<PAGE>
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) (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:*
--------------------------------------------------------------
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 10, 2000
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 18,
2000 at 6:30 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 18th. 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 AND CHIEF EXECUTIVE OFFICER
<PAGE>
UNION BANKSHARES CORPORATION
- --------------------------------------------------------------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
- --------------------------------------------------------------------------------
TO BE HELD ON APRIL 18, 2000
The Annual Meeting of Shareholders of Union Bankshares Corporation will
be held at the Richmond County Elementary School on Maple Street in Warsaw,
Virginia, at 6:30 p.m. on April 18, 2000 for the following purposes:
1. To elect one director 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 25, 2000, 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 10, 2000
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 18, 2000
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 18, 2000, 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 10, 2000.
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 25,
2000 are entitled to notice of and to vote at the Annual Meeting or any
adjournment thereof. As of the close of business on February 25, 2000, there
were 7,487,829 shares of the Company's common stock 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.
<PAGE>
ELECTION OF DIRECTOR - 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
person named immediately below, who currently serves as the only Class I
director of the Company, will be nominated to serve as a Class I director. If
elected, the nominee will serve until the Annual Meeting of Shareholders held in
2003. The persons named in the proxy will vote for the election of the nominee
named below unless authority is withheld. If for any reason the person named as
nominee below should become unavailable to serve, an event which management does
not anticipate, proxies will be voted for such other person as the Board of
Directors may designate.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE
NOMINEE SET FORTH BELOW. The nominee 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>
2000 CLASS (NOMINEE FOR ELECTION TO THE BOARD OF DIRECTORS):
M. Raymond Piland, III (66) 1980 President, Williamsburg Millwork Corporation,
Bowling Green, Virginia.
2001 CLASS (DIRECTORS SERVING UNTIL THE 2001 ANNUAL MEETING):
Ronald L. Hicks (53) 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. (66) 1966 Attorney, Smith, Murphy and Taliaferro, Warsaw,
Virginia; delegate in the House of Delegates of the
Virginia General Assembly from 1982 until 2000.
A. D. Whittaker (60) 1981 President, A. D. Whittaker, Inc., a commercial
construction firm in Hanover County, Virginia.
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
2002 CLASS (DIRECTORS SERVING UNTIL THE 2002 ANNUAL MEETING):
<S> <C>
G. William Beale (50) 1990 President and Chief Executive Officer of the Company
since its inception; President of Union Bank & Trust
Company since 1991.
B. Walton Mahon (71) 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 (86) 1940 Attorney, Warsaw, Virginia; Vice Chairman of the
Board of the Company.
</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. 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 1999. Each
incumbent 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 1999.
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, 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 1999, there was one meeting of the Executive Committee.
AUDIT COMMITTEE. The Audit Committee is composed of A. D. Whittaker and
W. Tayloe Murphy, Jr. and also includes Daniel I. Hansen of the Union Bank &
Trust Company Board and William H. Hughes of the Northern Neck State Bank Board.
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 three times in
1999.
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
3
<PAGE>
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 1999.
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 200 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.
OWNERSHIP OF COMPANY COMMON STOCK
The following table sets forth, as of February 25, 2000, 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 February 25, 2000, 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>
G. William Beale................................... 29,497 (3)(4) (2)
Ronald L. Hicks.................................... 20,351 (3) (2)
B. Walton Mahon.................................... 101,055 (3) 1.33%
W. Tayloe Murphy, Jr............................... 171,332 (3) 2.26%
M. Raymond Piland, III............................. 10,480 (3) (2)
Charles H. Ryland.................................. 264,510 (3) 3.51%
A. D. Whittaker.................................... 49,145 (3) (2)
All directors and executive officers
as a group......................................... 649,119 8.57%
</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, 3,067 shares; Mr. Hicks, 6,785 shares; Mr.
Mahon, 21,455 shares; Mr. Murphy, 77,010 shares; Mr. Piland, 2,880 shares;
Mr. Ryland, 119,110 shares; and Mr. Whittaker, 29,218 shares.
(4) Includes 24,000 shares that may be acquired pursuant to currently
exercisable stock options granted under the Company's Stock Option Plan.
4
<PAGE>
EXECUTIVE COMPENSATION
During 1999, 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, and E. Peyton Motley, Executive Vice President. The
following table shows the cash compensation paid to Messrs. Beale and Motley
during 1999, 1998 and 1997.
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) 1999 $ 180,250 $ 5,911 -- $ 17,450
President/Chief 1998 155,000 2,805 10,000 27,250
Executive Officer 1997 135,000 3,561 -- 24,399
E. Peyton Motley (1) 1999 $ 126,154 $ 5,995 -- $ 5,995
Executive Vice 1998 122,325 7,189 4,000 7,189
President 1997 116,600 6,250 -- 6,250
</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.
(2) The amount of compensation in the form of perquisites or other personal
benefits did not exceed the lesser of $50,000 or 10% of the total annual
salary and bonus reported in each year for Messrs. Beale and Motley.
(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 1999: (i) $13,031 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) $4,419 accrued on behalf of Mr. Beale
under a deferred compensation arrangement; and (iii) $6,601 accrued on
behalf of Mr. Motley 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.
STOCK OPTION GRANTS IN 1999
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 to Messrs. Beale or Motley during 1999.
5
<PAGE>
STOCK OPTION EXERCISES IN 1999 AND YEAR-END OPTION VALUES
The following table shows certain information with respect to the
number and value of unexercised options at year-end for Messrs. Beale and
Motley.
<TABLE>
<CAPTION>
NUMBER OF SHARES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
NUMBER OF DECEMBER 31, 1999 DECEMBER 31, 1999 (1)
SHARES ACQUIRED VALUE ---------------------------- ----------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C>
G. William Beale --- --- 22,000 8,000 $72,500 ---
E. Peyton Motley --- --- 800 3,200 --- ---
</TABLE>
- ----------------
(1) Calculated by subtracting the exercise price from the fair market value of
the stock at December 31, 1999.
EMPLOYEE BENEFIT PLANS
The Company and its subsidiaries, Union Bank & Trust Company ("Union
Bank"), Northern Neck State Bank ("Northern Neck Bank"), Rappahannock National
Bank ("Rappahannock Bank"), Bank of Williamsburg, Union Investment Services,
Inc. and Mortgage Capital Investors, Inc., maintain several tax qualified and
non-qualified employee benefit plans for their employees which 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. Employees of
Rappahannock Bank and Mortgage Capital Investors, Inc. do not participate in
this plan.
The Retirement Plan was terminated by the Board of Directors of the
Company effective October 1, 1999. Benefit accruals ceased on September 30, 1999
and all participants in the plan were 100% vested in their accrued benefit. An
Application for Determination for Terminating Plan was submitted to the Internal
Revenue Service on December 6, 1999.
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 10 15 20 25 30 35
------------ -- -- -- -- -- --
<S> <C>
$25,000 $ 3,250 $4,875 $6,500 $8,125 $9,750 $11,375
50,000 7,775 11,663 15,550 19,438 23,325 27,213
75,000 12,900 19,350 25,800 32,250 38,700 45,150
100,000 18,025 27,038 36,050 45,063 54,075 63,088
125,000 23,150 34,725 46,300 57,875 69,450 81,025
150,000 28,275 42,413 56,550 70,688 84,825 98,963
175,000 33,400 50,100 66,800 85,300 100,200 116,900
</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 expected termination of the plan
effective October 1, 1999, it is estimated that the termination benefit (accrued
through September 30, 1999) for Messrs. Beale and Motley will be $22,761 and
$34,847, respectively. The final average earnings and the respective years of
service as of October 1, 1999, for Mr. Beale were $134,240 and ten years,
respectively, and for Mr. Motley were $114,040 and thirty-one years,
respectively. For 1999 and 1997, the Company contributed $787,626 and $156,944,
respectively, 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 contributions, not
to exceed 15% of the employee's compensation. The Company was not required to,
but could, 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 1999, $13,031 was accrued on behalf of Mr.
Beale and $6,601 on behalf of Mr. Motley under this plan.
Effective January 1, 2000 the Company amended and restated the 401(k)
Plan. The Virginia Bankers Association prototype plan will be replaced with a
prototype plan sponsored by Putnam Mutual Funds Corporation. The basic
provisions of the 401(k) Plan remain the same except the Company is required to
match up to 3% of the employee's contributions.
EMPLOYEE STOCK OWNERSHIP PLAN. The Company also offers a
Non-Contributory Employee Stock Ownership Plan and Trust (the "ESOP"), under
which all salaried employees (the "Participants") who are at least 18 years of
age and who have been employed by the Company for at least 6 months are eligible
to participate. Allocations of contributions under the ESOP are discretionary at
the election of the Company's and subsidiaries' Boards of Directors, and
Participants are not permitted to make contributions to the 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 1999, $13,031 accrued under
the ESOP for the benefit of Mr. Beale.
7
<PAGE>
Distributions under the 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.
UNION BANK'S PLANS
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, 1999, Union Bank had accrued approximately $ 328,450 to cover its
obligations under all these agreements.
DEFERRED COMPENSATION PLAN (FORMER KING GEORGE STATE BANK). Before King
George Bank was merged with Union Bank it maintained a voluntary deferred
compensation program which permitted eligible directors and officers to defer
receipt of a portion of their directors' fees. Life insurance was purchased on
all of the participants in amounts that, in the aggregate, actuarially fund its
future liabilities under this program, and Union Bank (as the successor to King
George Bank) 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 Union 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
8
<PAGE>
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.
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.
RAPPAHANNOCK NATIONAL BANK'S PLANS
Rappahannock National Bank sponsors a noncontributory defined benefit
retirement plan ("Rappahannock Retirement Plan") which covers all 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 remuneration covered by the Rappahannock Retirement Plan is an
employee's "final average earnings" which, under the terms of the Rappahannock
Retirement Plan is defined to be the average of the highest five consecutive
calendar years of base salary earned by the employee during the five calendar
years prior to his or her date of retirement, termination of employment,
disability, or death. No offset for primary Social Security benefits received by
a pensioner is allowed with respect to the benefits paid under the Rappahannock
Retirement Plan.
The Rappahannock Retirement Plan was terminated by the Board of
Directors of the Company effective October 31, 1999. Benefit accruals ceased on
September 30, 1999 and all participants in the plan were 100% vested in their
accrued benefit. An Application for Determination for Terminating Plan was
submitted to the Internal Revenue Service on December 6, 1999.
EMPLOYMENT CONTRACTS AND TERMINATION AND CHANGE IN CONTROL ARRANGEMENTS
The Company and Mr. Beale entered into an employment agreement
effective April 1, 1999. The agreement has a two year initial term and will be
extended for successive one-year terms beginning April 1, 2001 unless the
Company elects not to extend the term of the agreement. The employment agreement
provides for an annual base salary of $170,000, which is adjustable annually in
the discretion of the Board, and annual cash bonuses in such amounts as
determined by the Board. The Company may terminate Mr. Beale's employment at any
time for "Cause" (as defined in the agreement) without incurring any additional
obligations to him. If the Company terminates Mr. Beale's employment for any
reason other than for "Cause" or if Mr. Beale terminates his employment for
"Good Reason" (as defined in the agreement), the Company will be obligated to
continue to provide the compensation and benefits specified in the agreement
until the expiration of its term. The employment agreement will terminate in the
event that there is a change in control of the Company, at which time the change
in control agreement described below between the Company and Mr. Beale will
become effective and any termination benefits will be determined and paid solely
pursuant to the change in control agreement.
9
<PAGE>
The Company also has an agreement with Mr. Beale that becomes effective
upon a change in control of the Company. Under the terms of this agreement, the
Company or its successor agrees to continue Mr. Beale in its employ for a term
of three years after the date of a change in control. During the contract term,
Mr. Beale 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 at least equal to the annual bonus paid prior
to the change in control. If Mr. Beale's employment is terminated during the
three years 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, he 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 Mr. Beale's base salary, annual bonus, and equivalent
benefits.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Compensation for the President and Chief Executive Officer of the
Company is determined by the Board of Directors, excluding the President and
Chief Executive Officer, 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 Chief Executive Officer
and the compensation paid to persons in comparable positions within the
industry.
Compensation for executive officers other than the President and Chief
Executive Officer is determined by the Board of Directors based on the
recommendation of the President and Chief Executive Officer. 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 1999 and up to the present time, there were transactions between
Union Bank and Northern Neck 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.
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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, 1994, and that dividends were reinvested.
[GRAPH]
<TABLE>
<CAPTION>
1994 1995 1996 1997 1998 1999
---- ---- ---- ---- ---- ----
<S> <C>
Union Bankshares Performance Index 100 110.67 109.17 190.90 157.08 136.46
Nasdaq Stock Market Index 100 141.33 173.89 213.07 300.25 542.43
Nasdaq/NM Bank Index 100 149.00 196.73 329.39 327.11 314.42
</TABLE>
INTEREST OF DIRECTORS AND OFFICERS IN CERTAIN TRANSACTIONS
Certain directors and officers of the Company and its subsidiaries 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, Rappahannock Bank, Bank of Williamsburg, Union Investment
Services and Mortgage Capital Investors. As such, these persons engaged in
transactions with the Company and its subsidiaries in the ordinary course of
business during 1999, and will have additional transactions with these companies
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. Mr. Whittaker's construction company is
building the permanent location for Bank of Williamsburg and has built several
branch buildings for Union Bank.
11
<PAGE>
INDEPENDENT AUDITORS
On September 27, 1999, the Company's Board of Directors voted to engage
the accounting firm of Yount, Hyde & Barbour, P.C. as the independent public
accountant to audit the Company's financial statements for the fiscal year
ending December 31, 1999, to replace the firm of KPMG LLP, the independent
public accountant engaged to audit the Company's financial statements as of
December 31, 1998 and 1997, and for each of the years in the two year period
ended December 31, 1998.
Consistent with the Company's policies, the Company conducted a bidding
process to select the independent public accountant to audit the Company's
fiscal year ending December 31, 1999. The Company's Board of Directors received
bids from several independent public accounting firms including KPMG. After
reviewing the proposals, the Company's Board of Directors selected Yount, Hyde &
Barbour.
During 1998 and 1997, KPMG's reports with respect to the Company's
financial statements neither contained an adverse opinion or a disclaimer of
opinion, nor were such reports qualified or modified as to uncertainty,
audit-scope or accounting principles. During 1998 and 1997, and up to the date
of the discontinuation of services of KPMG, there were no disagreements with
KPMG on any matter of accounting principles or practices, financial statement
disclosure or auditing scope or procedure which, if not resolved to the
satisfaction of KPMG, would have caused it to make a reference to the subject
matter of the disagreement in connection with its reports. During that period,
the Company did not consult with Yount, Hyde & Barbour regarding either (i) the
application of accounting principles to a specific transaction, either completed
or proposed, or the type of audit opinion that might be rendered on the
Company's financial statements or (ii) any other matter that would be required
to be stated herein.
Yount, Hyde & Barbour has advised the Company that neither the firm nor
any member of the firm now has, or has held in the most recent two fiscal years,
any direct or indirect financial interest in the Company. Representatives of the
firm are expected to be present at the Annual Meeting and will be given an
opportunity to make a statement if they desire to do so and will be available to
respond to appropriate questions.
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,
insiders of the Company complied with all filing requirements during 1999 with
the exception of Mr. Ryland and Mr. Hicks for whom on one occasion with respect
to one transaction each, a report was not timely filed.
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. O. Box 446, Bowling Green, Virginia 22427 on or before November 11,
2000.
12
<PAGE>
ANNUAL REPORT ON FORM 10-K
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED
DECEMBER 31, 1999, EXCLUDING EXHIBITS, TO BE FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION PRIOR TO MARCH 30, 2000, 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.
13
<PAGE>
P R O X Y
UNION BANKSHARES CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Ronald L. Hicks, W. Tayloe Murphy, Jr.
and A.D. Whittaker, 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 18, 2000, at 6:30 p.m. at the Richmond County Elementary School in Warsaw,
Virginia, or any adjournment thereof, on each of the following matters:
1. To elect one Class I director to serve until the Annual Meeting of
Shareholders in 2003.
[ ] FOR the Nominee listed below [ ] WITHHOLD AUTHORITY TO VOTE FOR THE
NOMINEE INDICATED BELOW
M. Raymond Piland, III
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:___________________, 2000
_________________________________
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.
