Valley Financial Corporation
36 Church Avenue, SW
Roanoke, Virginia 24011
This Proxy is solicited by the Board of Directors of Valley Financial
Corporation for the 1999 Annual Meeting of Shareholders to be held on April 29,
1999.
The undersigned hereby appoints Douglas W. Densmore, Esq. and Kevin P.
Oddo, Esq., either of whom may act, with full power of substitution, as proxy to
vote all of the shares of common stock of the Company held of record by the
undersigned on February 26, 1999 at the Annual Meeting of the Company to be held
on April 29, 1999 and at any adjournments thereof, as designated below:
1. ELECTION OF FIVE CLASS B DIRECTORS to serve until the 2002 Annual Meeting
of Shareholders.
[ ] FOR all nominees below [ ] WITHHOLD AUTHORITY
(except as marked to the contrary to vote for all nominees below
below)
CLASS B NOMINEES: Abney S. Boxley, III, W. Jackson Burrows, William D. Elliot,
Barbara B. Lemon and Ward W. Stevens, M.D.
Instruction: To withhold authority for any individual nominee, write that
nominee's name on the space provided below.
- --------------------------------------------------------------------------------
2. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting.
THE STOCK REPRESENTED BY THIS PROXY WILL BE VOTED IN THE MANNER DIRECTED BY THE
UNDERSIGNED. IF NO DIRECTION IS GIVEN, THE PROXY WILL BE VOTED FOR PROPOSAL NO.
1 ABOVE.
The undersigned hereby acknowledges receipt of the Notice and Proxy Statement
dated March 22, 1999 with respect to the 1999 Annual Meeting.
Dated ______________________, 1999
Number of Shareholders Attending
the Annual Meeting _________
__________________________________
(Signature of Shareholder)
__________________________________
(Signature of Shareholder)
NOTE: When signing as attorney, trustee,
administrator, executor or guardian, please give your
full title as such. If a corporation, please sign in
full corporate name by President or other authorized
officer. In the case of joint tenants, each joint
owner must sign.
<PAGE>
VALLEY FINANCIAL CORPORATION
36 Church Avenue, SW
Roanoke, Virginia 24011
NOTICE OF 1999 ANNUAL MEETING OF SHAREHOLDERS
NOTICE IS HEREBY GIVEN, that the 1999 Annual Meeting of Shareholders of
Valley Financial Corporation (the "Annual Meeting") will be held at the Hotel
Roanoke & Conference Center, 110 Shenandoah Avenue NW, Roanoke, Virginia 24012
on Thursday, April 29, 1999 at 6:00 p.m. local time, for the following purposes:
1. To elect five Class B directors to serve until the 2002 Annual Meeting
of Shareholders, or in the case of each director, until his or her
successor is duly elected and qualifies.
2. To transact such other business as may properly come before the Annual
Meeting.
Only shareholders of record at the close of business on February 26, 1999
are entitled to notice of and to vote at the Annual Meeting or any adjournments
thereof.
Your attention is directed to the Proxy Statement accompanying this Notice
for a more complete statement regarding matters proposed to be acted upon at the
Annual Meeting.
To assure that your shares are represented at the Annual Meeting, please
complete, sign, date and mail promptly the enclosed proxy, for which a return
envelope is provided. Your proxy is revocable by you at any time prior to its
exercise.
By Order of the Board of Directors
A. Wayne Lewis
Executive Vice President, Chief Operating
Officer and Corporate Secretary
March 22, 1999
<PAGE>
VALLEY FINANCIAL CORPORATION
36 Church Avenue, SW
Roanoke, Virginia 24011
PROXY STATEMENT
FOR THE 1999 ANNUAL MEETING OF SHAREHOLDERS
The solicitation of the enclosed proxy is made by and on behalf of the
Board of Directors of Valley Financial Corporation (the "Company") to be used at
the 1999 Annual Meeting of Shareholders (the "Annual Meeting") to be held at
6:00 p.m. local time, at the Hotel Roanoke & Conference Center, 110 Shenandoah
Avenue NW, Roanoke, Virginia 24012 on Thursday, April 29, 1999 and at any
adjournments thereof. The approximate mailing date of this Proxy Statement is
March 22, 1999.
The cost of solicitation of proxies will be borne by the Company. Such
costs include charges by brokers, fiduciaries and custodians for forwarding
proxy materials to beneficial owners of Company stock held in their names.
Solicitations will be made only by use of the mails, except that if necessary,
officers, directors and employees of the Company may without additional
compensation solicit proxies by telephone or personal contact.
All properly executed proxies delivered pursuant to this solicitation will
be voted at the Annual Meeting in accordance with the instructions thereon. Any
person signing and mailing the enclosed proxy may, nevertheless, revoke the
proxy at any time prior to the actual voting thereof by providing written notice
of revocation of the proxy, or by submitting a signed proxy bearing a later
date. Any such written notice of revocation should be sent to the Corporate
Secretary of the Company, P.O. Box 2740, Roanoke, Virginia 24001.
An Annual Report to Shareholders, including the summary consolidated
financial statements for the year ended December 31, 1998 is being mailed to you
concurrently with this Proxy Statement, but is not and should not be considered
proxy solicitation material.
VOTING PROCEDURES
As of February 26, 1999 the Company had outstanding 964,990 shares of its
common stock, no par value (the "Common Stock"), each of which is entitled to
one vote at the Annual Meeting or any adjournment thereof. A majority of votes
entitled to be cast on matters to be considered at the Annual Meeting
constitutes a quorum. Broker nonvotes (in which brokers fail to vote shares on
behalf of the beneficial owners thereof) will not be treated as present or
represented at the meeting, and will not be included in determining whether a
quorum is present.
Election of Directors. Directors are elected by a plurality of the votes
of the shares represented in person or by proxy at the Annual Meeting. Only
shares that are voted in favor of a nominee will be counted toward that
nominee's achievement of a plurality. Shares represented by proxy as to which
the shareholder properly withheld authority to vote for a nominee will not be
counted toward that nominee's achievement of a plurality.
Other Matters. The affirmative vote of a majority of the shares
represented at the Annual Meeting is required for a matter to be deemed approved
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<PAGE>
by the shareholders. Shares represented by proxy as to which the shareholder
abstained from voting are considered present at the meeting for the proposal
but, because they are not affirmative votes for the proposal, they have the same
effect as votes cast against the proposal. Broker nonvotes are not considered
present at the Annual Meeting and are not counted with regard to the proposal.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information as to persons believed
by management of the Company to be beneficial owners of more than 5% of the
outstanding Common Stock. Other than as disclosed below, the Company is not
aware of any person or group, as those terms are defined in the Securities
Exchange Act of 1934, who beneficially owned more than 5% of the outstanding
Common Stock as of February 26, 1999.
<TABLE>
<CAPTION>
Name and Address Number of
Title of Class of Beneficial Owner Shares Owned Percent of Class
-------------- ------------------- ------------ ----------------
<S> <C> <C> <C>
Common Stock George W. Logan 90,000 9.33%
P.O. Box 1190
Salem, VA 24153
</TABLE>
ELECTION OF DIRECTORS
The Company's Articles of Incorporation divide the Board of Directors into
three classes (A, B and C) as nearly equal in number as possible, with the terms
of office of each class ending in successive years. The current term of office
of the Class B directors expires at this 1999 Annual Meeting. The terms of
office of the Class C and Class A directors will expire in 2000 and 2001,
respectively.
It is the intent of the named proxies, unless otherwise directed, to vote
in favor of the election of each of the five nominees for Class B director whose
names appear below. Each nominee has agreed to serve if elected. In the event
any named nominee shall unexpectedly be unable to serve, proxies will be voted
for the remaining named nominees and such other person or persons as may be
designated by the Board of Directors.
INFORMATION CONCERNING DIRECTORS AND NOMINEES
The following information, including the principal occupation during the
past five years, is given with respect to the nominees for election to the Board
at the Annual Meeting, and for the directors who will continue in office after
the Annual Meeting. All of the nominees for re-election as directors currently
serve as directors of the Company and of Valley Bank, N.A. (the "Bank"), the
Company's wholly-owned subsidiary.
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<PAGE>
<TABLE>
<CAPTION>
Shares of Common Stock
Beneficially Owned as of
February 26, 1999
Name, Age and Year Shares Percent
First Became Director Principal Occupation Owned of Class
- --------------------- -------------------- ------ --------
<S> <C> <C> <C>
NOMINEES FOR DIRECTOR
CLASS B
(to serve until 2002 Annual Meeting)
Abney S. Boxley, III(1) President and Chief Executive 20,000 2.07%
Age 41 Office, W. W. Boxley Co.
Director since 3/94 (construction materials supplier),
Roanoke, VA
W. Jackson Burrows* Executive Vice President, 17,700(2) 1.83%
Age 51 Virginia Construction Supply,
Director since 3/94 Inc. (distributor to commercial
and highway contractors),
Salem, VA
William D. Elliot* Chairman and President, AEW, Inc. 45,000(3) 4.66%
Age 53 (specialists in construction and
Director since 3/94 maintenance of overhead electric
power lines, industrial electric
wiring and industrial process
controls), Roanoke, VA
Barbara B. Lemon Civic Leader, Roanoke, VA 20,000 2.07%
Age 62
Director since 3/94
Ward W. Stevens, M.D.* Retired neurosurgeon since 1997; 27,500 2.85%
Age 63 prior thereto, Neurosurgeon,
Director since 3/94 Neurosurgical Associates of
Roanoke, Inc., Roanoke, VA
CLASS C
(serving until 2000 Annual Meeting)
Ellis L. Gutshall* President and Chief Executive 29,680(4) 3.01%
Age 48 Officer of the Company since
Director since 6/96 1996; prior thereto, Senior Vice
President and Chief Lending
Officer since 1995; prior thereto,
Executive Vice President, First
Virginia Bank - Southwest,
Roanoke VA
Mason Haynesworth Director of Specialized Audits, 500(5) 0.05%
Age 58 Norfolk Southern Corporation (rail
Director since 6/97 transportation company),
Roanoke, VA
4
<PAGE>
Shares of Common Stock
Beneficially Owned as of
February 26, 1999
Name, Age and Year Shares Percent
First Became Director Principal Occupation Owned of Class
- --------------------- -------------------- ------ --------
A. Wayne Lewis* Executive Vice President, Chief 41,920(6) 4.21%
Age 55 Operating Officer, Chief
Director since 3/94 Financial Officer and Corporate
Secretary of the Company since
1996; prior thereto, Senior Vice
President, Roanoke, VA
George W. Logan*(7) Chairman of the Board of 90,000 9.33%
Age 54 Directors of the Company;
Director since 3/94 Chairman, Warsaw Industrial
Centers (developer of commercial
distribution warehouses),
Roanoke, VA
Maury L. Strauss Chairman, Strauss Development 20,100(8) 2.08%
Age 74 Corporation (real estate
Director since 3/94 development firm) since 1995;
prior thereto, Chairman, Strauss
Construction Co. (real estate
development and residential
construction firm), Roanoke, VA
CLASS A
(serving until 2001 Annual Meeting)
Eddie F. Hearp President, National Financial 24,981(9) 2.59%
Age 55 Services, Inc. (personal and
Director since 3/94 business insurance, retirement
benefit planning), Roanoke, VA
Anna L. Lawson Anthropologist, Daleville, VA 32,500(10) 3.37%
Age 55
Director since 3/94
John W. Starr, M.D. Cardiologist, Consultants in 22,900(11) 2.37%
Age 52 Cardiology, P.C., Roanoke, VA
Director since 3/94
Michael E. Warner Private Investor, Roanoke, VA 22,100(12) 2.29%
Age 63
Director since 3/94
14 Directors and 414,881 40.73%
Executive Officers as
a group
- ---------------------
</TABLE>
* Member of the Executive Committee
(1) Mr. Boxley is also a director of Roanoke Gas Company.
(2) Includes 200 shares held by Crystal Spring Development Co., of which Mr.
Burrows is Managing Partner.
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<PAGE>
(3) Includes 15,000 shares held by AEW, Inc., of which Mr. Elliot is Chairman
and President.
(4) Includes 200 shares held by Mr. Gutshall as custodian for his children and
22,280 shares Mr. Gutshall has the right to acquire within 60 days through the
exercise of stock options.
(5) Includes 500 shares held jointly by Mr. Haynesworth with his spouse.
(6) Includes 30,920 shares Mr. Lewis has the right to acquire within 60 days
through the exercise of stock options.
(7) Mr. Logan is also a director of Roanoke Electric Steel Corporation.
(8) Includes 20,000 shares held by Strauss Development Corporation, of which Mr.
Strauss is Chairman.
(9) Includes 250 shares held by Mr. Hearp's spouse.
(10) Includes 2,000 shares held by Mrs. Lawson's son, 1,000 shares held by her
spouse and 2,000 shares held by Mrs. Lawson as custodian for her nephew.
(11) Includes 1,000 shares held by Dr. Starr's spouse, 20,000 shares owned
beneficially by Dr. Starr through the Consultants in Cardiology, P.C. Profit
Sharing Plan and 400 shares held by Dr. Starr as custodian for his children.
(12) Includes 20,000 shares held jointly by Mr. Warner with his spouse.
YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH OF THE NOMINEES FOR CLASS B
LISTED ABOVE.
Certain Relationships and Related Transactions
Anna L. Lawson, a Class A Director, is the sister of George W. Logan, a
Class C Director and Chairman of the Board of Directors. Other than the
foregoing, there are no family relationships among the Directors and Executive
Officers of the Company.
The Company leases the premises for its South Roanoke office from Betty J.
Burrows, the mother of W. Jackson Burrows, a director of the Company. The lease
is for a term of twelve years from January 1, 1997 with one five-year renewal
option. Total lease payments by the Company to Mrs. Burrows during the initial
term of the lease will aggregate $151,080. Management is of the opinion that
the terms of the lease are no less favorable to the Company than if with an
unaffiliated party.
The Bank has had and expects to have loan transactions with certain of the
directors and officers and their affiliates. Management of the Bank is of the
opinion that such loans were made in the ordinary course of business, on
substantially the same terms, including interest rates and collateral, as those
prevailing at the time for comparable transactions with other persons, and do
not involve more than normal risk of collectibility or present other unfavorable
features.
BOARD OF DIRECTORS AND COMMITTEES
The Boards of the Company and the Bank are identical in membership. The
Boards have standing audit, nominating and compensation committees (or
committees performing similar functions) as listed below.
6
<PAGE>
Audit Committee
The Audit Committee consists of Mrs. Lemon (Chairman), Messrs. Haynesworth
and Hearp, and Dr. Starr. The Committee meets periodically with the independent
auditors, internal auditors, bank regulators and certain appropriate officers of
the Company. The basic functions of this committee include reviewing annual
and interim reports of the internal and the independent auditors, reviewing the
Company's system of internal controls and recommending the selection of
independent auditors. The Audit Committee met twice in 1998.
Human Resources Committee
The Human Resources Committee consists of Messrs. Elliot (Chairman), Boxley
and Logan, and Mrs. Lawson. The Committee oversees the Company's compensation
and benefits practices, recommends to the full Board the compensation
arrangements for the Chief Executive Officer and the Chief Operating Officer,
administers any executive compensation plans (including the present Incentive
Stock Plan), reviews management succession plans and recommends to the full
Board candidates for election as directors. The Committee met once in 1998.
The Committee will consider suggestions from all sources, including
shareholders, regarding possible candidates for nomination and election to the
Board. Generally, candidates should be highly qualified by business,
professional or comparable experience, affirmatively desirous of serving on the
Board, financially capable of making a meaningful investment in the Company's
stock, and able to represent the interests of all shareholders and not merely
those of any special interest group. Shareholders wishing to suggest a
candidate for consideration at the 2000 Annual Meeting of Shareholders should
forward not later than December 15, 1999 the candidate's name and a description
of the candidate's background and qualifications to the Corporate Secretary of
the Company, who also serves as Secretary to the Human Resources Committee.
Compensation of Directors
Directors of the Company did not receive any fees or other compensation for
their services as directors in 1998.
Board and Committee Meetings and Attendance
The Board of the Company met six times in 1998 and the Board of the Bank
met thirteen times during the same period. All incumbent directors except for
Mr. Elliot, Dr. Starr and Mr. Strauss attended at least 75% of the total
meetings of the Boards of the Company and the Bank, and all committees thereof
on which he or she sat.
Section 16(a) Beneficial Ownership Reporting Compliance
Based upon a review of beneficial ownership reporting Forms 3 and 4
furnished to the Company under Rule 16a-3(e) of the Securities and Exchange
Commission (the "Commission"), the Company believes that all reports of initial
and subsequent changes in beneficial ownership of the Company's securities as
required pursuant to Section 16(a) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), were filed with the Commission on a timely basis
during the most recent fiscal year or prior fiscal years by all persons who were
directors or officers of the Company at any time during such fiscal years.
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<PAGE>
EXECUTIVE COMPENSATION
The following table shows the cash compensation paid by the Company to its
executive officers for the three years ended December 31, 1998.
<TABLE>
<CAPTION>
Summary Compensation Table
Securities
Underlying
Name and Principal Position Year Salary $ Bonus $ Options Other $(1)
- --------------------------- ---- -------- ------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Ellis L. Gutshall
President/Chief Executive 1998 124,373 30,000 9,640 1,009
Officer
1997 117,879 19,500 9,640 0
1996 109,769 0 0 0
A. Wayne Lewis
Executive Vice President/ 1998 108,150 20,000 9,640 1,638
Chief Operating Officer
1997 102,248 12,500 19,280 0
1996 94,776 0 5,000 0
</TABLE>
(1) Includes 401(k) employer matching contributions.
Incentive Stock Plan
The Incentive Stock Plan (the "Plan") was effective January 19, 1995 and is
applicable to not more than 99,000 shares of the Company's Common Stock. The
Plan is administered by the Human Resources Committee (the "Committee") of the
Board (directors Boxley, Elliot, Lawson and Logan), which has the authority to
grant to officers and employees of the Company and the Bank stock options, stock
appreciation rights and outright grants of stock. Option prices are determined
by the Committee, but cannot be less than fair market value of the Company's
Common Stock at the time the option is granted. The exercise period of each
option is determined by the Committee at the date of grant but cannot be more
than ten years. Non-employee directors of the Company are not eligible for
awards under the Plan.
There were no options granted under the Plan in 1998 to any executive
officer named in the summary compensation table. The following table shows
stock options exercised during the last fiscal year (if any) and granted but
unexercised stock options under the Plan for the named executive officers at
December 31, 1998.
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<PAGE>
<TABLE>
<CAPTION>
Aggregated Option Exercises in Last Fiscal Year
and Fiscal Year-End Option Values
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options at Options at
12/31/98(#) 12/31/98($)
Shares
Acquired on Value Exercisable/ Exercisable/
Name Exercise(#) Realized($) Unexercisable Unexercisable
- ---- ----------- ----------- ------------- -------------
<S> <C> <C> <C> <C>
Ellis L. Gutshall 0 0 3,000 16,500
2,000 11,000
A. Wayne Lewis 0 0 2,000 13,500
3,000 20,250
</TABLE>
Individual Stock Option Agreements
In addition to the Incentive Stock Plan described above, the Company has
entered into agreements with Messrs. Gutshall and Lewis whereby those executive
officers have received nontransferable options to purchase at $10 per share for
each of three years shares of Company Common Stock in an amount up to one
percent of the total shares sold in the Company's initial public offering,
subject to the Bank meeting certain performance criteria as to profitability,
size and loan quality for that year. With respect to Mr. Lewis, the performance
criteria relate to the Bank's first through third years of operation since its
opening on May 15, 1995 and, with respect to Mr. Gutshall, the Bank's second
through fourth years of operation. The Company's individual stock option
agreement with Mr. Lewis is contained in his employment agreement dated April 8,
1994 which was intended to induce him to become an organizer of the Bank (see
"Employment Contracts and Termination of Employment and Change-in-Control
Agreements"). The Company entered into a Stock Option Agreement dated December
19, 1996 with Mr. Gutshall (the "Option Agreement"), which was intended to
compensate him in part for his assumption on June 20, 1996 of the position of
President and Chief Executive Officer of the Company and the Bank.
The Company sold 964,040 shares of Common Stock in its initial public
offering, so if the Bank meets the applicable specified performance criteria for
all of its first four years of operation, each officer would have three
exercisable stock purchase options of 9,640 shares each or an aggregate of
28,920 shares per officer. The options are cumulative and exercisable in whole
or in part only if the performance criteria are met, or if the Board determines
that the performance criteria have been substantially met. Each option has a
term of ten years from the date of vesting unless the officer's employment is
terminated prior to the expiration of the ten year period. As of December 31,
1998 options with respect to all 28,920 shares had vested in the case of Mr.
Lewis, and options with respect to 19,280 shares had vested in the case of Mr.
Gutshall.
Employment Contracts and Termination of Employment and Change-in-Control
Agreements
On April 8, 1994 the Company entered into an employment agreement (the
"Employment Agreement") with Mr. Lewis. The Employment Agreement has an initial
term of three years from the first day of the month following the Company's
breaking escrow on its initial public offering (February 1, 1995), with an
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<PAGE>
automatic extension each year of one additional year unless either party gives
notice at least 120 days prior to the date of extension that the Employment
Agreement shall not be extended. The Agreement provides for a certain minimum
salary level that may be increased (but not decreased) by the Board pursuant to
an annual evaluation, as well as group benefits to the extent provided to other
executives, the establishment of a life insurance policy financing facility and
the stock option arrangement described above.
The Employment Agreement also contains change-in-control provisions
entitling Mr. Lewis to certain benefits in the event his employment is
terminated within three years of a change in control of the Company for reason
other than death, retirement, disability, cause, voluntary resignation other
than for good reason, or pursuant to notice of termination given prior to the
change in control (except notice of termination given after any regulatory
filing has been made in contemplation of a change in control). If a change in
control followed by such termination occurs, the executive will receive a lump-
sum payment equal to 2.99 times average compensation (determined as set forth in
the Agreement), provided that if the payment is or will be subject to the excise
tax imposed by Section 4999 of the Internal Revenue Code or any similar tax (the
"Excise Tax"), the amount of such payment will be reduced by the amount
necessary to avoid the Excise Tax.
As an inducement in part to become the Chief Lending Officer of the Bank in
January, 1995, the Company agreed to enter into a change-in-control severance
agreement with Mr. Gutshall (the "Severance Agreement"). The effective date of
the Severance Agreement is December 19, 1996 and the initial term is five years.
The Severance Agreement provides that if there is a change in control of the
Company during the term of the Severance Agreement, then Mr. Gutshall shall be
entitled to the same change-in-control protections and compensation as outlined
in the discussion of Mr. Lewis' Employment Agreement in the immediately
preceding paragraph.
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
KPMG LLP acted as the Company's independent certified public accountants
for the fiscal year ended December 31, 1998. Representatives of KPMG LLP are
expected to attend the Annual Meeting and will have the opportunity to make a
statement if they so desire, and will be available to respond to appropriate
questions from shareholders.
SHAREHOLDER PROPOSALS
Proposals of shareholders intended to be presented at the Company's 2000
Annual Meeting of Shareholders must be received not later than December 15, 1999
by the Corporate Secretary at P.O. Box 2740, Roanoke, VA 24001 for inclusion in
the Company's Proxy Statement relating to that meeting.
OTHER MATTERS WHICH MAY COME BEFORE THE MEETING
The Board of Directors knows of no other matter which may properly come
before the Annual Meeting for action. However, if any other matter does
properly come before the Annual Meeting, the persons named in the enclosed form
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<PAGE>
of proxy will vote the proxy in accordance with their judgment as to what is in
the best interests of the Company.
Annual Report on Form 10-KSB
A copy of the Company's Annual Report on Form 10-KSB as filed with the
Commission for the year ended December 31, 1998 is available without charge to
shareholders after March 31, 1999 upon request to the Corporate Secretary at
P.O. Box 2740, Roanoke, VA 24001.
By Order of the Board of Directors
A. Wayne Lewis
Roanoke, Virginia Executive Vice President, Chief
March 22, 1999 Operating Officer and Corporate
Secretary
11
<PAGE>
