SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant (X)
Filed by a Party other than the Registrant ( )
Check the appropriate box:
( ) Preliminary Proxy Statement ( ) Confidential, for Use of the
Commission Only (as permitted
by Rule 14a-6(e)(2))
(X) Definitive Proxy Statement
( ) Definitive Additional Materials
( ) Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
CRESTAR FINANCIAL CORPORATION
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
(X) No fee required
( ) Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
( ) Fee paid previously with preliminary materials.
( ) Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule, or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
[LOGO]
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
FRIDAY, APRIL 25, 1997, 10:00 A.M.
4TH FLOOR AUDITORIUM, CRESTAR CENTER
919 EAST MAIN STREET, RICHMOND, VIRGINIA
Dear Crestar Shareholder:
You are cordially invited to attend the 1997 Annual Meeting of Shareholders of
Crestar Financial Corporation (the "Corporation"), which will be held at the
time and place noted above. The business purpose of the meeting is:
1. To elect five Class I directors for a three-year term and one Class II
director for a one-year term.
2. To approve the amended and restated 1993 Stock Incentive Plan.
3. To ratify the appointment of KPMG Peat Marwick LLP as the Corporation's
independent auditors for 1997.
4. To transact any other business properly brought before the meeting.
As in past years, the meeting will include a report on the state of the
Corporation, and there will be an opportunity for comments and questions from
shareholders.
Shareholders of record at the close of business on February 28, 1997 (the
"record date") will be entitled to vote at the meeting. Whether or not you plan
to attend the meeting in person, it is important that your Crestar shares be
represented and voted. Accordingly, after you review the enclosed proxy
material, I encourage you to COMPLETE, SIGN AND DATE YOUR PROXY CARD, AND RETURN
IT AS SOON AS POSSIBLE IN THE POSTAGE-PAID ENVELOPE. You are free to revoke or
change your proxy later, or vote in person at the meeting.
Admission to the Annual Meeting will be limited to persons who are listed on the
Corporation's records as shareholders as of the record date, or who bring a
statement from a broker, bank or other institution indicating their beneficial
ownership as of the record date.
1996 was a year of significant accomplishment for Crestar. Our objective is to
continue to provide an excellent return to our shareholders by providing
exceptional performance for each and every customer.
Sincerely,
/s/ Richard G. Tilghman
- --------------------------
Richard G. Tilghman
Chairman and
Chief Executive Officer
March 19, 1997
<PAGE>
TABLE OF CONTENTS
PROXY STATEMENT
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General Information......................................................... 1
Principal Holders of the Corporation's Stock................................. 2
\Proposal 1. Election of Directors........................................... 2
Your Board of Directors..................................................... 3
Board of Directors and Committees........................................ 8
Director Compensation....................................................... 9
Beneficial Ownership of Management........................................ 11
Certain Relationships and Related Interests............................... 12
Section 16(a) Beneficial Ownership Reporting Compliance.................. 13
\Proposal 2. Approval of Amended and Restated 1993 Stock Incentive Plan...... 13
Human Resources and Compensation Committee Report on Executive Compensation.. 17
Compensation Committee Interlocks and Insider Participation.............. 21
Performance Graph............................................................ 22
Compensation of Executive Officers........................................... 23
Termination of Employment and Change-in-Control Agreements................... 25
\Proposal 3. Ratification of Appointment of Independent Auditors............ 26
Other Business.............................................................. 26
1998 Shareholder Proposals and Director Nominations........................ 27
Annual Report and Form 10-K.................................................. 27
\ Denotes items on the agenda for the Annual Meeting
<PAGE>
PROXY STATEMENT
Crestar Financial Corporation
919 East Main Street
P. O. Box 26665
Richmond, VA 23261-6665
Annual Meeting of Shareholders
April 25, 1997
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GENERAL INFORMATION
The following information is being furnished in connection with the Annual
Meeting of Shareholders of Crestar Financial Corporation (the "Corporation"). It
is anticipated that this Proxy Statement and the enclosed form of proxy will be
first sent to shareholders on March 19, 1997.
Only holders of Common Stock of record at the close of business on February 28,
1997 (the "record date") are entitled to notice of, and to vote at, the meeting
or any adjournment thereof. On that date, there were 110,495,923 shares
outstanding. Each share is entitled to one vote on all matters to come before
the meeting. The presence at the meeting, either in person or by proxy, of a
majority of the shares outstanding will constitute a quorum. Attendance at the
Annual Meeting will be limited to persons who are determined to be shareholders
as of the record date.
The enclosed proxy for the Annual Meeting is being solicited by your Board of
Directors of the Corporation and is revocable at any time before it is
exercised. All properly executed proxies delivered pursuant to this solicitation
will be voted at the meeting in accordance with directions given in the proxies.
The cost of this solicitation will be borne by the Corporation. In addition to
the use of the mail, employees may solicit proxies by telephone, fax or
electronic mail, or in person. Banks, brokerage houses and other institutions,
nominees and fiduciaries will be requested to forward the soliciting material to
beneficial owners and to obtain authorization for the execution of proxies. The
Corporation will, upon request, reimburse parties for their reasonable expenses
in forwarding proxy material to beneficial owners. The Corporation has engaged
D.F. King & Co., Inc. to assist in proxy solicitation for a fee of $12,000 plus
out-of-pocket expenses.
Abstentions and shares held of record by a broker or its nominee ("broker
shares") that are voted on any matter are included in determining the number of
votes present or represented at the meeting. Broker shares that are not voted on
any matter at the meeting (commonly referred to as "broker non-votes") are not
included in determining whether a quorum is present. The vote required on
matters to be considered is disclosed under the caption for such matters. Votes
that are withheld and broker non-votes are not included in determining the
number of votes cast in the election of directors or on other matters.
Virginia law prohibits Crestar Bank from voting shares for which it has sole
voting power. Shares for which Crestar Bank has shared voting power can be voted
by the person with whom it shares such power. Pursuant to Virginia law, a
co-fiduciary has been appointed for all of the shares for which Crestar Bank has
sole power to vote, so that such shares may be voted at the Annual Meeting.
In this Proxy Statement, unless noted otherwise, all share amounts and
information on option prices and performance objectives have been adjusted to
reflect a 2-for-1 split in the form of a stock dividend of the Corporation's
Common Stock distributed on January 24, 1997.
1
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PRINCIPAL HOLDERS OF THE CORPORATION'S STOCK
Based on the Corporation's records and filings with the Securities and Exchange
Commission that reflect information as of December 31, 1996, the Corporation is
not aware of any persons who are beneficial owners of 5% or more of the
Corporation's Common Stock, except as listed below:
<TABLE>
<CAPTION>
AMOUNT AND
NATURE
NAME AND ADDRESS OF BENEFICIAL OF BENEFICIAL
OWNER OWNERSHIP PERCENT OF CLASS(3)
- ----------------------------------- ---------------- ---------------------
<S> <C> <C>
Crestar Bank as Trustee for the
Crestar Employees' Thrift and
Profit Sharing Plan 6,629,404 shares(1) 6.03%
919 East Main Street
Richmond, VA 23219
Delaware Management Holdings, Inc. 7,958,576 shares(2) 7.25%
One Commerce Square
Philadelphia, PA 19103-3682
</TABLE>
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(1)Shares are held on behalf of Plan participants. Crestar Bank has no voting
rights or any investment or dispositive power with respect to the shares. Plan
information is as of December 31, 1996.
(2)Shares attributed to Delaware Management Holdings, Inc. include shares held
by Delaware Management Company, Inc., a mutual fund manager. Delaware Management
Holdings, Inc. reports that it has sole voting power with respect to 6,130,540
shares; shared voting power with respect to no shares; sole dispositive power
for 7,642,776 shares; and shared dispositive power for 315,800 shares. Delaware
Management Holdings, Inc. information is as of December 31, 1996 and was
obtained from a Schedule 13G filed by Delaware Management Holdings, Inc.
(3)Percentages reflect issuance of shares of the Corporation's Common Stock in
the acquisition of Citizens Bancorp on December 31, 1996.
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PROPOSAL 1. ELECTION OF DIRECTORS
/ YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ALL NOMINEES
The Board of Directors is divided into 3 classes (Class I, Class II and Class
III), with each class elected at successive Annual Meetings. The term of office
for all Class I directors expires at this Annual Meeting. The following
individuals have been nominated by the Board for election as Class I directors
for a 3-year term expiring in 2000: J. Carter Fox, Patrick J. Maher, Gordon F.
Rainey, Jr., Alfred H. Smith, Jr. and Robert C. Wilburn. Jeffrey R. Springer has
been nominated by the Board for election as a Class II director for a 1-year
term expiring in 1998. All of the candidates presently serve on the Board, and
all were previously elected by shareholders with the exception of Messrs. Smith,
Springer and Wilburn, who joined the Board in January, 1997.
o It is the intention of the persons named as proxies in the accompanying
form of proxy to vote for the election of each of the 6 named nominees
unless authorization is withheld.
o Each nominee has agreed to serve if elected. In the event any nominee
shall unexpectedly be unable to serve, the Board may reduce its size or
nominate an alternate candidate for whom the proxies will be voted.
o The election of each nominee requires the affirmative vote of the
holders of a plurality of the shares of Common Stock cast in the
election of directors.
Gene A. James and H. Gordon Leggett, Jr., both Class I directors, are retiring
from the Board when their terms expire in April. The Corporation gratefully
acknowledges Mr. James' 17 years of service to the Corporation, including 10
years of service on the Board and 7 years on the Crestar Bank Advisory Board,
and Mr. Leggett's 13 years of service on the Board.
2
<PAGE>
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YOUR BOARD OF DIRECTORS
The name, age, principal occupation and recent business experience of each
nominee and director are outlined below. The descriptions also include the
length of service as a director of the Corporation, service on committees of the
Board and any other public company directorships. All directors also serve as
directors of Crestar Bank, the Corporation's banking subsidiary.
DIRECTOR NOMINEES:
CLASS I -- TERM EXPIRING IN 2000
<TABLE>
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[Picture] J. CARTER FOX, 57, is Chairman, President and Chief Executive Officer of Chesapeake
Corporation (packaging, paper and forest products manufacturer), Richmond, Virginia. Mr.
Fox is a director of Chesapeake Corporation and assumed the post of Chairman in April,
1994. Except for a 13-month period from February, 1995 to March, 1996, he has served as
President of Chesapeake Corporation since November, 1980. Mr. Fox is also a trustee of
Virginia Union University. He was elected a director of the Corporation in 1985 and
serves on the Executive Committee and the Nominating and Governance Committee.
[Picture] PATRICK J. MAHER, 60, is Chairman and Chief Executive Officer of Washington Gas Light
Company (natural gas distributor), Washington, D.C. Mr. Maher was President of the
company from October, 1987 until November, 1992. He has been Chief Executive Officer
since February, 1992 and Chairman since November, 1992. He is also a director of
Washington Gas Light Company. Mr. Maher was elected a director of the Corporation in 1991
and serves as Chair of the Audit Committee as well as a member of the Executive
Committee.
[Picture] GORDON F. RAINEY, JR., 56, is a partner in the law firm of Hunton & Williams, Richmond,
Virginia. Mr. Rainey is also Chair of the Executive Committee of Hunton & Williams, a
position that he assumed in April, 1994. He is also a trustee of The Colonial
Williamsburg Foundation. He was elected a director of the Corporation in 1991 and was a
member of the Audit Committee until November, 1996 when he became a member of the
Executive Committee.
[Picture] ALFRED H. SMITH, JR., 63, is a partner in A.H. Smith Associates Limited Partnership
(concrete, sand and gravel distributor), Branchville, Maryland. He was Chairman and Chief
Executive Officer of Citizens Bancorp from June, 1987 to December, 1996 when it merged
with the Corporation. He served as a director of Citizens Bank of Maryland from 1963
until January, 1997, and as Chairman of its Board from June, 1987 until January, 1997
when he became a director of the Corporation.
</TABLE>
3
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<TABLE>
<S> <C>
[Picture] ROBERT C. WILBURN, 53, is President of The Colonial Williamsburg Foundation (educational
museum, hotels and restaurants), Williamsburg, Virginia, a position he has held since
August, 1992. From August, 1984 to August, 1992, Mr. Wilburn was President of the
Carnegie Institute and Library. He served as Secretary of Education for the Commonwealth
of Pennsylvania from December, 1982 to August, 1984, and as Secretary of Budget and
Administration from January, 1979 to December, 1982. Mr. Wilburn is also a director of
Harsco Corporation. He was elected a director of the Corporation in January, 1997 and
serves on the Audit Committee.
</TABLE>
DIRECTOR NOMINEE:
CLASS II -- TERM EXPIRING IN 1998
<TABLE>
<S> <C>
[Picture] JEFFREY R. SPRINGER, 52, is Vice Chairman of Crestar Bank-Greater Washington Region, a
position he has held since March, 1997. He served as President of Citizens Bank of
Maryland from October, 1987 to March, 1997 when it merged with Crestar Bank. He also
served as President and Chief Operating Officer of Citizens Bancorp from October, 1987
until its merger with the Corporation in December, 1996. Mr. Springer was elected a
director of the Corporation in January, 1997.
</TABLE>
DIRECTORS CONTINUING IN OFFICE:
CLASS II -- TERM EXPIRING IN 1998
<TABLE>
<S> <C>
[Picture] BONNIE GUITON HILL, 55, is President and Chief Executive Officer of Times Mirror
Foundation and Vice President of Times Mirror Company (news and information services),
Los Angeles, California, positions she has held since February, 1997. From July, 1992 to
January, 1997, she was Dean of the McIntire School of Commerce at the University of
Virginia. From April, 1991 to June, 1992, Ms. Hill was Secretary of the State and
Consumer Services Agency for the State of California. Ms. Hill serves as a director of
Niagara Mohawk Power Corporation, Louisiana-Pacific, Inc., Hershey Foods Corporation, AK
Steel Holding Corporation and NASD Regulation, Inc. She is also a board member of the
Center for Excellence in Education, the American Forest Foundation and the National Urban
League. Ms. Hill was elected a director of the Corporation in April, 1994 and is a member
of the Audit Committee. She is also Chair of the Nominating and Governance Committee.
</TABLE>
4
<PAGE>
<TABLE>
<S> <C>
[Picture] FRANK E. MCCARTHY, 62, is Executive Vice President of the National Automobile Dealers
Association, McLean, Virginia. Mr. McCarthy has been a director of the Corporation since
1987. He served on the Executive Committee until October, 1996 when he became a member of
the Human Resources and Compensation Committee.
[Picture] G. GILMER MINOR, III, 56, is Chairman, President and Chief Executive Officer of Owens &
Minor, Inc. (hospital and medical supply distributor), Richmond, Virginia. Mr. Minor
assumed the post of Chairman in May, 1994. He is a director of Owens & Minor, Inc. and
Richfood Holdings, Inc. He also is a director of The Virginia Biotechnology Research Park
and a trustee of the Virginia Military Institute Foundation and the National Committee
for Quality Health Care. He has been a director of the Corporation since 1987 and serves
on the Human Resources and Compensation Committee and the Nominating and Governance
Committee.
[Picture] EUGENE P. TRANI, 57, is President of Virginia Commonwealth University, Richmond,
Virginia, a position he has held since July, 1990. Dr. Trani is also President and a
director of The Virginia Biotechnology Research Park and serves on the boards of a number
of community, cultural and educational organizations. He also serves as a director of
Lawyers Title Corporation and Heilig-Meyers Corporation. Dr. Trani was elected a director
of the Corporation in 1993 and serves on the Audit Committee.
[Picture] JAMES M. WELLS III, 50, is President and Chief Operating Officer of the Corporation and
Crestar Bank. Mr. Wells was elected a director of the Corporation in December, 1988. In
October, 1988, he was elected President of the Corporation, as well as President of
Crestar Bank. Prior to becoming President, he served as Executive Vice President of the
Corporation and Crestar Bank, and in February, 1997 he was elected Chief Operating
Officer of the Corporation and Crestar Bank. Mr. Wells is a director of VISA U.S.A., Inc.
and serves on the Corporation's Executive Committee.
</TABLE>
5
<PAGE>
DIRECTORS CONTINUING IN OFFICE
CLASS III -- TERM EXPIRING IN 1999
<TABLE>
<S> <C>
[Picture] CHARLES R. LONGSWORTH, 67, is Chairman Emeritus of The Colonial Williamsburg Foundation
(educational museum, hotels and restaurants), Williamsburg, Virginia. Mr. Longsworth was
President and Chief Executive Officer of the Foundation until November, 1992 and assumed
the post of Chairman in November, 1991. He served as Chairman until November, 1994 when
he was named Chairman Emeritus. Mr. Longsworth is a director of Houghton Mifflin, Inc.,
Caliber System, Inc., Saul Centers, Inc. and The Virginia Eastern Shore Corporation. He
is also Chairman of the Board of Trustees of Amherst College and a director of Public
Radio International. Mr. Longsworth was elected a director of the Corporation in 1986 and
is Chair of the Human Resources and Compensation Committee. He also serves on the
Executive Committee.
[Picture] PAUL D. MILLER, 55, is President of Litton/Sperry Marine, Inc. (marine navigation and
control systems manufacturer), Charlottesville, Virginia, a position he has held since
Litton Industries, Inc. acquired Sperry Marine in May, 1996. Admiral Miller (Ret.) served
as Chief Executive Officer of Sperry Marine from November, 1995 to May, 1996. From
November, 1994 to November, 1995, he served as Sperry Marine's President and Chief
Operating Officer. Prior to joining Sperry Marine, he completed 30 years of service in
the U.S. Navy. From January, 1991 until July, 1992, Admiral Miller was Commander-in-Chief
of the U.S. Atlantic Fleet, and from July, 1992 until his retirement from the Navy,
Admiral Miller was Commander-in-Chief of the U.S. Atlantic Command and NATO's Supreme
Allied Commander Atlantic. Admiral Miller also serves on the Foundation Board of Trustees
for the University of Virginia McIntire School of Commerce, the Dean's Advisory Council
for the School of Engineering and Applied Science of the University of Virginia and the
Educational Foundation Board of Directors for Piedmont Virginia Community College. He was
elected a director of the Corporation in 1995 and serves on the Audit Committee.
[Picture] FRANK S. ROYAL, 57, is President and member of Frank S. Royal, M.D., P.C. (family
medicine), Richmond, Virginia. He has been a practicing physician since 1969. Dr. Royal
is a director of Chesapeake Corporation, Columbia/HCA Healthcare, Inc., CSX Corporation
and Dominion Resources, Inc. He is also Chairman of the boards of Meharry Medical
College, Virginia Union University and the YMCA of Greater Richmond and is a director of
The Virginia Biotechnology Research Park. Dr. Royal has been a director of the
Corporation since 1979 and is a member of the Executive Committee.
</TABLE>
6
<PAGE>
<TABLE>
<S> <C>
[Picture] RICHARD G. TILGHMAN, 56, is Chairman and Chief Executive Officer of the Corporation and
Crestar Bank. He has been Chairman since April, 1986 and Chief Executive Officer since
September, 1985. Mr. Tilghman was President of the Corporation and Crestar Bank from
September, 1985 until October, 1988. He is a director of Chesapeake Corporation and a
trustee of The Colonial Williamsburg Foundation. Mr. Tilghman has been a director of the
Corporation since 1984 and serves as Chair of the Executive Committee.
[Picture] L. DUDLEY WALKER, 66, is Chairman of Bassett-Walker, Inc. (textile and apparel
manufacturer), Martinsville, Virginia. Prior to July, 1987, Mr. Walker was also President
and Chief Executive Officer of Bassett-Walker, Inc. Mr. Walker is a director of VF
Corporation and Hooker Furniture Corporation. He became a director of the Corporation in
1982 and serves on the Audit Committee.
[Picture] KAREN HASTIE WILLIAMS, 52, is a partner in the Crowell & Moring law firm, Washington,
D.C. Ms. Williams is a director of Federal National Mortgage Association, Washington Gas
Light Company, Continental Airlines, Inc. and SunAmerica, Inc. She also serves as a
trustee of the NAACP Legal Defense Fund, Inc., Executive Committee Chair of the Black
Student Fund and Chair of The Greater Washington Research Center. Ms. Williams was
elected a director of the Corporation in 1987 and served on the Human Resources and
Compensation Committee until October, 1996 when she became a member of the Audit
Committee.
</TABLE>
7
<PAGE>
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BOARD OF DIRECTORS AND COMMITTEES
In 1996, your Board of Directors held 10 meetings. The Board has established 4
standing committees to perform assigned functions as outlined below. All
directors attended at least 75% of all meetings of the Board and committees on
which they serve. No employees of the Corporation serve on the Audit, Human
Resources and Compensation or Nominating and Governance Committees.
EXECUTIVE COMMITTEE (10 MEETINGS IN 1996)
MEMBERS: TILGHMAN (CHAIR), FOX, LONGSWORTH, MAHER, RAINEY, ROYAL AND WELLS
o Exercises all powers of the Board of Directors between Board meetings,
except for certain matters reserved to the Board by law.
o Reviews management's annual business plan and financial goals.
o Serves as the Board's steering committee and recommends matters for
Board action.
o Serves as the Board's advisor on mergers and acquisitions and corporate
structure issues.
o Until formation of the Nominating and Governance Committee in October,
1996, functioned as the nominating committee by recommending nominees
for election as directors of the Corporation.
AUDIT COMMITTEE (5 MEETINGS IN 1996)
MEMBERS: MAHER (CHAIR), HILL, MILLER, TRANI, WALKER AND WILLIAMS
o Recommends selection of independent auditors to be appointed by the
Board and ratified by the shareholders.
o Reviews reports of examination by regulatory agencies with jurisdiction
over the Corporation and its subsidiaries.
o Reviews findings of the independent and internal auditors and the scope
of the internal audit plan.
o Reviews administration of the Corporation's Standards of Conduct.
o Assists the Board in fulfilling responsibilities for financial and
regulatory reporting.
o Serves as the Board's Community Reinvestment Act Committee.
o Reviews the basis of management's report required by the Federal
Deposit Insurance Corporation Improvement Act of 1991.
HUMAN RESOURCES AND COMPENSATION COMMITTEE (6 MEETINGS IN 1996)
MEMBERS: LONGSWORTH (CHAIR), JAMES, LEGGETT, MCCARTHY AND MINOR
o Reviews and approves major compensation policies.
o Recommends to the Board the salaries and bonuses to be paid to the 5
highest paid executive officers of the Corporation.
o Approves performance targets for the Corporation's benefit plans.
o Determines Management Incentive Plan awards, stock options and other
grants to eligible officers.
o Reviews and recommends for Board approval new qualified and
non-qualified benefit plans and significant changes to existing benefit
plans.
o Recommends for Board approval appropriate changes in director
compensation.
8
<PAGE>
NOMINATING AND GOVERNANCE COMMITTEE (4 MEETINGS AS A SPECIAL COMMITTEE IN 1996;
ESTABLISHED AS A STANDING COMMITTEE IN DECEMBER, 1996)
MEMBERS: HILL (CHAIR), FOX AND MINOR
o Identifies, evaluates and recommends nominees for election as directors
of the Corporation. (The committee will consider nominations by
shareholders.)
o Interprets Board member eligibility requirements, as set forth in the
Corporation's Bylaws and Board committee guidelines.
o Recommends changes to Board member eligibility requirements.
o Reviews board governance practices of other corporations and banks.
o Adopts, monitors and amends the Corporation's corporate governance
guidelines.
o Evaluates Board performance assessment.
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DIRECTOR COMPENSATION
DIRECTOR COMPENSATION PHILOSOPHY -- The Corporation's philosophy on director
compensation is based on two fundamental principles:
o PAY FOR PERFORMANCE -- Directors should be provided an opportunity to
participate in the success of the Corporation by receiving higher pay
for better performance in delivering total return to shareholders.
o EXTERNAL COMPETITIVENESS -- The Corporation should offer an attractive
and competitive compensation package to those it asks to serve on the
Board.
By implementing these principles, the Corporation achieves the following:
o ALIGNMENT OF DIRECTOR INTERESTS WITH SHAREHOLDER INTERESTS -- Directors
are encouraged to own Common Stock as a reflection of their long-term
interests in the Corporation, thus encouraging appropriate risk taking.
o EXTERNAL EQUITY -- Directors are assured that they will be compensated
competitively as compared to the Corporation's peer group.
The directors' compensation package is designed to reflect these principles:
o Directors are encouraged to increase their ownership of Common Stock as
a means of promoting a greater identity of interests with the
Corporation's shareholders. At least a portion of director compensation
is generally paid in Common Stock, which allows directors to share in
the success of the Corporation through increases in total shareholder
return.
o Director compensation is periodically evaluated using data from
independent surveys and comparisons of director compensation for the
same peer group used in evaluating executive compensation. Total
director compensation is targeted to be at or about the median of the
peer group.
9
<PAGE>
The members of your Board of Directors were compensated for their services in
1996 as shown in the following table. Directors who are officers of the
Corporation do not receive any fees for service on the Board or any Board
committee.
<TABLE>
<CAPTION>
DIRECTOR COMPENSATION FOR 1996(1)
CASH COMPENSATION SECURITY GRANTS
------------------------------- -------------------
(B)
ANNUAL (C) (D)
(A) RETAINER MEETING NUMBER
NAME FEES ($)(2) FEES ($)(3) OF SHARES (#)(4)
------------- ------------- -------------------
<S> <C> <C> <C>
Richard M. Bagley(5) 12,001 6,000 204
J. Carter Fox 12,001 22,500 204
Bonnie Guiton Hill 13,168 18,000 204
Gene A. James 12,001 16,000 204
H. Gordon Leggett, Jr. 12,001 14,000 204
Charles R. Longsworth 15,501 24,500 204
Patrick J. Maher 15,501 24,500 204
Frank E. McCarthy 12,001 18,000 204
Paul D. Miller 12,001 15,000 204
G. Gilmer Minor, III 12,001 19,000 204
Gordon F. Rainey, Jr. 12,001 15,000 204
Frank S. Royal 12,001 20,000 204
Eugene P. Trani 12,001 14,500 204
L. Dudley Walker 12,001 13,000 204
Karen Hastie Williams 18,000 14,000 0
</TABLE>
---------------------
(1) Directors may defer all or part of their retainers and meeting fees.
Amounts shown in this table include deferred fees.
(2) Total annual retainer is $18,000, with $12,000 generally payable in
cash (reported in column (b)) and $6,000 payable in Common Stock (reported
in column (d)). Non-officer committee chairs receive an additional $3,500
per year, pro-rated for service less than a year, which is also reported
in column (b).
(3) Meeting fees are $1,000 per meeting attended, with an additional $500
for a second meeting on the same day.
(4) Column (d) shows the stock portion of the annual retainer. The number
of shares was determined by dividing $6,000 by $58.8125, the average of
the high and low trading prices of Common Stock on January 2, 1996. The
number reported in column (d) reflects the 2-for-1 stock split distributed
on January 24, 1997. Fractional shares were paid in cash and are reported
in column (b). Ms. Williams received her entire 1996 annual retainer in
cash because her arrangement with her law firm did not allow her to
participate in the Directors' Stock Compensation Plan.
(5) Mr. Bagley retired as a director in April, 1996.
Non-employee directors also participate in the Directors' Equity Program, which
was approved by shareholders at the 1996 Annual Meeting. Under this Program,
directors receive equity awards, credited to their equity award accounts at the
beginning of each 5-year cycle, equal to a number of whole shares of Common
Stock with a fair market value of $40,000. The first 5-year cycle began in 1996.
New directors who begin Board service after a cycle has begun receive pro-rated
equity awards for that cycle. Equity award accounts vest 20% annually for each
year of service on the Board, taking into account all of a participant's Board
service. A director may also defer all or part of the annual retainer, whether
payable in cash or in stock, to a deferred stock account under the Directors'
Equity Program. Both equity award accounts and deferred stock accounts are
maintained only as bookkeeping entries. Accounts are credited with dividend
equivalents and are valued on the basis of the fair market value of Common
Stock. Benefits are distributed in whole shares of Common Stock and cash for
fractional shares on February 15 following the year in which the director's
Board membership ends, either in a lump sum or in annual installments over 5
years. No voting rights are associated with the deferred stock accounts or
equity award accounts.
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Directors may also defer their cash retainers and meeting fees under the
Deferred Compensation Plan for Outside Directors. Deferred fees are credited, at
the director's election, either to a variable rate, interest-bearing deferred
cash account or, if the director is 65 or younger, to a deferred income benefit
account earning a fixed interest rate. Benefits are paid in a lump sum or in
annual installments for 5 to 20 years and include survivor's benefits.
Accelerated payment of deferred benefits may occur under certain conditions,
including upon a change-in-control of the Corporation. If accelerated payment
occurs, the amount paid is calculated according to a present value formula that
considers each director's accelerated taxation and adjusts to provide the same
after-tax benefit that each director would have received if the payments had
been made according to the original payment schedule. That calculation might
result in a larger payment by the Corporation than would have occurred absent
acceleration. Assets available to pay deferred benefits under this Plan are held
in a trust but remain available to the Corporation's creditors in the event of
the Corporation's insolvency.
- --------------------------------------------------------------------------------
BENEFICIAL OWNERSHIP OF MANAGEMENT
The table that follows lists the beneficial ownership of Common Stock by all
directors (including nominees), the Chief Executive Officer and the 5 executive
officers who received the highest compensation in 1996, and all directors and
executive officers of the Corporation as a group as of the record date for the
1997 Annual Meeting.
o Unless otherwise indicated, all persons listed below have sole voting
and investment power over all shares beneficially owned. Beneficial
ownership has been computed in accordance with Securities and Exchange
Commission rules and does not necessarily indicate beneficial ownership
for any other purpose.
o In determining beneficial ownership, shares owned by immediate family
members with respect to which an individual has disclaimed beneficial
ownership have been excluded from the table but are indicated by
footnote.
<TABLE>
<CAPTION>
PERCENTAGE
AMOUNT AND NATURE OF SHARES DEFERRED
BENEFICIAL OWNERSHIP OF BENEFICIAL OWNERSHIP OUTSTANDING UNITS(1)
----------------------- ------------ --------
<S> <C> <C> <C>
DIRECTORS:
J. Carter Fox 7,204(2) Less than 1% 1,795
Bonnie Guiton Hill 1,158 Less than 1% 567
Gene A. James 3,345 Less than 1% 1,417
H. Gordon Leggett, Jr. 4,967 Less than 1% 1,417
Charles R. Longsworth 2,788 Less than 1% 2,130
Patrick J. Maher 7,776(3) Less than 1% 1,417
Frank E. McCarthy 8,560(4) Less than 1% 2,556
Paul D. Miller 400 Less than 1% 661
G. Gilmer Minor, III 6,675 Less than 1% 1,417
Gordon F. Rainey, Jr. 25,804(5) Less than 1% 1,417
Frank S. Royal 3,928 Less than 1% 1,630
Alfred H. Smith, Jr. 1,160,694(6) 1.05% 0
Jeffrey R. Springer 151,763(7) Less than 1% 0
Richard G. Tilghman 542,443(8) Less than 1% 15,347
Eugene P. Trani 1,111 Less than 1% 1,512
L. Dudley Walker 54,255(9) Less than 1% 1,795
James M. Wells III 309,926(10) Less than 1% 6,208
Robert C. Wilburn 1,000 Less than 1% 0
Karen Hastie Williams 1,234(11) Less than 1% 1,417
(chart, including all footnotes, continued on next page)
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE
AMOUNT AND NATURE OF SHARES DEFERRED
BENEFICIAL OWNERSHIP OF BENEFICIAL OWNERSHIP OUTSTANDING UNITS(1)
----------------------- ------------ --------
<S> <C> <C> <C>
EXECUTIVE OFFICERS (NOT DIRECTORS):
Estate of William C. Harris 89,090(12) Less than 1% 0
Oscar H. Parrish, Jr. 125,997(13) Less than 1% 1,523
C. Garland Hagen 202,224(14) Less than 1% 4,324
Richard F. Katchuk 43,681(15) Less than 1% 823
All directors and executive officers
as a group (35 persons) 3,639,407(16) 3.29% 71,091
</TABLE>
---------------------
(1) For non-employee directors, Deferred Units represent vested equity
awards and director fees deferred under the Directors' Equity Program and
their dividend equivalents, which will be payable in Common Stock
following termination of Board membership. For employees, Deferred Units
represent phantom accounts under non-qualified plans, which provide
benefits in excess of the limits allowed under the Internal Revenue Code
and which will be payable in cash following termination of employment. No
voting rights are associated with any Deferred Units.
(2) Excludes 200 shares owned by Mr. Fox's spouse, for which Mr. Fox
disclaims beneficial ownership.
(3) Includes 6,404 shares held jointly with Mr. Maher's spouse but
excludes 695 shares held by Mr. Maher's children, for which Mr. Maher
disclaims beneficial ownership.
(4) Includes 5,095 shares held jointly with Mr. McCarthy's spouse, but
excludes 107 shares held by one of Mr. McCarthy's children, for which Mr.
McCarthy disclaims beneficial ownership.
(5) Includes 9,600 shares held by two trusts for which Mr. Rainey is
Co-Trustee and has shared voting and investment power.
(6) Includes 501,748 shares held by Smith Citizens Associates, L.P., for
which Mr. Smith has sole voting power. Also includes 51,556 shares held
jointly with Mr. Smith's spouse, 4,726 shares held individually by Mr.
Smith's spouse and 736 shares owned jointly by Mr. Smith's spouse and his
mother-in-law.
(7) Includes exercisable options for 74,315 shares and 5,124 shares held
by two trusts for the benefit of Mr. Springer's children, for which Mr.
Springer is Trustee.
(8) Includes exercisable options for 364,810 shares and 3,540 shares held
by Mr. Tilghman as custodian for his children, but excludes 11,544 shares
held by Mr. Tilghman's spouse, for which Mr. Tilghman disclaims beneficial
ownership.
(9) Excludes 8,702 shares held by Mr. Walker's spouse, for which Mr.
Walker disclaims beneficial ownership.
(10) Includes exercisable options for 227,396 shares.
(11) Excludes 360 shares held in trust for Ms. Williams' children, for
which Ms. Williams disclaims beneficial ownership.
(12) Includes exercisable options for 39,498 shares, but excludes 13,146
shares held by Mr. Harris' spouse.
(13) Includes exercisable options for 70,600 shares.
(14) Includes exercisable options for 98,100 shares.
(15) Includes exercisable options for 38,600 shares.
(16) Includes exercisable options for 1,681,397 shares and 78,117 shares
for which directors and executive officers have shared voting and
investment power but excludes 41,363 shares for which directors and
executives disclaim beneficial ownership.
- --------------------------------------------------------------------------------
CERTAIN RELATIONSHIPS AND RELATED INTERESTS
The Corporation's subsidiaries have made loans and extended credit in the
ordinary course of business to directors and officers of the Corporation and to
their associates, including corporations or organizations of which they are an
executive officer or partner, on substantially the same terms, including
interest rates and collateral, as those prevailing at the time for comparable
transactions with others. No such loans or extensions of credit are
nonperforming or involve more than the normal risk of collectability or present
other unfavorable features.
During 1996, the Corporation and its subsidiaries utilized the legal services of
the law firms of Hunton & Williams and Crowell & Moring, of which directors
Gordon F. Rainey, Jr. and Karen Hastie Williams,
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respectively, are partners. The amount of fees paid by the Corporation and its
subsidiaries to Hunton & Williams and to Crowell & Moring did not exceed 5% of
either firm's gross revenues in its last full fiscal year.
Hunton & Williams leased 15,708 square feet of office space in Crestar Bank's
Norfolk headquarters building for a term of 12 years, commencing December 1,
1991. Over the term of the lease, Crestar Bank expects to realize rental income
of $2,985,000, plus additional income from tenant parking. Because of the high
vacancy factor for office space in the Norfolk market at the time, and the
intense competition for tenants, Crestar Bank made various at-market concessions
to induce Hunton & Williams to enter into the lease. In the judgment of
management, these concessions and other lease terms were similar in nature and
amount to arms-length financial inducements offered to Hunton & Williams by
owners of other Norfolk buildings. The lease is expected to increase the future
sale value of the building, although there is no present plan to sell the
building.
During 1996, the Corporation, including its subsidiaries, utilized the services
of ExecuSearch, an executive search firm in Richmond, Virginia. The principal
owner of ExecuSearch is Brenda Watts-Kelley, spouse of James J. Kelley, the
Corporation's Group Executive Vice President-Management Resources Group. During
1996, the Corporation paid ExecuSearch approximately $63,000 in reimbursable
expenses, a substantial portion of which reflected compensation to a recruiter
the Corporation leased from ExecuSearch, and $81,000 in commissions. The Board's
Human Resources and Compensation Committee has determined that the business
relationship with ExecuSearch is competitive and conducted in accordance with
ordinary business practices and that the commissions paid ExecuSearch are
comparable to commissions charged for consulting services by other executive
search firms. It is expected that the Corporation and its subsidiaries will, in
the future, retain the services of ExecuSearch, although they are under no
obligation to do so.
- --------------------------------------------------------------------------------
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires that the
Corporation's directors and executive officers, and persons who own more than
10% of a registered class of the Corporation's equity securities, file with the
Securities and Exchange Commission initial reports of ownership and reports of
change in ownership of Common Stock and other equity securities of the
Corporation. The same persons are also required by SEC regulation to furnish the
Corporation with copies of all Section 16(a) forms that they file.
To the Corporation's knowledge, based solely on review of the copies of such
reports furnished to the Corporation and written representations that no other
reports were required during the fiscal year ended December 31, 1996, all
Section 16(a) filing requirements applicable to its executive officers,
directors and greater than 10% beneficial owners were complied with, except that
executive officer F. Edward Harris reported late on his year-end Form 5, the
November 12, 1996 sale of 953 shares of Common Stock by his spouse (the shares
of which Mr. Harris disclaims beneficial ownership), and executive officers
Thomas M. Eckis, F. Edward Harris and William C. Harris reported late in early
March, 1996, exempt sales of Common Stock within Crestar's 401(k) plan in
November, 1995. These intra-plan transfers, which were undertaken for the
purpose of diversification, should have been reported on year-end Forms 5 for
1995, but complete reporting information was not made available at the time.
- --------------------------------------------------------------------------------
PROPOSAL 2. APPROVAL OF AMENDED AND RESTATED 1993 STOCK INCENTIVE PLAN
/ YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL
The Board of Directors voted in February, 1997 to adopt the Crestar Financial
Corporation 1993 Stock Incentive Plan, as amended and restated effective
February 28, 1997 (the "Amended Stock Plan"), subject to approval by the
shareholders at the 1997 Annual Meeting.
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<PAGE>
The Amended Stock Plan is an amendment and restatement of the Crestar Financial
Corporation 1993 Stock Incentive Plan (the "1993 Plan"), which was adopted by
the Board on January 22, 1993 and approved by shareholders at the 1993 Annual
Meeting. The Board believes that, by providing employees with opportunities for
increased stock ownership, the 1993 Plan is fulfilling its purposes of helping
to recruit and retain employees with ability and initiative, providing greater
incentive for employees of the Corporation and its subsidiaries, and associating
the interests of employees with those of the Corporation, its subsidiaries and
its shareholders.
The Amended Stock Plan, if approved by shareholders, will be a continuation of
the 1993 Plan and will include provisions that (i) conform the Plan to the
requirements of Section 162(m) of the Internal Revenue Code of 1986, as amended
(the "Code"), for performance-based compensation; (ii) increase the number of
shares of Common Stock authorized to be issued under the Plan; and (iii) allow
the grant of vested stock awards and performance-based cash incentive awards.
o The Corporation will provide promptly, upon written request and without
charge, a copy of the full text of the Amended Stock Plan to each
person to whom a copy of this Proxy Statement is delivered. Requests
should be directed to: Linda F. Rigsby, Senior Vice President and
Corporate Secretary, Crestar Financial Corporation, 919 East Main
Street, Richmond, Virginia 23219 (804/782-7738).
o Approval of the Amended Stock Plan requires the affirmative vote of the
holders of a majority of the shares of Common Stock present or
represented by proxy at the meeting.
o It is the intention of the persons named as proxies in the accompanying
form of proxy to vote for the approval of the Amended Stock Plan unless
authorization is withheld.
The principal features of the Amended Stock Plan are summarized in the following
paragraphs. This summary is subject, in all respects, to the terms of the
Amended Stock Plan.
SUMMARY OF THE AMENDED STOCK PLAN
ADMINISTRATION. The Human Resources and Compensation Committee of the Board (the
"Committee") will administer the Amended Stock Plan. The Committee may delegate
its authority to administer the Amended Stock Plan to one or more officers of
the Corporation or to the Executive Committee of the Board. The Committee,
however, may not delegate its authority with respect to individuals who are
subject to Section 16 of the Securities Exchange Act of 1934. As used in this
summary, the term "Administrator" means the Committee and any delegate appointed
by the Committee.
ELIGIBILITY. Each employee of the Corporation or a subsidiary is eligible to
participate in the Amended Stock Plan. The Administrator will select the
individuals who will participate in the Amended Stock Plan ("Participants"). The
Administrator may, from time to time, grant stock options, stock appreciation
rights ("SARs"), stock awards, performance shares or incentive awards to
Participants. All awards made under the Amended Stock Plan will be evidenced by
written agreements between the Corporation and the Participant.
OPTIONS. Participants may be granted options under the Amended Stock Plan.
Options may be incentive stock options ("ISOs") or non-qualified stock options
("NQSOs"). A stock option entitles the Participant to purchase shares of Common
Stock from the Corporation at the option price. The option price will be fixed
by the Administrator at the time the option is granted, but the price cannot be
less than the shares' fair market value on the date of grant. The option price
may be paid in cash, in a cash equivalent acceptable to the Administrator, with
shares of Common Stock or with a combination of cash and Common Stock.
Options may be exercised, in whole or in part, at such times and subject to such
conditions as may be prescribed by the Administrator. Each option agreement will
specify the maximum exercise period, which may not exceed 10 years. No
Participant, however, may be granted incentive stock options (under the Amended
Stock Plan and all plans of the Corporation and its affiliates) that are first
exercisable in a calendar year for Common Stock having an aggregate fair market
value (determined as of the date an option is granted) exceeding $100,000. In
addition, no Participant may be granted options in any calendar year covering
more than 100,000 shares of Common Stock.
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<PAGE>
SARS. Participants also may be granted SARs under the Amended Stock Plan. SARs
entitle the Participant to receive the lesser of (i) the excess of the fair
market value of a share of Common Stock on the date of exercise over the initial
value of the SAR or (ii) the initial value. The initial value of the SAR is
determined by the Administrator at the time of the grant but cannot be less than
the fair market value of a share of Common Stock on the date of grant. The
amount payable upon the exercise of a SAR may be paid in cash, Common Stock or a
combination of the two.
SARs may be granted in relation to option grants ("Corresponding SARs") or
independently of option grants. The difference between these two types of SARs
is that the exercise of a Corresponding SAR requires the Participant to
surrender, unexercised, that portion of the option to which the Corresponding
SAR relates.
No individual may be granted SARs in any calendar year covering more than
100,000 shares of Common Stock. For purposes of this limitation and the option
grant limitation, an option and a Corresponding SAR are treated as a single
award.
STOCK AWARDS. Participants may also be awarded shares of Common Stock pursuant
to a stock award, but no Participant may receive stock awards in any calendar
year for more than 30,000 shares of Common Stock. A Participant's rights in a
stock award may be nontransferable or forfeitable or both for a period of time
or subject to such conditions as may be prescribed by the Administrator. These
conditions may include, for example, a requirement that the Participant continue
employment with the Corporation or a subsidiary for a specified period or that
the Corporation, a subsidiary or the Participant achieve stated objectives,
including objectives based on the performance measures described below.
PERFORMANCE SHARES. The Amended Stock Plan also allows for the award of
performance shares. A performance share award entitles the Participant to
receive a payment equal to the fair market value of a specified number of shares
of Common Stock if certain performance objectives are achieved, including
objectives based on the performance measures described below. The period in
which any performance criteria must be satisfied cannot be less than 1 year. To
the extent that performance shares are earned, the obligation may be settled in
cash, in Common Stock or by a combination of the two. The maximum number of
shares of Common Stock that may be earned by an individual under all performance
share awards (whether settled in Common Stock, cash or a combination of the two)
granted in a calendar year may not exceed the product of (i) 35,000 shares and
(ii) the number of years (measured in terms of 12 consecutive months) during
which one or more performance criteria was measured.
INCENTIVE AWARDS. The Amended Stock Plan also allows the Administrator to make
incentive awards to Participants on such terms and conditions as the
Administrator prescribes. No Participant may receive an incentive award payment
in any calendar year that exceeds the lesser of (i) 150% of the Participant's
annual base salary as of the date the incentive award is granted or
(ii)7$1,000,000. An incentive award may be earned only to the extent that
performance objectives are achieved, including objectives based on the
performance measures described below. To the extent that any incentive awards
are earned, they will be paid in cash.
TRANSFERABILITY. In general, options, SARs, performance shares, incentive awards
and stock awards will be nontransferable except by will or the laws of descent
and distribution. If provided in the agreement governing the grant, options that
are not ISOs, SARs (other than a Corresponding SAR that is related to an ISO)
and performance shares may be transferred by the Participant to his or her
spouse, children or grandchildren, or to a trust or trusts for the benefit of
such family members or to a partnership in which such family members are the
only partners, on such terms as permitted under Securities and Exchange
Commission Rule 16b-3.
PERFORMANCE MEASURES. The Administrator may prescribe that a stock award is
vested or transferable or both, or that payment under a performance share award
or an incentive award is earned only upon the attainment of certain performance
objectives. Such performance objectives may be based on one or more of the
Corporation's, a subsidiary's or an operating unit's (i) return on equity, (ii)
NIACC (i.e., net income after capital charge), (iii) return on assets, (iv)
earnings per share, (v) efficiency ratio (i.e.,
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<PAGE>
noninterest expense less nonrecurring expense divided by the sum of net interest
income and noninterest income), (vi) earnings growth, (vii) total earnings,
(viii) the fair market value of the Common Stock, (ix) total shareholder return
or (x) such other measures as selected by the Administrator.
CHANGE-IN-CONTROL. The Amended Stock Plan provides that each outstanding SAR and
option will become fully exercisable and each outstanding stock award will be
transferable and nonforfeitable as of the date of a change-in-control (as
defined in the Amended Stock Plan) and during a period following a tender or
exchange offer for shares of Common Stock. Additionally, if more than 3 months
have passed since the award, a pro-rata amount of outstanding performance shares
will be earned and settled in whole shares of Common Stock and a pro-rata amount
of each incentive award's target amount will be earned.
SHARE AUTHORIZATION. Approximately 1,096,000 shares of Common Stock remain
available for awards under the 1993 Plan. The Amended Stock Plan increases the
share authorization by approximately 2,900,000 shares, so that a maximum of
4,000,000 shares of Common Stock may be issued under the Amended Stock Plan for
awards made on and after February 28, 1997. The maximum number of shares that
may be issued under the Amended Stock Plan as stock awards and in the settlement
of performance shares awarded on or after February 28, 1997 is 1,200,000 shares.
The share limitation, the terms of outstanding awards and the individual grant
limitations shall be adjusted, as the Committee deems appropriate, in the event
of a stock dividend, stock split, combination, reclassification,
recapitalization or other similar events. Shares that are forfeited or not
earned may be reallocated under other grants.
AMENDMENT AND TERMINATION. No option, SAR, stock award, incentive award or
performance shares may be granted under the Amended Stock Plan after February
27, 2007. The Board may terminate the Amended Stock Plan without further action
by shareholders. The Board also may amend the Amended Stock Plan except that no
amendment that increases the number of shares of Common Stock that may be issued
under the Amended Stock Plan or expands the class of individuals who may be
selected to participate in the Amended Stock Plan will become effective until it
is approved by shareholders.
NEW PLAN BENEFITS. On February 27, 1997, the Committee approved performance
share awards, subject to the shareholders' approval of the Amended Stock Plan.
None of the performance shares will be earned unless the Common Stock
appreciation during a 3-year performance period (1997-1999) is at least 6% per
year, compounded annually. The full awards will be earned if the Common Stock
appreciation for the period is 12% or more per year, compounded annually. The
number of performance shares that are preliminarily earned will be determined by
straight line interpolation if the Common Stock appreciation for the period is
more than 6% but less than 12%, and then will be subject to adjustment by a peer
group modifier.
A peer group modifier will be applied to adjust the number of shares
preliminarily earned, based upon the Corporation's stock price performance
compared to its peer banks' stock price performance. No performance shares will
be earned if the Corporation ranks at or below the 30th percentile in its peer
group with respect to stock appreciation. If the Corporation's ranking is at or
above the 75th percentile, 150% of the performance shares preliminarily earned
will be settled. The peer group modifier uses straight line interpolation to
determine the number of performance shares that will be settled if the
Corporation's ranking is above the 30th percentile but below the 75th
percentile.
The number of performance shares awarded, subject to shareholders' approval of
the Amended Stock Plan, was: 43,400 Tilghman; 23,600 Wells; 10,900 Hagen; 10,900
Parrish; 10,900 Katchuk and 114,600 to executive officers as a group.
Except as described above, neither the number of individuals who will be
selected to participate in the Amended Stock Plan nor the type or size of awards
that will be approved by the Administrator can be predetermined.
FEDERAL INCOME TAX CONSEQUENCES
The Corporation has been advised by counsel regarding the federal income tax
consequences of the Amended Stock Plan. No income is recognized by a Participant
at the time an option is granted. If the option is an ISO, no income will be
recognized upon the Participant's exercise of the option. Income is
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<PAGE>
recognized by a Participant when he disposes of shares acquired under an ISO.
The exercise of a non-qualified stock option generally is a taxable event that
requires the Participant to recognize, as ordinary income, the difference
between the shares' fair market value and the option price.
No income is recognized upon the grant of a SAR. The exercise of a SAR generally
is a taxable event. The Participant generally must recognize income equal to any
cash that is paid and the fair market value of the Common Stock received in
settlement of a SAR.
The Participant will recognize income on account of a stock award on the first
day that the shares are either transferable or not subject to a substantial risk
of forfeiture. The amount of income recognized by the Participant is equal to
the fair market value of the Common Stock received on that date.
The Participant will recognize income on account of the settlement of a
performance share award and the payment of an incentive award (unless payment
has been deferred to a later time). The Participant will recognize income equal
to any cash that is paid and the fair market value of Common Stock (on the date
that the shares are first transferable or not subject to a substantial risk of
forfeiture) that is received in settlement of the award.
The employer (either the Corporation or the subsidiary) will be entitled to
claim a federal income tax deduction on account of the exercise of a
non-qualified option or SAR, the vesting of a stock award, the settlement of a
performance share award and the payment of an incentive award. The amount of the
deduction is equal to the ordinary income recognized by the Participant. The
employer will not be entitled to a federal income tax deduction on account of
the grant or the exercise of an ISO, but may claim the deduction on account of
certain dispositions of Common Stock acquired by the exercise of an ISO.
- --------------------------------------------------------------------------------
HUMAN RESOURCES AND COMPENSATION COMMITTEE REPORT
ON EXECUTIVE COMPENSATION
COMPENSATION PHILOSOPHY
The Human Resources and Compensation Committee (the "Committee") is responsible
for administering the Corporation's integrated and competitive compensation
programs. The programs are designed to recruit, reward, retain and motivate a
pool of talented and skilled employees who work as a team to achieve the
Corporation's mission -- to provide a broad array of financial products and
services at a price that represents the best value for our customers' money and,
by doing so, to provide a superior return to our shareholders.
All compensation strategies are designed to reward those individuals who
aggressively contribute to the achievement of the Corporation's strategic goals
by --
o Using the organizational strengths to tap opportunities within the
Corporation's markets. This includes demonstrating effective use of the
Corporation's strong branch network, technology related capabilities
and human resources.
o Developing and offering the products that best meet and exceed customer
expectations and competitive choices.
o Providing the best quality service, characterized by convenience, speed
and an upbeat attitude.
o Maintaining a low cost structure, which in turn provides the
Corporation's customers with superior value.
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EXECUTIVE COMPENSATION
The Corporation's executive compensation programs are based on two fundamental
principles:
o PAY FOR PERFORMANCE. Every executive's long-term and short-term
incentive compensation is related to performance against specific
corporate and business unit goals.
o EXTERNAL COMPETITIVENESS. When targeted performance is achieved,
executive officers' total compensation is proportionate to their
achievement, as well as competitive with annually reported regional
peer group and national survey data.
By implementing these principles within the executive compensation programs, the
Committee ensures the following:
o ACCOUNTABILITY -- tying an executive's incentive compensation to the
achievement of performance goals.
o VARIABILITY -- preventing entitlement (a portion of compensation for
every executive is variable and must be re-earned every year).
o INTERNAL EQUITY -- assuring compensation equity among jobs of similar
content, responsibility and contribution to total corporate
performance.
The Corporation's executive compensation programs are designed as follows:
o An executive's total compensation includes both fixed and variable (at
risk) components, and is clearly linked either to the corporate
performance or to the performance of the business unit for which the
executive has the most direct responsibility, whichever is more
appropriate.
o Executives with greater responsibility have a larger share of their
total compensation at risk.
o The compensation programs are designed to encourage appropriate risk
taking by aligning executives' risk position with that of shareholders.
o The selection of performance measures is based primarily on the
executives' creation of shareholder value.
o Eligibility for executive compensation programs varies among programs
and includes key management employees and individual contributors whose
inclusion is appropriate to reflect level of responsibility and
industry practice.
o Programs are flexible to allow changes in response to legal, regulatory
and/or business requirements.
o Executives are encouraged to own Common Stock as a reflection of their
long-term investment in the future of the Corporation. The level of
ownership is expected to be proportionately higher for executives whose
positions encompass greater responsibilities and who are paid at a
higher level.
COMPLIANCE WITH SECTION 162(M) OF THE INTERNAL REVENUE CODE
The Committee continues to consider changes to the Corporation's programs to
ensure deductibility of compensation under the limitation of Section 162(m) of
the Internal Revenue Code to the extent that those changes continue to support
the Corporation's ability to achieve its goals and maintain its compensation
philosophy. Currently, no named executive officer has exceeded the deduction
limitation. While Mr. Tilghman's total 1996 compensation reported in the Summary
Compensation Table exceeded $1 million, his deductible compensation did not
exceed the limit under Section 162(m). The Amended Stock Plan, if approved by
shareholders, will allow the Committee to provide for performance-based awards
that are deductible compensation under Section 162(m).
COMPONENTS OF EXECUTIVE COMPENSATION
All Crestar executives are eligible for several compensation components, some
fixed and some at risk (variable, depending on performance).
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BASE SALARY -- The Committee's goal is to set base salary so that, when combined
with annual incentives, it is competitive within the industry when the
Corporation's financial performance objectives are achieved. For all levels of
management, the Committee targets base salary primarily at the median level of
similarly-sized financial services organizations as published in national
executive compensation surveys and endorsed by the Committee's independent
consultant.
Salaries for the proxy reporting executive officers are also evaluated in
comparison to the salaries for comparable positions within the Corporation's
regional peer group, which includes financial institutions of varying size. The
Committee believes that the companies included in the survey data are more
representative of the Corporation's most direct competitors for executive talent
than the companies used in the index for shareholder return comparisons in the
Performance Graph. There is some overlap in the survey data, but the groups are
not identical.
ANNUAL INCENTIVE -- The Corporation's management incentive program is designed
to motivate executives by recognizing and rewarding performance against
pre-determined annual financial objectives.
o The Committee uses the annual incentive program to compensate
executives based on the Corporation's return on equity (ROE) and
achievement of individual performance goals. A minimum corporate
performance threshold, measured by the Corporation's ROE, must be
achieved before any incentive can be earned.
o Each April, the Committee establishes an incentive payout schedule that
is tied to ROE and based on the Corporation's annual financial
objectives.
o Each participant has a competitive target award expressed as a
percentage of salary, which varies according to level of
responsibility. Target awards are set annually, based on the same
competitive standards used to establish base salary levels.
o Each participant's target award includes both corporate ROE and
individual components, which are weighted according to the executive's
mix of responsibilities. These range from a 75% corporate weighting for
senior executives, including the 6 named executive officers, to a 25%
corporate weighting for less senior management participants.
o The individual component of each participant's target award may be
adjusted up to 150% or down to zero at the Committee's discretion,
based on the participant's individual achievement.
o Approximately 250 officers, or 3% of the total employee population,
participate in the annual management incentive program.
o For 1996, incentive targets were based on the achievement of a 15.5%
ROE, with a range for awards to be paid out at a maximum 17.5% ROE and
a minimum 12% ROE.
o The Committee exercised its discretion in deciding that the ROE measure
for 1996 awards should be computed without regard to the impact of the
one-time costs related to the Citizens Bancorp acquisition on December
31, 1996 and SAIF Recapitalization. Excluding those items resulted in a
15.2% ROE and, based on the Committee's pre-established objectives,
this provided for a payout of 97% of targets for eligible participants,
before adjustments for individual performance factors.
LONG-TERM INCENTIVE PROGRAMS -- Crestar's 1993 Stock Incentive Plan is the
primary vehicle for providing long-term compensation for those executives who
have a more direct impact on creating shareholder value. Under the Plan, the
Committee may grant stock options (both incentive and non-qualified), financial
performance-related stock awards and outright awards of stock. The Plan design
is flexible, allowing the Committee to appropriately respond to changes in
business, financial and regulatory conditions. The Value Share Program was
approved by the Corporation's Board of Directors in 1994 as a component program
under the 1993 Stock Incentive Plan to provide long-term incentive compensation.
STOCK OPTIONS -- Stock options permit the Committee to link executive rewards
directly to shareholder return and are a way to encourage management ownership
in the Corporation.
19
<PAGE>
Options may be granted to key management employees who have a significant effect
on the long-term strategic success of the Corporation.
o Grants are made to top management to provide incentives for future
performance, rather than to reward for prior performance. Therefore,
prior grants and the number of outstanding options are not considered
when new grants are made.
o The option exercise price is the fair market value of the shares on the
date the options are granted, determined as the average of the high and
low trading prices of Common Stock on that date.
o The number of shares underlying each executive's annual stock option
grant is a percentage of annual base salary divided by the fair market
value of Common Stock on the date of the grant.
o The percent of salary is determined using the same national survey data
as used in setting executive base salary and potential incentive
levels, combined with the advice of the Committee's independent
compensation consultant and the discretion of the Committee.
VALUE SHARE PROGRAM -- This program is designed to provide the top 25 executive
officers with stock and cash awards for long-term stock price appreciation,
thereby rewarding the creation and maintenance of shareholder value. It replaced
future grants under the 1987 Performance Equity Plan.
o The program awards performance shares, payable half in Common Stock and
half in cash, plus non-qualified stock options equal to the number of
performance shares that are earned under the award, if a predetermined
stock price appreciation target is reached over a 2-year or 3-year
performance period.
o Performance shares were granted in February, 1994 based on a grant
price of $43.5625 (pre-split). To be fully payable at the end of the
2-year and 3-year performance periods, the Common Stock price was
required to reach $61.2022 (pre-split) on the second or third
anniversary of the grant. If the Common Stock price was at least
$51.8836 (pre-split) but less than $61.2022 (pre-split) on those dates,
a pro-rata portion of the award would be earned at the end of the
3-year performance period in February, 1997.
o Performance shares were paid in 1997 based on the Corporation's stock
price on February 24, 1997 of $36.875 for a total award payment of
approximately $3.5 million.
PERFORMANCE EQUITY PLAN -- The final grants under this Plan were made in 1993,
and executives continue to be eligible to earn payouts in Common Stock for
grants made in 1992 and 1993.
o For all or a portion of prior grants to be paid out, the Corporation
must achieve a minimum return on assets (ROA) rank at the 50th
percentile or better of the top 100 U.S. bank holding companies (ranked
by asset size and published each April by the AMERICAN BANKER).
o Because the Corporation exceeded the 1995 ROA competitive ranking
target, a total of 28,801 shares of Common Stock was awarded on May 1,
1996 to 22 eligible executives, including the 6 reported executive
officers, and additional shares were earned that will be issued in
1997.
o The 1996 payout represented one-half of the 1992 grant under this Plan,
adjusted for the level of ROA achievement in 1995. Specifically, 63% of
the 1995 portion of the 1992 award was paid.
o Remaining portions of the 1993 grants will produce payouts in 1997. All
grants expire in 1997.
COMPENSATION OF THE CHAIRMAN AND CHIEF EXECUTIVE OFFICER
o For 1996, Chairman and Chief Executive Officer Richard G. Tilghman
received a base salary of $645,000. The base was established using the
median level of CEO compensation for the same financial institutions
used in setting base salary for other executive officers.
o Mr. Tilghman received a 1996 annual incentive award of $422,000 or 65%
of his 1996 base salary. The Committee, exercising its discretion as
allowed in the annual incentive plan, chose to adjust Mr. Tilghman's
target achievement of 60% of salary upward to the 65% level to reflect
his leadership and contributions to the Corporation's strong earnings
in 1996.
20
<PAGE>
o As a participant in the Performance Equity Plan, Mr. Tilghman earned a
1996 payout of 5,160 (pre-split) shares of Common Stock. The payout
value, representing one-half of his 1992 grant as adjusted for the 1995
ROA achievement, was $294,120.
o For 1996, Mr. Tilghman received a total grant of 36,000 (pre-split)
incentive and non-qualified stock options. This number was determined
based on the competitive percentage of base salary, divided by the fair
market value of Common Stock on the grant date. He also received
dividend equivalents with a fair market value of $30,778 with respect
to the restricted stock award units granted to him in 1995.
PAY FOR PERFORMANCE
The Committee affirms its strategy on pay for performance, as evidenced by the
following graph relating the Corporation's CEO cash compensation (base salary
plus annual incentive as reported in the Summary Compensation Table) to the
Corporation's 5-year shareholder return values (as defined in the Performance
Graph).
CUMULATIVE PERCENTAGE CHANGE IN CEO CASH COMPENSATION VS.
CUMULATIVE PERCENTAGE CHANGE IN TOTAL SHAREHOLDER RETURN
[GRAPH]
1991 1992 1993 1994 1995 1996
CEO Cash Compensation 0% 40% 63% 94% 112% 113%
Total Shareholder RETU 0% 127% 150% 133% 280% 394%
HUMAN RESOURCES AND COMPENSATION COMMITTEE
Charles R. Longsworth, Chair
Gene A. James
H. Gordon Leggett, Jr.
G. Gilmer Minor, III
Frank E. McCarthy
- --------------------------------------------------------------------------------
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No member of the Human Resources and Compensation Committee is a former or
current officer or employee of the Corporation or any of its subsidiaries. In
1996, director Karen Hastie Williams served as a member of the Human Resources
and Compensation Committee from January until October, 1996. Ms. Williams is a
partner in Crowell & Moring, a law firm that provided legal services to the
Corporation and its subsidiaries in 1996.
21
<PAGE>
- --------------------------------------------------------------------------------
PERFORMANCE GRAPH
The graph below compares total returns (assuming reinvestment of dividends) for
the Corporation's Common Stock, the S&P 500 Index and the Dow Jones Regional
Banks Index, and assumes $100 is invested on December 31, 1991 in Common Stock
and each of the indices. The shareholder return shown on this graph is not
necessarily indicative of future performance.
COMPARISON OF 5-YEAR CUMULATIVE TOTAL RETURN*
AMONG CRESTAR FINANCIAL CORPORATION, THE S&P 500 INDEX AND THE DOW JONES
REGIONAL BANKS INDEX
[GRAPH]
Crestar Financial S&P 500 DJ Regional BANKS
1991 100 100 100
1992 227 108 134
1993 250 118 141
1994 233 120 135
1995 380 165 217
1996 494 203 298
*$100 INVESTED ON 12/31/91 IN STOCK OR INDEX, INCLUDING REINVESTMENT OF
DIVIDENDS. FISCAL YEAR ENDING DECEMBER 31.
22
<PAGE>
- --------------------------------------------------------------------------------
COMPENSATION OF EXECUTIVE OFFICERS
The following table contains information regarding individual compensation of
the Chief Executive Officer, the 4 other most highly compensated executive
officers and a former executive officer for services in all capacities to the
Corporation and its subsidiaries in 1996, 1995, and 1994.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
(a) (b) (c) (d) (e) (f) (g)
LONG-TERM COMPENSATION
-----------------------
AWARDS
-----------------------
ANNUAL COMPENSATION RESTRICTED SECURITIES
NAME & -------------------------- STOCK UNDERLYING ALL OTHER
PRINCIPAL SALARY(2) BONUS(3) AWARDS OPTIONS COMPENSATION(4)
POSITION(1) YEAR ($) ($) ($) (#) ($)
- ----------------------------------------- ---- -------- -------- ---------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Richard G. Tilghman 1996 645,000 746,898 -- 72,000 71,868
Chairman & Chief 1995 605,000 544,571 858,000 80,000 82,998
Executive Officer 1994 570,000 412,000 -- 56,000 83,140
James M. Wells III 1996 425,000 416,472 -- 39,600 36,098
President & Chief Operating 1995 400,000 328,742 -- 42,000 48,305
Officer 1994 376,000 250,000 -- 30,000 56,305
William C. Harris 1996 375,000 223,236 -- 18,600 22,814
Corporate Executive Vice President 1995 340,750 214,871 -- 24,000 37,928
& Chairman - Greater Washington 1994 308,000 167,000 -- 16,000 50,769
and Maryland Banking
Oscar H. Parrish, Jr. 1996 295,000 228,236 -- 18,600 23,682
President - Regional and Corporate 1995 276,000 176,871 -- 24,000 35,671
Banking 1994 260,000 142,000 -- 16,000 34,517
C. Garland Hagen 1996 285,000 230,103 -- 18,600 26,084
Corporate Executive Vice President- 1995 275,000 172,415 -- 24,000 38,465
Corporate Development & Funds 1994 260,000 125,000 -- 16,000 30,825
Management
Richard F. Katchuk 1996 300,000 142,000 -- 18,600 25,710
Corporate Executive Vice President 1995 97,900 142,716 -- 20,000 --
& Chief Financial Officer 1994 N/A N/A N/A N/A N/A
- ---------------
</TABLE>
(1) Mr. Harris died in October, 1996. He is included as one of the 1996
executive officers in accordance with SEC regulations. Mr. Katchuk first became
an employee of the Corporation in August, 1995.
(2) Salary is reported in the year in which earned and includes amounts deferred
at the executive's election. None of the named officers received perquisites or
other personal benefits in excess of the lesser of $50,000 or 10% of the total
salary and bonus reported in columns (c) and (d).
(3) Bonus includes annual incentives earned under the Management Incentive
Program (see description in the Compensation Committee Report) in the amounts
for 1996 of: $422,000 Tilghman; $240,000 Wells; $135,000 Harris; $140,000
Parrish; $135,000 Hagen and $142,000 Katchuk, all of which are reported for the
year in which earned, even if not actually paid until the following year or
deferred at the executive's election. Bonus also includes awards earned under
the Performance Equity Plan (see description in the Compensation Committee
Report), which are reported in the year of payout. The payout that occurred in
1996 was as follows: $294,120 Tilghman; $176,472 Wells; $88,236 Harris; $88,236
Parrish and $73,587 Hagen. Bonus also includes $30,778 in dividend equivalents
to Mr. Tilghman with respect to restricted stock award units granted in 1995.
Bonus also includes a special stock award granted to Mr. Hagen in connection
with the successful acquisition of Citizens Bancorp on December 31, 1996, for
605 shares of Common Stock, calculated and paid with dividend equivalents in
January, 1997 for a total value of $21,516. A special stock bonus award was
granted to Mr. Katchuk in August, 1995 at a fair market value of $67,716.
(4) Column (g) includes corporate contributions to the Corporation's 401(k) plan
and amounts accrued but not contributed under the Corporation's non-qualified
plans, which provide benefits that would have been provided under the 401(k)
plan except for certain Internal Revenue Code limits, in the amounts for 1996
of: $43,387 Tilghman; $23,500 Wells; $17,137 Harris; $11,786 Parrish; $11,675
Hagen and $6,625 Katchuk. Column (g) also includes interest earned on deferred
compensation in excess of 120% of the long term applicable federal rate in the
amounts for 1996 of: $7,778 Tilghman; $2,371 Wells; $5,677 Harris; $3,317
Parrish; $3,629 Hagen and $505 Katchuk. Column (g) further includes actuarial
equivalent of benefits to executives from the Corporation's annual premiums
under a split dollar life insurance program in the amounts for 1996 of: $20,703
Tilghman; $10,227 Wells; $8,579 Parrish; $10,780 Hagen and $18,580 Katchuk.
23
<PAGE>
The following table shows all grants of options to the named executive officers
of the Corporation during 1996.
<TABLE>
<CAPTION>
OPTION GRANTS IN 1996(1)
POTENTIAL
REALIZABLE
VALUE
AT ASSUMED
ANNUAL RATES
OF STOCK
PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM(4)
- -------------------------------------------------------------------------------------------- ---------------------
(a) (b) (c) (d) (e) (f) (g)
NUMBER OF PERCENT OF
SECURITIES TOTAL
UNDERLYING OPTIONS GRANTED EXERCISE OR
OPTIONS TO EMPLOYEES BASE PRICE(3) EXPIRATION 5% 10%
NAME GRANTED(2) (#) IN FISCAL YEAR ($/SH) DATE ($) ($)
- ----------------------- -------------------- --------------- ------------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Richard G. Tilghman 72,000 12% 27.06 1/25/06 1,225,440 3,105,360
James M. Wells III 39,600 7% 27.06 1/25/06 673,992 1,707,948
William C. Harris 18,600 3% 27.06 1/25/06 316,572 802,218
Oscar H. Parrish, Jr. 18,600 3% 27.06 1/25/06 316,572 802,218
C. Garland Hagen 18,600 3% 27.06 1/25/06 316,572 802,218
Richard F. Katchuk 18,600 3% 27.06 1/25/06 316,572 802,218
- ---------------
</TABLE>
(1)The numbers in this table have been adjusted, as appropriate, to reflect the
2-for-1 stock split distributed on January 24, 1997.
(2) Options became exercisable on January 25, 1997, 12 months from the date of
grant.
(3) Exercise Price is the average of the high and low trading prices of the
Corporation's Common Stock on the date of the grant, adjusted to reflect the
2-for-1 stock split distributed on January 24, 1997.
(4) In order to realize the potential values set forth in columns (f) and (g),
the price per share of the Corporation's Common Stock would be approximately
$44.08 and $70.19, respectively, at the end of the 10-year option term.
The following table provides information concerning stock options exercised by
each of the 6 named executive officers during 1996 and the value of options held
by each on December 31, 1996.
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN 1996 AND FY-END OPTION VALUES(1)
(a) (b) (c) (d) (e)
VALUE OF UNEXERCISED
NUMBER OF IN-THE-MONEY
SECURITIES UNDERLYING OPTIONS AT
UNEXERCISED OPTIONS AT DECEMBER 31, 1996
DECEMBER 31, 1996 (#) ($)(2)
----------------------- --------------------
SHARES ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE (#) REALIZED ($) UNEXERCISABLE UNEXERCISABLE
- ----------------------- --------------- ------------ ----------------------- --------------------
<S> <C> <C> <C> <C>
Richard G. Tilghman 34,564 699,940 292,810/72,000 6,092,697/2,691,000
James M. Wells III 8,204 155,620 187,796/39,600 4,037,267/1,480,050
William C. Harris(3) 48,708 776,478 50,694/0 830,628/0
Oscar H. Parrish, Jr. 44,198 822,856 52,000/18,600 914,410/695,175
C. Garland Hagen 9,500 226,177 79,5000/18,600 1,698,785/695,175
Richard F. Katchuk 0 0 20,000/18,600 198,750/695,175
- ---------------
</TABLE>
(1) The numbers in this table have been adjusted, as appropriate, to reflect the
2-for-1 stock split distributed on January 24, 1997.
(2) The average of the high and low trading prices on December 31, 1996 for the
Corporation's Common Stock was $74.75 (pre-split) and is used in calculating the
value of unexercised options.
(3) Mr. Harris' unexercisable options became exercisable at his death in
October, 1996.
24
<PAGE>
The following table shows the estimated annual single-life benefits payable to
the named executive officers upon retirement under the current provisions of the
Corporation's tax-qualified and non-qualified pension plans. Senior executive
officers participate in an unfunded Supplemental Executive Retirement Plan
("SERP") which provides benefits on retirement at age 55 or later. SERP benefits
are not reduced by Social Security but are reduced by (1) benefits payable under
the Corporation's tax-qualified, noncontributory pension plan, which covers
substantially all active full-time and part-time employees and vested former
employees of the Corporation and its affiliates, and (2) pension benefits under
any other non-qualified plan of the Corporation. Full retirement benefits equal
to 50% of the highest 3-year average compensation are payable on retirement at
age 60 with 20 years of service, and reduced benefits are payable as early as
age 55 with 20 years of service, or earlier if there is a change-in-control.
Participants who cannot complete 20 years of service by the age of 60 may
receive a pro-rata benefit based on years of service completed at retirement on
or after age 55.
<TABLE>
<CAPTION>
PENSION PLAN TABLE
YEARS OF CREDITED SERVICE
------------------------------------------------------------
REMUNERATION(1) 15 20 25 30 35
- --------------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
300,000 112,500 150,000 150,000 150,000 150,000
400,000 150,000 200,000 200,000 200,000 200,000
500,000 187,500 250,000 250,000 250,000 250,000
600,000 225,000 300,000 300,000 300,000 300,000
700,000 262,500 350,000 350,000 350,000 350,000
800,000 300,000 400,000 400,000 400,000 400,000
900,000 337,500 450,000 450,000 450,000 450,000
1,000,000 375,000 500,000 500,000 500,000 500,000
1,100,000 412,500 550,000 550,000 550,000 550,000
1,200,000 450,000 600,000 600,000 600,000 600,000
1,300,000 487,500 650,000 650,000 650,000 650,000
1,400,000 525,000 700,000 700,000 700,000 700,000
</TABLE>
- ---------------
(1) Remuneration is the average of the highest 3 years of compensation, whether
or not consecutive. Compensation includes base salary and annual incentive as
reported in the salary and bonus columns of the Summary Compensation Table and
excludes any other bonus amounts reported, such as Performance Equity Plan award
payouts and special bonuses. Each of the named executive officers other than Mr.
Katchuk has completed 20 or more years of service; Mr. Katchuk has completed one
year of service.
- --------------------------------------------------------------------------------
TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL AGREEMENTS
SEVERANCE AGREEMENTS -- The Corporation has entered into severance agreements
with Messrs. Tilghman, Wells, Parrish, Hagen and Katchuk. The agreement with Mr.
Harris terminated at his death in October, 1996. The agreements are identical,
and each is subject to the Corporation's Executive Severance Plan. The
agreements were unanimously approved by the independent members of the Board of
Directors.
The agreements provide for certain benefits in the event of a change-in-control
of the Corporation followed by termination of employment without cause by the
Corporation's successor, or by the employee for certain reasons, including
substantial adverse change in responsibilities, decrease in base pay, change of
principal work location or substantial decrease in benefits. "Cause" means
continued and willful failure to perform duties or conduct demonstrably and
materially injurious to the Corporation or its affiliates.
All agreements for the 5 named executive officers provide for 3-year terms. The
term of each agreement will be extended automatically for an additional calendar
year unless, before the end of each year, the Human Resources and Compensation
Committee votes not to extend the term. The current agreements are operative
until December 31, 1999. The agreement terms are automatically extended for 36
months if a change-in-control occurs.
25
<PAGE>
If a change-in-control occurs and benefits are paid under the agreements and the
Executive Severance Plan, the principal benefits an executive receives are as
follows:
o A lump-sum severance payment will be made in an amount equal to 3.75
times annual base salary (determined at the change-in-control date, the
date of termination or 12 months before either event, whichever
produces the largest payment), plus the amount of the Corporation's
profit sharing contribution that would have been allocated to the
executive's 401(k) plan account for the full calendar year in which
employment is terminated.
o If the severance pay and other payments the executive is entitled to
receive under any other plans and agreements result in excess parachute
payments under the "golden parachute" rules of Internal Revenue Code
Section 280G, the Corporation and the executive intend to reduce any
excess parachute payments if, and only to the extent that, a reduction
will allow the executive to receive a greater net after-tax amount than
the executive would receive absent a reduction. This determination will
be made by independent accountants.
The Corporation has agreed to pay all legal fees and expenses, if any, incurred
by the executive in seeking to obtain these benefits.
- --------------------------------------------------------------------------------
PROPOSAL 3. RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
/YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" RATIFICATION
The Audit Committee has recommended and your Board of Directors has reappointed
KPMG Peat Marwick LLP as independent auditors to audit the consolidated
financial statements of the Corporation and its subsidiaries for 1997.
o The appointment is subject to ratification by the shareholders. A
majority of the votes cast is required for ratification. It is the
intention of the persons named as proxies in the accompanying form of
proxy to vote for the ratification unless authorization is withheld.
o KPMG Peat Marwick LLP has served as the Corporation's auditors
continuously since 1963.
Representatives of KPMG Peat Marwick LLP will be present at the Annual Meeting.
They will have the opportunity to make a statement, if they desire, and will be
available to respond to appropriate questions.
- --------------------------------------------------------------------------------
OTHER BUSINESS
Your Board of Directors does not know of any matters to be presented for action
at the Annual Meeting other than those listed in this Proxy Statement. The
enclosed proxy confers discretionary authority, however, with respect to the
transaction of any other matters that may properly come before the meeting. It
is the intention of the persons named in the proxy to vote in accordance with
their judgment on any such matters.
In accordance with the Corporation's Bylaws (as stated in the 1996 Proxy
Statement) and to permit the Annual Meeting to be conducted in an orderly
manner, shareholders who wished to bring business before the Annual Meeting
(including the nomination of a director) were required to provide written notice
to the Secretary of the Corporation not less than 60 days prior to the Annual
Meeting, which was no later than February 24, 1997. Since no such notices were
given, any matter presented by a shareholder for action at the 1997 Annual
Meeting will be ruled out of order. This notice provision is not intended to
limit the right of shareholders to speak and ask questions at the Corporation's
shareholder meetings on matters germane to the Corporation's business, subject
to any rules established for the orderly conduct of the meeting.
26
<PAGE>
- --------------------------------------------------------------------------------
1998 SHAREHOLDER PROPOSALS AND DIRECTOR NOMINATIONS
Shareholders who wish to bring business before the 1998 Annual Meeting
(including the nomination of a director) must provide written notice to the
Secretary of the Corporation not less than 60 nor more than 90 days prior to the
anticipated date of the meeting (April 24, 1998), which would be no later than
February 23, 1998. The Corporation's Bylaws outline procedures for bringing
business before the annual meeting, and a copy of the pertinent provisions is
available on request to the Secretary of the Corporation.
Any proposal (including recommendations for director-nominees) that a
shareholder wishes to have included in the Proxy Statement relating to the
Corporation's 1998 Annual Meeting must be received by the Corporation no later
than November 14, 1997. Recommendations for director-nominees should include
information that will enable the Nominating and Governance Committee to evaluate
the qualifications of the proposed candidate. Shareholder proposals must comply
with SEC proxy rules if they are to be included in the Proxy Statement and
should be directed to the Secretary of the Corporation.
- --------------------------------------------------------------------------------
ANNUAL REPORT AND FORM 10-K
The Corporation's Annual Report and Form 10-K for the fiscal year ended December
31, 1996 (the "Annual Report"), which is being mailed concurrently with the
mailing of this Proxy Statement, contains the consolidated financial statements
of the Corporation. Such consolidated financial statements, including the notes
thereto and management's discussion and analysis of operations and financial
condition (collectively, the "Financial Statements"), are incorporated by
reference in this Proxy Statement and are considered a part of the proxy
soliciting material. Except for the Financial Statements, the Annual Report is
not incorporated in this Proxy Statement and is not considered a part of the
proxy soliciting material.
By Order of Your Board of Directors
Linda F. Rigsby
Senior Vice President,
Deputy General Counsel and Corporate Secretary
March 19, 1997
27
<PAGE>
PROXY
CRESTAR FINANCIAL CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF SHAREHOLDERS ON APRIL 25, 1997
The undersigned hereby appoints Bonnie Guiton Hill, Charles R. Longsworth
and Eugene P. Trani as Proxies, each with the power to appoint her or his
substitute, and authorizes them to represent and to vote all shares of Common
Stock held of record by the undersigned on February 28, 1997, at the Annual
Meeting of Shareholders of Crestar Financial Corporation to be held on April 25,
1997, or any adjournment thereof.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1, 2 AND 3.
1. ELECTION OF FIVE CLASS I DIRECTORS FOR A TERM OF THREE YEARS AND ONE CLASS II
DIRECTOR FOR A TERM OF ONE YEAR: CLASS I NOMINEES: J. CARTER FOX, PATRICK J.
MAHER, GORDON F. RAINEY, JR., ALFRED H. SMITH, JR. AND ROBERT C. WILBURN; AND
CLASS II NOMINEE: JEFFREY R. SPRINGER.
[ ] FOR all nominees listed [ ] WITHHOLD AUTHORITY
(except as marked to vote for all nominees
to the contrary) listed
INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, WRITE
THAT NOMINEE'S NAME ON THE SPACE PROVIDED BELOW:
- --------------------------------------------------------------------------------
2. APPROVAL OF THE AMENDED AND RESTATED 1993 STOCK INCENTIVE PLAN.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. RATIFICATION OF THE APPOINTMENT OF KPMG PEAT MARWICK LLP AS INDEPENDENT
AUDITORS FOR 1997.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(CONTINUED ON REVERSE)
<PAGE>
IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
MATTERS AS MAY PROPERLY COME BEFORE THE MEETING.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED BY
THE UNDERSIGNED SHAREHOLDER(S). IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED AS RECOMMENDED BY THE BOARD OF DIRECTORS.
PLEASE CHECK IF YOU PLAN TO ATTEND THE ANNUAL MEETING. [ ]
NOTE: ADMISSION TO THE ANNUAL MEETING WILL BE LIMITED TO PERSONS WHO ARE LISTED
ON THE CORPORATION'S RECORDS AS SHAREHOLDERS AS OF FEBRUARY 28, 1997, OR WHO
BRING A STATEMENT FROM A BROKER, BANK OR OTHER INSTITUTION INDICATING THEIR
BENEFICIAL OWNERSHIP AS OF THE RECORD DATE.
________________________________________________________________________________
Signature
________________________________________________________________________________
Signature if held jointly
Dated_____________________________________________________________________, 1997
PLEASE SIGN EXACTLY AS YOUR NAME APPEARS. When shares are held by joint tenants,
both should sign. When signing as attorney, executor, administrator, trustee or
guardian, please give full title. If a corporation, please sign with full
corporate name by president or other authorized officer. If a partnership,
please sign in partnership name by authorized person.
