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 ss. 240.14a-11(c) or ss. 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:
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2) Aggregate number of securities to which transaction applies
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:*
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 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: _______________________________________________
Union Bankshares Corporation
March 9, 2001
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 17,
2001 at 6:00 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 17th. 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 and Chief Executive Officer
Union Bankshares Corporation
________________________________________________________________________________
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
________________________________________________________________________________
To be Held on April 17, 2001
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
6:00 p.m. on April 17, 2001 for the following purposes:
1. To elect three directors to serve for a three-year term;
2. To elect two directors to serve for the remaining two years of a
three-year term; and
3. 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 24, 2001, 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
Senior Vice President and Corporate Secretary
March 9, 2001
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.
212 N. Main Street, P. O. Box 446, Bowling Green, Virginia 22427
Union Bankshares Corporation
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
APRIL 17, 2001
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 17, 2001, 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 9, 2001.
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 24,
2001 are entitled to notice of and to vote at the Annual Meeting or any
adjournment thereof. As of the close of business on February 24, 2001, there
were 7,516,449 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.
ELECTION OF DIRECTORS - PROPOSALS ONE & TWO
Directors
The Company's Board is divided into three classes (I, II and III). The
term of office for Class II directors will expire at the Annual Meeting and the
nominees to serve as Class II directors are set forth below. Each of the Class
II nominees currently serves as a director of the Company. If elected, the Class
II nominees will serve until the Annual Meeting of Shareholders held in 2004.
The Board has also nominated Frank B. Bradley and William M. Wright to
serve as Class I directors. Messrs. Bradley and Wright were appointed to the
Board in January 2001 and currently serve as directors of the Company. If
elected, the Class I nominees will serve until the Annual Meeting of
Shareholders held in 2003.
The persons named in the proxy will vote for the election of the
nominees named below unless authority is withheld. If for any reason the persons
named as nominees below should become unavailable to serve, an event which
management does not anticipate, proxies will be voted for such other persons as
the Board of Directors may designate.
The Board of Directors recommends that shareholders vote for the
nominees set forth below. The nominees receiving the greatest number of
affirmative votes cast at the Annual Meeting will be elected.
Served as Principal Occupation
Name (Age) Director Since (1) During Past Five Years
---------- ------------------ ----------------------
2001 Class (Nominees):
Ronald L. Hicks (54) 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. (67) 1966 Attorney, Smith, Murphy and Taliaferro, Warsaw,
Virginia; delegate in the House of Delegates of
the Virginia General Assembly from 1982 until
2001.
A. D. Whittaker (61) 1981 President, A. D. Whittaker, Inc., a commercial
construction firm in Hanover County, Virginia.
2003 Class (Nominees):
Frank B. Bradley (53) 2001 President, Bradley Properties; formerly
President and Chief Executive Officer of Fas
Mart Convenient Stores, Inc., Mechanicsville,
Virginia, until February 1998.
William M. Wright (73) 2001 Chief Executive Officer of Wood Preservers,
Inc., a lumber treatment company headquartered
in Warsaw, Virginia.
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Served as Principal Occupation
Name (Age) Director Since (1) During Past Five Years
---------- ------------------ ----------------------
2002 Class (Directors Serving Until the 2002 Annual Meeting):
G. William Beale (51) 1990 President and Chief Executive Officer of the
Company since its inception; President of Union
Bank & Trust Company since 1991.
B. Walton Mahon (72) 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 (87) 1940 Attorney, Warsaw, Virginia; Vice Chairman of the
Board of the Company.
2003 Class (Director Serving Until the 2003 Annual Meeting):
M. Raymond Piland, III (67) 1980 President, Williamsburg Millwork Corporation,
Bowling Green, Virginia.
__________________
(1) With the exception of Directors Bradley and Wright, who were appointed to
the Board in January 2001, 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 ten meetings of the Board of Directors in 2000. 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 2000.
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 2000, there were no meetings 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, William H. Hughes of the Northern Neck State Bank Board,
Elisabeth Jones of the Rappahannock National Bank Board and
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A.G.W. Christopher, Jr. of the Bank of Williamsburg 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 issue its report to the Board of
Directors. The Board of Directors of the Company has adopted a written charter
for the Audit Committee, which is attached to this Proxy Statement as Attachment
A. All members of the Audit Committee are independent directors. The Audit
Committee met six times in 2000.
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 2000.
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.
REPORT OF THE AUDIT COMMITTEE
The Audit Committee's Report to the Shareholders, which follows, was
approved and adopted by the Committee on February 22, 2001 and by the Board of
Directors on March 9, 2001. The members of the Audit Committee are all
independent directors.
The Audit Committee has reviewed and discussed the audited financial
statements with management, discussed with the auditors the matters required by
SAS 61, received communications from the auditors as to their independence, and
discussed independence with the auditors.
Based on its review and discussions with the auditors, the Audit Committee
recommended to the Board of Directors that the audited financial statements be
included in the Form 10-K filed by the Company.
The Audit Committee and the Board of Directors have adopted a written
charter for the Audit Committee which is included as Attachment A to this Proxy
Statement.
The following fees were paid to Yount, Hyde & Barbour, P.C., Union
Bankshares Corporation's Certified Public Accountants, for services provided to
the Company for the fiscal year ended December 31, 2000.
Audit Fees: $ 56,367
Financial Information Systems Design & Implementation Fees: ---
All Other Fees: $ 45,335
Audit fees are fees billed for the audit of the Company's financial
statements and for the required quarterly reviews of those statements. Financial
information systems design and implementation fees are fees billed for financial
information systems design work and implementation fees for services rendered as
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part of that work for the most recent fiscal year. All other fees include
payments for any other types of services provided, including, but not limited
to, preparation of income tax returns, audits of benefits plans and compliance
audits.
The Audit Committee of the Board of Directors believes that the non-audit
services provided by Yount, Hyde & Barbour, P.C. are compatible with maintaining
the auditor's independence.
W. Tayloe Murphy, Jr., Chairman
A. D. Whittaker
William H. Hughes, CPA
Daniel I. Hansen
Elisabeth Jones
A.G.W. Christopher Jr.
OWNERSHIP OF COMPANY COMMON STOCK
The following table sets forth, as of February 24, 2001, 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 24, 2001, no shareholder of the Company beneficially owned
5% or more of the Company's common stock.
Amount and Nature of Percent
Name Beneficial Ownership (1) of Class
---- ------------------------ --------
G. William Beale............................................... 38,756 (3)(4) (2)
Frank B. Bradley, III.......................................... 1,000 (2)
Ronald L. Hicks................................................ 25,383 (3) (2)
B. Walton Mahon................................................ 101,255 (3) 1.35%
W. Tayloe Murphy, Jr........................................... 165,122 (3) 2.20%
M. Raymond Piland, III......................................... 10,680 (3) (2)
Charles H. Ryland.............................................. 191,916 (3) 2.55%
A. D. Whittaker................................................ 56,566 (3) (2)
William M. Wright.............................................. 44,448 (3) (2)
All directors and executive officers as a group................ 643,229 (5) 8.46%
__________________
(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, 3,992 shares; Mr. Hicks, 10,818 shares; Mr. Mahon,
21,455 shares; Mr. Murphy, 70,400 shares; Mr. Piland, 2,880 shares; Mr.
Ryland, 47,416 shares; Mr. Whittaker, 29,218 shares; and Mr. Wright, 4,128
shares.
(footnotes continued on next page)
5
(footnotes continued on next page)
(4) Includes 26,240 shares that may be acquired pursuant to currently
exercisable stock options granted under the Company's Stock Option Plan.
(5) Includes 90,252 shares that may be acquired pursuant to currently
exercisable stock options granted under the Company's Stock Option Plan.
EXECUTIVE COMPENSATION
During 2000, the only executive officer of the Company who received annual
compensation in excess of $100,000 was G. William Beale, President and Chief
Executive Officer. The following table shows the total compensation paid or
accrued during the fiscal years indicated below to Mr. Beale.
Summary Compensation Table
Long-Term
Compensation
------------
Securities
Name and Annual Compensation (1) Underlying All Other
----------------------
Principal Position Year Salary Bonus Options (2) Compensation (3)
------------------ ---- ------ ----- ----------- ----------------
G. William Beale 2000 $ 182,545 $ 4,145 1,200 $ 26,609
President/Chief 1999 180,250 5,911 -- 25,941
Executive Officer 1998 155,000 2,805 10,000 21,767
__________________
(1) 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.
(2) 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.
(3) Includes for 2000: (i) $17,861 accrued on behalf of Mr. Beale under the
Employee Stock Ownership Plan; (ii) $4,881 accrued on behalf of Mr. Beale
under a deferred compensation arrangement; and (iii) a $3,867 matching
contribution to Mr. Beale's 401(k) plan account under the Profit Sharing and
Thrift Plan. See the discussion below in the section captioned "Employee
Benefit Plans" for a description of the Company's employee benefit plans.
Stock Option Grants in 2000
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 2000 to Mr. Beale.
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Individual Grants
-----------------------------------------------------------------
Percent of
Number of Total
Shares Options
Underlying Granted to Exercise Potential
Options Employees Price per Expiration Realizable Value (1)
--------------------
Name Granted in 2000 Share Date 5% 10%
---- ------- ------- ------ ---- -- ---
G. William Beale 1,200 4.60% $ 13.375 2/20/10 $ 10,093 $ 25,580
_________________
(1) Potential realizable value at the assumed annual actual option term (10
years) and annual rates of stock price appreciation indicated, based
compounding, less cost of shares at exercise on price .
Stock Option Exercises in 2000 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 Mr. Beale.
Number of Shares Value of Unexercised
Underlying Unexercised In-the-Money
Number of Options at Options at
Shares Acquired Value December 31, 2000 December 31, 2000 (1)
----------------- ---------------------
Name on Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
---- ---------- -------- ----------- ------------- ------------ -------------
G. William Beale -0- --- 26,240 7,460 $ -0- $ -0-
________________
(1) Calculated by subtracting the exercise price from the fair market value of
the stock at December 31, 2000.
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
-------------------
Profit Sharing and 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"). Under the 401(k) Plan, employees of the
Company are eligible to participate after six months of employment. The 401(k)
Plan provides for employee pre-tax contributions, not to exceed 15% of the
employee's compensation. The Company is required to match up to 3% of the
employee's contributions. During 2000, $3,867 was contributed on behalf of Mr.
Beale as a matching contribution under this plan. 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. No additional contribution was accrued for the
401(k) Plan for 2000.
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
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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 2000, $17,861 was accrued
under the ESOP for the benefit of Mr. Beale.
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. Prior to 1997, Union Bank offered its directors
the option to participate in a deferred supplemental compensation program.
Participating 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. 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, 2000, Union Bank had accrued approximately $335,179 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.
8
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.
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.
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 by providing at least twelve months
prior notice, which it has not done. The employment agreement provides for an
annual base salary of $170,000, which is adjustable annually at 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.
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.
9
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 2000 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.
10
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, 1995, and that dividends were reinvested.
[GRAPH]
1995 1996 1997 1998 1999 2000
---- ---- ---- ---- ---- ----
Union Bankshares Performance Index 100 98.62 174.06 142.85 123.81 93.23
Nasdaq Stock Market Index 100 123.04 150.69 212.51 394.92 237.62
Nasdaq/NM Bank Index 100 132.04 221.06 219.64 211.14 241.08
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 2000, 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.
11
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, as well as the Bank of Williamsburg's building.
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 and
for the year 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
financial statements for the 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. That firm also was chosen to audit the
Company's financial statements for the fiscal year ending December 31, 2000.
During 1998, KPMG's report 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 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, P.C. 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, P.C. 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 common stock. 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 2000.
12
SHAREHOLDER PROPOSALS
In order for a shareholder proposal to be considered for possible inclusion
in the 2002 Proxy Statement, it must be received by the Company's Corporate
Secretary, D. Anthony Peay, Union Bankshares Corporation, 212 N. Main Street,
P.O. Box 446, Bowling Green, Virginia 22427 on or before November 9, 2001.
ANNUAL REPORT ON FORM 10-K
A copy of the Company's Annual Report on Form 10-K for the year ended
December 31, 2000, excluding exhibits, to be filed with the Securities and
Exchange Commission prior to March 31, 2001, can be obtained without charge by
writing to D. Anthony Peay, Senior Vice President and Corporate Secretary, Union
Bankshares Corporation, P. O. Box 446, Bowling Green, Virginia 22427.
13
ATTACHMENT A
Union Bankshares Corporation
Board of Directors
Audit Committee Charter
STATEMENT OF POLICY
A soundly conceived, effective Audit Committee is essential to the management,
operation, and financial reporting process of Union Bankshares Corporation and
its subsidiaries. The Audit Committee shall provide assistance to the corporate
directors in fulfilling their responsibilities to the shareholders relating to
corporate accounting, reporting practices of the corporation, and the quality
and integrity of the financial reports of the corporation. In so doing, it is
the responsibility of the Audit Committee to maintain free and open means of
communication between the directors, the independent auditors, the internal
auditors, and the financial management of the corporation.
ORGANIZATION
Members
There shall be a committee of the Board of Directors known as the Audit
Committee. This committee shall be composed of at least two directors of Union
Bankshares Corporation and at least one director of each subsidiary bank, each
of whom is independent of the management of the corporation and are free of any
relationship that, in the opinion of the Board of Directors, would interfere
with their exercise of independent judgment as a committee member.
At the committee's discretion, management of the corporation may attend meetings
of the Audit Committee, but this attendance should be in a non-voting capacity.
Committee membership standards will be maintained in accordance with applicable
banking laws and regulations.
Meetings
The Audit Committee shall meet on a bi-monthly or six (6) times per year basis.
The committee reserves the right to meet at other times as required and/or to
meet without members of corporate management, internal audit, or the independent
accounting firm.
Minutes
Minutes shall be prepared for all meetings of the Audit Committee to document
the Committee's discharge of its responsibilities. The minutes shall provide an
accurate record of the proceedings, and shall be approved at or before the next
meeting of the Committee.
AUTHORITY
The authority of the Audit Committee is derived from the full Board of Directors
of Union Bankshares Corporation.
A-1
The Audit Committee is appointed by the Board to assist the Board in monitoring
(1) the integrity of the financial statements of the Company, (2) the compliance
of the Company with legal and regulatory requirements and (3) the independence
and performance of the Company's internal and external auditors.
The Audit Committee shall have the authority to retain special legal, accounting
or other consultants to advise the Committee. The Audit Committee may request
any officer or employee of the Company or the Company's outside counsel or
independent auditor to attend a meeting of the Committee or to meet with any
members of, or consultants to, the Committee.
RESPONSIBILITIES
In fulfilling the stated role within the framework of the Audit Committee's
Statement of Policy, the primary, general responsibilities of the Audit
Committee will be as follows:
. To provide for an internal audit function to serve all subsidiaries of the
corporation in an examining and advisory capacity.
. To provide for all required external audits of all corporate subsidiaries
by suitable independent accountants.
. To serve as a focal point and reporting outlet for communications among
non-committee directors, corporate management, internal auditors, and
independent accountants.
. To assist the Board of Directors in fulfilling its fiduciary
responsibilities for financial reporting and internal accounting and
operations controls.
. To act as an agent for the Board of Directors to help insure the
independence of internal auditors and independent accountants, the
integrity of management, and the adequacy of disclosure to stockholders.
Specific duties of the Audit Committee, within the noted general
responsibilities, will include, but not be limited to the following items:
1. Review and reassess the adequacy of this Charter annually and submit it to
the Board for approval.
2. Review the annual audited financial statements with management, including
major issues regarding accounting and auditing principles and practices as
well as the adequacy of internal controls that could significantly affect
the Company's financial statements.
3. Review an analysis prepared by management and the independent auditor of
significant financial reporting issues and judgments made in connection
with the preparation of the Company's financial statements.
4. Based on the review and discussions noted in numbers 2 and 3 above,
recommend to the Board of Directors that the audited financial statements
be included in the Company's annual report on Form 10-K.
A-2
5. Meet with management, as deemed necessary by the Audit Committee, to review
the Company's major financial risk exposures and the steps management has
taken to monitor and control such exposures.
6. Review major changes to the Company's auditing and accounting principles
and practices as suggested by the independent auditor, internal auditors or
management.
7. Recommend to the Board the appointment of the independent auditor, which
firm is ultimately accountable to the Audit Committee and the Board.
8. Approve the fees to be paid to the independent auditor.
9. Receive periodic reports from the independent auditor regarding the
auditor's independence, discuss such reports with the auditor, and if so
determined by the Audit Committee, recommend that the Board take
appropriate action to ensure the independence of the auditor.
10. Evaluate the performance of the independent auditor and, if so determined
by the Audit Committee, recommend that the Board replace the independent
auditor.
11. Review the appointment and replacement of the senior internal auditing
executive.
12. Review the significant reports to management prepared by the internal
auditing department and management's responses.
13. Meet with the independent auditor prior to its annual audit to review the
planning and staffing of the audit.
14. Discuss with the independent auditor the matters required to be discussed
by Statement of Auditing Standards No. 61 relating to the conduct of the
audit.
15. Review with the independent auditor any problems or difficulties the
auditor may have encountered and any management letter provided by the
auditor and the Company's response to that letter. Such review should
include:
a. Any difficulties encountered in the course of the audit work,
including any restrictions on the scope of the activities or access to
required information.
b. Any changes required in the planned scope of the internal audit.
c. The internal audit department responsibilities, budget and staffing.
16. Review with the Company's General Counsel legal matters that may have a
material impact on the financial statements, the Company's compliance
policies and any material reports or inquiries received from regulators or
governmental agencies.
While the Audit Committee has the responsibilities and powers set forth in this
Charter, it is not the duty of the Audit Committee to plan or conduct audits or
to determine that the Company's financial statements are complete and accurate
and are in accordance with generally accepted accounting principles. This is the
responsibility of management and the independent auditor. Nor is it the duty of
the Audit Committee to conduct investigations, to resolve disagreements, if any,
between management and the independent auditor or to assure compliance with laws
and regulations and the Company's Code of Conduct.
[x] PLEASE MARK VOTES REVOCABLE PROXY
AS IN THIS EXAMPLE UNION BANKSHARES CORPORATION
ANNUAL MEETING OF SHAREHOLDERS 1. To elect three Class III directors to With- For All
APRIL 17, 2001 serve until the Annual Meeting of For hold Except
Shareholders in 2004. (except as [ ] [ ] [ ]
The undersigned hereby appoints G. William Beale, marked to the contrary below):
B. Walton Mahon and Charles H. Ryland, jointly
and severally, proxies, with full power to act Ronald L. Hicks, W. Tayloe Murphy, Jr. and A.D. Whittaker
alone and with full power of substitution, to
represent the undersigned and vote all shares INSTRUCTION: To withhold authority to vote for any individual
of the Company standing in the name of the nominee, mark "For All Except" and write that nominee's name in the
undersigned at the Annual Meeting of Shareholders space provided below.
Of Union Bankshares Corporation to be held on ___________________________________________________________________
Tuesday, April 17, 2001, at 6:00 p.m. at the
Caroline County High School located near the
intersection of Route 676 and Highway 207, 2. To elect two Class II directors to With- For All
approximately 5 miles west of Bowling Green, serve until the Annual Meeting of For hold Except
Virginia, or any adjournment thereof, on each Shareholders in 2003 (except as [ ] [ ] [ ]
of the following matters: marked to the contrary below):
Frank B. Bradley, III and William M. Wright
INSTRUCTION: To withhold authority to vote for any individual
nominee, mark "For All Except" and write that nominee's name in the
space provided below.
___________________________________________________________________
3. The transaction of any other business which may properly come
before the Annual Meeting. Management at present knows of no
------------------ other business to be presented at the Annual Meeting.
Please be sure to sign and date | Date |
this Proxy in the box below. | | The meeting will be followed by a reception.
- ------------------------------------------------------ Please check this box if you plan to attend.-----> [ ]
| |
| | This proxy, when properly executed, will be voted in the manner
Shareholder sign above___Co-holder (if any) sign above directed by the undersigned shareholder. If no direction is
made, this proxy will be voted "FOR" each proposal.
- --------------------------------------------------------------------------------
Detach above card, sign, date and mail in postage paid envelope provided.
UNION BANKSHARES CORPORATION
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
PLEASE ACT PROMPTLY
SIGN, DATE & MAIL YOUR PROXY CARD TODAY
HAS YOUR ADDRESS CHANGED?
____________________________________________________
____________________________________________________
____________________________________________________