<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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:
[X] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
First Virginia Banks, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the 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)(1) 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> 2
FIRST VIRGINIA BANKS, INC.
6400 ARLINGTON BOULEVARD
FALLS CHURCH, VIRGINIA 22042-2336
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 24, 1998
The Annual Meeting of Stockholders of First Virginia Banks, Inc. will
be held at corporate headquarters at One First Virginia Plaza, 6400 Arlington
Boulevard, Falls Church, Virginia, in the 5th Floor Auditorium at 10:00 a.m. on
Friday, April 24, 1998, for the following purposes:
(1) To elect five Class B directors for a term of three years.
(2) To approve an amendment to the Articles of Incorporation
increasing the authorized Common Stock from 60,000,000 to
175,000,000 shares.
(3) To approve the 1998 Stock Incentive Plan and authorize the
issuance of up to 2,500,000 shares of Common Stock under the
Plan.
(4) To ratify the appointment of Ernst & Young LLP as independent
auditors for the year ending December 31, 1998.
(5) To transact such other business as may properly come before
the meeting or any adjournments thereof.
Stockholders of record at the close of business on February 17, 1998,
are entitled to notice of and to vote at the meeting or any adjournments
thereof.
STOCKHOLDERS ARE URGED TO COMPLETE, DATE, AND SIGN THE ENCLOSED PROXY AND MAIL
IT PROMPTLY IN THE ENCLOSED POSTAGE-PAID RETURN ENVELOPE REGARDLESS OF WHETHER
OR NOT THEY EXPECT TO ATTEND THE MEETING.
By Order of the Board of Directors,
Thomas P. Jennings
Secretary
Falls Church, Virginia
March 6, 1998
<PAGE> 3
FIRST VIRGINIA BANKS, INC.
6400 ARLINGTON BOULEVARD
FALLS CHURCH, VIRGINIA 22042-2336
PROXY STATEMENT FOR ANNUAL MEETING OF STOCKHOLDERS
This Proxy Statement is furnished in connection with the solicitation
by the Board of Directors of First Virginia Banks, Inc. (hereinafter referred
to as "First Virginia") of proxies to be voted at the Annual Meeting of
Stockholders of First Virginia to be held at 10:00 a.m. on Friday, April 24,
1998, or any adjournments thereof. The approximate mailing date of this Proxy
Statement and the accompanying proxy is March 6, 1998.
All properly executed proxies in the accompanying form received by
First Virginia prior to the meeting will be voted at the meeting in accordance
with any direction noted thereon. Proxies on which no specification has been
made will be voted for the nominees listed herein as directors and for Items 2,
3, and 4 on the proxy. Any stockholder who has executed and delivered a proxy
may revoke it at any time before it is voted by attending the Annual Meeting
and voting in person or by giving written notice of revocation of the proxy to
the Secretary or by submitting to First Virginia a signed proxy bearing a later
date.
Both Common and Preferred stockholders of First Virginia are entitled
to vote at the meeting. Each share of Common and Preferred Stock is entitled
to one vote on all matters which may come before the meeting. As of February
17, 1998, the record date for the determination of stockholders entitled to
notice of and to vote at the meeting, there were ____________ shares of
Common Stock and _____________ shares of Preferred Stock of First Virginia
issued and outstanding. No person is known by management of First Virginia to
own beneficially, directly or indirectly, more than 5% of the outstanding stock
of First Virginia.
I. ELECTION OF DIRECTORS
The Board of Directors is divided into three classes (A, B and C).
The term of office for Class B directors will expire at this Annual Meeting.
Five persons, four of whom are presently on the Board, have been nominated to
serve as Class B directors. If elected, the five nominees for Class B director
will serve for a term of three years. Mr. John B. Melvin, a Class B director
since 1995, is retiring at the 1998 Annual Meeting and will not stand for
re-election.
With respect to the election of directors, the five Class B nominees
receiving the greatest number of votes cast for the election of directors will
be elected, assuming a quorum is present at the meeting. The presence in
person or by proxy of a majority of the outstanding shares of Common and
Preferred Stock entitled to vote at the meeting will constitute a quorum.
Shares for which the holder has elected to abstain or withhold the proxy's
authority to vote (but not including broker nonvotes) on a matter will count
toward a quorum.
It is the intention of the persons named in the accompanying form of
proxy, unless stockholders specify otherwise by their proxies, to vote for the
election of the five nominees named on the next two pages. Although the Board
of Directors does not expect that any of the persons named will be unable to
serve as a director, should any of them be unable to accept nomination or
election, it is intended that shares represented by the accompanying form of
proxy will be voted by the proxy holders for such other person or persons as
may be designated by the present Board of Directors.
1
<PAGE> 4
Certain information concerning the nominees for election at this
meeting and the Class B and Class C directors who will continue in office after
the meeting is set forth below and on the following pages, as furnished by
them.
NOMINEES FOR CLASS B DIRECTORS
(To serve until the Annual Meeting in 2001)
<TABLE>
<CAPTION>
Common Stock
Beneficially
Owned December 31,
Name, Age and Year Principal Occupation, Business Experience in Last Five Years, 1997 and Percentage
Became a Director Other Directorships of Class(1)
------------------- ---------------------------------------------------------------------------- -------- ----------
<S> <C> <C>
EDWARD L. Partner, Breeden, MacMillan & Green, a law firm in Norfolk, Virginia, since 99,403(2)
BREEDEN, III 1968. Director, First Virginia Bank of Tidewater, Norfolk, Virginia, and
Age 62 First Virginia Life Insurance Company, Falls Church, Virginia.
1982
GILBERT R. GIORDANO Portfolio Manager, Titan Financial Advisors, LLC, since 1996. Partner, 295,012(3)
Age 69 Giordano & Villareale, P.A., a law firm in Upper Marlboro, Maryland,
1989 1972-1997. Chairman of the Board, First Virginia Bank-Maryland, Upper
Marlboro.
ERIC C. KENDRICK President, Mereck Associates, Inc., a real estate management and 77,844(4)
Age 51 development firm in Arlington, Virginia, since 1989. President, Murteck
1986 Construction, Inc., Upton Corporation, and Old Dominion Warehouse
Corporation, Arlington.
ROBERT M. ROSENTHAL Chairman of the Board since 1990 of Geneva Enterprises, Inc., lead 30,816(5)
Age 69 company of the Rosenthal Automotive Organization, which is comprised of ten
1998 Nominee divisional automotive dealerships and a management company located
throughout the Washington, D.C. Metropolitan Area. Other related companies
on which Mr. Rosenthal also serves as Chairman include: Maryland Imported
Cars, Inc., since 1994; Imported Cars of Maryland, Inc., since 1991;
Fairfax Imports, Inc., since 1988; Rosenthal Landover Enterprises, Inc.,
since 1978; Auto Supply and Parts, Inc., since 1985; Old Dominion Insurance
Company, since 1979; New Dominion Insurance Company, since 1990; and,
Geneva Air Services, Inc., since 1987. President, Arcoa, Inc., an
advertising company, since 1970. Trustee, Capital Automotive REIT, a real
estate investment trust which invests in real property and improvements
used by motor vehicle related businesses in major urban areas across the
country. Director, First Virginia Bank, Falls Church. Trustee, Vice
President and Treasurer, The Phillips Collection, Washington, D.C.
</TABLE>
- -----------------
1 No director or executive officer owned as much as 1.0% of First Virginia
Common Stock.
2 Includes 11,250 shares held by a corporation of which Mr. Breeden is
President, 24,487 shares held by two foundations of which Mr. Breeden is
Chairman, and 57,262 shares held by two trusts of which Mr. Breeden is
trustee.
3 Includes 418 shares held in a trust for his son, 130 shares held by his
spouse and daughter, 815 shares held by his spouse and son, 16,720 shares
held by the Giordano Family Foundation, 6,893 shares held by his spouse as
custodian for his son, and 24,817 shares held by his spouse alone.
4 Includes 13,535 shares held by his spouse and 2,593 shares held by a
corporation of which Mr. Kendrick is a director and President.
5 Includes 26,316 shares held by the Marion and Robert Rosenthal Foundation.
2
<PAGE> 5
NOMINEES FOR CLASS B DIRECTORS (CONTINUED)
<TABLE>
<S> <C> <C>
ROBERT H. ZALOKAR Retired Chairman of the Board and Chief Executive Officer of 184,451(6)
Age 70 First Virginia, 1984-1994. Director, First Virginia Bank,
1959 First Virginia Life Insurance Company, and First Virginia
Mortgage Company, Falls Church, Virginia. Trustee, George
Mason University Foundation.
</TABLE>
CLASS C DIRECTORS
(Serving until the 1999 Annual Meeting)
<TABLE>
<CAPTION>
Common Stock
Beneficially
Owned December 31,
Name, Age and Year Principal Occupation, Business Experience in Last Five Years, 1997, and Percentage
Became a Director Other Directorships of Class
------------------ ------------------------------------------------------------------------ -----------------------
<S> <C> <C>
PAUL H. GEITHNER, JR. Retired President and Chief Administrative Officer, First Virginia, 52,518(7)
Age 67 1985-1995. Director, First Virginia Life Insurance Company. Director,
1984 Ellicott Machine Corporation, Baltimore, Maryland. Trustee,
Bridgewater College, Bridgewater, Virginia.
L. H. GINN, III President, Lighting Affiliates, Inc., a distributor of electrical 20,010(8)
Age 64 fixtures located in Richmond, Virginia, since 1975; retired U.S. Army
1974 Reserve Major General. Chairman of the Board, First Virginia
Bank-Colonial, Richmond. Director, J. Sargeant Reynolds Community
College and J. Sargeant Reynolds Community College Educational
Foundation, Richmond; Director, Westminster-Canterbury Foundation, a
foundation associated with a retirement facility in Richmond; Trustee,
Episcopal Diocesan Schools and Episcopal Diocesan Homes, Richmond.
Vice President, SHEPCABEL Corporation, a real estate management
company, and Parking Control Corporation, which owns and operates a
public parking facility, Richmond.
T. KEISTER GREER Principal, T. Keister Greer, P.C., a law firm in Rocky Mount, Virginia, 18,150(9)
Age 76 since 1995; Partner, Greer & Greer, Rocky Mount, 1983-1993. Director,
1976 1971-1997, and Chairman of the Board, 1977-1997, First Virginia
Bank-Franklin County, Rocky Mount.
EDWARD M. HOLLAND Attorney-at-Law in Northern Virginia since 1966; former Senator, 77,968(10)
Age 58 Virginia General Assembly, 1972-1996. Director, First Virginia Bank,
1974 Falls Church.
</TABLE>
- ---------------------
6 Includes 1,500 shares held by a trust of which Mr. Zalokar is trustee.
7 Includes 43,087 shares held in a revocable trust and 6,501 shares held
indirectly through his spouse's trust.
8 Includes 369 shares held indirectly through his spouse's Investment
Retirement Account and 2,447 shares held by a trust of which Mr. Ginn is
trustee.
9 Includes 8,100 shares of Common Stock held by a trust in which Mr. Greer
has a beneficial interest.
10 Includes 51,718 shares held by a corporation of which Mr. Holland is an
officer, director, and owner and 10,500 shares held in a trust.
3
<PAGE> 6
CLASS A DIRECTORS
(Serving until the 2000 Annual Meeting)
<TABLE>
<CAPTION>
Common Stock
Beneficially
Owned December 31, 1997,
Name, Age and Year Principal Occupation, Business Experience in Last Five Years, and Percentage
Became a Director Other Directorships of Class
-------------------- ----------------------------------------------------------------------- ----------------------
<S> <C> <C>
BARRY J. FITZPATRICK Chairman of the Board, President and Chief Executive Officer of First 94,803(11)
Age 57 Virginia since 1995; Executive Vice President, 1992-1995. Chairman of
1995 the Board, First Virginia Bank in Falls Church, and a director and
principal officer of numerous First Virginia affiliated nonbanking
companies since 1995. Trustee, Marymount University, Arlington,
Virginia.
ELSIE C. GRUVER Community and civic leader in Arlington, Virginia. 9,594(12)
Age 71
1973
W. LEE PHILLIPS, JR. Professional engineer and land surveyor since 1959; involved in real 12,281(13)
Age 62 estate management and home building in Falls Church, Virginia, and
1985 southern Maryland since 1991.
JOSIAH P. ROWE, III Publisher and President, The Free Lance-Star Publishing Co. of 2,250
Age 69 Fredericksburg, Va., since 1998; Co-Publisher and General Manager,
1991 1949-1997. Director, First Virginia Bank, Falls Church, Virginia.
Trustee, Union Theological Seminary, Richmond. Also owns 100 shares
of Preferred Stock.
ALBERT F. ZETTLEMOYER Retired President, Government Systems Group of UNISYS Corporation in 10,000
Age 63 McLean, Virginia, 1993-1995; retired Executive Vice President, UNISYS
1978 Corporation, 1993-1995; Vice President, UNISYS, 1988-1993.
</TABLE>
As of December 31, 1997, executive officers and directors as a group
beneficially owned 1,325,436 shares of Common Stock representing approximately
2.6% of those shares outstanding, of which 218,180 shares represent shares
covered by options exercisable as of December 31, 1997 (or sixty days
thereafter) and 125 shares of Preferred Stock representing approximately .21%
of those shares outstanding. Messrs. Breeden, Greer, Holland and Giordano are
members of or are associated with law firms which have been in the last two
years, and are proposed in the future to be, retained by subsidiaries of First
Virginia. Messrs. Breeden, Fitzpatrick, Geithner, Ginn, Giordano, Greer,
Holland, Phillips, Rowe and Zalokar have been directors of various subsidiaries
of First Virginia during the past five years. Ages of the directors are stated
as of December 31, 1997.
- ----------------------
11 Includes options to purchase 39,477 shares of Common Stock which are
exercisable as of December 31, 1997 or sixty days thereafter.
12 Includes 4,743 shares of Common Stock held in an Individual Retirement
Account and 1,350 shares held in her spouse's Individual Retirement
Account.
13 Includes 4,500 shares held by a trust of which Mr. Phillips is a trustee.
4
<PAGE> 7
BENEFICIAL OWNERSHIP OF NAMED EXECUTIVE OFFICERS
The following table sets forth certain information regarding the named
executives' beneficial ownership of First Virginia Common Stock as of December
31, 1997.
<TABLE>
<CAPTION>
Shares of Common Stock of First Virginia
Beneficially Owned
Name of Officer Number * Percent of Class
---------------------------------------------------------------------
<S> <C> <C>
Barry J. Fitzpatrick 94,803 .1819
Shirley C. Beavers, Jr. 63,830 .1225
Raymond E. Brann, Jr. 50,776 .0975
Richard F. Bowman 35,277 .0677
Michael G. Anzilotti 18,975 .0364
</TABLE>
* The amounts shown represent the total shares owned beneficially by such
individuals as of December 31, 1997 together with shares which are issuable
upon the exercise of all stock options that are exercisable. Specifically, the
following individuals have options that are exercisable as of December 31, 1997
(or sixty days thereafter) which gives them the right to acquire the shares
indicated after their names, upon the exercise of stock options: Mr.
Fitzpatrick, 39,477; Mr. Beavers, 43,578; Mr. Brann, 27,150; Mr. Bowman,
25,400; and Mr. Anzilotti, 16,800.
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
First Virginia's Board of Directors has a standing Audit Committee,
Director Nominating Committee, Management Compensation and Benefits Committee,
Public Policy Committee, and Executive Committee.
The Audit Committee, comprised of Directors Breeden, Giordano, Gruver,
Melvin, and Phillips, held four meetings during 1997. Functions of the
Committee include (1) reviewing with the independent public accountants and
management such matters as: the financial statements and the scope of First
Virginia's audit, compliance with laws and regulations, and the adequacy of
First Virginia's system of internal procedures and controls and resolution of
material weaknesses; (2) reviewing with First Virginia's internal auditors the
activities and performance of the internal auditors; (3) reviewing with
management the selection and termination of the independent public accountants
and any significant disagreements between the independent public accountants
and management; and (4) reviewing the nonaudit services of the independent
public accountant. Under Section 36 of the Federal Deposit Insurance Act, the
Audit Committee also performs similar functions for some of the First Virginia
member banks.
The Director Nominating Committee, comprised of Directors Zalokar,
Fitzpatrick, Ginn, Giordano, Greer, and Rowe, held one meeting in 1997. The
functions of the Committee include annually recommending to the Board the names
of persons to be considered for nomination and election by First Virginia's
stockholders and, as necessary, recommending to the Board the names of persons
to be elected to the Board between annual meetings.
The Management Compensation and Benefits Committee, comprised of
Directors Zettlemoyer, Holland, Kendrick, Melvin, and Phillips, held one
meeting in 1997. The Committee has the authority to establish the level of
compensation (including bonuses) and benefits of management of First Virginia.
In addition, the Committee has authority to award long-term incentive
compensation, e.g., stock options, to First Virginia's management based on such
factors as individual and corporate performance.
5
<PAGE> 8
The Public Policy Committee, comprised of Directors Gruver, Breeden,
Fitzpatrick, Geithner, Greer, Kendrick, Rowe, and Zalokar, met two times during
1997. This Committee supervises First Virginia's contributions and matching
gifts programs. The Committee also monitors the programs developed for
affirmative action and compliance with the Community Reinvestment Act and Title
VII of the Civil Rights Act of 1964.
The Executive Committee, comprised of Directors Zalokar, Breeden,
Fitzpatrick, Geithner, Ginn, Holland, and Zettlemoyer, held 12 meetings in
1997. The Committee exercises all of the powers of the Board of Directors when
the Board is not in session, except for those powers reserved for the Board
under state law and by First Virginia's Articles of Incorporation and Bylaws.
During 1997, there were 12 meetings of the Board of Directors. All
incumbent directors attended more than 75% of the aggregate total number of
meetings of the Board and committees of the Board on which they served, except
Mr. Greer, who attended 60% of the required meetings primarily due to an
illness.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires First
Virginia's executive officers and directors to file reports of ownership and
changes in ownership with the Securities and Exchange Commission and the New
York Stock Exchange. Executive officers and directors are required by SEC
regulation to furnish First Virginia with copies of all Section 16(a) forms
they file.
Based on a review of the forms that were filed and written
representations from the executive officers and directors, First Virginia
believes that during the year 1997 all filing requirements applicable to its
officers and directors were met.
EXECUTIVE COMPENSATION
The Summary Compensation Table shows the annual compensation for the
last three fiscal years for First Virginia's Chief Executive Officer and for
the four most highly compensated executive officers other than First Virginia's
Chief Executive Officer:
6
<PAGE> 9
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term
Annual Compensation Compensation
------------------- ------------
(a) (b) (c) (d) (e) (f) (g)
Other
Annual Options/ All Other
Name and Compensa- SARs Compen-
Principal tion Awarded sation
Position Year Salary ($)(1) Bonus ($)(2) ($)(3) (#) ($)(4)
--------- ---- ------------- ------------ ------------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Barry J. Fitzpatrick 1997 600,000 346,944 3,395 30,000 66,144
Chairman, President and 1996 470,000 269,960 3,724 10,000 56,783
Chief Executive Officer 1995 350,000 156,275 3,636 20,000 45,804
of First Virginia
Shirley C. Beavers, Jr. 1997 253,500 134,265 3,708 15,000 32,812
Executive Vice President 1996 241,500 108,433 3,748 5,000 31,426
of First Virginia and 1995 230,000 93,362 3,868 5,000 30,818
Chairman and Chief Executive
Officer of First Virginia
Services, Inc.
Raymond E. Brann, Jr. 1997 204,500 132,471 5,052 15,000 62,268
Executive Vice President 1996 194,500 106,803 4,568 5,000 59,339
of First Virginia 1995 183,821 61,735 66,360 5,000 57,270
Richard F. Bowman 1997 183,000 132,245 3,708 15,000 18,662
Senior Vice President, Treasurer 1996 168,000 106,088 3,263 5,000 15,943
and Chief Financial Officer 1995 153,000 60,817 2,858 5,000 14,520
of First Virginia
Michael G. Anzilotti 1997 196,900 69,700 2,250 7,500 16,898
Senior Vice President and 1996 188,400 56,550 2,459 0 15,966
Regional Executive Officer 1995 173,798 46,524 2,250 5,000 15,034
of First Virginia and
President and Chief Executive
Officer of First Virginia Bank
</TABLE>
(1) The Salary column (c) includes the base salary earned by the
executive officer, which includes amounts that are deferred under the First
Virginia Banks, Inc. Employees Thrift Plan and the First Virginia Pre-Tax
Health Benefit Plan.
(2) The Bonus column (d) includes the amount earned as a bonus for
that year even if paid in the following year. It also includes amounts earned
for that year under the First Virginia Banks, Inc. Profit Sharing Plan.
(3) The Other Annual Compensation column (e) includes the amount
of taxes paid by First Virginia for certain benefits. In Mr. Brann's case, it
also includes for years 1995-1997 the interest benefit to him of a
below-market-rate residential mortgage loan made to him as an inducement to
relocate to Northern Virginia. During 1995, Mr. Brann had perquisites or
personal benefits whose value amounted to $56,900. Of that amount, $32,459 was
for country club dues and a country club initiation fee and $17,287 was for
moving expenses.
(4) The All Other Compensation column (g) includes the amount paid
by the employer under the First Virginia Banks, Inc. Employees Thrift Plan
which, for each of the named officers, was $7,125. It also includes the
amounts paid by the employer under the First Virginia Supplemental Benefits
Plan. This plan provides supplemental retirement benefits for those key
officers who are restricted from receiving further benefits under the Thrift
Plan as a result of the limitation on pretax
7
<PAGE> 10
contributions imposed by the Internal Revenue Code. For 1997, these amounts
were: for Mr. Fitzpatrick, $35,398; Mr. Beavers, $9,173; Mr. Brann, $6,894;
Mr. Bowman, $5,895; and Mr. Anzilotti, $4,291. It also includes the premium
amounts paid by the employer under the First Virginia Split Dollar Life
Insurance Plan. For 1997, these amounts were: for Mr. Fitzpatrick, $21,630;
Mr. Beavers, $14,500; Mr. Brann, $43,913; Mr. Bowman, $5,243; and Mr.
Anzilotti, $4,191. It also includes the "above-market" earnings on deferred
compensation earned during 1997. These amounts were: for Mr. Fitzpatrick,
$1,991; Mr. Beavers, $2,014 Mr. Brann, $4,336; Mr. Bowman, $399; and Mr.
Anzilotti, $1,291.
STOCK OPTIONS AND STOCK APPRECIATION RIGHTS
The following table shows for each of the named executive officers (1)
the number of options that were granted during 1997, (2) out of the total
number of options granted to all employees, the percentage granted to the named
executive officer, (3) the exercise price, (4) the expiration date, and (5) the
potential realizable value of the options, assuming that the market price of
the underlying securities appreciates in value from the date of grant to the
end of the option term, at a 5% and 10% annualized rate. No freestanding or
tandem SARs were granted in 1997.
STOCK OPTION GRANTS IN 1997
<TABLE>
<CAPTION>
Percent of
Number of Total Potential Realizable
Securities Options Value at Assumed Annual
Underlying Granted to Exercise Rates of Stock Price
Options Employees or Base Appreciation for Option
Granted in Fiscal Price Expiration Term
Name (# Shs.)(1) Year (2) ($/Sh.) Date 5%($) 10%($)
---- ----------- ---------- -------- ---------- ----- ------
<S> <C> <C> <C> <C> <C> <C>
Barry J. Fitzpatrick 30,000 15.38% 52.31 12/16/2007 986,918 2,501,056
Shirley C. Beavers, Jr. 15,000 7.69% 52.31 12/16/2007 493,459 1,250,527
Raymond E. Brann, Jr. 15,000 7.69% 52.31 12/16/2007 493,459 1,250,527
Richard F. Bowman 15,000 7.69% 52.31 12/16/2007 493,459 1,250,527
Michael G. Anzilotti 7,500 3.85% 52.31 12/16/2007 246,728 625,263
</TABLE>
(1) Options granted to the named executive officers in 1997 vest
over a five-year period. All of the options that were granted in 1997 include
a provision that would accelerate the vesting of the options upon a "change in
control" of First Virginia. For an explanation of the "change in control"
provision, see "Directors' Compensation, Consulting Arrangements and Plans
Which Include Change in Control Arrangements."
(2) Options to purchase 195,000 shares of First Virginia Common
Stock were granted to employees during 1997. No freestanding SARs were granted
in 1997 to employees, and none of the options that were granted had any tandem
SARs.
The following table on the next page shows for each of the named
executive officers the number of shares of First Virginia Common Stock acquired
upon the exercise of stock options and stock appreciation rights during 1997,
the value realized upon their exercise, the number of unexercised stock options
and SARs at the end of 1997, and the value of unexercised "in-the-money" stock
options and SARs at the end of 1997. Stock options or freestanding SARs are
considered "in-the-money" if the fair market value of the underlying securities
exceeds the exercise price of the option or SAR. Some of the stock options
which were granted to First Virginia's executive officers include a provision
that would accelerate the vesting of the options upon a "change in control" of
First Virginia. There were no unexercisable or exercisable freestanding SARs
owned by any of the named executive officers at yearend.
8
<PAGE> 11
AGGREGATED OPTIONS/SAR EXERCISES IN 1997 AND
YEAREND OPTIONS/SAR VALUES
<TABLE>
<CAPTION>
Number of Value of Unexercised
Unexercised In-the-Money Options
Options at at
Shares Yearend (#) Yearend ($)
Acquired on Exercisable/ Exercisable/
Name Exercise(#) Value Realized ($) Unexercisable Unexercisable
---- ------------- ------------------ -------------- -----------------------
<S> <C> <C> <C> <C>
Barry J. Fitzpatrick 8,144 253,554 27,478/75,000 958,459/1,056,186
Shirley C. Beavers, Jr. 1,044 37,047 37,578/34,500 1,346,005/475,031
Raymond E. Brann, Jr. 4,500 156,688 23,550/29,700 878,065/332,231
Richard F. Bowman 4,621 166,082 20,150/33,000 704,375/430,250
Michael G. Anzilotti --- --- 13,050/18,000 436,471/276,968
</TABLE>
PENSION AND THRIFT PLANS AND SUPPLEMENTAL ARRANGEMENTS
The following table on the next page shows the estimated annual
benefit payable upon retirement (life only) under the First Virginia Pension
Trust Plan and under the First Virginia Supplemental Pension Trust Plan based
on specified remuneration and years of credited service classifications,
assuming a participant retired on December 31, 1997, at age 65. Credited
service in excess of thirty years is also not taken into account in determining
benefits under either plan.
ANNUAL BENEFITS UNDER FIRST VIRGINIA'S PENSION TRUST PLAN AND
THE FIRST VIRGINIA SUPPLEMENTAL PENSION TRUST PLAN
<TABLE>
<CAPTION>
Average
Annual Pay 10 Years 15 Years 20 Years 25 Years 30 Years
for Highest of of of of of
Five Years Service Service Service Service Service
----------- -------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
$200,000 $ 30,535 $ 45,802 $ 61,070 $ 76,337 $ 91,604
$300,000 $ 46,535 $ 69,802 $ 93,070 $116,337 $139,604
$400,000 $ 62,535 $ 93,802 $125,070 $156,337 $187,604
$500,000 $ 78,535 $117,802 $157,070 $196,337 $235,604
$600,000 $ 94,535 $141,802 $189,070 $236,337 $283,604
$700,000 $110,535 $165,802 $221,070 $276,337 $331,604
</TABLE>
Under the First Virginia Pension Trust Plan, a participant retiring at
age 65 with 30 years of credited service under the Plan will receive a maximum
annual pension benefit equal to 1.1% of average annual pay multiplied by 30
years of credited service plus 0.5% of average annual pay in excess of covered
compensation multiplied by 30 years of credited service. The calculation of
"average annual pay" is based on annual compensation for the highest five
consecutive years out of the participant's final 10 years of service. "Covered
compensation" is calculated by multiplying the annual average of Social
Security taxable wage bases in effect for the 35 years ending with the last day
of the year in which the participant attains Social Security retirement age.
Effective January 1, 1996, First Virginia adopted the First Virginia
Supplemental Pension Trust Plan for certain key employees to provide for the
payment of supplemental pension benefits as a result of the IRS restrictions on
9
<PAGE> 12
benefits under the First Virginia Pension Trust Plan. All of the named
executive officers (except for Mr. Fitzpatrick who would receive benefits at
retirement under his Supplemental Compensation Agreement) participate in the
Supplemental Pension Trust Plan.
Remuneration on earnings determining pension benefits under both the
Pension Trust Plan and the Supplemental Pension Trust Plan includes salaries
and bonuses (which are listed in the Summary Compensation Table) and any other
taxable compensation. Effective February 1, 1996, compensation resulting from
the exercise of nonqualified options, SARs, and deferred compensation are
excluded from the computation of benefits under both plans. Credited service
under both plans as of December 31, 1997, for each of the named executives was
as follows: Mr. Fitzpatrick, 28.4 years; Mr. Beavers, 28.3 years; Mr. Brann,
32 years; Mr. Bowman, 22.5 years; and Mr. Anzilotti, 19.2 years. If a
participant retired on December 31, 1997, at age 65, the participant would
receive the pension benefits as determined by using the Summary Compensation
and Pension Tables shown above in conjunction with the formula described above.
Mr. Fitzpatrick's Supplemental Compensation Agreement ("Agreement")
provides him with supplemental retirement benefits in addition to those pension
benefits he would receive from the First Virginia Pension Trust Plan. Under
the Agreement, if he resigns, retires or leaves First Virginia for any reason
after reaching the age of 58, he is entitled to receive for the rest of his
life, supplemental compensation equal to sixty percent of the average of his
highest five years of annual salary and bonus, reduced by the amount he would
receive under the First Virginia Pension Trust Plan. Highest annual salary
includes salary and bonus and any profit sharing payments received under the
First Virginia Profit Sharing Plan but does not include any other form of
compensation that is not salary or bonuses, such as compensation arising from
the exercise of SARs and nonqualified options. To avoid a possible doubling up
of benefits from this Agreement and a separate Employment Agreement (see
below), payments to Mr. Fitzpatrick pursuant to his Agreement would be delayed
for three years upon a change of control. Should Mr. Fitzpatrick die, his wife
would be entitled to one-half of his total annual benefit for the rest of her
life. Under his Agreement, once benefits begin to be paid, Mr. Fitzpatrick is
to remain available to provide consulting and advisory services if he is
physically and mentally capable of doing so. Furthermore, his benefits are
forfeitable under certain circumstances.
Messrs. Fitzpatrick, Beavers, Brann and Bowman have entered into
employment agreements with First Virginia which provide for their continued
employment for a three-year period following the date on which a "change of
control" takes place (the "Employment Period"). These agreements require
First Virginia (or any successor corporation) to employ the executive during
the Employment Period following a change of control in a position with
authority, duties and responsibilities at least commensurate to what the
executive had prior to a change of control, and at compensation levels
(including benefits) at least equal to what the executive was making prior to
the change of control. If, during the first year of his Employment Period, the
executive is terminated other than for "cause" or "disability" or the executive
terminates his employment for "good reason" (as those terms are defined under
the employment agreements), then First Virginia (or its successor) would pay
the executive a lump sum equal to 2.99 times the sum of his annual base salary
and bonus. If, during the second or third year of his Employment Period, the
executive is terminated other than for cause or disability or terminates his
employment for good reason, then First Virginia or its successor would pay the
executive a lump sum equal to two times the sum of his annual base salary and
bonus. During a thirty-day period after the first year, the executive could
terminate his employment for any reason and receive two times the sum of his
annual base salary and bonus. Furthermore, if any payments made under the
agreements subject the executive to taxes under Internal Revenue Code Section
4999, such payments would be "grossed up" to put the executive in the same
after-tax position as if no excise taxes had been imposed.
Executive officers, like other employees of First Virginia, are
eligible to participate in the First Virginia Banks, Inc. Employees' Thrift
Plan ("Thrift Plan"). Under the Thrift Plan, employees of First Virginia and
its subsidiaries who have completed one year of service can contribute up to
six percent of their compensation and receive matching employer contributions
equal to 50% of their employee contributions. For the years when First
Virginia meets an earnings test under the Thrift Plan, First Virginia
contributes 75% of employee contributions. The Thrift Plan complies with
Section 401(k) of the Internal Revenue Code so that employee contributions can
be made on a pretax basis. Employees can direct the investment of their
contributions and the matching employer
10
<PAGE> 13
contributions into one or more of three funds that are administered by the
Trust Department of First Virginia Bank. Reference is made to footnote 4 of
the Summary Compensation Table for the amount of contributions made on behalf
of the named executive officers under the Thrift Plan.
First Virginia also maintains a First Virginia Supplemental Benefits
Plan which provides supplemental retirement benefits for those key officers who
are restricted from receiving further benefits under the Thrift Plan as a
result of the limitation on pretax contributions imposed by the Internal
Revenue Code for 1996. Under the First Virginia Supplemental Benefits Plan,
executive officers can continue to make pretax contributions in excess of the
IRS limits imposed on the Thrift Plan and receive matching contributions from
First Virginia identical to what they would have received if they were in the
Thrift Plan and there were no limitations on contributions. Reference is made
to Footnote 4 of the Summary Compensation Table for the amount of the employer
contributions made on behalf of the named executive officers under the First
Virginia Supplemental Benefits Plan.
DIRECTORS' COMPENSATION, CONSULTING ARRANGEMENTS
AND PLANS WHICH INCLUDE CHANGE IN CONTROL ARRANGEMENTS
For 1997, directors of First Virginia who are not salaried officers
will be paid an annual retainer of $14,000 per year, a fee of $925 for each
meeting of the Board of Directors attended, and a fee of $725 for each meeting
of a Committee of the Board of Directors attended. Committee chairmen will
receive $875 for each committee meeting they chair. Directors are reimbursed
for out-of-town expenses incurred in connection with attendance at Board and
Committee meetings.
During 1997, Edwin T. Holland, the founder and former Chairman and
Chief Executive Officer of First Virginia, and Thomas K. Malone, Jr., former
Chairman and Chief Executive Officer of First Virginia, were paid $157,452 and
$126,372, respectively, under supplemental compensation agreements, in addition
to amounts they received from the First Virginia Pension Trust Plan and, in the
case of Mr. Malone, in addition to his director fees. When requested, both
Holland and Malone are required to provide consulting services under their
supplemental compensation agreements. Also, during 1997, Robert H. Zalokar,
former Chairman and Chief Executive Officer of First Virginia, and Paul H.
Geithner, Jr., former President and Chief Administrative Officer of First
Virginia, were paid $521,316 and $282,527, respectively, under supplemental
compensation agreements, in addition to amounts they received from the First
Virginia Pension Trust Plan and their director fees. When requested, both
Zalokar and Geithner are required to provide consulting services under their
supplemental compensation agreements.
First Virginia paid Mr. Zalokar's and Mr. Malone's country club
membership fees of $2,958 and $1,488, respectively, during 1997.
During 1997, Virginia H. Brown, formerly Virginia H. Beeton, received
$71,000 pursuant to her former husband's Supplemental Retirement Agreement with
First Virginia, in addition to what she received from the First Virginia
Pension Trust Plan. Her former husband, Ralph A. Beeton, was Chairman and
Chief Executive Officer of First Virginia.
First Virginia also has two key employee salary reduction deferred
compensation plans, one of which began in 1983 and the other in 1986, and two
directors' deferred compensation plans, which also began in 1983 and 1986
("Deferred Compensation Plans"). Under the Deferred Compensation Plans,
participants elect to defer some or all of their compensation from First
Virginia, and First Virginia agrees to pay at normal retirement age or earlier
(or to participant's beneficiary or estate on participant's death) a sum
substantially in excess of what each participant has deferred. To fund the
benefits under the Deferred Compensation Plans, First Virginia has purchased
life insurance contracts on the lives of the participants, with First Virginia
as the beneficiary. For the period ending December 31, 1997, none of the named
executive officers of First Virginia deferred any compensation under the
Deferred Compensation Plans.
11
<PAGE> 14
The 1983 deferred compensation plans include a provision regarding
"change in control." If there is a "change in control" of First Virginia, and
a director is terminated under the directors' plan, or in the case of the
employee plan, an employee is terminated "without cause" or the employee
terminates his/her employment for "good reason," as those terms are defined
under the employee plan, then the director or employee, as the case may be,
becomes entitled to receive his/her benefits under the 1983 Deferred
Compensation Plans at retirement, notwithstanding the fact that his/her
affiliation with First Virginia has terminated.
First Virginia has a Split Dollar Life Insurance Plan ("Split Dollar
Plan") which currently includes all executive employees of First Virginia
including those named in the Summary Compensation Table. Under the Split
Dollar Plan, an executive can purchase ordinary life insurance policies with
coverage of at least two times what is projected to be the executive's base
salary at retirement, up to a limit of $1,000,000. A portion of the premiums
will be loaned to the executives by First Virginia up to the later of ten years
or the executive's retirement date. At the end of this period, if assumptions
about mortality, dividends and other factors are realized, First Virginia will
recover all of its loans for premiums from the cash value of the policy. The
policy will then be transferred to the executive, who will pay all further
premiums, if any, under the policy. Executives who participate in the Split
Dollar Plan forego any insurance coverage over $50,000 under the First Virginia
Group Life Insurance Plan. During 1989, the Split Dollar Plan was amended so
that in the event of a "change in control," only the executive would have the
right to terminate the policy.
First Virginia's Board of Directors approved in 1992 the establishment
of a trust with Chemical Bank (now The Chase Manhattan Bank) as the trustee to
partially secure the benefits of some of First Virginia's nonqualified
compensation plans, including the Deferred Compensation Plans and the First
Virginia Supplemental Benefits Plan, in case of a change in control. Under the
trust agreement establishing the trust, if a "change in control" takes place,
the trustee would pay the benefits under the covered compensation plans out of
the trust assets that have been contributed to the trust by First Virginia, if
First Virginia refused to pay the benefits. The trust is considered a "grantor
trust" subject to the claims of First Virginia's general creditors. For
accounting purposes, the trust assets are considered corporate assets and,
therefore, no balance sheet impact to First Virginia will result from the
establishment of the trust. The trust agreement does not include a provision
which would accelerate the vesting or payment of any of the benefits under the
covered compensation plans in case of a change in control. During 1997, First
Virginia did not make a contribution to the Trust.
The 1983 deferred compensation plans, the Split Dollar Plan, the
above-described trust agreement with The Chase Manhattan Bank, Mr.
Fitzpatrick's Supplemental Compensation Agreement, certain stock option
agreements, and the above-described employment agreements all include change in
control provisions. Under this definition, a change in control means: (a) an
acquisition by any individual, entity or group (within the meaning of Section
13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) (a "Person") of beneficial ownership (within the meaning of
Rule 13d-3 promulgated under the Exchange Act) of 20% or more of either (i) the
then outstanding shares of First Virginia Common Stock or (ii) the combined
voting power of the then outstanding voting securities of First Virginia
entitled to vote generally in the election of directors (the "Outstanding First
Virginia Voting Securities"); provided, however, that any acquisition directly
from or by First Virginia or any acquisition by any employee benefit plan (or
related trust) sponsored or maintained by First Virginia or an affiliated
company or any acquisition by a company pursuant to a transaction which
complies with clauses (i), (ii) and (iii) of (c) below would be excluded; or
(b) individuals who, as of the date when the change in control provisions were
adopted, constitute the Board (the "Incumbent Board") of First Virginia, cease
for any reason to constitute at least a majority of the Board; provided,
however, that any individual becoming a director whose election, or nomination
for election by First Virginia's shareholders, was approved by vote of at least
a majority of the directors then comprising the Incumbent Board shall be
considered as though such individual was a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose initial assumption of
office occurs as a result of an actual or threatened election contest with
respect to the election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other than the
Board; or (c) consummation of a reorganization, merger or consolidation or sale
or other disposition of all or substantially all of the assets of First
Virginia (a "Business Combination"), in each case, unless, following such
Business Combination, (i) all or substantially all of the individuals and
entities who were the beneficial owners, respectively, of the outstanding First
12
<PAGE> 15
Virginia Common Stock and Outstanding First Virginia Voting Securities
immediately prior to such Business Combination beneficially own, directly or
indirectly, more than 50% of, respectively, the then outstanding shares of
common stock and the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of directors, as the case
may be, of the corporation resulting from such Business Combination (including,
without limitation, a corporation which as a result of such transaction owns
First Virginia or all or substantially all of First Virginia's assets either
directly or through one or more subsidiaries) in substantially the same
proportions as their ownership, immediately prior to such Business Combination
of the outstanding First Virginia Common Stock and the outstanding First
Virginia Voting Securities, as the case may be, (ii) no Person (excluding any
corporation resulting from such Business Combination or any employee benefit
plan (or related trust) of First Virginia or such corporation resulting from
such Business Combination) beneficially owns, directly or indirectly, 20% or
more of, respectively, the then outstanding shares of common stock of the
corporation resulting from such Business Combination or the combined voting
power of the then outstanding voting securities of such corporation except to
the extent that such ownership existed prior to the Business Combination and
(iii) at least a majority of the members of the board of directors of the
corporation resulting from such Business Combination were members of the
Incumbent Board at the time of the execution of the initial agreement, or the
action of the Board, providing for such Business Combination; or (d) approval
by the shareholders of First Virginia of a complete liquidation or dissolution
of First Virginia.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The current members of First Virginia's Management Compensation and
Benefits Committee are Edward M. Holland, Eric C. Kendrick, John B. Melvin, W.
Lee Phillips, Jr., and Albert F. Zettlemoyer. Edward M. Holland is the son of
Edwin T. Holland, the founder and former Chairman and Chief Executive Officer
of First Virginia. As noted above, Edwin T. Holland receives a fee from First
Virginia pursuant to a Supplemental Compensation Agreement. Also, as noted
above, Edward M. Holland's sister, Virginia H. Brown, receives a benefit
pursuant to her former husband's Supplemental Retirement Agreement with First
Virginia. Albert F. Zettlemoyer's daughter is an officer of First Virginia
Insurance Services, Inc., a subsidiary of First Virginia. None of the members
of the Management Compensation and Benefits Committee served as members of the
compensation committees of another entity. No executive officer of First
Virginia served as a director of another entity that had an executive officer
serving on First Virginia's compensation committee. No executive officer of
First Virginia served as a member of the compensation committee of another
entity which had an executive officer who served as a director of First
Virginia.
MANAGEMENT COMPENSATION AND BENEFITS COMMITTEE
REPORT CONCERNING FIRST VIRGINIA'S
EXECUTIVE COMPENSATION POLICY
The Management Compensation and Benefits Committee (the "Committee")
of the Board of Directors establishes the policy for the compensation of the
executive officers of First Virginia. It is also responsible for administering
most of First Virginia's executive compensation programs. The Committee is
composed entirely of outside directors who are not eligible, with the exception
of the directors' deferred compensation plans, to participate in the plans over
which it has authority.
The overall goal of First Virginia's compensation policy is to
motivate, reward, and retain its key executive officers. The Committee
believes this should be accomplished through an appropriate combination of
competitive base salaries and, at times, both short-term and long-term
incentives.
The primary components of First Virginia's executive compensation
program are base salaries, bonuses, (e.g., short-term compensation), and equity
compensation (e.g., long-term compensation). Executive officers also
participate in other broad-based employee compensation and benefit programs.
In its determination of executive compensation, the Committee noted the
potential effect of the one million dollar deduction limitation under Section
13
<PAGE> 16
162(m) of the Internal Revenue Code but declined to alter its policy in
determining executive compensation to meet the requirements for deductibility
under Section 162(m) because the amount of compensation affected, if any, was
not material.
BASE SALARY
The Compensation Committee's policy for determining base salaries is
based on two primary factors:
(1) the degree of responsibility the executive officer has, his
experience, and the number of years he has been in office and
(2) the compensation levels of corresponding positions at other
banking companies of comparable size that compete with and
serve the same markets as First Virginia. This "Local Peer
Group" of companies consists of Crestar Financial Corporation,
Central Fidelity Banks, Inc., and Signet Banking Corporation
based in Virginia, First Maryland Bancorp and Mercantile
Bankshares Corporation based in Maryland, First Tennessee
National Corporation based in Memphis and First American
Corporation of Tennessee based in Nashville. Base salaries
are targeted to be the median salaries of corresponding
positions in the "Local Peer Group". For 1997, Mr.
Fitzpatrick's base salary was $600,000 which was equal to the
median for salaries paid to his counterparts in the "Local
Peer Group".
SHORT-TERM INCENTIVES/BONUSES
The Committee grants bonuses to the executive officers and CEO based
on the extent to which First Virginia achieves or exceeds annual performance
objectives. The Compensation Committee may award bonuses to the CEO and to the
executive officers if First Virginia achieves a return on total average assets
(ROA) of at least 1% (the same basis for determining payments of profit sharing
to all employees). ROA generally is considered by the Committee to be the most
important single factor in measuring the performance of a banking company, and
achievement of a 1% ROA generally is considered by the Committee to be the
minimum for a good performing banking company.
Bonus awards are based on the following:
(a) The Committee establishes target amounts each year for return
on average assets ("ROA"), return on total stockholders'
equity ("ROE"), asset quality, and capital strength consistent
with First Virginia's Profit Plan target amounts. Up to 50%
of an executive's salary may be awarded if the corporation
achieves an ROA equivalent to 80% or more of the ROA target
amount for the year. For the chief executive officer, First
Virginia would also have to achieve 80% of targeted amounts
for ROE, asset quality as determined by the ratio of
nonperforming assets to total loans (NPA ratio) and net loan
charge-offs (CO ratio), and capital strength based on the
average equity-to-asset ratio (Equity/Asset ratio) and the
Tier I risk-based capital ratio); or
(b) Up to 30% of an executive's bonus may be awarded based on the
degree to which First Virginia's earnings, asset quality, and
capital ratios exceed the average for the other major banking
companies based in the Southeast, the "Southern Regional Peer
Group," as compiled by Keefe, Bruyette and Woods, the New York
securities firm which specializes exclusively in the banking
and thrift industry; or
(c) Up to 20% of an executive's bonus may be awarded at the
discretion of the Committee based on an individual executive's
performance.
Within the above parameters, at the beginning of each year, the
Committee establishes for the CEO a target bonus which is based on a projected
return on assets for First Virginia. At the end of the year, the Committee
14
<PAGE> 17
considers a preliminary bonus after taking into account the target bonus, First
Virginia's actual return on assets for the year, and a formula which is based
on a set relationship between the actual versus the projected return on assets.
The Committee then exercises its judgment in light of the foregoing
parameters and other considerations, including the Committee's view of
individual performance and potential and the recommendations of the CEO for the
executive officers (other than himself), to reach a bonus decision for each
executive officer and for the CEO. The Committee does not use a formula to
determine a final bonus decision. Among other things, Mr. Fitzpatrick's bonus
reflected First Virginia's success in achieving a 1.49% return on assets (for
the first nine months) and the other above-described results. Consistent with
the Committee's avoidance of a strict formula approach, no specific weighting
among the above 50%, 30% and 20% factors was specified. The Committee believes
that the use of the above approach provides a flexible yet effective method of
motivating First Virginia's management.
Listed on the next page are the annualized ratios for First Virginia
and the Southern Regional Peer Group based on results for the first nine months
of 1997, the latest data available to the Committee at the time the incentive
awards were considered.
First Virginia
<TABLE>
<CAPTION>
Profit Plan
or Target KBW Southern
Amount Actual Regional Peer Group
------ ------ -------------------
<S> <C> <C> <C>
Earnings (Higher is better)
ROA 1.40% 1.49% 1.29%
ROE 13.09% 13.76% 15.11%
Asset Quality (Lower is better)
NPA .50% .43% .59%
CO .30% .30% .32%
Capital (Higher is better)
Equity/Asset Ratio 9.5% 11.20% 8.46%
Tier I Risk-Based Capital 10.0% 12.79% 10.87%
</TABLE>
First Virginia's actual results equaled or exceeded the profit plan or
target amount in every category and exceeded the Regional Peer Group in every
category except ROE. For that reason, the Committee awarded Mr. Fitzpatrick a
bonus of $325,000.
LONG-TERM COMPENSATION/STOCK OPTIONS
The Committee believes that the granting of stock options is the most
appropriate form of long-term compensation for executives and that such awards
of equity encourage the executive to achieve a significant ownership stake in
the success of First Virginia.
At the end of 1997, the Committee granted options covering a total of
195,000 shares of First Virginia Common Stock at $52.31 per share to the CEO
and to certain executive officers. Each option that was awarded by the
Committee vests over a five-year period in equal annual installments.
The size of each option award was not based on a formula and did not
necessarily correlate to the degree by which First Virginia's results exceeded
those of its Market Area Peer Group or the amount of each executive's current
stock-based holdings. Instead, the size of each award was based on a number of
factors, some of which
15
<PAGE> 18
were subjective, including the performances of the CEO and each executive
officer and the degree of responsibility each executive officer has with First
Virginia. Mr. Fitzpatrick received options covering 30,000 shares. The size
of his grant was primarily based on the performance of First Virginia as
described above.
Edward M. Holland
Eric C. Kendrick
John B. Melvin
W. Lee Phillips
Albert F. Zettlemoyer
PERFORMANCE GRAPH
The following performance graph compares the yearly percentage change
in First Virginia's cumulative total shareholder return on its Common Stock
with (1) the cumulative total return of a broad market index that includes
companies whose equity securities are traded on the same exchange or are of
comparable market capitalization and (2) the cumulative total return of a
published industry or line-of-business index.
First Virginia Banks, Inc.
Cumulative Total Return
Graph Information
<TABLE>
<CAPTION>
First Virginia S&P 400
Banks, Inc. Mid Cap KBW 50
-------------- ------- ------
<S> <C> <C> <C>
1992 100 100 100
1993 92 114 106
1994 93 110 100
1995 126 144 160
1996 150 171 227
1997 249 227 332
</TABLE>
First Virginia believes the most appropriate equity market indices to
be used to measure the price performance of First Virginia's Common Stock are
the "S&P MidCap 400" and the "KBW 50." First Virginia is included as a
component of the S&P MidCap 400.
The Standard & Poor's MidCap 400 is comprised of 400 securities with
market value between approximately $200 million and $4 billion. First Virginia
considers it more representative of companies its size (yearend 1997 market
capitalization of approximately $2.684 billion) than the S&P 500 index which is
heavily
16
<PAGE> 19
dominated by large capitalization stocks (the 50 largest stocks account for 50%
of the total value of the S&P 500). Also, financial stocks represent
approximately 15% of the S&P MidCap 400 index.
The KBW 50 is an index comprised of 50 banking companies, including
all the money center banks and most large regional banks. It was developed by
Keefe, Bruyette & Woods, a New York securities firm which specializes in the
banking and thrift industry. The KBW 50 is considered more representative of
price performance of the major banking companies in America. As is the case
with the S&P MidCap 400 index, the KBW 50 is a market capitalization weighted
index and assumes quarterly reinvestment of dividends.
As indicated in the Management Compensation and Benefits Committee
Report above, return on average assets (ROA) is an important factor for
determining First Virginia's performance and for determining short-term and
long-term compensation for First Virginia's executive officers. The following
chart compares First Virginia's ROA during the period 1993-1997 with the KBW
Southern Regional Peer Group and with a local peer group consisting of Central
Fidelity Banks, Inc., Crestar Financial Corporation, Signet Banking
Corporation, Mercantile Bankshares Corporation, First Tennessee National
Corporation and First American Corporation of Tennessee. (Because of the
acquisitions of Central Fidelity Banks, Inc. and Signet Banking Corporation,
Riggs National Corporation's and F&M National Corporation's fourth quarter ROAs
were substituted for those corporations.) As noted in the Management
Compensation and Benefits Committee Report, the Compensation Committee compared
First Virginia's ROA with both these groups as part of their evaluation of
executive compensation.
FIRST VIRGINIA BANKS, INC.
CALCULATION OF FIVE-YEAR RETURN ON AVERAGE ASSETS
YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
First Virginia Southern Local
Banks, Inc. Region Peer
-------------- -------- -----
<S> <C> <C> <C>
1993 1.68 1.21 0.81
1994 1.58 1.24 1.25
1995 1.41 1.23 1.45
1996 1.43 1.27 1.40
1997 1.44 1.30 1.42
</TABLE>
TRANSACTIONS WITH MANAGEMENT
During the past year, certain of the directors and officers of First
Virginia and their associates had loans outstanding from First Virginia's
banking subsidiaries. Each of these loans was made in the ordinary course of
the lending bank's business. In some cases, where officers of First Virginia
or its subsidiaries had to be relocated, residential mortgage loans were made
by First Virginia at favorable interest rates. During 1995, First Virginia
17
<PAGE> 20
made a below market rate residential mortgage loan in the amount of $400,000 at
7-5/8% to Raymond E. Brann, Jr., Executive Vice President of First Virginia, as
an inducement for him to relocate to Northern Virginia. The interest benefit
to him of that loan is included in the Summary Compensation Table. However,
none of the other named executive officers had any other below market rate
loans from First Virginia and none of them had any loans from any of First
Virginia's banking subsidiaries at favorable interest rates. All other loans
have been made on substantially the same terms, including interest rates and
collateral, as those prevailing at the time for comparable transactions with
other persons and did not involve more than the normal risk of collectibility
or present other unfavorable features. As of December 31, 1997, the aggregate
amount of loans outstanding to all directors and executive officers of First
Virginia and associates and members of their immediate families was
approximately $4,592,582.
II. APPROVAL OF AMENDMENT TO ARTICLES OF INCORPORATION
The Board of Directors has recommended an amendment to First
Virginia's Articles of Incorporation, in the form below, to increase the
authorized Common Stock, $1.00 par value, from 60,000,000 shares to 175,000,000
shares. Presently, First Virginia has approximately ________________ shares of
Common Stock outstanding. The amendment would not change the currently
authorized 3,000,000 shares of Preferred Stock.
If authorized, additional Common Stock will be available for a
possible future financings of, or acquisitions by, First Virginia, for future
stock splits and for general corporate purposes without any legal requirement
that further shareholder authorization for issuance be obtained. First
Virginia has no present plans for the issuance of any Common Stock other than
with respect to existing stock option plans and First Virginia's Dividend
Reinvestment Plan and the 1998 Stock Incentive Plan as described in this Proxy
Statement.
Shareholders should be aware that the issuance of additional shares of
Common Stock could cause a dilution of voting rights and net income and net
book value per share of Common Stock. First Virginia, however, would receive
consideration for any additional shares of Common Stock issued, thereby
reducing or eliminating the economic effect to each stockholder of such
dilution.
The affirmative vote of a majority of all shares of Common and
Preferred Stock (voting as separate voting groups) entitled to vote on the
matter will be required for the adoption of this amendment.
The proposed amendment to First Virginia's Articles of Incorporation
consists of revising the first sentence of Article III to read as follows
(change underlined):
The Corporation shall have the authority to issue 175,000,000
shares of Common Stock, $1.00 par value, and 3,000,000 shares
of Preferred Stock, $10.00 par value.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THE
AMENDMENT TO FIRST VIRGINIA'S ARTICLES OF INCORPORATION TO INCREASE THE
AUTHORIZED COMMON STOCK TO 175,000,000 SHARES.
III. APPROVAL OF THE 1998 STOCK INCENTIVE PLAN
The Board of Directors proposes that the shareholders approve the
First Virginia Banks, Inc. 1998 Stock Incentive Plan (the "Plan"). Approval of
the Plan requires the affirmative vote of the holders of a majority of the
shares of Common and Preferred Stock present or represented by properly
executed and delivered proxies at the meeting. Abstentions and Broker Shares
voted as to any matter at the meeting will be included in determining the
number of votes present or represented at the meeting with respect to
determining the vote on the Plan. Broker
18
<PAGE> 21
Shares that are not voted on any matter at the meeting will not be included in
determining the number of shares present or represented at the meeting with
respect to determining the vote on the Plan.
The Board believes that the Plan will benefit First Virginia by (i)
assisting it in recruiting and retaining employees with ability and initiative,
(ii) providing greater incentive for employees of First Virginia and its
related entities, and (iii) associating the interests of employees with those
of First Virginia, its related entities, and its shareholders through
opportunities for increased stock ownership. A maximum of 2,500,000 shares of
Common Stock may be issued under the Plan. The Plan is intended to conform to
the requirements of Section 162(m) of the Internal Revenue Code of 1986, as
amended, for performance-based compensation.
The following paragraphs summarize the principal features of the Plan.
This summary is subject, in all respects, to the terms of the Plan. First
Virginia will provide promptly, upon request and without charge, a copy of the
full text of the Plan to each person to whom a copy of this Proxy Statement is
delivered. Requests should be directed to: Secretary's Office, First Virginia
Banks, Inc., 6400 Arlington Boulevard, Falls Church, Virginia 22042-2336
(800-995-9416).
SUMMARY OF THE PLAN
The Plan shall be administered by the Management Compensation and
Benefits Committee (the "Committee") of the Board of Directors or any delegate
of that Committee. As used in this summary, the term "Administrator" means the
Committee and any delegate, as appropriate. Each employee of First Virginia or
a related entity is eligible to participate in the Plan. The Administrator
will select the individuals who participate in the Plan ("Participants"). The
Administrator may, from time to time, grant stock options, stock appreciation
rights ("SARs"), stock awards or performance shares to Participants.
Options granted under the Plan may be incentive stock options (ISOs)
or nonqualified stock options. A stock option entitles the Participant to
purchase shares of Common Stock from First Virginia 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, with shares of Common
Stock, or with a combination of cash and Common Stock.
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 SARs 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 an exercise of the 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 to exercise a Corresponding SAR, the Participant must
surrender unexercised that portion of the stock option to which the
Corresponding SAR relates.
Participants may also be awarded shares of Common Stock pursuant to a
stock award. The Administrator, in its discretion, may prescribe that a
Participant's rights in a stock award shall be nontransferable or forfeitable
or both unless certain conditions are satisfied. These conditions may include,
for example, a requirement that the Participant continue employment with First
Virginia or a related entity for a specified period or that First Virginia, a
related entity, or the Participant achieves stated objectives. If a
Participant's rights in a stock award are restricted, the period during which
the restriction applies cannot be less than one year.
The Plan also provides 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 standards are met. The Administrator will prescribe the
requirements that must be satisfied before a performance share award is earned.
The performance share requirements may include, for example, a
19
<PAGE> 22
requirement that the Participant continue employment with First Virginia or a
related entity for a specified period or that First Virginia, a related entity,
or the Participant achieve stated objectives. The period in which any
performance criteria must be satisfied cannot be less than one 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.
Incentive awards also may be granted which will be subject to certain
performance objectives of First Virginia or a related entity being achieved, as
specified by the Administrator. No Participant may receive an incentive award
in any calendar year that exceeds the lesser of $1,000,000 or 150% of the
Participant's annual base salary.
All awards made under the Plan will be evidenced by written agreement
between First Virginia and the Participant. A maximum of 2,500,000 shares of
Common Stock may be issued under the Plan. Subject to this aggregate maximum,
the maximum number of shares that may be issued under the Plan as stock awards,
including the settlement of performance share awards, is 800,000. The share
limitation and the terms of outstanding awards will be adjusted, as the
Committee deems appropriate, in the event of a stock dividend, stock split,
combination, reclassification, recapitalization, or similar events.
No option, SAR, or stock awards may be granted and no performance
shares may be awarded under the Plan after April 24, 2008. The Board may
sooner terminate the Plan without further action by shareholders. The Board
may also amend the Plan, except that no amendment that increases the number of
shares of Common Stock that may be issued under the Plan or changes the class
of individuals who may be selected to participate in the Plan will become
effective until it is approved by shareholders.
Neither the number of individuals who will be selected to participate
in the Plan or the type or size of awards that will be approved by the
Administrator can be determined. First Virginia is also unable to determine
the number of individuals who would have participated in the Plan or the type
or size of awards that would have been made under the Plan had it been in
effect in 1997.
FEDERAL INCOME TAX CONSEQUENCES
First Virginia has been advised by counsel regarding the federal
income tax consequences of the Plan. No income is recognized by a Participant
at the time the option is granted. If the option is an ISO, no income will be
recognized upon the Participant's exercise of the option. Income is recognized
by a Participant when he disposes of shares required under an ISO. The
exercise of a nonqualified 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.
The exercise of an ISO may result in a tax to the optionee under the
alternative minimum tax because, as a general rule, the excess of the fair
market value of stock received on the exercise of an ISO over the exercise
price is defined as an item of "tax preference" for purposes of determining
alternative minimum taxable income.
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 Common Stock
that is 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. The Participant will recognize income equal to any
cash that is paid and the fair market value of Common Stock (on the
20
<PAGE> 23
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 First Virginia or a related entity) will be
entitled to claim a federal income tax deduction on account of the exercise of
a nonqualified 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
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. The employer may claim a federal income
tax deduction on account of certain dispositions of Common Stock acquired upon
the exercise of an ISO.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THE FIRST
VIRGINIA BANKS, INC. 1998 STOCK INCENTIVE PLAN AND AUTHORIZATION TO ISSUE UP TO
2,500,000 SHARES OF COMMON STOCK UNDER THE PLAN.
IV. APPOINTMENT OF INDEPENDENT AUDITORS
At the meeting a vote will be taken on a proposal to ratify the
appointment by the Board of Directors of Ernst & Young LLP as independent
auditors for the year ending December 31, 1998. Ratification will require the
affirmative vote of the holders of a majority of shares of Common and Preferred
Stock present or represented by properly executed and delivered proxies at the
meeting. Abstentions and Broker Shares voted as to any matter at the meeting
will be included in determining the number of votes present or represented at
the meeting with respect to determining the vote on ratification. Broker
Shares that are not voted on any matter at the meeting will not be included in
determining the number of shares present or represented at the meeting with
respect to determining the vote on the ratification. Ernst & Young LLP has
served as independent auditors for First Virginia since 1974. Representatives
of the firm are expected to be present at the stockholders' meeting and will be
available to respond to appropriate questions and to make a statement if they
desire to do so.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" RATIFICATION OF THE
APPOINTMENT OF ERNST & YOUNG LLP AS INDEPENDENT AUDITORS FOR 1998.
STOCKHOLDER PROPOSALS
Any stockholder proposal intended to be presented at the 1999 Annual
Meeting and included in First Virginia's 1999 Proxy Statement must be received
by First Virginia no later than November 7, 1998. Upon receipt of any such
proposal, First Virginia will determine whether or not to include such proposal
in the Proxy Statement and proxy in accordance with regulations governing the
solicitation of proxies.
Under First Virginia's Bylaws, in order for a stockholder to nominate
a candidate for director, written notice of the nomination must be given to
First Virginia in advance of the meeting. Ordinarily, such notice must be
given not less than 60 nor more than 90 days before the meeting. However, if
First Virginia gives less than 70 days notice or prior public disclosure of the
meeting, then the stockholder must give such notice within 10 days after notice
of the meeting is mailed or other public disclosure of the meeting is made.
The notice must include, among other things, (1) the name and record address
of, and the class and amount of voting securities of First Virginia owned by,
the stockholder proponent, (ii) the name, age, address and occupation of, and
the class and amount of voting securities of First Virginia owned by, the
nominee, and (iii) all information that would be required under Securities and
Exchange Commission rules in a proxy statement soliciting proxies for such
nominee. In order for a stockholder to bring other business before an annual
meeting of stockholders, written notice must be given to First Virginia within
the same time limits described above for the nomination of a candidate for
director. The notice must include, among other things, (i) the name and record
address of, and the class and amount of voting securities of First Virginia
owned by, the stockholder proponent and any other stockholder known to be
supporting such
21
<PAGE> 24
proposal, (ii) a brief description of the proposed business, the reasons for
conducting such business at the annual meeting, and (iii) any financial or
other interest of the stockholder in such proposal. These advance notice
requirements are separate from and in addition to the requirements a
stockholder must meet to have a proposal included in First Virginia's Proxy
Statement. In each case, the notice must be given to the Secretary of First
Virginia at its principal executive offices, 6400 Arlington Boulevard, Falls
Church, Virginia 22042-2336.
The foregoing summary of certain provisions of First Virginia's Bylaws
is not intended to be complete and is qualified in its entirety by reference to
the Bylaws of First Virginia, copies of which will be furnished without charge
to any stockholder upon written request to the Secretary.
OTHER MATTERS
Management does not know of any other business to be presented to the
meeting except for matters incident to the conduct of the meeting. The persons
named in the accompanying proxy will vote in accordance with the specifications
on the proxy form and will vote in accordance with their best judgment on any
other matters which properly come before the meeting.
The cost of soliciting proxies will be borne by First Virginia. In
addition to solicitation by mail, proxies may be solicited in person, by
telephone or telegraph, or by directors, officers and employees of First
Virginia. In addition, First Virginia has engaged Morrow & Co., Inc. to aid in
the distribution of proxy materials and to solicit proxies from brokers,
nominees, and security-holding companies for a fee of $6,500 plus out-of-pocket
expenses. First Virginia does not expect to pay any other compensation for the
solicitation of proxies, but will pay brokers, nominees, fiduciaries, and other
custodians their reasonable expenses for sending proxy material to principals
and obtaining their instructions.
A copy of First Virginia's Annual Report for 1997, including financial
statements, is being mailed with this Proxy Statement to all stockholders of
record. The Annual Report is not to be regarded as proxy soliciting material.
FIRST VIRGINIA WILL PROVIDE WITHOUT CHARGE, UPON THE WRITTEN REQUEST
OF ANY STOCKHOLDER ENTITLED TO VOTE AT THE ANNUAL MEETING, A COPY OF ITS ANNUAL
REPORT FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997, ON FORM 10-K, WHICH REPORT
WILL BE FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OR BEFORE MARCH
31, 1998. STOCKHOLDERS OF RECORD ON FEBRUARY 17, 1998, AND BENEFICIAL OWNERS
OF SUCH SECURITIES SHOULD SUBMIT REQUESTS FOR SUCH REPORT TO THOMAS P.
JENNINGS, SECRETARY, 6400 ARLINGTON BOULEVARD, FALLS CHURCH, VIRGINIA
22042-2336.
22
<PAGE> 25
REVOCABLE PROXY
FIRST VIRGINIA BANKS, INC.
X PLEASE MARK VOTES
AS IN THIS EXAMPLE
Proxy for Annual Meeting of Stockholders
Friday, April 24, 1998
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Elsie C. Gruver, John B. Melvin and W. Lee
Phillips, Jr., and each of them, proxies with full power to vote all of the
stock of FIRST VIRGINIA BANKS, INC., which the undersigned has the power to
vote at the Annual Meeting of Stockholders to be held Friday, April 24, 1998,
at 6400 Arlington Boulevard, Falls Church, Virginia, in the Fifth Floor
Auditorium at 10:00 a.m., local time, and any adjournment thereof, in
accordance with instructions noted below, and at their discretion, upon any
other business not now known which properly may come before the said meeting,
all as more fully set forth in the accompanying proxy statement, receipt of
which is acknowledged.
With- For All
1. ELECTION OF DIRECTORS For hold Except
( ) ( ) ( )
C Class B (for a term of 3 years):
O Edward L. Breeden, III
M Gilbert R. Giordano
M Eric C. Kendrick
O Robert M. Rosenthal
N Robert H. Zalokar
INSTRUCTION: To withhold authority to
vote for any individual nominee, mark
"For All Except" and write that nominee's
name in the space provided below.
- ----------------------------------------------
For Against Abstain
2. PROPOSAL TO AMEND ( ) ( ) ( )
THE ARTICLES OF
INCORPORATION to
increase the
authorized shares
of Common Stock
to 175,000,000.
For Against Abstain
3. PROPOSAL TO ADOPT ( ) ( ) ( )
THE 1998 STOCK
INCENTIVE PLAN and
to approve the
authorization of
2,500,000 shares
for the Plan.
For Against Abstain
4. PROPOSAL TO RATIFY ( ) ( ) ( )
THE APPOINTMENT OF
ERNST & YOUNG LLP
as independent
auditors for the
year 1998.
Please be sure to sign and date
this Proxy in the box below. Date
Stockholder sign above. Co-holder (if any)
sign above.
- ------------------------------------------------------------------------------
Detach above card, sign, date and mail in postage paid envelope provided.
FIRST VIRGINIA BANKS, INC.
If no choice is indicated above, this proxy shall be deemed to grant
authority to vote FOR the election of director nominees and to vote FOR each of
the proposals. The stockholder's signature should be exactly as the name
appears above. When shares are held by joint tenants, both should sign. When
signing as attorney, executor, administrator, trustee, or guardian, please give
full title as such. If a corporation, please sign in full corporate name by
the President or other authorized officer. If a partnership, please sign in
partnership name by authorized person.
PLEASE ACT PROMPTLY
SIGN, DATE & MAIL
YOUR PROXY CARD TODAY
<PAGE> 26
REVOCABLE PROXY
FIRST VIRGINIA BANKS, INC.
X PLEASE MARK VOTES
AS IN THIS EXAMPLE
Proxy for Annual Meeting of Stockholders
Friday, April 24, 1998
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Elsie C. Gruver, John B. Melvin and W. Lee
Phillips, Jr., and each of them, proxies with full power to vote all of the
stock of FIRST VIRGINIA BANKS, INC., which the undersigned has the power to
vote at the Annual Meeting of Stockholders to be held Friday, April 24, 1998,
at 6400 Arlington Boulevard, Falls Church, Virginia, in the Fifth Floor
Auditorium at 10:00 a.m., local time, and any adjournment thereof, in
accordance with instructions noted below, and at their discretion, upon any
other business not now known which properly may come before the said meeting,
all as more fully set forth in the accompanying proxy statement, receipt of
which is acknowledged.
With- For All
1. ELECTION OF DIRECTORS For hold Except
( ) ( ) ( )
P Class B (for a term of 3 years):
R Edward L. Breeden, III
E Gilbert R. Giordano
F Eric C. Kendrick
E Robert M. Rosenthal
R Robert H. Zalokar
R
E
D
INSTRUCTION: To withhold authority to
vote for any individual nominee, mark
"For All Except" and write that nominee's
name in the space provided below.
- ------------------------------------
<PAGE> 27
For Against Abstain
2. PROPOSAL TO AMEND ( ) ( ) ( )
THE ARTICLES OF
INCORPORATION to
increase the
authorized shares
of Common Stock
to 175,000,000.
For Against Abstain
3. PROPOSAL TO ADOPT ( ) ( ) ( )
THE 1998 STOCK
INCENTIVE PLAN and
to approve the
authorization of
2,500,000 shares
for the Plan.
For Against Abstain
4. PROPOSAL TO RATIFY ( ) ( ) ( )
THE APPOINTMENT OF
ERNST & YOUNG LLP
as independent
auditors for the
year 1998.
Please be sure to sign and date
this Proxy in the box below. Date
Stockholder sign above. Co-holder (if any)
sign above.
- ------------------------------------------------------------------------------
Detach above card, sign, date and mail in postage paid envelope provided.
FIRST VIRGINIA BANKS, INC.
If no choice is indicated above, this proxy shall be deemed to grant
authority to vote FOR the election of director nominees and to vote FOR each of
the proposals. The stockholder's signature should be exactly as the name
appears above. When shares are held by joint tenants, both should sign. When
signing as attorney, executor, administrator, trustee, or guardian, please give
full title as such. If a corporation, please sign in full corporate name by
the President or other authorized officer. If a partnership, please sign in
partnership name by authorized person.
PLEASE ACT PROMPTLY
SIGN, DATE & MAIL
YOUR PROXY CARD TODAY
<PAGE> 1
FIRST VIRGINIA BANKS, INC.
1998 STOCK INCENTIVE PLAN
Effective April 24, 1998
<PAGE> 2
<TABLE>
<CAPTION>
ARTICLE I DEFINITIONS
<S> <C>
1.01 Acquiring Person 1
1.02 Administrator 1
1.03 Agreement 1
1.04 Associate 1
1.05 Board 1
1.06 Change in Control 1
1.07 Code 1
1.08 Committee 1
1.09 Common Stock 2
1.10 Continuing Director 2
1.11 Control Affiliate 2
1.12 Control Change Date 2
1.13 Corporation 2
1.14 Corresponding SAR 2
1.15 Disability 2
1.16 Efficiency Ratio 2
1.17 Exchange Act 2
1.18 Fair Market Value 2
1.19 Incentive Award 3
1.20 Initial Value 3
1.21 NIACC 3
1.22 Option 3
1.23 Participant 3
1.24 Performance Shares 3
1.25 Person 3
1.26 Plan 3
1.27 Related Entity 4
1.28 Retirement 4
1.29 SAR 4
1.30 Stock Award 4
1.31 Total Shareholder Return 4
ARTICLE II PURPOSES 4
ARTICLE III ADMINISTRATION 5
ARTICLE IV ELIGIBILITY 5
ARTICLE V STOCK SUBJECT TO PLAN 6
5.01 Shares Issued 6
5.02 Aggregate Limit 6
5.03 Reallocation of Shares 6
ARTICLE VI OPTIONS 7
6.01 Award 7
6.02 Option Price 7
6.03 Maximum Option Period 7
6.04 Nontransferability 7
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
6.05 Transferable Options 7
6.06 Employee Status 8
6.07 Exercise 8
6.08 Payment 8
6.09 Change in Control 8
6.10 Shareholder Rights 9
6.11 Disposition of Stock 9
ARTICLE VII SARS 9
7.01 Award 9
7.02 Maximum SAR Period 9
7.03 Nontransferability 9
7.04 Transferable SARs 10
7.05 Exercise 10
7.06 Change in Control 10
7.07 Employee Status 11
7.08 Settlement 11
7.09 Shareholder Rights 11
ARTICLE VIII STOCK AWARDS 11
8.01 Award 11
8.02 Vesting 11
8.03 Performance Objectives 11
8.04 Employee Status 12
8.05 Change in Control 12
8.06 Shareholder Rights 12
ARTICLE IX PERFORMANCE SHARE AWARDS 12
9.01 Award 12
9.02 Earning the Award 12
9.03 Payment 13
9.04 Shareholder Rights 13
9.05 Nontransferability 13
9.06 Transferable Performance Shares 13
9.07 Employee Status 13
9.08 Change in Control 14
ARTICLE X INCENTIVE AWARDS 14
10.01 Award 14
10.02 Terms and Conditions 14
10.03 Nontransferability 15
10.04 Employee Status 15
10.05 Change in Control 15
10.06 Shareholder Rights 15
ARTICLE XI ADJUSTMENT UPON CHANGE IN COMMON STOCK 16
ARTICLE XII COMPLIANCE WITH LAW AND
APPROVAL OF REGULATORY BODIES 16
</TABLE>
<PAGE> 4
<TABLE>
<S> <C>
ARTICLE XIII GENERAL PROVISIONS 17
13.01 Effect on Employment and Service 17
13.02 Unfunded Plan 17
13.03 Rules of Construction 17
13.04 Tax Withholding 17
ARTICLE XIV AMENDMENT 18
ARTICLE XV DURATION OF PLAN 18
ARTICLE XVII EFFECTIVE DATE OF PLAN 18
</TABLE>
<PAGE> 5
ARTICLE I
DEFINITIONS
1.01 Acquiring Person means that (a) a Person, considered alone or
together with all Control Affiliates and Associates of that Person, becomes
directly or indirectly the beneficial owner of securities representing at least
twenty percent of the Corporation's then outstanding securities entitled to
vote generally in the election of the Board, or (b) a person enters into an
agreement that would result in that Person satisfying the conditions in
subsection (a) or that would result in a Related Entity's failure to be a
Related Entity.
1.02 Administrator means the Committee and any delegate of the
Committee that is appointed in accordance with Article III.
1.03 Agreement means a written agreement (including any amendment or
supplement thereto) between the Corporation and a Participant specifying the
terms and conditions of an award of Performance Shares or a Stock Award,
Option, SAR or Incentive Award granted to such Participant.
1.04 Associate, with respect to any Person, is defined in Rule 12b-2
of the General Rules and Regulations under the Exchange Act, as amended as of
January 1, 1990. An Associate does not include the Company or a majority-owned
subsidiary of the Corporation.
1.05 Board means the Board of Directors of the Corporation.
1.06 Change in Control means that (a) the Corporation enters into any
agreement with a Person that involves the transfer of ownership of the
Corporation or of at least fifty percent of the Corporation's total assets on a
consolidated basis, as reported in the Corporation's consolidated financial
statements filed with the Securities and Exchange Commission (including an
agreement for the acquisition of the Corporation by merger, consolidation, or
statutory share exchange - regardless of whether the Corporation is intended to
be the surviving or resulting entity after the merger, consolidation, or
statutory share exchange - or for the sale of substantially all of the
Corporation's assets to that Person), (b) any Person is or becomes an Acquiring
Person, or (c) during any period of two consecutive calendar years, the
Continuing Directors cease for any reason to constitute a majority of the
Board.
1.07 Code means the Internal Revenue Code of 1986, and any amendments
thereto.
1.08 Committee means the Management and Benefits Compensation
Benefits Committee of the Board, each member of which shall be a "nonemployee
director" as such term is defined in Rule 16b-3
1
<PAGE> 6
promulgated under the Exchange Act. Notwithstanding the foregoing, Committee
may be a "nonemployee director" subcommittee of the Management Compensation and
Benefits Committee if any of its members is not a "nonemployee director."
1.09 Common Stock means the common stock of the Corporation.
1.10 Continuing Director means any member of the Board, while a
member of the Board and (i) who was a member of the Board prior to the adoption
of the Plan or (ii) whose subsequent nomination for election or election to the
Board was recommended or approved by a majority of the Continuing Directors.
1.11 Control Affiliate with respect to any Person, means an affiliate
as defined in Rule 12b-2 of the General Rules and Regulations under the
Exchange Act, as amended as of January 1, 1990.
1.12 Control Change Date means the date on which a Change in Control
occurs. If a Change in Control occurs on account of a series of transactions,
the Control Change Date is the date of the last of such transactions.
1.13 Corporation means First Virginia Banks, Inc.
1.14 Corresponding SAR means an SAR that is granted in relation to a
particular Option and that can be exercised only upon the surrender to the
Corporation, unexercised, of that portion of the Option to which the SAR
relates.
1.15 Disability means, as to an incentive stock option, a disability
within the meaning of Code Section 2(e)(3). Disability means, as to all other
awards, that a Participant is unable to engage in any substantial gainful
activity by reason of any medically determinable physical or mental impairment
which can be expected to result in death, or which has lasted or can be
expected to last for a continuous period of not less than twelve months.
1.16 Efficiency Ratio means the percentage determined by dividing (i)
noninterest expense less nonrecurring expense by (ii) the sum of net interest
income plus noninterest income, all as reported on the Corporation's financial
statements.
1.17 Exchange Act means the Securities Exchange Act of 1934, as
amended and as in effect on the date of this Agreement.
1.18 Fair Market Value means, on any given date, the price per share
of the last sale of Common Stock on the New York Stock Exchange on such date,
or if the Common Stock was not traded on the New York Stock Exchange on such
day, then on the next preceding day that the Common Stock was traded on such
exchange, all as reported in The Wall Street Journal.
2
<PAGE> 7
1.19 Incentive Award means an award under Article X which, subject to
such terms and conditions as may be prescribed by the Administrator, entitles
the Participant to receive a cash payment from the Corporation or a Related
Entity.
1.20 Initial Value means, with respect to a Corresponding SAR, the
option price per share of the related Option and, with respect to an SAR
granted independently of an Option, the price per share of Common Stock as
determined by the Administrator on the date of the grant; provided, however,
that the price per share of Common Stock encompassed by the grant of an SAR
shall not be less than the Fair Market Value on the date of grant.
1.21 NIACC means net income after a capital charge.
1.22 Option means a stock option that entitles the holder to purchase
from the Corporation a stated number of shares of Common Stock at the price set
forth in an Agreement.
1.23 Participant means an employee of the Corporation or a Related
Entity, including an employee who is a member of the Board, who satisfies the
requirements of Article IV and is selected by the Administrator to receive an
award of Performance Shares, a Stock Award, an Option, an SAR, an Incentive
Award or a combination thereof.
1.24 Performance Shares means an award, in the amount determined by
the Administrator and specified in an Agreement, stated with reference to a
specified number of shares of Common Stock, that entitles the holder to receive
a payment for each specified share equal to the Fair Market Value of Common
Stock on the date of payment. In the discretion of the Administrator, a
Performance Share award may include the right to receive an additional payment
for the accumulated dividends that would have been paid on each specified share
as if such dividends had been invested in Common Stock on the dividend payment
date, from the date of grant to the date of payment.
1.25 Person means any human being, firm, corporation, partnership, or
other entity. Person also includes any human being, firm, corporation,
partnership, or other entity as defined in sections 13(d) (3) and 14(d)(2) of
the Exchange Act, as amended as of January 1, 1990. For purposes of this Plan,
the term Person does not include the Corporation or any Related Entity, and the
term Person does not include any employee-benefit plan maintained by the
Corporation or by any Related Entity, and any person or entity organized,
appointed, or established by the Corporation or by any subsidiary for or
pursuant to the terms of any such employee-benefit plan, unless the Board
determines that such an employee-benefit plan or such person or entity is a
Person.
1.26 Plan means the First Virginia Banks, Inc. 1998 Stock Incentive
Plan.
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1.27 Related Entity means any entity that directly or indirectly,
through one or more intermediaries, controls, or is controlled by, or is under
common control with, the Corporation.
1.28 Retirement means a Participant's separation from service on or
after his early, normal or delayed retirement date under the First Virginia
Pension Trust Plan.
1.29 SAR means a stock appreciation right that entitles the holder to
receive, with respect to each share of Common Stock encompassed by the exercise
of such SAR, the lesser of (a) the excess, if any, of the Fair Market Value at
the time of exercise over the Initial Value, or (b) the Initial Value.
References to "SARs" include both Corresponding SARs and SARs granted
independently of Options, unless the context requires otherwise.
1.30 Stock Award means Common Stock awarded to a Participant under
Article VIII.
1.31 Total Shareholder Return means, with respect to any period, the
sum of (i) the excess, if any, of the Fair Market Value on the first day of the
period over the Fair Market Value on the last day of the period and (ii) the
value of any dividends on Common Stock payable with respect to such period.
ARTICLE II
PURPOSES
The Plan is intended to promote a closer identification of the
interests of employees with those of the Corporation and its shareholders,
thereby further stimulating their efforts to enhance the soundness,
profitability, growth and shareholder value of the Corporation. The Plan also
is intended to assist the Corporation and Related Entities in recruiting and
retaining individuals with ability and initiative by enabling such persons to
participate in the future success of the Corporation and the Related Entities
and to associate their interests with those of the Corporation and its
shareholders. The Plan is intended to permit the grant of both Options
qualifying under Section 422 of the Code ("incentive stock options") and
Options not so qualifying, and the grant of SARs, Stock Awards, Performance
Shares and Incentive Awards. No Option that is intended to be an incentive
stock option shall be invalid for failure to qualify as an incentive stock
option. The proceeds received by the Corporation from the sale of Common Stock
pursuant to this Plan shall be used for general corporate purposes.
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ARTICLE III
ADMINISTRATION
The Plan shall be administered by the Administrator. The
Administrator shall have authority to grant Stock Awards, Performance Shares,
Incentive Awards, Options and SARs upon such terms (not inconsistent with the
provisions of this Plan), as the Administrator may consider appropriate. Such
terms may include conditions (in addition to those contained in this Plan), on
the exercisability of all or any part of an Option or SAR or on the
transferability or forfeitability of a Stock Award, an award of Performance
Shares or an Incentive Award, including by way of example and not of
limitation, conditions on which Participants may defer receipt of benefits
under the Plan, requirements that the Participant complete a specified period
of employment with the Corporation or a Related Entity, requirements that the
Corporation achieve a specified level of financial performance or that the
Corporation achieve a specified level of financial return. Notwithstanding any
such conditions, the Administrator may, in its discretion, accelerate the time
at which any Option or SAR may be exercised, or the time at which a Stock Award
may become transferable or nonforfeitable or the time at which an Incentive
Award or an award of Performance Shares may be settled.
The Administrator also shall have complete authority to interpret all
provisions of this Plan; to prescribe the form of Agreements; to adopt, amend,
and rescind rules and regulations pertaining to the administration of the Plan;
and to make all other determinations necessary or advisable for the
administration of this Plan. The express grant in the Plan of any specific
power to the Administrator shall not be construed as limiting any power or
authority of the Administrator. Any decision made, or action taken, by the
Administrator or in connection with the administration of this Plan shall be
final and conclusive. Neither the Administrator nor any member of the
Committee shall be liable for any act done in good faith with respect to this
Plan or any Agreement, Option, SAR, Stock Award or Incentive Award or award of
Performance Shares. All expenses of administering this Plan shall be borne by
the Corporation, a Related Entity or a combination thereof.
ARTICLE IV
ELIGIBILITY
Any employee of the Corporation or a Related Entity (including a
corporation that becomes a Related Entity after the adoption of this Plan), is
eligible to participate in this Plan if the Administrator, in its sole
discretion, determines that such person has contributed significantly or can be
expected to contribute
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significantly to the profits or growth of the Corporation or a Related Entity.
Directors of the Corporation who are employees of the Corporation or a Related
Entity may be selected to participate in this Plan.
ARTICLE V
STOCK SUBJECT TO PLAN
5.01 Shares Issued. Upon the award of shares of Common Stock
pursuant to a Stock Award or in settlement of an award of Performance Shares,
the Corporation may issue shares of Common Stock from its authorized but
unissued Common Stock. Upon the exercise of any Option or SAR the Corporation
may deliver to the Participant (or the Participant's broker if the Participant
so directs), shares of Common Stock from its authorized but unissued Common
Stock.
5.02 Aggregate Limit. The maximum aggregate number of shares of
Common Stock that may be issued under this Plan, pursuant to the exercise of
SARs and Options and the grant of Stock Awards and the settlement of
Performance Shares awarded on and after April 24, 1998, is 2,500,000 shares.
The maximum aggregate number of shares that may be issued under this Plan as
Stock Awards and in settlement of Performance Shares awarded on and after April
24, 1998, is 800,000 shares. The maximum aggregate number of shares that may
be issued under this Plan and the maximum number of shares that may be issued
as Stock Awards and in settlement of Performance Shares shall be subject to
adjustment as provided in Article XI.
5.03 Reallocation of Shares. If an Option is terminated, in whole or
in part, for any reason other than its exercise or the exercise of a
Corresponding SAR that is settled with Common Stock, the number of shares of
Common Stock allocated to the Option or portion thereof may be reallocated to
other Options, SARs, Performance Shares and Stock Awards to be granted under
this Plan. If an SAR is terminated, in whole or in part, for any reason other
than its exercise that is settled with Common Stock or the exercise of a
related Option, the number of shares of Common Stock allocated to the SAR or
portion thereof may be reallocated to other Options, SARs, Performance Shares
and Stock Awards to be granted under this Plan. If an award of Performance
Shares is terminated, in whole or in part, for any reason other than its
settlement with Common Stock, the number of shares of Common Stock allocated to
the Performance Shares or portion thereof may be reallocated to other options,
SARs, Performance Shares and Stock Awards to be granted under this Plan. If a
Stock Award is forfeited, in whole or in part, for any reason, the number of
shares of Common Stock allocated to the Stock Award or portion thereof may be
reallocated to other Options, SARs, Performance Shares and Stock Awards to be
granted under this Plan.
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ARTICLE VI
OPTIONS
6.01 Award. In accordance with the provisions of Article IV, the
Administrator will designate each individual to whom an Option is to be granted
and will specify the number of shares of Common Stock covered by each such
award; provided, however, that no individual may be granted Options in any
calendar year covering more than 100,000 shares of Common Stock.
6.02 Option Price. The price per share for Common Stock purchased on
the exercise of an Option shall be determined by the Administrator on the date
of grant, but shall not be less than the Fair Market Value on the date the
Option is granted.
6.03 Maximum Option Period. The maximum period in which an Option
may be exercised shall be ten years from the date such Option was granted. The
terms of any Option may provide that it is exercisable for a period less than
such maximum period.
6.04 Nontransferability. Except as provided in Section 6.05, each
Option granted under this Plan shall be nontransferable except by will or by
the laws of descent and distribution. In the event of any transfer of an
Option (by the Participant or his transferee), the Option and any Corresponding
SAR that relates to such Option must be transferred to the same person or
persons or entity or entities. Except as provided in Section 6.05, during the
lifetime of the Participant to whom the Option is granted, the Option may be
exercised only by the Participant. No right or interest of a Participant in
any Option shall be liable for, or subject to, any lien, obligation, or
liability of such Participant.
6.05 Transferable Options. Section 6.04 to the contrary
notwithstanding, if the Agreement provides, an Option that is not an incentive
stock option may be transferred by a Participant to the Participant's children,
grandchildren, spouse, one or more trusts for the benefit of such family
members or a partnership in which such family members are the only partners, on
such terms and conditions as may be permitted under Securities Exchange
Commission Rule 16b-3 as in effect from time to time. The holder of an Option
transferred pursuant to this section shall be bound by the same terms and
conditions that governed the Option during the period that it was held by the
Participant; provided, however, that such transferee may not transfer the
Option except by will or the laws of descent and distribution. In the event of
any transfer of an Option (by the Participant or his transferee), the Option
and any Corresponding SAR that relates to such Option may be transferred to the
same person or persons or entity or entities.
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6.06 Employee Status. For purposes of determining the applicability
of Section 422 of the Code (relating to incentive stock options), or in the
event that the terms of any Option provide that it may be exercised only during
employment or within a specified period of time after termination of
employment, the Administrator may decide to what extent leaves of absence for
governmental or military service, illness, temporary disability, or other
reasons shall not be deemed interruptions of continuous employment.
6.07 Exercise. Subject to the provisions of this Plan and the
applicable Agreement, an Option may be exercised in whole at any time, or in
part from time to time at such times, beyond one year after it is granted and
in compliance with such requirements as the Administrator shall determine;
provided, however, that incentive stock options (granted under the Plan and all
plans of the Corporation and its Related Entities) may not be first exercisable
in a calendar year for stock having a Fair Market Value (determined as of the
date an Option is granted) exceeding the limit prescribed by Code section
422(d); and further provided, however, that an Option that is exercisable on
the date of termination of employment must be exercised, if at all, prior to
the earlier of: (1) the close of the period of: (a) three months less one day
next succeeding the date of termination of employment for reasons other than
Disability or death, or (b) one year next succeeding the date of termination of
employment on account of Disability or death, and (2) the close of the option
period. An Option granted under this Plan may be exercised with respect to any
number of whole shares less than the full number for which the Option could be
exercised. A partial exercise of an Option shall not affect the right to
exercise the Option from time to time in accordance with this Plan and the
applicable Agreement with respect to the remaining shares subject to the
Option. The exercise of an Option shall result in the termination of any
Corresponding SAR to the extent of the number of shares with respect to which
the Option is exercised.
6.08 Payment. Unless otherwise provided by the Agreement, payment of
the Option price shall be made in cash or a cash equivalent acceptable to the
Administrator. Subject to rules established by the Administrator, payment of
all or part of the Option price may be made with shares of Common Stock which
have been owned by the Participant for at least six months and which have not
been used for another exercise during the prior six months. If Common Stock is
used to pay all or part of the Option price, the sum of the cash and cash
equivalent and the Fair Market Value (determined as of the day preceding the
date of exercise) of such shares must not be less than the Option price of the
shares for which the Option is being exercised.
6.09 Change in Control. Section 6.07 to the contrary
notwithstanding, each outstanding Option shall be fully exercisable (in whole
or in part at the discretion of the holder) on and after
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a Control Change Date and during the period (i) beginning on the first day
after a tender offer or exchange offer for shares of Common Stock (other than
an offer made by the Corporation), provided that shares are acquired pursuant
to such offer, and (ii) ending on the thirtieth day following the expiration of
such offer.
6.10 Shareholder Rights. No Participant shall have any rights as a
shareholder with respect to shares subject to his Option until the date of
exercise of such Option.
6.11 Disposition of Stock. A Participant shall notify the Company of
any sale or other disposition of Common Stock acquired pursuant to an Option
that was an incentive stock option if such sale or disposition occurs (i)
within two years of the grant of an Option or (ii) within one year of the
issuance of the Common Stock to the Participant. Such notice shall be in
writing and directed to the Secretary of the Company.
ARTICLE VII
SARS
7.01 Award. In accordance with the provisions of Article IV, the
Administrator will designate each individual to whom SARs are to be granted and
will specify the number of shares covered by each such award; provided,
however, that no individual may be granted SARs in any calendar year covering
more than 100,000 shares. For purposes of the preceding sentence, an Option
and Corresponding SAR shall be treated as a single award. In addition, no
Participant may be granted Corresponding SARs (under all incentive stock option
plans of the Corporation and its Affiliates) that are related to incentive
stock options which are first exercisable in any calendar year for stock having
an aggregate Fair Market Value (determined as of the date the related Option is
granted) that exceeds the limit prescribed by Code section 422(d).
7.02 Maximum SAR Period. The maximum period in which an SAR may be
exercised shall be ten years from the date such SAR was granted. The terms of
any SAR may provide that it has a term that is less than such maximum period.
7.03 Nontransferability. Except as provided in Section 7.04, each
SAR granted under this Plan shall be nontransferable except by will or by the
laws of descent and distribution. In the event of any such transfer, a
Corresponding SAR and the related Option must be transferred to the same person
or persons or entity or entities. Except as provided in Section 7.04, during
the lifetime of the Participant to whom the SAR is granted, the SAR may be
exercised only by the Participant. No right or interest of a Participant in
any SAR shall be liable for, or subject to, any lien, obligation, or liability
of such Participant.
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7.04 Transferable SARs. Section 7.03 to the contrary
notwithstanding, if the Agreement provides, an SAR, other than a Corresponding
SAR that is related to an incentive stock option, may be transferred by a
Participant to the Participant's children, grandchildren, spouse, one or more
trusts for the benefit of such family members or a partnership in which such
family members are the only partners, on such terms and conditions as may be
permitted under Securities Exchange Commission Rule 16b-3 as in effect from
time to time. The holder of an SAR transferred pursuant to this section shall
be bound by the same terms and conditions that governed the SAR during the
period that it was held by the Participant; provided, however, that such
transferee may not transfer the SAR except by will or the laws of descent and
distribution. In the event of any transfer of a Corresponding SAR and the
related Option must be transferred to the same person or person or entity or
entities.
7.05 Exercise. Subject to the provisions of this Plan and the
applicable Agreement, an SAR may be exercised in whole at any time, or in part
from time to time at such times, beyond one year after it is granted and in
compliance with such requirements as the Administrator shall determine;
provided, however, that a Corresponding SAR that is related to an incentive
stock option may be exercised only to the extent that the related Option is
exercisable and only when the Fair Market Value exceeds the option price of the
related Option; and further provided, however, that an SAR that is exercisable
on the date of termination of employment must be exercised, if at all, prior to
the earlier of: (1) the close of the period of: (a) three months less one day
next succeeding the date of termination of employment for reasons other than
Disability or death, or (b) one year next succeeding the date of termination of
employment on account of Disability or death, and (2) the close of the SAR
period. An SAR granted under this Plan may be exercised with respect to any
number of whole shares less than the full number for which the SAR could be
exercised. A partial exercise of an SAR shall not affect the right to exercise
the SAR from time to time in accordance with this Plan and the applicable
Agreement with respect to the remaining shares subject to the SAR. The
exercise of a Corresponding SAR shall result in the termination of the related
Option to the extent of the number of shares with respect to which the SAR is
exercised.
7.06 Change in Control. Section 7.05 to the contrary
notwithstanding, each outstanding SAR shall be fully exercisable (in whole or
in part at the discretion of the holder) on and after a Control Change Date and
during the period (i) beginning on the first day after any tender offer or
exchange offer for shares of Common Stock (other than one made by the
Corporation), provided that shares are acquired pursuant to such offer, and
(ii) ending on the thirtieth day following the expiration of such offer.
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7.07 Employee Status. If the terms of any SAR provide that it may be
exercised only during employment or within a specified period of time after
termination of employment, the Administrator may decide to what extent leaves
of absence for governmental or military service, illness, temporary disability
or other reasons shall not be deemed interruptions of continuous employment.
7.08 Settlement. At the Administrator's discretion, the amount
payable as a result of the exercise of an SAR may be settled in cash, Common
Stock, or a combination of cash and Common Stock. No fractional share will be
deliverable upon the exercise of an SAR but a cash payment will be made in lieu
thereof.
7.09 Shareholder Rights. No Participant shall, as a result of
receiving an SAR, have any rights as a shareholder of the Corporation until the
date that the SAR is exercised and then only to the extent that the SAR is
settled by the issuance of Common Stock.
ARTICLE VIII
STOCK AWARDS
8.01 Award. In accordance with the provisions of Article IV, the
Administrator will designate each individual to whom a Stock Award is to be
made and will specify the number of shares of Common Stock covered by each such
award; provided, however, that no Participant may receive Stock Awards in any
calendar year for more than 30,000 shares of Common Stock.
8.02 Vesting. The Administrator, on the date of the award, may
prescribe that a Participant's rights in a Stock Award shall be forfeitable or
otherwise restricted for a period of time or subject to such conditions as may
be set forth in the Agreement.
8.03 Performance Objectives. In accordance with Section 8.02, the
Administrator may prescribe that Stock Awards will become vested or
transferable or both based on objectives stated with respect to the
Corporation's, a Related Entity's or an operating unit's return on equity,
earnings per share, total earnings, earnings growth, return on assets, Fair
Market Value, NIACC, Efficiency Ratio, Total Shareholder Return or such other
measures as may be selected by the Administrator. If the Administrator, on the
date of award, prescribes that a Stock Award shall become nonforfeitable and
transferable only upon the attainment of performance objectives, the shares
subject to such Stock Award shall become nonforfeitable and transferable only
to the extent that the Administrator certifies that such objectives have been
achieved.
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8.04 Employee Status. In the event that the terms of any Stock Award
provide that shares may become transferable and nonforfeitable thereunder only
after completion of a specified period of employment, the Administrator may
decide in each case to what extent leaves of absence for governmental or
military service, illness, temporary disability, or other reasons shall not be
deemed interruptions of continuous employment.
8.05 Change in Control. Sections 8.02, 8.03 and 8.04 to the contrary
notwithstanding, on and after a Control Change Date or the first day following
a tender offer or exchange offer for shares of Common Stock (other than one
made by the Corporation), provided that shares are acquired pursuant to such
offer, each outstanding Stock Award shall be transferable and nonforfeitable as
of the Control Change Date or the first day following such offer.
8.06 Shareholder Rights. Prior to their forfeiture (in accordance
with the applicable Agreement and while the shares of Common Stock granted
pursuant to the Stock Award may be forfeited or are nontransferable), a
Participant will have all rights of a shareholder with respect to a Stock
Award, including the right to receive dividends and vote the shares; provided,
however, that during such period (i) a Participant may not sell, transfer,
pledge, exchange, hypothecate, or otherwise dispose of shares of Common Stock
granted pursuant to a Stock Award, (ii) the Corporation shall retain custody of
any certificates evidencing shares of Common Stock granted pursuant to a Stock
Award, and (iii) the Participant will deliver to the Corporation a stock power,
endorsed in blank, with respect to each Stock Award. The limitations set forth
in the preceding sentence shall not apply after the shares of Common Stock
granted under the Stock Award are transferable and are no longer forfeitable.
ARTICLE IX
PERFORMANCE SHARE AWARDS
9.01 Award. In accordance with the provisions of Article IV, the
Administrator will designate each individual to whom an award of Performance
Shares is to be made and will specify the number of shares of Common Stock
covered by each such award; provided, however, that the maximum number of
shares of Common Stock that may be earned by a Participant under all
Performance Share awards (whether settled in Common Stock, cash or a
combination of Common Stock and cash) granted in a calendar year shall be the
product of (i) 35,000 shares and (ii) the number of years (twelve consecutive
months) during which one or more performance criteria is measured.
9.02 Earning the Award. The Administrator, on the date of the grant
of an award, shall prescribe that the Performance Shares, or portion thereof,
will be earned, and the Participant will be
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entitled to receive payment pursuant to the award of Performance Shares, only
upon the satisfaction of performance objectives and such other criteria as may
be prescribed by the Administrator during a performance measurement period of
at least one year. The performance objectives may be stated with respect to
the Corporation's, a Related Entity's or an operating unit's return on equity,
earnings per share, total earnings, earnings growth, return on assets, Fair
Market Value, NIACC, Efficiency Ratio, Total Shareholder Return or such other
measures as may be selected by the Administrator. No payments will be made
with respect to Performance Shares unless, and then only to the extent that,
the Administrator certifies that such objectives have been achieved.
9.03 Payment. In the discretion of the Administrator, the amount
payable when an award of Performance Shares is earned may be settled in cash,
by the issuance of Common Stock or a combination of cash and Common Stock. A
fractional share shall not be deliverable when an award of Performance Shares
is earned, but a cash payment will be made in lieu thereof.
9.04 Shareholder Rights. No Participant shall, as a result of
receiving an award of Performance Shares, have any rights as a shareholder
until and to the extent that the award of Performance Shares is earned and
settled by the issuance of Common Stock. After an award of Performance Shares
is earned, if settled completely or partially in Common Stock, a Participant
will have all the rights of a shareholder with respect to such Common Stock.
9.05 Nontransferability. Except as provided in Section 9.06,
Performance Shares granted under this Plan shall be nontransferable except by
will or by the laws of descent and distribution. No right or interest of a
Participant in any Performance Shares shall be liable for, or subject to, any
lien, obligation, or liability of such Participant.
9.06 Transferable Performance Shares. Section 9.05 to the contrary
notwithstanding, if the Agreement provides, an award of Performance Shares may
be transferred by a Participant to the Participant's children, grandchildren,
spouse, one or more trusts for the benefit of such family members or a
partnership in which such family members are the only partners, on such terms
and conditions as may be permitted under Securities Exchange Commission Rule
16b-3 as in effect from time to time. The holder of Performance Shares
transferred pursuant to this section shall be bound by the same terms and
conditions that governed the Performance Shares during the period that they
were held by the Participant; provided, however that such transferee may not
transfer Performance Shares except by will or the laws of descent and
distribution.
9.07 Employee Status. In the event that the terms of any Performance
Share award provide that no payment will be made unless the Participant
completes a stated period of employment, the
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Administrator may decide to what extent leaves of absence for government or
military service, illness, temporary disability, or other reasons shall not be
deemed interruptions of continuous employment.
9.08 Change In Control. Section 9.02 to the contrary
notwithstanding, a pro rata amount of each outstanding Performance Share award
shall be earned and settled in whole shares of Common Stock as of a Control
Change Date that occurs at least three months after the first day of the
measurement period or on the first day after a tender offer or exchange offer
for shares of Common Stock (other than one made by the Company), provided that
such day is at least three months after the first day of the measurement period
and provided further that shares are acquired pursuant to such offer. Such
Common Stock shall be nonforfeitable and transferable. The number of shares of
Common Stock issuable under this Section 9.02 shall be determined by
multiplying the target amount of shares (as prescribed by the applicable
Agreement), by a fraction. The numerator shall be the number of days in the
period beginning on the date of the first day of the measurement period and
ending on the Control Change Date or the first day after the tender or exchange
offer described in this Section 9.03. The denominator is the number of days in
the period, or the longest of such periods, during which performance is
measured under the Performance Share award.
ARTICLE X
INCENTIVE AWARDS
10.01 Award. the Administrator shall designate Participants to whom
Incentive Awards are made. All Incentive Awards shall be finally determined
exclusively by the Administrator under the procedures established by the
Administrator; provided, however, that no Participant may receive an Incentive
Award payment in any calendar year that exceeds the lesser of (i) $1,000,000
and (ii) 150% of the Participant's annual base salary (prior to any salary
reduction or deferral elections) as of the date of grant of the Incentive
Award.
10.02 Terms and Conditions. The Administrator, at the time an
Incentive Award is made, shall specify the terms and conditions which govern
the award. Such terms and conditions shall prescribe that the Incentive Award
shall be earned only upon, and to the extent that, performance objectives are
satisfied. The performance objectives may be stated with respect to the
Corporation's, a Related Entity's or an operating unit's return on equity,
earnings per share, total earnings, earnings growth, return on assets, Fair
Market Value, NIACC, Efficiency Ratio, Total Shareholder Return or such other
measures as may be selected by the Administrator. Such terms and conditions
also may include other limitations on the
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payment of Incentive Awards including, by way of example and not of limitation,
requirements that the Participant complete a specified period of employment
with the Corporation or a Related Entity. The Administrator, at the time an
Incentive Award is made, shall also specify when amounts shall be payable under
the Incentive Award and whether amounts shall be payable in the event of the
Participant's death, Disability, or Retirement. No payments will be made with
respect to an Incentive Award unless, and then only to the extent that, the
Administrator certifies that the performance objectives have been achieved.
10.03 Nontransferability. Incentive Awards granted under this Plan
shall be nontransferable except by will or by the laws of descent and
distribution and then only to the extent that the Administrator specified, at
the time the Incentive Award was made, that amounts may be payable in the event
of the Participant's death. No right or interest of a Participant in an
Incentive Award shall be liable for, or subject to, any lien, obligation, or
liability of such Participant.
10.04 Employee Status. If the terms of an Incentive Award provide
that a payment will be made thereunder only if the Participant completes a
stated period of employment, the Administrator may decide to what extent leaves
of absence for governmental or military service, illness, temporary disability
or other reasons shall not be deemed interruptions of continuous employment.
10.05 Change in Control. Section 10.02 to the contrary
notwithstanding, a pro rata amount of each Incentive Award shall be earned as
of a Control Change Date that occurs at least three months after the first day
of the measurement period or on the first day after a tender offer or exchange
offer for shares of Common Stock (other than one made by the Company), provided
that such day is at least three months after the first day of the measurement
period and provided further that shares are acquired pursuant to such offer.
The amount payable under this Section 10.05 shall be determined by multiplying
the target amount (as prescribed by the applicable Agreement), by a fraction.
The numerator shall be the number of days in the period beginning on the first
day of the measurement period and ending on the Control Change Date or the
first day after the tender or exchange offer described in this Section 10.05.
The denominator shall be the number of days in the period, or the longest of
such periods, during which performance is measured under the Incentive Award.
10.06 Shareholder Rights. No Participant shall, as a result of
receiving an Incentive Award, have any rights as a shareholder of the
Corporation or any Affiliate on account of such award.
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ARTICLE XI
ADJUSTMENT UPON CHANGE IN COMMON STOCK
The maximum number of shares as to which Options, SARs, Performance
Shares and Stock Awards may be granted under this Plan, the terms of
outstanding Stock Awards, Options, Performance Shares, Incentive Awards, and
SARs, and the per individual limitations on the number of shares for which
Options, SARs, Performance Shares, and Stock Awards may be granted shall be
adjusted as the Committee shall determine to be equitably required in the event
that the Corporation (i) effects one or more stock dividends, stock split-ups,
subdivisions or consolidations of shares, recapitalizations, mergers with the
Corporation being the survivor, or other changes in the Corporation's capital
stock or (ii) engages in a transaction to which Section 424 of the Code
applies. Any determination made under this Article XI by the Committee shall
be final and conclusive.
The issuance by the Corporation of shares of stock of any class, or
securities convertible into shares of stock of any class, for cash or property,
or for labor or services, either upon direct sale or upon the exercise of
rights or warrants to subscribe therefor, or upon conversion of shares or
obligations of the Corporation convertible into such shares or other
securities, shall not affect, and no adjustment by reason thereof shall be made
with respect to, the maximum number of shares as to which Options, SARs,
Performance Shares and Stock Awards may be granted, the per individual
limitations on the number of shares for which Options, SARs, Performance Shares
and Stock Awards may be granted or the terms of outstanding Stock Awards,
Options, Performance Shares, Incentive Awards or SARs.
The Committee may make Stock Awards and may grant Options, SARs,
Performance Shares, and Incentive Awards in substitution for performance
shares, phantom shares, stock awards, stock options, stock appreciation rights,
or similar awards held by an individual who becomes an employee of the
Corporation or a Related Entity in connection with a transaction described in
the first paragraph of this Article XI. Notwithstanding any provision of the
Plan (other than the limitation of Section 5.02), the terms of such substituted
Stock Awards or Option, SAR, Performance Shares or Incentive Award grants shall
be as the Committee, in its discretion, determines is appropriate.
ARTICLE XII
COMPLIANCE WITH LAW AND
APPROVAL OF REGULATORY BODIES
No Option or SAR shall be exercisable, no Common Stock shall be
issued, no certificates for shares of Common Stock shall be
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delivered, and no payment shall be made under this Plan except in compliance
with all applicable federal and state laws and regulations (including, without
limitation, withholding tax requirements), any listing agreement to which the
Corporation is a party, and the rules of all domestic stock exchanges on which
the Corporation's shares may be listed. The Corporation shall have the right
to rely on an opinion of its counsel as to such compliance. Any share
certificate issued to evidence Common Stock when a Stock Award is granted, a
Performance Share is settled, or for which an Option or SAR is exercised may
bear such legends and statements as the Administrator may deem advisable to
assure compliance with federal and state laws and regulations. No Option or
SAR shall be exercisable, no Stock Award or Performance Share shall be granted,
no Common Stock shall be issued, no certificate for shares shall be delivered,
and no payment shall be made under this Plan until the Corporation has obtained
such consent or approval as the Administrator may deem advisable from
regulatory bodies having jurisdiction over such matters.
ARTICLE XIII
GENERAL PROVISIONS
13.01 Effect on Employment and Service. Neither the adoption of this
Plan, its operation, nor any documents describing or referring to this Plan (or
any part thereof), shall confer upon any individual any right to continue in
the employ or service of the Corporation or a Related Entity or in any way
affect any right and power of the Corporation or a Related Entity to terminate
the employment or service of any individual at any time with or without
assigning a reason therefor.
13.02 Unfunded Plan. The Plan, insofar as it provides for grants,
shall be unfunded, and the Corporation shall not be required to segregate any
assets that may at any time be represented by grants under this Plan. Any
liability of the Corporation to any person with respect to any grant under this
Plan shall be based solely upon any contractual obligations that may be created
pursuant to this Plan. No such obligation of the Corporation shall be deemed
to be secured by any pledge of, or other encumbrance on, any property of the
Corporation.
13.03 Rules of Construction. Headings are given to the articles and
sections of this Plan solely as a convenience to facilitate reference. The
reference to any statute, regulation, or other provision of law shall be
construed to refer to any amendment to or successor of such provision of law.
13.04 Tax Withholding. Each Participant shall be responsible for
satisfying any income and employment tax withholding obligation attributable to
participation in this Plan. If approved in advance
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by the Administrator after a written request from a Participant, a Participant
may surrender shares of Common Stock or receive fewer shares of Common Stock
than otherwise would be issuable in satisfaction of all or part of that
obligation.
ARTICLE XIV
AMENDMENT
The Board may amend or terminate this Plan from time to time;
provided, however, that no amendment may become effective until shareholder
approval is obtained if (i) the amendment increases the aggregate number of
shares of Common Stock that may be issued under the Plan (other than an
adjustment pursuant to Article XI) or (ii) the amendment changes the class of
individuals eligible to become Participants. No amendment shall, without a
Participant's consent, adversely affect any rights of such Participant under
any Stock Award, Performance Share award, Option, SAR or Incentive Award
outstanding at the time such amendment is made.
ARTICLE XV
DURATION OF PLAN
No Stock Award, Performance Share award, Option, SAR or Incentive
Award may be granted under this Plan after April 24, 2008. Stock Awards,
Performance Share awards, Options, SARs and Incentive Awards granted before
that date shall remain valid in accordance with their terms.
ARTICLE XVII
EFFECTIVE DATE OF PLAN
Options, SARs, Performance Shares and Incentive Awards may be granted
under this Plan upon its adoption by the Board, provided that no Option, SAR,
Performance Shares or Incentive Award granted on or after April 24, 1998 shall
be effective or exercisable unless this Plan is approved by a majority of the
votes cast by the Company's shareholders, voting either in person or by proxy,
at a duly held shareholders' meeting at which a quorum is present. Stock
Awards may be granted under this Plan on or after April 24, 1998, upon the
later of its adoption by the Board or its approval by shareholders in
accordance with the preceding sentence.
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