Neck Bank"), King George
State Bank ("King George Bank") and Rappahannock National Bank ("Rappahannock
Bank") maintain several tax qualified and non-qualified employee benefit plans
for employees of the Company and the banks, which benefit plans are described
below.
<PAGE>
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.
<TABLE>
<CAPTION>
Average Years of Service
Compensation ---------------------------------------------------------------------------
------------ 15 20 25 30 35
-- -- -- -- --
<S> <C> <C> <C> <C> <C> <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 $68,612 and $64,354, respectively. The final
average earnings and the respective years of service as of October 1, 1998, for
Mr. Beale were $125,906 and nine years, respectively, and for Mr. Motley were
$111,379 and thirty years, respectively. For 1997, the Company contributed
$156,944 to the Retirement Plan. There was no contribution to the Retirement
Plan for 1998.
Profit Sharing Thrift Plan. The Company has adopted a defined
contribution plan, established in accordance with Section 401(k) of the Internal
Revenue Code (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 1998, $11,625 was accrued on
behalf of Mr. Beale and $5,995 on behalf of Mr. Motley under this plan.
<PAGE>
Union Bank's Plans
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, Union
Mortgage Company, LLC. 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 1998, $11,625
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, 1998, Union Bank had accrued approximately $324,150 to cover its obligations
under all these agreements.
<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
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.
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.
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 and
Executive 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.
<PAGE>
Compensation for executive officers other than the President and
Executive 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
Ronald L. Hicks
Charles H. Ryland
Compensation Committee Interlocks and Insider Participation
During 1998 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. Hicks 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.
<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 ("Nasdaq/NM") Bank Index, assuming that investments of
$100 were made on December 31, 1993, and that dividends were reinvested.
[GRAPH]
<TABLE>
<CAPTION>
1993 1994 1995 1996 1997 1998
---- ----- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Union Bankshares Performance Index 100 105.46 116.47 114.92 199.29 164.39
Nasdaq Stock Market Index 100 97.75 138.26 170.01 208.58 293.21
Nasdaq/NM Bank Index 100 95.53 138.66 177.46 277.86 270.17
</TABLE>
INTEREST OF DIRECTORS AND OFFICERS IN CERTAIN TRANSACTIONS
Certain directors and officers of the Company, Union Bank, Northern
Neck Bank, King George Bank and Rappahannock 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 and Rappahannock Bank. As such, these persons engaged in
transactions with the banks in the ordinary course of business during 1998, 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.
<PAGE>
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. Mr. Whittaker's construction company has built
several branch buildings for Union Bank.
SHAREHOLDER PROPOSALS
In order for a shareholder proposal to be considered for possible
inclusion in the 2000 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 16,
1999.
ANNUAL REPORT ON FORM 10-K
A copy of the Company's Annual Report on Form 10-K for 1998,
excluding exhibits, to be filed with the Securities and Exchange Commission
prior to March 31, 1999, 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.
<PAGE>
PROXY
UNION BANKSHARES CORPORATION
This Proxy is solicited on behalf of the Board of Directors
The undersigned hereby appoints M. Raymond Piland, III and E. Peyton
Motley, 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 20,
1999 at 6:30 p.m. at the Caroline County High School, Bowling Green, Virginia,
or any adjournment thereof, on each of the following matters:
1. To elect three Class III directors to serve until the Annual Meeting of
Shareholders in 2002.
[ ] FOR all Nominees listed below [ ] WITHHOLD AUTHORITY TO
VOTE FOR THOSE INDICATED
BELOW
G. William Beale B. Walton Mahon Charles H. Ryland
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: ___________, 1999 _____________________________________
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
