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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
[X] Filed by the Registrant
[ ] Filed by a Party other than the Registrant
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted
[X] Definitive Proxy Statement by Rule 14a-6(e)(2))
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
The PNC Financial Services Group, Inc.
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(Name of Registrant as Specified In Its Charter)
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(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)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(4) Date Filed:
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Notes:
Reg. (S) 240.14a-101.
SEC 1913 (3-99)
James E. Rohr
Chairman, President and Chief Executive Officer
[LOGO OF PNC FINANCIAL SERVICES GROUP]
March 29, 2002
Dear Shareholder:
You will find enclosed the notice of meeting, proxy statement and
proxy card for the annual meeting of shareholders of The PNC
Financial Services Group, Inc., which will be held on Tuesday, April
23, 2002, at One PNC Plaza, 15th Floor, 249 Fifth Avenue, in
Pittsburgh, Pennsylvania, beginning at 11:00 a.m. Our 2001 Annual
Report to Shareholders accompanies these enclosures.
Please review the enclosed material and complete, sign, date and
return the proxy card regardless of whether you plan to attend the
annual meeting, so that the matters coming before the meeting can be
acted upon. For the first time, instead of returning a proxy card,
you may choose to vote your PNC shares by using the Internet or
telephone voting options explained on your proxy card. Also a first
this year, you can consent to access future annual reports, proxy
statements and other proxy soliciting material by means of the
Internet, rather than receiving paper copies. Details are provided on
your proxy card.
As was the case last year, if you're not able to attend the annual
meeting in person, you can choose to listen to the meeting by webcast
or telephone conference options, which are explained on the opposite
side of this letter.
We look forward to discussing the business of your company with you
at the annual meeting.
Cordially,
/s/ James E. Rohr
James E. Rohr
The PNC Financial Services Group
One PNC Plaza 249 Fifth Avenue Pittsburgh Pennsylvania 15222-2707
IMPORTANT NOTICE REGARDING DELIVERY OF SECURITY HOLDER DOCUMENTS
In order to reduce printing and postage costs, The PNC Financial Services
Group, Inc. ("PNC") has undertaken an effort to deliver only one annual report
and one proxy statement to multiple shareholders sharing an address. This
delivery method, called "householding," is not being used, however, if PNC has
received contrary instructions from one or more of the shareholders sharing an
address. If your household has received only one annual report and one proxy
statement, PNC will deliver promptly a separate copy of the annual report and
the proxy statement to any shareholder who sends a written request to Corporate
Election Services, P.O. Box 125, Pittsburgh, PA 15230-0125 or calls Corporate
Election Services at (412) 262-1100. You can also notify PNC that you would
like to receive separate copies of PNC's annual report and proxy statement in
the future by writing or calling Corporate Election Services. Even if your
household has received only one annual report and one proxy statement, a
separate proxy card has been provided for each shareholder account. Each proxy
card should be signed, dated, and returned in the enclosed self-addressed
envelope.
If your household has received multiple copies of PNC's annual report and
proxy statement, you can request the delivery of single copies in the future by
writing or calling Corporate Election Services as instructed above.
WEBCAST AND TELECONFERENCE DIRECTIONS
You are cordially invited to listen to PNC's 2002 annual meeting of
shareholders webcast live via the Internet on Tuesday, April 23, 2002 beginning
at 11 a.m. Eastern Time. The audio portion of the event will also be available
in a listen-only mode via telephone conference call. Using only the webcast
will enable you to view the slides shown at the meeting and hear the speakers
on a synchronized basis. Neither the webcast nor the teleconference will enable
you to ask questions or to vote your PNC shares.
To access the meeting, please go to
http://www.visualwebcaster.com/event.asp?id=3930 or dial 800-233-2795
(domestic) or 1-785-832-1077 (international), using the passcode"PNC," at least
15 minutes prior to the designated starting time to register and download any
necessary audio software. If you plan to listen online, we suggest that you
test your computer's access to RealNetworks RealPlayer or Windows MediaPlayer
by visiting the above URL one week prior to the meeting date.
If you are unable to listen online or via teleconference during the meeting,
the event will be archived on the web site at the same address above for one
week. The audio portion of the event will also be archived by teleconference
for the same duration at 800-283-4642 (domestic) and 1-402-220-0857
(international). The event will be removed on April 30, 2002.
Note: Minimum requirements to listen to this broadcast online: The RealPlayer
software, downloadable free from www.real.com/products/player/index.html,
and at least a 14.4Kbps connection to the Internet or Windows MediaPlayer
software, downloadable at
http://www.microsoft.com/windows/windowsmedia/en/ download/default.asp.
[LOGO OF PNC FINANCIAL SERVICES GROUP]
March 29, 2002
Notice of Annual Meeting of Shareholders
April 23, 2002
To The Shareholders:
The annual meeting of the shareholders of The PNC Financial Services
Group, Inc. will be held at One PNC Plaza, 15th Floor, 249 Fifth
Avenue, Pittsburgh, Pennsylvania on Tuesday, April 23, 2002,
beginning at 11:00 a.m., local time, for the purpose of considering
and acting upon the following matters:
(1) The election of 15 directors to serve until the next annual
meeting and until their successors are elected and qualified;
and
(2) Such other business as may properly come before the meeting or
any adjournment thereof.
Shareholders of record at the close of business on February 28, 2002
are entitled to receive notice of, and to vote at, the meeting and
any adjournment thereof.
A proxy statement, form of proxy and self-addressed envelope are
enclosed. Please complete, date and sign the proxy card. Return it
promptly in the envelope provided, which requires no postage if
mailed in the United States. Alternatively, you may choose to vote
your shares using the Internet or telephone voting options explained
on the proxy card. If you attend the meeting, you may withdraw your
proxy and vote in person if you so choose.
By Order of the Board of Directors,
/s/ Thomas R. Moore
Thomas R. Moore
Corporate Secretary
The PNC Financial Services Group
One PNC Plaza 249 Fifth Avenue Pittsburgh Pennsylvania 15222-2707
[LOGO OF PNC FINANCIAL SERVICES GROUP]
March 29, 2002
Proxy Statement
FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD
APRIL 23, 2002
The enclosed proxy is being solicited by the Board of Directors ("Board of
Directors" or "Board") of The PNC Financial Services Group, Inc.
("Corporation" or "PNC") for use at the Corporation's annual meeting of
shareholders to be held on April 23, 2002, or at any adjournment thereof
("meeting" or "annual meeting"). Solicitation of proxies may be made by mail,
personal interviews, telephone and facsimile by officers and employees of the
Corporation and its subsidiaries. The Corporation has retained D. F. King &
Co., Inc. to assist in the solicitation of proxies for a fee of $12,500 plus
out-of-pocket expenses. Brokerage houses and other custodians, nominees and
fiduciaries will be requested to forward soliciting material to the beneficial
owners of the stock held of record by such persons. Expenses for such
solicitation will be borne by the Corporation. The proxy statement and form of
proxy are first being mailed to shareholders on or about March 29, 2002.
The enclosed proxy is revocable at any time prior to the time voting is
declared closed by the filing of an instrument revoking it, or of a duly
executed proxy bearing a later date, with the Corporate Secretary of the
Corporation, or by a properly authenticated electronic transmission revoking
it or transmitting a proxy bearing a later date, or by attending the meeting
and voting in person. All properly executed or authenticated proxies received
by the Corporate Secretary prior to the time voting is declared closed, and
not revoked or superseded prior to that time, will be voted at the meeting in
accordance with instructions, if any. Unless otherwise directed, proxies will
be voted FOR the election as director of each of the persons named on page 3.
The Board of Directors has fixed the close of business on February 28, 2002
as the record date for determining shareholders entitled to receive notice of
and to vote at the meeting ("Record Date"). On the Record Date, there were
issued and outstanding 283,182,441 shares of the Corporation's common stock,
par value $5.00 per share ("Common Stock"), and the following shares of the
Corporation's preferred stock entitled to vote at the meeting: 9,835 shares of
$1.80 Cumulative Convertible Preferred Stock-Series A ("Preferred Stock-A");
2,938 shares of $1.80 Cumulative Convertible Preferred Stock-Series B
("Preferred Stock-B"); 200,939 shares of $1.60 Cumulative Convertible
Preferred Stock-Series C ("Preferred Stock-C"); and 290,736 shares of $1.80
Cumulative Convertible Preferred Stock-Series D ("Preferred Stock-D")
(collectively, "Voting Preferred Stock").
The holders of Common Stock are entitled to one vote per share. Holders of
each share of Voting Preferred Stock are entitled to a number of votes equal
to the number of full shares of Common Stock which can be acquired upon
conversion of such preferred stock, with holders of Preferred Stock-A and
Preferred Stock-B being entitled to 8 votes per share and holders of Preferred
Stock-C and Preferred Stock-D being entitled to 4 votes per 2.4 shares.
Holders of record of the Common Stock and Voting Preferred Stock will vote
together as a single class at the meeting. The presence in person or by proxy
of shareholders entitled to cast at least a majority of the votes that all
holders of the Common Stock and the Voting Preferred Stock are entitled to
cast at the meeting will constitute a quorum for the transaction of business
at the meeting.
1
The Corporation will provide without charge, to each shareholder upon
written request, a copy of the Corporation's Annual Report on Form 10-K for
the year ended December 31, 2001, filed with the Securities and Exchange
Commission ("SEC"). Requests for copies should be addressed to Thomas F.
Garbe, Director of Financial Accounting, The PNC Financial Services Group,
Inc., One PNC Plaza, 249 Fifth Avenue, Pittsburgh, Pennsylvania 15222-2707.
Requests may also be directed to (412) 762-1553 or via e-mail to
financial.reporting@pnc.com. Copies may also be accessed electronically by
means of the SEC's home page on the Internet at www.sec.gov. Neither the
Annual Report on Form 10-K nor the 2001 Annual Report to Shareholders is part
of the proxy solicitation materials.
ITEM 1
ELECTION OF DIRECTORS
Information Concerning Nominees
The By-Laws of the Corporation provide that the number of directors shall
not be fewer than five nor more than 36 as from time to time determined by the
Board of Directors. Pursuant to the recommendation of its Committee on
Corporate Governance, the Board has acted to fix the number of directors to be
elected at the annual meeting at 15 and to nominate the persons named on page
3 for election as directors, to hold office until the next annual meeting of
shareholders and the election and qualification of their successors. Mr. W.
Craig McClelland is retiring from the Board at the annual meeting, in
accordance with an established Board retirement policy.
The proxies solicited hereby, unless directed to the contrary therein, will
be voted FOR all nominees named on page 3. All such nominees are now directors
of the Corporation. All nominees have consented to being named in this proxy
statement and to serve if elected. The Board of Directors has no reason to
believe that any nominee will be unavailable or unable to serve as a director,
but if for any reason any nominee should not be available or able to serve,
the accompanying proxy will be voted by the person or persons acting under
said proxy in accordance with the recommendation of the Board of Directors.
The table on page 3 sets forth the names of the nominees for election as
directors of the Corporation; their ages; their principal occupations as of
February 28, 2002; the years the nominees first became directors of the
Corporation; and their directorships of certain other companies. All nominees
have held the positions indicated or another senior executive position with
the same entity or one of its affiliates or a predecessor corporation for at
least the past five years. Dennis F. Strigl, who is the president and chief
executive officer of Verizon Wireless, Inc. and an executive vice president of
Verizon Communications, Inc. was appointed a director of the Corporation by
the Board of Directors effective as of August 23, 2001, upon the
recommendation of the Committee on Corporate Governance and is standing for
election by the shareholders for the first time.
2
Directorships in Companies
Other than the Corporation
Director Filing Reports with the
Name Age Principal Occupation Since SEC
---- --- -------------------- -------- --------------------------
Paul W. Chellgren 59 Chairman and Chief Executive 1995 Ashland Inc.; and Medtronic, Inc.
Officer of Ashland Inc. (energy
company)
Robert N. Clay 55 President and Chief Executive 1987 None
Officer of Clay Holding Company
(investments)
George A. Davidson, Jr. 63 Retired Chairman of Dominion 1988 B.F. Goodrich Company; and
Resources, Inc. (public utility Dominion Resources, Inc.
holding company)
David F. Girard-diCarlo 59 Co-Chairman, Chief Executive 1995 None
Officer and Managing Partner of
Blank Rome Comisky & McCauley LLP
(law firm)
Walter E. Gregg, Jr. 60 Vice Chairman of the Corporation 1998 BlackRock, Inc.
William R. Johnson 53 Chairman, President and Chief 1997 Amerada Hess Corporation;
Executive Officer of H.J. Heinz The Clorox Company; and
Company (food products company) H.J. Heinz Company
Bruce C. Lindsay 60 Chairman and Managing Director of 1995 None
Brind-Lindsay & Co., Inc.
(advisory company)
Thomas H. O'Brien 65 Retired Chairman of 1983 BlackRock, Inc.; Hilb, Rogal and
the Corporation Hamilton Company; US Airways
Group, Inc.; and
Verizon Communications, Inc.
Jane G. Pepper 56 President of Pennsylvania 1997 None
Horticultural Society
(nonprofit horticultural
membership organization)
James E. Rohr 53 Chairman, President and Chief 1989 Allegheny Technologies
Executive Officer of the Incorporated;
Corporation BlackRock, Inc.; Equitable
Resources Inc.; and
Water Pik Technologies, Inc.
Lorene K. Steffes 56 General Manager, Global 2000 None
Electronics Industry,
International Business Machines
Corporation (electronics industry
products and solutions, strategy,
sales and marketing)
Dennis F. Strigl 55 President and Chief Executive 2001 ANADIGICS Inc. ; and
Officer of Verizon Wireless, Inc. Salient 3 Communications, Inc.
(wireless communications)
Thomas J. Usher 59 Chairman, President and Chief 1992 H.J. Heinz Company; Marathon Oil
Executive Officer of United Corporation; PPG Industries,
States Steel Corporation Inc.; and
(integrated steelmaker) United States Steel Corporation
Milton A. Washington 66 President and Chief Executive 1994 None
Officer of Allegheny Housing
Rehabilitation Corporation
(housing rehabilitation and
construction)
Helge H. Wehmeier 59 President and Chief Executive 1992 None
Officer of Bayer Corporation
(healthcare, life sciences and
chemicals)
3
Board and Committees
The Board of Directors has six standing committees: an Audit Committee; a
Committee on Corporate Governance; a Credit Committee; an Executive Committee;
a Finance Committee; and a Personnel and Compensation Committee. The Chairman
of each standing committee is authorized to appoint one or more subcommittees,
as he or she may deem necessary or advisable in connection with the proper
functioning of the standing committee. A subcommittee consists of one or more
committee members selected by the committee chairman; under certain
circumstances, a subcommittee member's attendance at a subcommittee meeting
will excuse him or her from attending the next regularly scheduled committee
meeting. The following descriptions of the functions performed by the
committees of the Board of Directors are necessarily general in nature and are
qualified in their entirety by reference to a committee's charter or the
relevant By-Law provisions.
The Audit Committee is governed by a written charter adopted by the
Corporation's Board of Directors. The Audit Committee's primary purpose is to
provide assistance to the Board in fulfilling the Board's oversight
responsibilities relating to: overseeing management's conduct of the
Corporation's financial reporting process, management's maintenance of
internal control, and management's maintenance of processes regarding
compliance with applicable laws and regulations and with the Corporation's
Code of Ethics; and overseeing the audit function, including private
discussion, as appropriate, with the independent and the internal auditors.
The Audit Committee will also, under applicable regulation, perform the
duties required by law to be performed by an audit committee for any
subsidiary bank of the Corporation that does not have its own audit committee
and by a fiduciary audit committee for any subsidiary bank of the Corporation
exercising fiduciary powers that does not have its own audit committee, in
each case to the extent permitted, and in the manner required, by applicable
laws and regulations.
The Committee is presently composed of Ms. Pepper and Messrs. Wehmeier
(Chairman), Davidson, Girard-diCarlo and Lindsay. Each Audit Committee member
is independent, as defined in the New York Stock Exchange listing standards.
The Committee on Corporate Governance is responsible for recommending to the
Board of Directors persons to be nominated for election or appointment as
directors of the Corporation and assisting the Board in promoting the best
interests of the Corporation and its shareholders through the implementation
of sound corporate governance principles and practices. In performing its
nominating function, the Committee may consider director nominees recommended
by shareholders. Such recommendations with respect to the 2003 annual meeting
of shareholders must be submitted in writing no later than November 30, 2002
to the Corporate Secretary, The PNC Financial Services Group, Inc., One PNC
Plaza--21st Floor, 249 Fifth Avenue, Pittsburgh, Pennsylvania 15222-2707, and
include the name, age, citizenship, business and residence addresses,
qualifications, including principal occupation or employment, and
directorships and other positions held by the proposed nominee in business,
charitable, and community organizations. For information on the requirements
governing shareholder nominations for the election of directors to be made at
an annual meeting of shareholders, please see the section captioned
"Shareholder Proposals and Nominations" beginning on page 30. The Committee is
presently composed of Ms. Pepper, Ms. Steffes and Messrs. McClelland
(Chairman), Clay, Usher and Wehmeier.
The Credit Committee provides oversight for risk within the lending and
credit-related activities of the Corporation and its subsidiaries. The
Committee is presently composed of Ms. Steffes and Messrs. Davidson
(Chairman), Girard-diCarlo, Rohr and Washington.
The Executive Committee has all the powers of the Board of Directors to the
extent permitted by law and can exercise such powers between meetings of the
Board of Directors. The Committee is presently composed of Messrs. O'Brien
(Chairman), Chellgren, Davidson, Gregg, McClelland, Rohr, Usher and Wehmeier.
The Finance Committee provides oversight for the Corporation's interest rate
and liquidity risks. The Committee also provides oversight for the
Corporation's capital management activities and trading activities,
4
including related market risk management policies and risk limits. The
Committee also provides administrative oversight for the fiduciary activities
of the Corporation's subsidiaries and the activities of the Corporation's
Pension Plan Committee and the Incentive Savings Plan Committee. The Committee
is presently composed of Messrs. Chellgren (Chairman), Clay, Gregg, Lindsay
and O'Brien.
The Personnel and Compensation Committee is responsible for recommending to
the Board of Directors the persons to be elected as Chairman, Chief Executive
Officer, President, and Vice Chairman of the Corporation and providing
oversight for the Corporation's executive compensation program as described in
the Committee's report beginning on page 12. The Committee also makes
recommendations to the Board of Directors or otherwise takes action regarding
the adoption or amendment of employee benefit, bonus, incentive compensation
or similar plans. The Committee also administers certain executive
compensation plans maintained by the Corporation. The Committee is presently
composed of Messrs. Usher (Chairman), Chellgren, Johnson, McClelland and
Washington.
The Board of Directors met nine times during 2001. During 2001, the Board's
committees held the following number of meetings: Audit Committee--six
meetings; Committee on Corporate Governance--four meetings; Credit Committee--
four meetings; Executive Committee--one meeting; Finance Committee--four
meetings; and Personnel and Compensation Committee--five meetings. In 2001,
each director then serving attended at least 75% of the total meetings of the
Board of Directors. In addition, each director attended at least 75% of the
combined total number of meetings of the Board and all committees on which the
director served.
Compensation of Directors
Executive officers of the Corporation who are employees and directors or
members of committees of the Board of Directors of the Corporation or its
subsidiaries receive no compensation for serving in such positions. All non-
employee directors of the Corporation are compensated for their Board services
by a per diem fee of $1,200 for any day's participation in a Board or
committee meeting, or any combination thereof, an annual retainer fee of
$37,000 for Board membership and, in accordance with the terms of the
Corporation's 1992 Director Share Incentive Plan, an annual grant equal to a
number of shares of Common Stock having a fair market value on the date of the
award equal to $5,000, rounded up to the nearest whole share. In addition, the
chairman of each standing committee receives a $5,000 annual retainer fee.
Under the Directors Deferred Compensation Plan, non-employee directors may
elect to defer the receipt of all or a portion of the cash compensation
otherwise payable to them as a result of their service as a director. The
minimum deferral amount is $10,000 per year. A director may elect one of two
investment options with respect to amounts deferred: an interest rate
alternative or an investment in phantom shares of Common Stock. Investment
elections may be changed quarterly. A director may also elect the event or
date when amounts credited to his or her account are paid out in cash and
whether the payout will be in a lump sum or a designated number of annual
installments not to exceed ten. The director may designate a beneficiary to
receive any amounts that may not yet have been paid at the time of the
director's death.
Under the PNC Outside Directors Deferred Stock Unit Plan, prior to 2001 each
non-employee director received a grant of deferred stock units in an amount
determined by the Committee on Corporate Governance, which is generally
responsible for administration of the plan. A deferred stock unit is a phantom
share of Common Stock. Prior to a director's retirement, the value of deferred
stock units credited to a director's account will track the performance of the
Common Stock and will be valued on a quarterly basis. The plan provides for
the deemed reinvestment of dividends in additional deferred stock units. Each
director has the right to elect an event or date when the deferred stock units
credited to his or her account will be redeemed and paid out in cash. That
event or date generally cannot precede the earlier of the director's
retirement from the Board or the date on which the director attains age 70. A
director may elect to receive payment in a lump sum or a designated number of
annual installments not to exceed ten. A director may also designate one or
more beneficiaries to receive distributions from his or her account in the
event of death. No grants of deferred stock units were made under this plan in
2001.
5
At PNC's 2001 annual meeting, shareholders approved amendments to the
Corporation's 1997 Long-Term Incentive Award Plan which, among other things,
added non-employee directors as eligible persons for all awards available
under the plan, except incentive stock options. Under the amended plan, the
Board's Committee on Corporate Governance is given the authority to make
awards to non-employee directors.
Following the 2001 annual meeting, the Committee on Corporate Governance met
to consider possible awards to non-employee directors under the 1997 Long-Term
Incentive Award Plan, as amended. After receiving guidance from an independent
compensation consultant, the Committee approved the grant of nonstatutory
stock options covering 4,000 shares of Common Stock to each non-employee
director elected at the 2001 annual meeting. The Committee also awarded
incentive shares to each such non-employee director in the form of 1,000
restricted shares of Common Stock.
The nonstatutory stock options have an exercise price equal to the average
of the high and low prices of a share of Common Stock on the date of grant and
a term of ten years, and are subject to a one-year vesting period. Once
vested, the options cannot be forfeited for any reason.
One-half of the restricted shares will vest upon the director's completion
of the term of office which began on April 24, 2001 and one-half will vest
upon the director's completion of the term of office which will begin upon his
or her election at the 2002 annual meeting. During the vesting period, the
non-employee director receives dividends on, and has the right to vote, the
restricted shares.
Prior to vesting, the options and restricted shares are subject to
forfeiture if the director leaves the Board for any reason other than death,
disability, or the termination of his or her service as a director due to a
Board policy which requires the director to resign or retire, or failure to be
re-elected at the annual meeting.
Effective upon Mr. Strigl's appointment to the Board on August 23, 2001, the
Committee on Corporate Governance granted him nonstatutory stock options
covering 4,000 share of Common Stock upon the same terms and conditions as
those previously granted to other non-employee directors. The exercise price
of Mr. Strigl's options was determined as of the date of his option grant.
The Committee on Corporate Governance intends to review the total
compensation package of non-employee directors on a regular basis, with the
assistance of an independent compensation consultant. In order to maintain the
competitiveness of that compensation package, the Committee on Corporate
Governance currently intends to make nonstatutory stock option grants
following each annual meeting to each non-employee director elected at the
meeting. The size of the option grant will be determined each year, and may be
adjusted in light of competitive practices and other factors. The Committee
may also make other grants and awards to non-employee directors under the 1997
Long-Term Incentive Award Plan, as amended.
The Committee on Corporate Governance currently intends that grants and
awards made under the amended 1997 Long-Term Incentive Award Plan to non-
employee directors will be made in lieu of future grants of deferred stock
units under the PNC Outside Directors Deferred Stock Unit Plan. Nevertheless,
the PNC Outside Directors Deferred Stock Unit Plan will remain in existence.
Deferred stock units previously credited to a non-employee director's account
will remain vested, and deemed dividends will continue to be credited to those
accounts in the form of additional deferred stock units. In addition, the
Committee on Corporate Governance will continue to have the authority to make
grants of deferred stock units to current and future non-employee directors.
Each non-employee director is also eligible to participate in a charitable
matching gift program, under which his or her personal gifts to qualifying
charitable organizations are matched up to an annual aggregate dollar amount
of $5,000. In addition, PNC, its subsidiaries, and the PNC Foundation, a tax-
exempt private foundation created by PNC's principal banking subsidiary, make
other grants and contributions to various nonprofit and charitable
organizations. In some cases, directors or executive officers of the
Corporation serve as officers, trustees, or directors of these organizations.
To the Corporation's knowledge, the aggregate grants and contributions made by
PNC, its subsidiaries, and the PNC Foundation during 2001 to any one of such
nonprofit or charitable organizations did not exceed five percent of that
organization's 2001 consolidated gross revenues.
6
Mr. O'Brien, the retired Chairman of the Corporation's Board of Directors,
retired as an employee of the Corporation on April 30, 2000 and relinquished
the position of Chief Executive Officer. Following his retirement, he entered
into a consulting agreement with the Corporation, subject to approval by the
Board's Personnel and Compensation Committee. The Personnel and Compensation
Committee granted such approval at the Committee's meeting held on July 6,
2000. The term of this consulting arrangement began on May 1, 2000 and ended
on April 30, 2001. Under the arrangement, Mr. O'Brien agreed to provide
consultation with the Corporation's Chief Executive Officer from time to time,
assistance and support in acquisition and divestiture planning, and assistance
in establishing and maintaining customer relationships and PNC's corporate
presence in the communities served by the Corporation. The Corporation
provided Mr. O'Brien with office space and secretarial services in the
principal executive offices of the Corporation for his use in performing these
consulting services and reimbursed his expenses incurred under the
arrangement. As compensation for Mr. O'Brien's availability and for all
services he provided in a given month, the Corporation agreed to pay Mr.
O'Brien a flat fee of $45,000 per month. During 2001, PNC paid Mr. O'Brien
fees of $180,000 pursuant to the consulting agreement. As the retired Chief
Executive Officer of the Corporation, certain benefits are currently made
available to Mr. O'Brien. These benefits include: office space and secretarial
services; automobile and aircraft use; financial planning services; club
memberships; the payment of net premiums in connection with the Corporation's
Key Executive Equity Plan, a split-dollar insurance arrangement; and
reimbursement for certain tax liabilities. During 2001, the aggregate
incremental cost to the Corporation of Mr. O'Brien's automobile and aircraft
use, financial planning services, and club memberships was approximately
$55,800. The 2001 net premium paid by the Corporation in connection with the
Key Executive Equity Plan on behalf of Mr. O'Brien was $208,212. During 2001,
Mr. O'Brien received reimbursement for certain tax liabilities in the amount
of $4,717.
For services provided on or after May 1, 2000 as a member of the
Corporation's Board of Directors, Mr. O'Brien is compensated on the same basis
as other non-employee directors. In addition, during 2001 Mr. O'Brien received
compensation as a director of BlackRock, Inc. ("BlackRock"), a majority-owned
investment management subsidiary of the Corporation that is listed on the New
York Stock Exchange under the symbol "BLK." Mr. O'Brien elected to receive
shares of BlackRock class A common stock and cash in lieu of fractional shares
having an aggregate value of $50,000 in lieu of the cash retainer otherwise
payable to him. Finally, during 2001 Mr. O'Brien received $40,000 for his
services as a director of PNC Equity Management Corp, an indirect, wholly-
owned subsidiary of the Corporation.
Common Stock Purchase Guideline
In 1995, upon the recommendation of the Committee on Corporate Governance,
the Board of Directors adopted a Common Stock purchase guideline, which
provides that each non-employee director annually purchase Common Stock in an
amount equal to twenty-five percent of the annual retainer fee then in effect.
This guideline may be satisfied through open market purchases, participation
in the Corporation's Dividend Reinvestment and Stock Purchase Plan, or
investments in phantom shares of Common Stock in the Directors Deferred
Compensation Plan. Each non-employee director has complied, or has committed
to comply, with this guideline.
7
SECURITY OWNERSHIP OF DIRECTORS, NOMINEES AND EXECUTIVE OFFICERS
The table below captioned "Security Ownership of Directors, Nominees and
Executive Officers" sets forth information concerning beneficial ownership of
the Corporation's Common Stock as of February 28, 2002 by each director and
nominee for election as a director, each of the executive officers named in
the Summary Compensation Table on page 19, and all directors, nominees and
executive officers of the Corporation as a group. Except as otherwise noted,
each individual exercises sole voting and investment power over the shares of
Common Stock shown. The separate table captioned "Common Stock Unit Ownership"
shows phantom or deferred Common Stock units owned by the individual or group
through the compensation or benefit plan identified in the corresponding
footnote. The Common Stock units can be settled only in cash and carry no
voting rights. The number of shares of Common Stock shown in the Security
Ownership Table as beneficially owned by each director and executive officer
is determined under the rules of the SEC and the information is not
necessarily indicative of beneficial ownership for any other purpose. For
purposes of the Security Ownership Table, beneficial ownership includes any
shares of Common Stock as to which the individual has sole or shared voting
power or investment power and also any shares of Common Stock that the
individual has the right to acquire within 60 days of February 28, 2002
through the exercise of any option, warrant or right.
Security Ownership of Directors, Nominees and
Executive Officers
----------------------------------------------------------------------------------------------------------------------------
Amount and Nature
of Beneficial Ownership
---------------------------------------------------------------------------------------------------------------------------------
Common Stock Unit
Name Common Stock* Ownership
---------------------------------------------------------------------------------------------------------------------------------
Paul W. Chellgren 10,872(/1/)(/2/) 10,277(a)(b)
---------------------------------------------------------------------------------------------------------------------------------
Robert N. Clay 9,450(/2/) 9,094(a)(b)
---------------------------------------------------------------------------------------------------------------------------------
George A. Davidson, Jr. 15,384(/2/) 5,738(a)
---------------------------------------------------------------------------------------------------------------------------------
David F. Girard-diCarlo 8,945(/2/)(/3/) 3,428(b)
---------------------------------------------------------------------------------------------------------------------------------
Walter E. Gregg, Jr. 269,549(/4/)(/5/) 25,798(c)
---------------------------------------------------------------------------------------------------------------------------------
Joseph C. Guyaux 200,906(/4/)(/5/)(/6/) 672(c)
---------------------------------------------------------------------------------------------------------------------------------
William R. Johnson 5,466(/2/)(/3/) 5,641(a)(b)
---------------------------------------------------------------------------------------------------------------------------------
Bruce C. Lindsay 10,645(/2/) 4,538(a)(b)
---------------------------------------------------------------------------------------------------------------------------------
W. Craig McClelland 8,835(/2/)(/3/) 8,366(a)(b)
---------------------------------------------------------------------------------------------------------------------------------
Thomas H. O'Brien 705,681(/2/)(/4/)(/5/)(/8/) 35,315(c)
---------------------------------------------------------------------------------------------------------------------------------
Jane G. Pepper 6,481(/2/) 3,432(a)(b)
---------------------------------------------------------------------------------------------------------------------------------
James E. Rohr 716,980(/4/)(/5/)(/9/) 40,713(c)(d)
---------------------------------------------------------------------------------------------------------------------------------
Timothy G. Shack 192,854(/5/) 1,724(d)
---------------------------------------------------------------------------------------------------------------------------------
Lorene K. Steffes 5,385(/2/) 765
---------------------------------------------------------------------------------------------------------------------------------
Dennis F. Strigl 590 330(b)
---------------------------------------------------------------------------------------------------------------------------------
Thomas J. Usher 10,780(/2/) 6,093(a)(b)
---------------------------------------------------------------------------------------------------------------------------------
Milton A. Washington 25,718(/2/) 8,197(a)
---------------------------------------------------------------------------------------------------------------------------------
Helge H. Wehmeier 10,240(/2/) 5,901(a)(b)
---------------------------------------------------------------------------------------------------------------------------------
Thomas K. Whitford 159,098(/3/)(/4/)(/5/) 9,651(c)(d)
---------------------------------------------------------------------------------------------------------------------------------
Directors, nominees and executive officers
as a group (24 persons)*/** 2,918,851(/1/)(/2/)(/3/)(/4/)(/5/)(/6/)(/7/)(/8/)(/9/) 187,890(a)(b)(c)(d)
----------------------------------------------------------------------------------------------------------------------------------
* As of February 28, 2002, there were 283,182,441 shares of the
Corporation's Common Stock issued and outstanding. The number of shares of
Common Stock held by each individual is less than 1% of the outstanding
shares of Common Stock; the total number of shares of Common Stock held by
the group is approximately 1.02% of the class. No director, nominee or
executive officer owns shares of preferred stock of the Corporation. These
percentages were calculated by adding shares subject to employee stock
options to the foregoing number if the options were either exercisable as
of February 28, 2002 or exercisable within 60 days of that date.
** Certain of the directors and executive officers also own shares of
BlackRock's class A common stock. The number of such shares beneficially
owned by individuals listed in the Security Ownership Table are as
follows: Ms. Pepper (1,000); and Messrs. Clay (7,500); Davidson (10,000);
Girard-diCarlo (5,000); Gregg (10,000); Lindsay (7,500); O'Brien (12,410);
Rohr (10,000); Usher (5,376); Washington (10,000); and Wehmeier (7,956).
Of the 7,500 shares held by Mr. Clay, 2,500 are held by him as a trustee.
The total number of such shares owned by directors and executive officers
as a group (15 persons) is 111,065. The number of shares of BlackRock
class A common stock held by each individual is less than 1% of the
outstanding shares as of February 28, 2002; the total number of such
shares held by the group is also less than 1% of the class.
(1) Includes shares held in the PNC Bank Kentucky, Inc. Directors Deferred
Compensation Plan.
(2) Includes 4,000 shares subject to non-employee director nonstatutory stock
options exercisable within 60 days of February 28, 2002.
(3) Includes shares held jointly with spouse.
(4) Includes shares held in the Corporation's Incentive Savings Plan, a
qualified defined contribution plan.
(5) Includes shares subject to employee nonstatutory stock options held by Mr.
O'Brien and the executive officers and either exercisable as of February
28, 2002 or exercisable within 60 days of that date. The shares subject to
such options are as follows: Messrs. O'Brien (285,583 shares); Rohr
(455,181 shares); Gregg (197,383 shares); Guyaux (140,096 shares); Shack
(106,821 shares); and Whitford (98,453 shares). The aggregate number of
shares subject to such options for the remaining five executive officers
is 335,334. In the case of Messrs. Gregg, Guyaux, and Whitford and two of
the remaining five executive officers, the share numbers include
restricted shares of Common Stock awarded on February 20, 2002 in lieu of
cash as part of the 2001 annual incentive award.
(6) Includes 14 shares held indirectly as custodian for grandchild.
(7) Includes 9,745 shares owned by spouse, as to which the individual
disclaims beneficial ownership.
(8) Includes 1,000 shares owned by spouse, as to which the individual
disclaims beneficial ownership.
(9) Includes 391 shares held indirectly as custodian for daughter.
COMMON STOCK UNIT OWNERSHIP TABLE FOOTNOTES
(a) Includes deferred Common Stock units credited to an account established
under the Corporation's Outside Directors Deferred Stock Unit Plan.
(b) Includes phantom Common Stock units credited to an account established
under the Corporation's Directors Deferred Compensation Plan.
(c) Includes phantom Common Stock units held in the Corporation's Supplemental
Incentive Savings Plan, a non-qualified excess defined contribution plan.
(d) Includes phantom Common Stock units credited to an account established
under the Corporation's Deferred Compensation Plan. In the case of Messrs.
Rohr and Shack and two other executive officers not identified by name,
includes restricted phantom Common Stock units deferred on February 20,
2002 in lieu of cash as part of the 2001 annual incentive award.
9
Security Ownership of Certain Beneficial Owners
As of February 28, 2002, based solely on Schedules 13G filed with the SEC
under the Securities Exchange Act of 1934 ("Exchange Act"), the following
persons are known by the Corporation to be the beneficial holders of more than
five percent of the Corporation's Common Stock. The numbers shown in the table
represent holdings as of December 31, 2001 and should be interpreted in light
of the related footnotes.
Amount and Nature Percent of
Name and Address of Beneficial Owner of Beneficial Ownership Class
------------------------------------ ----------------------- -----------
FMR Corp.(/1/) 18,619,955(/2/) 6.555%(/2/)
Fidelity Management & Research Company
Fidelity Management Trust Company
Strategic Advisers, Inc.
82 Devonshire Street
Boston, Massachusetts 02109
Fidelity International Limited(/1/) (/2/) (/2/)
Pembroke Hall
42 Crow Lane
Hamilton, Bermuda
--------
(1) The shares reported by FMR Corp. relate to those attributable to the
following wholly-owned subsidiaries of FMR Corp.: (i) Fidelity Management
& Research Company ("Fidelity Research"), an investment adviser registered
under Section 203 of the Investment Advisers Act of 1940; (ii) Fidelity
Management Trust Company ("Fidelity Trust"), a bank as defined in Section
3(a)(6) of the Exchange Act; and (iii) Strategic Advisers, Inc.
("Strategic Advisers"), an investment adviser registered under Section 203
of the Investment Advisers Act of 1940.
Fidelity International Limited ("FIL"), a Bermudan joint stock company and
an investment adviser to various investment companies and certain
institutional investors, is an entity which FMR Corp. asserts currently
operates independently of FMR Corp. and Fidelity Research. FMR Corp. and
FIL disclaim that they act as a "group" for purposes of Section 13(d) of
the Exchange Act or that the shares of the Common Stock held by the other
company need be aggregated for purposes of Section 13(d). FMR Corp.,
however, made its filing on a voluntary basis as if all of the shares of
Common Stock held by FIL are beneficially owned by FMR Corp. and FIL on a
joint basis.
(2) FMR Corp. reports sole voting power as to 2,460,655 shares of Common Stock
and sole dispositive power as to 18,619,955 shares. These shares do not
include shares owned directly by the Fidelity Funds and which Fidelity
Research votes under written guidelines established by the Funds' Boards
of Trustees, but do include 16,053,500 shares as to which Fidelity
Research reports sole dispositive power. Fidelity Trust has sole
dispositive power over 1,648,252 shares and sole voting power over
1,541,152 shares and these shares are included in the shares reported by
FMR Corp. FMR Corp.'s beneficial ownership may include shares beneficially
owned through Strategic Advisers. FIL is the beneficial owner of 915,131
shares of Common Stock.
TRANSACTIONS INVOLVING DIRECTORS AND EXECUTIVE OFFICERS
Certain directors, executive officers, and/or their associates were
customers of and had transactions with the Corporation or its subsidiaries
("Company") during 2001. Transactions that involved loans or commitments by
subsidiary banks were made in the ordinary course of business and 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.
10
There is no family relationship as defined in the SEC's rules between any
executive officer or director and any other executive officer or director.
Family relationships exist between certain of PNC's executive officers or
directors and some of the over 24,000 employees of various PNC subsidiaries.
These employees participate in compensation and incentive plans or
arrangements on the same basis as other similarly situated employees.
Since the beginning of 2001, the Corporation has advanced expenses in the
net amount of approximately $273,200 on behalf of Thomas H. O'Brien, retired
Chairman of the Corporation, in connection with legal proceedings and claims
against him on account of his service as a former trustee of Allegheny Health
Education and Research Foundation, a non-profit entity which with certain
affiliates was a customer of the Company. The Corporation expects to advance
additional amounts in the future.
Blank Rome Comisky & McCauley LLP, the law firm for which Mr. Girard-diCarlo
serves as Co-Chairman, Chief Executive Officer and Managing Partner, provided
legal services to the Company during 2001 and is providing similar services
during 2002.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Corporation's directors, its
executive officers, and persons who own more than ten percent of a registered
class of the Corporation's equity securities (currently there are no such
shareholders) to file with the Corporation, the SEC and the New York Stock
Exchange initial reports of ownership and reports of changes in ownership of
any equity securities of the Corporation. With respect to 2001, to the best of
the Corporation's knowledge, all required report forms were filed on a timely
basis. In making this statement, the Corporation has relied in part on the
written representations of its current and certain of its former non-employee
directors and certain of its current and former executive officers, and copies
of the reports provided to the Corporation.
11
COMPENSATION OF EXECUTIVE OFFICERS
Personnel and Compensation Committee Report
The following is the Personnel and Compensation Committee's report to
shareholders on the Corporation's executive compensation policies with respect
to compensation reported for fiscal year 2001. In accordance with the rules of
the SEC, this report shall not be incorporated by reference into any of the
Corporation's future filings made under the Exchange Act or under the
Securities Act of 1933 ("Securities Act"), and shall not be deemed to be
soliciting material or to be filed with the SEC under the Exchange Act or the
Securities Act.
Personnel and Compensation Committee Report on Executive Compensation for
Fiscal Year 2001
Introduction
The Personnel and Compensation Committee of The PNC Financial Services Group,
Inc. Board of Directors is composed solely of non-employee directors. No
Committee member can be a current or former officer of the Corporation.
One of the Committee's key responsibilities is to provide oversight for the
Corporation's executive compensation program. The Committee conducts regular,
comprehensive reviews of the Corporation's executive compensation program and
establishes the annual compensation of the Corporation's executive officers.
The Committee also takes action, or recommends that the Board take action,
regarding the adoption or amendment of executive compensation or benefit plans.
The Committe also administers certain executive compensation plans maintained
by the Corporation.
The Corporation's executive compensation program is designed to: attract,
motivate and retain executive officers who can make significant contributions
to the Corporation's long-term success; align the interests of executive
officers with those of shareholders; and place a significant proportion of our
executive officers' total compensation at risk by tying it to the Corporation's
financial and common stock price performance.
The Committee is assisted by both an independent compensation consultant and
the Corporation's internal support staff. The Committee also uses comparative
compensation data for the financial services industry and key management
positions obtained from nationally recognized compensation consulting firms.
This compensation data covers a Peer Group of selected financial services
companies that compete with the Corporation. The Committee considers the
companies included in the Peer Group to be indicative of the Corporation's
financial services competitors in terms of size and mix of businesses. The
appropriateness of the Peer Group's composition is reviewed and approved by the
Committee at least annually.
The Committee uses the Peer Group as its primary tool to compare performance
and compensation when making key compensation-related decisions. The companies
included in the Peer Group do not necessarily include the same companies
included in the S&P Major Regional Banks Index used for the Common Stock
Performance Graph on page 25. The Common Stock Performance Graph, however, also
shows the median total shareholder return for the 2001 Peer Group companies
listed in the footnote to the graph.
The three primary components of the Corporation's executive compensation
program are: base salary; annual incentive awards; and long-term incentive
awards. The following three sections of this report discuss each of these
components in turn.
12
Base Salary
The base salaries of executive officers are generally targeted at the middle
of the competitive marketplace. The Corporation's human resources staff
determines the market rate for an executive position annually. In making this
determination, the human resources staff considers a number of factors,
including: relevant industry salary practices; the position's complexity and
level of responsibility; the position's importance to the Corporation in
relation to other executive positions; and the competitiveness of an
executive's total compensation.
Specific compensation data obtained from Peer Group proxy statements is used
in establishing the salaries of the Corporation's Chief Executive Officer and
its Vice Chairman.
Subject to the Committee's approval, the level of an executive officer's base
salary is determined on the basis of relevant comparative compensation data and
the Chief Executive Officer's assessment of the executive's performance,
experience, demonstrated leadership, job knowledge, and management skills.
Annual Incentive Awards
Annual incentive awards are bonuses designed to provide a linkage among
executive performance, annual objective performance measures and long-term
increases in shareholder value.
For the 2001 award period, annual incentive awards were made to Mr. Rohr and
the other four executive officers listed in the compensation tables beginning
on page 19 under the Corporation's 1996 Executive Incentive Award Plan, as
amended. The 1996 Executive Incentive Award Plan is designed to give the
Committee the flexibility to make annual incentive awards that are comparable
to those found in the marketplace in which the Corporation competes for
executive talent. This plan is also designed to permit the payment of annual
incentive awards that are intended to qualify as deductible, performance-based
compensation under Section 162(m) of the Internal Revenue Code.
For 2001, the five participants in this plan share in a compensation pool
equal to one-half of one percent of the Corporation's 2001 consolidated pre-tax
net income. This amount is determined in accordance with generally accepted
accounting principles, after adjustment to exclude or include unusual,
infrequently occurring or extraordinary items or cumulative effects of changes
in accounting principles, as defined under generally accepted accounting
principles.
During the first quarter of 2001, the Committee assigned incentive award
amounts. An incentive award amount is the maximum percentage of the
compensation pool a participant could receive for the 2001 award period. No
participant could be assigned a percentage of the compensation pool greater
than 40% and the sum of all percentages assigned cannot exceed 100% of the
compensation pool. The maximum percentage of the award pool a participant can
receive was increased from 35% to 40% beginning in 2001, pursuant to an
amendment to the 1996 Executive Incentive Award Plan approved by shareholders
at PNC's 2001 annual meeting.
At PNC's 2001 annual meeting, shareholders also approved amendments to the
1996 Executive Incentive Award Plan which authorize the Committee to grant
incentive awards that are payable entirely in cash, entirely in shares of the
Corporation's common stock, or in a combination of cash and shares of common
stock. Shares of common stock issued pursuant to the terms of an incentive
award may be subject to such transfer restrictions or forfeiture provisions as
the Committee may specify. To the extent that an incentive award is paid in the
form of shares of common stock, the amended 1996 Executive Incentive Award Plan
also authorizes the issuance of additional shares of common stock to the
participant. The number of additional shares of common stock awarded cannot
exceed 25% of the number of shares issued to the participant in full or partial
payment of the participant's share of the compensation pool.
13
The Committee may permit deferral of the payment of any incentive award on
such terms as the Committee deems appropriate. In addition, a participant may
defer the payment of any incentive award and the issuance of additional stock
pursuant to any applicable deferred compensation plan of the Corporation. In
either case, any additional amounts accrued on account of such deferred payment
will be based either on a reasonable rate of interest or the actual rate of
return of one or more predetermined investments specified by the Committee or
pursuant to the terms of the deferred compensation plan.
With respect to the five participants in the 1996 Executive Incentive Award
Plan and certain other senior executive officers, the Committee exercised its
authority to pay 25% of each incentive award for 2001 in the form of restricted
shares of PNC common stock or to permit such amount to be deferred into
restricted phantom PNC common stock units issued under the Corporation's
Deferred Compensation Plan. This restricted stock/phantom unit portion was
increased by 25% to reflect the resulting risk of forfeiture and lack of
liquidity. The aggregate dollar value of the restricted shares or restricted
phantom PNC common stock units received by each participant in the 1996
Executive Incentive Award Plan is shown in the "Restricted Stock Award ($)"
column of the Summary Compensation Table for 2001, on page 19.
The Committee believes that the payment of a portion of the annual incentive
award in restricted shares of common stock or the deferral into restricted
phantom PNC common stock units helps to strengthen the linkage between the
interests of PNC's executive officers and the interests of the Corporation's
shareholders. The Committee has authorized a similar program for executive
officers not participating in the 1996 Executive Incentive Award Plan.
During the first quarter of 2002, the Committee took the actions necessary to
arrive at the amount of the annual incentive award for each of the five plan
participants. Among other things, the Committee: confirmed the identity of the
executive officers eligible to participate in the plan; certified in writing
the size of the compensation pool for the 2001 award period, in reliance upon
financial information supplied by the Corporation's officers; and certified in
writing the amount of the authorized incentive award to be paid to each
participant. The final amount of an incentive award is determined by the
maximum percentage of the compensation pool which could be paid to the
participant and such qualitative and quantitative performance factors as the
Committee deemed relevant in adjusting the incentive award payable in the form
of cash to the level shown in the Summary Compensable Table on page 19 in the
column captioned "Bonus ($)" for the year 2001, for Messrs. Rohr, Gregg,
Guyaux, Shack, and Whitford. As explained above, the balance of the 2001
incentive award was paid in the form of restricted shares of PNC common stock
or deferred as restricted phantom PNC common stock units.
For those executive officers who do not participate in the 1996 Executive
Incentive Award Plan, the target amount payable as an annual incentive award is
based on an analysis of competitive Peer Group pay practices and is expressed
as a percentage of base salary.
When the Committee established the 2001 target annual incentive awards, the
Committee assumed that the 2001 target performance goal would be achieved.
Achievement of that goal would result in approximately median total cash
compensation.
There are a number of factors that can affect the amount of an executive
officer's incentive award payment, including:
. ""EPS Goal"--This goal is based on the Corporation's earnings per share
in relation to the Corporation's budget. Management established, subject
to Committee approval, the target EPS Goal for 2001;
. ""Relative Goals"--These goals are based primarily on the Corporation's
return on average common shareholders' equity relative to the Peer Group,
with additional consideration given to the Corporation's relative return
on average assets;
14
. Business financial performance relative to that business's budget;
. The Chief Executive Officer's assessment of an executive officer's
performance; and
. The Committee may exercise its discretion to increase, reduce or
eliminate an executive officer's award, based on its assessment of the
officer's performance; among the factors the Committee considered with
respect to 2001 were effective communication with PNC's regulatory
agencies and the maintenance of effective financial reporting processes.
For PNC's most senior officers, incentive awards for 2001 were generally 40%
less than those paid for 2000, due to the Corporation's lower level of
financial performance. In addition, the Committee considered the 2001 financial
statement restatements announced after year end and further reduced the amount
of the 2001 incentive awards paid to Mr. Rohr, Mr. Gregg, and certain other
senior officers who are not included in the executive compensation tables which
follow this report.
Long-Term Incentive Awards
Stock option grants, restricted stock and other incentive share awards, and
other stock-based grants and awards are made under the Corporation's 1997 Long-
Term Incentive Award Plan, as amended. The purposes of the 1997 Long-Term
Incentive Award Plan are to attract, retain and motivate executives of
outstanding ability and to promote the identification of their interests with
those of the Corporation's shareholders.
The number of stock options granted by the Committee to executive officers is
determined as follows. A number of stock options is established that would
position the executive officer competitively relative to the Peer Group in
terms of long-term compensation. This number is called the baseline amount and
is used as a reference point for upward and downward adjustments to the stock
option grant level based on the Corporation's total shareholder return in
comparison with the Peer Group. If the Corporation's total shareholder return
is significantly higher or lower than the Peer Group's median return, the
number of options granted may be adjusted above or below the baseline amount.
The baseline amount is reestablished periodically in order to maintain the
Corporation's competitiveness in long-term compensation.
The Corporation's total shareholder return is based on its common stock
appreciation and dividend payments for the three most recent years. For
example, the 2001 option grants were based on common stock appreciation and
dividend payments for the period 1998 through 2000. The 2001 grants were 5%
above the established baseline to reflect the Corporation's total shareholder
return relative to its Peer Group.
Nonstatutory stock options with a "reload" feature were first granted to a
select group of senior officers by the Personnel and Compensation Committee on
February 19, 1997. All options granted to the named executive officers and
selected other senior officers by the Committee during 2001 also have a reload
feature. If options with a reload feature are exercised while the holder is
still an employee using common stock which has been held for at least six
months, the options exercised are replaced or "reloaded" with a new, at-the-
market option. A new option is issued for each share of common stock used to
satisfy the exercise price and meet any associated tax withholding obligation.
Options can be reloaded only once, so that a reload option cannot be replaced
when it is exercised. The reload option normally will become exercisable in one
year and will have the same remaining term as the option that was exercised.
The Committee believes that the reload option feature advances the
Corporation's goal of increased common stock ownership by senior executives by
encouraging the early exercise of stock options and the retention of shares.
15
As previously disclosed in the Corporation's 1999 annual meeting proxy
statement, in 1998 the Committee granted incentive share awards under the
Corporation's 1997 Long-Term Incentive Award Plan to certain PNC executive
officers. Mr. Rohr and each of the executive officers listed in the
compensation tables following this report received such incentive share awards,
which provided for the issuance of restricted shares of common stock upon the
achievement of one or more performance goals. The three-year performance period
for these grants ended on June 30, 2001.
Following the expiration of the performance period, the Committee reviewed
information concerning the attainment of certain of the performance goals and
certified in writing that the Corporation had achieved certain premium
performance levels with respect to the relative shareholder return and return
on common equity performance goals. Consistent with the relative shareholder
return and return on common equity performance levels achieved, but recognizing
that the common stock price performance goal of $87.00 per share had not been
achieved, the Committee authorized the issuance to each grantee of 50% of the
incentive shares granted in 1998, in the form of restricted shares of PNC
common stock. The dollar value of the restricted shares issued to each of the
executive officers included in the Summary Compensation Table on page 19 is
shown in the column captioned "LTIP Payouts."
Additional information about the grants and awards made by the Committee
under the 1997 Long-Term Incentive Award Plan, as amended, is included in the
Summary Compensation Table and Individual Option Grant Table which follow this
report.
Chief Executive Officer Compensation
When deciding the compensation to be paid to the Corporation's Chief
Executive Officer, the Committee acts privately, without the Chief Executive
Officer or other officers present. As appropriate, the Committee will confer
with its independent compensation consultant to determine whether the
Corporation's executive compensation program is consistent with marketplace
practices linking pay for performance. In general, the Committee considers the
Corporation's financial performance and Peer Group financial performance and
compensation data when making decisions regarding the Chief Executive Officer's
compensation. The Committee also considers the Chief Executive Officer's
leadership, decision-making skills, experience, knowledge, communication with
the Board, employees, and regulatory agencies, and strategic recommendations,
as well as the Corporation's positioning for future performance. The Committee
does not assign relative weights to these factors.
The Committee's significant decisions regarding the Chief Executive Officer's
compensation are reported to and discussed with the full Board. These
discussions are held privately, without the Chief Executive Officer or any of
the Corporation's other officers present.
The following portions of the report will discuss the Committee's decisions
regarding Mr. Rohr's compensation for 2001.
Mr. Rohr's base salary of $850,000 was unchanged for 2001.
As explained earlier in this report at the top of page 15, the Committee
reduced the size of Mr. Rohr's 2001 incentive award payment after considering
the financial statement restatements announced after year end. Nevertheless, in
deciding upon the size of Mr. Rohr's 2001 incentive award payment the Committee
also took into account the leadership and communication skills he displayed in
implementing several actions in the fourth quarter of 2001 to accelerate the
strategic repositioning of PNC's lending businesses and implement other
strategic initiatives. The Committee recognized that the actions taken in the
fourth quarter and other actions taken earlier in 2001 were implemented in a
challenging business and economic environment. In that context, the Committee
considered these accomplishments:
16
. As a result of PNC's repositioning strategies:
. PNC has an improved risk profile and a business mix more capable of
generating shareholder value and more consistent earnings growth over
time;
. PNC's reliance on lending revenue is among the lowest of its peers;
and
. Significant progress was made in the Corporation's efforts to reduce
balance sheet leverage.
. A stronger sales culture has been instilled among the Corporation's
employees, as evidenced by the success of the company-wide referral
program called the "Chairman's Challenge."
. The Regional Community Bank has continued to deepen its consumer and
small business relationships, with resulting improvements in customer
retention and satisfaction.
. PNC's asset management and processing businesses continued to be among
the industry's leaders, with an emphasis on achieving high-quality growth
and implementing best-of-class technology.
After considering all of these factors carefully, and taking into account
that 2001 was Mr. Rohr's first full year as Chief Executive Officer, the
Committee authorized the payment to Mr. Rohr of $1,500,000 as an incentive
award for 2001. Mr. Rohr received $1,125,000 of this award in the form of cash
and elected to defer the remainder of the amount, together with the 25%
premium, in the form of restricted phantom PNC common stock units under the
Corporation's Deferred Compensation Plan. Please refer to footnotes (a) and (c)
of the Summary Compensation Table on page 20 for additional information.
As for Mr. Rohr's long-term incentive compensation, he received his regularly
scheduled stock option grant at a level that was 5% higher than the baseline
level set for his regular 2000 grant. He did not receive any supplemental stock
option grants or incentive share awards during 2001 as he did in 2000 pursuant
to the Executive Recognition Program discussed in the Committee's report in the
2001 annual meeting proxy statement. As this report has already discussed, Mr.
Rohr did receive in 2001 restricted shares of common stock pursuant to the
incentive share award he was granted in 1998. Additional details are provided
in the Summary Compensation Table on page 19 and the relevant footnotes.
Tax Policy
Section 162(m) of the Internal Revenue Code disallows a federal income tax
deduction for compensation over $1 million paid to the Chief Executive Officer
and any of the executive officers included in the compensation tables following
this report, provided that they are serving in that capacity as of the last day
of the Corporation's fiscal year.
One exception to Section 162(m)'s disallowance of a federal income tax
deduction for compensation over $1 million applies to performance-based
compensation paid pursuant to shareholder-approved plans. Awards made under the
1996 Executive Incentive Award Plan, as amended, and certain awards under the
1997 Long-Term Incentive Award Plan, as amended can be made eligible for the
performance-based exception and therefore eligible as a federal income tax
deduction for the Corporation.
Although the Committee keeps in mind the desirability of controlling the
Corporation's nondeductible compensation expense, the Committee also believes
that it is equally important to maintain the flexibility and competitive
effectiveness of the Corporation's executive compensation program. Therefore,
the Committee may from time to time decide to make grants and awards which may
not be deductible for federal income tax purposes due to the provisions of
Section 162(m).
17
Conclusion
Based upon its review of the Corporation's executive compensation
program, the Committee believes that the program's basic structure is
appropriate, competitive and effective to serve the purposes for which it
was established.
MEMBERS OF THE COMMITTEE:
Thomas J. Usher, Chairman
Paul W. Chellgren
William R. Johnson
W. Craig McClelland
Milton A. Washington
Compensation Committee Interlocks and Insider Participation
Messrs. Usher, Chellgren, Clay, Johnson, McClelland, and Washington, none of
whom are officers or former officers of the Corporation or any of its
subsidiaries, served as members of the Personnel and Compensation Committee
during 2001. Mr. Clay, however, served as a member of the Committee only until
April 24, 2001.
Certain members of the Personnel and Compensation Committee and their
associates were customers of and had transactions with the Corporation or its
subsidiaries during 2001. Transactions that involved loans or commitments by
subsidiary banks were made in the ordinary course of business and 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.
Change in Control and Other Arrangements
The Corporation has entered into change in control severance agreements with
each of the executive officers named in the Summary Compensation Table and
certain other selected executive officers. If the executive officer's
employment is terminated by the Corporation without cause, or by the executive
officer for good reason, during a period of three years following a change in
control of the Corporation, the executive officer will receive severance
benefits, including (i) a lump sum payment of three times the executive
officer's annual base salary and bonus; (ii) the payment of at least the target
bonus for the executive officer for the fiscal year during which the executive
officer's employment is terminated; (iii) three years of additional benefits
under certain of the Corporation's retirement and benefit plans; and (iv) a
payment to reimburse the executive officer for any excise taxes on severance
benefits that are considered excess parachute payments under the Internal
Revenue Code of 1986, as amended ("Code"). The pension benefits payable to an
executive officer may be increased depending upon the officer's age on the date
of termination. Each agreement requires the executive officer not to use or
disclose any of the Corporation's confidential business information and, if the
executive officer receives the above severance benefits, not to employ or
solicit any officer of the Corporation during the year following the executive
officer's termination. Each agreement terminates when the executive officer
reaches age 65, and the Corporation may, upon one year's advance notice,
simultaneously terminate all of the change in control severance agreements. The
Corporation has entered into change in control severance arrangements with
certain other selected officers under which they will receive severance
benefits similar to those described above, but at a lower level of payment and
with a shorter coverage period.
The Corporation's displaced employee assistance plans for employees generally
provide an increase in severance benefits following a change in control under
certain circumstances. If an employee's employment is terminated by the
Corporation within two years following consummation of a change in control, the
employee will receive a lump sum payment equal to twice the benefits to which
such employee otherwise would be entitled under the applicable plan. In
addition to that lump sum payment, certain other selected officers and
employees will become eligible for an additional severance benefit under
similar circumstances, based on their variable compensation.
18
Summary Compensation Table*
The Summary Compensation Table shows, for the years 1999 through 2001, the
compensation paid or awarded to Mr. Rohr, the Corporation's Chairman,
President and Chief Executive Officer, and the Corporation's next four most
highly compensated, policy-making executive officers; the inclusion of those
four executive officers in this group is based on salary and bonus earned
during 2001. The amounts shown in the "Salary" column include the dollar
amounts attributable to holidays, vacation time, and paid time off. Mr. Rohr
and the four executive officers are referred to collectively for purposes of
the compensation tables as the Corporation's "named executive officers." For a
detailed discussion of the Corporation's executive compensation program,
please refer to the Personnel and Compensation Committee Report on Executive
Compensation beginning on page 12.
Annual Compensation Long-Term Compensation
--------------------------------- -------------------------------
Awards Payouts
--------------------- ---------
Other Securities
Annual Restricted Underlying LTIP All
Comp Stock Options/ Payouts Other
Name and Principal Position Year Salary ($) Bonus ($) ($) Award ($) SARS (#) ($) Comp ($)
--------------------------- ---- ---------- --------- ------ ---------- ---------- --------- --------
(a) (b) (c) (d) (e) (f)
James E. Rohr 2001 850,000 1,125,000 4,015 468,750 338,740 1,675,750 321,108
Chairman, President and 2000 836,120 2,601,000 3,690 3,862,500 277,261 0 226,931
Chief Executive Officer 1999 754,615 1,808,800 3,338 0 95,000 0 197,807
The PNC Financial Services Group, Inc.
Walter E. Gregg, Jr. 2001 680,000 487,500 0 203,125 126,000 1,122,753 193,244
Vice Chairman 2000 667,738 1,579,900 0 2,575,000 150,000 0 208,917
The PNC Financial Services Group, Inc. 1999 593,846 1,326,000 0 0 63,650 0 143,577
Joseph C. Guyaux 2001 405,769 283,500 0 118,125 63,000 469,210 52,038
Group Executive, Regional Community Banking 2000 375,422 486,400 0 1,931,250 104,644 0 50,187
The PNC Financial Services Group, Inc. 1999 342,307 511,000 0 0 64,461 0 41,874
Timothy G. Shack+ 2001+ 372,461 228,000 0 95,000 88,014 402,180 44,548
Group Executive, Chief Information Officer
The PNC Financial Services Group, Inc.
Thomas K. Whitford 2001 368,942 225,000 0 93,750 75,025 368,665 48,183
Group Executive, Strategic Planning 2000 339,615 469,200 0 1,609,375 85,802 0 45,732
The PNC Financial Services Group, Inc. 1999 302,308 427,800 0 0 48,771 0 37,213
----
* Footnotes to the Summary Compensation Table are set forth on page 20.
+ Mr. Shack was not an executive officer of the Corporation for purposes of
the SEC's executive compensation disclosure rules prior to 2001.
19
Footnotes to Summary Compensation Table
(a) In lieu of cash, 25% of the named executive officer's 2001 annual
incentive award was awarded to him in the form of restricted shares of
Common Stock or, in the case of Messrs. Rohr and Shack, deferred as
restricted phantom Common Stock units under the Corporation's Deferred
Compensation Plan. This restricted stock/phantom unit portion was
increased by 25% to reflect the resulting risk of forfeiture and lack of
liquidity. The aggregate dollar value of the restricted shares of Common
Stock or restricted phantom Common Stock units awarded to each named
executive officer is shown in the "Restricted Stock Award ($)" column of
this table for 2001, and additional details are provided in footnote (c)
and in the Personnel and Compensation Committee Report on Executive
Compensation beginning at page 13, under the caption "Annual Incentive
Awards."
(b) The amounts shown represent reimbursement for certain tax liabilities.
None of the named executive officers received perquisites or other
personal benefits, securities or property during 2001 that, in the
aggregate, cost the Corporation the lesser of $50,000 or 10% of the named
executive officer's salary and bonus earned during that year. Perquisites
and other personal benefits that were received by the named executive
officers were valued on the basis of their incremental cost to the
Corporation and its subsidiaries, as prescribed by the rules of the SEC.
(c) The dollar values in this column for 2001 equal the aggregate value of
the restricted shares of Common Stock awarded to or, in the case of
Messrs. Rohr and Shack, deferred as restricted phantom Common Stock units
by the named executive officer on February 20, 2002 in lieu of cash, as
part of the 2001 annual incentive award. The restricted shares were
awarded to Messrs. Gregg, Guyaux and Whitford under the Corporation's
1996 Executive Incentive Award Plan, as amended and the restricted
phantom Common Stock units were deferred by Messrs. Rohr and Shack under
the Corporation's Deferred Compensation Plan. The named executive
officers will be entitled to vote and to receive dividends on the
restricted shares, as declared by the Board on Common Stock. Restricted
phantom Common Stock units held in the Corporation's Deferred
Compensation Plan are credited with deemed dividends, as dividends are
declared by the Board on Common Stock, but they carry no voting rights
and can be settled only in cash. Please see footnote (a) and the
Personnel and Compensation Committee Report on Executive Compensation
beginning at page 13, under the caption "Annual Incentive Awards," for
additional details.
As of December 31, 2001, the named executive officers beneficially held
restricted shares of Common Stock (including the restricted shares awarded
on November 15, 2000 and the restricted shares issued on August 2, 2001) as
follows, with the aggregate dollar value shown as of December 31, 2001:
Messrs. Rohr (85,000 shares; $4,777,000); Gregg (56,750 shares;
$3,189,350); Guyaux (37,000 shares; $2,079,400); Shack (31,000 shares;
$1,742,200); and Whitford (30,500 shares; $1,714,100). The per share dollar
amount used to calculate these values was $56.20, the closing market price
of a share of Common Stock on the New York Stock Exchange on December 31,
2001.
(d) With respect to Messrs. Rohr, Shack, and Whitford, the number shown in
this column for 2001 includes shares of Common Stock underlying both
nonstatutory stock options granted by the Personnel and Compensation
Committee in its discretion during 2001 and reload nonstatutory stock
options granted upon the named executive officer's exercise during 2001
of nonstatutory stock options granted by the Personnel and Compensation
Committee prior to 2001 with a reload feature. The number of shares of
Common Stock underlying reload options are shown in parentheses for
Messrs. Rohr (128,740); Shack (40,764); and Whitford (22,525). For more
information about reload options, please see the "Individual Option
Grants--2001" table on page 21 and the relevant footnotes.
(e) The dollar values in this column were calculated by multiplying the
number of shares of restricted Common Stock issued to the named executive
officer on August 2, 2001 under the Corporation's 1997 Long-Term
Incentive Award Plan, as amended by the closing market price of a share
of Common Stock on the New York Stock Exchange on that date ($67.03). The
number of restricted shares of Common Stock issued to each of the named
executive officers is as follows: Messrs. Rohr (25,000 shares); Gregg
(16,750 shares); Guyaux (7,000 shares); Shack (6,000 shares); and
Whitford (5,500 shares). If the named executive officer's employment with
PNC terminates prior to the end of a two-year restricted period which
began on July 1, 2001, he will forfeit all shares awarded, except in
certain cases involving the officer's death, total disability, or
retirement or certain change in control events. During the restricted
period, the officer will receive
20
dividends on the restricted shares, as declared by the Board on Common
Stock, but may not sell or otherwise transfer the shares. For more
information about these restricted shares, please see the Personnel and
Compensation Committee Report on Executive Compensation at the top of
page 16.
(f) The amount shown for 2001 includes the dollar value of matching
contributions made pursuant to the Corporation's Incentive Savings Plan,
a qualified defined contribution plan, for Messrs. Rohr ($10,200); Gregg
($4,708); Guyaux ($10,200); Shack ($10,200); and Whitford ($4,425). The
amount also includes the employer matching contribution to the
Corporation's Supplemental Incentive Savings Plan, a nonqualified excess
defined contribution plan, for Messrs. Rohr ($118,830); Gregg ($83,489);
Guyaux ($29,223); Shack ($26,603); and Whitford ($31,874). The amount
also includes the 2001 net premiums paid by the Corporation in connection
with its Key Executive Equity Plan, a split-dollar insurance arrangement,
on behalf of Messrs. Rohr ($192,078); Gregg ($105,047); Guyaux ($12,615);
Shack ($7,745); and Whitford ($11,884). The net premiums disclosed in the
preceding sentence represent the full dollar amounts paid by the
Corporation for both the term and non-term portions of the Key Executive
Equity Plan.
Option Grants in 2001
This table provides information on stock options granted to the named
executive officers in 2001. Only nonstatutory stock options were granted in
2001 under the Corporation's 1997 Long-Term Incentive Award Plan, as amended.
The table provides information about two categories of options granted
during 2001: (i) options granted to each of the named executive officers at
the discretion of the Personnel and Compensation Committee; and (ii) reload
options granted to Messrs. Rohr, Shack, and Whitford upon their exercise, in
the required manner, of options previously granted to them by the Personnel
and Compensation Committee with a reload feature. Reload options included in
the following table are marked with the symbol "(R)." Information about reload
options is included in footnote (b); where appropriate, other footnotes
provide additional information which is specific to the reload options shown
in the table.
Individual Option Grants--2001
Number of % of Total
Securities Options
Underlying Granted to Grant Date
Options Employees Exercise or Base Expiration Present
Name Granted (#) in 2001 Price ($/Sh) Date Value ($)
---- ----------- ---------- ---------------- ---------- ----------
(a)(b) (c) (d) (e)
James E. Rohr 210,000 5.33 74.59375 1/04/2011 3,406,200
16,810(R) 0.43 70.57500 1/31/2010 259,378
24,384(R) 0.62 70.57500 1/06/2010 376,245
60,778(R) 1.54 70.57500 2/19/2008 937,805
26,768(R) 0.68 65.55000 2/17/2009 371,272
Walter E. Gregg, Jr. 126,000 3.20 74.59375 1/04/2011 2,043,720
Joseph C. Guyaux 63,000 1.60 74.59375 1/04/2011 1,021,860
Timothy G. Shack 47,250 1.20 74.59375 1/04/2011 766,395
10,917(R) 0.28 72.09375 1/06/2010 168,777
609(R) 0.02 72.09375 2/17/2009 9,415
11,395(R) 0.29 72.21000 2/17/2009 179,471
7,974(R) 0.20 72.21000 2/19/2008 125,591
9,869(R) 0.25 68.12000 2/19/2008 145,963
Thomas K. Whitford 52,500 1.33 74.59375 1/04/2011 851,550
6,333(R) 0.16 73.25000 1/06/2010 100,568
5,907(R) 0.15 67.08000 1/06/2010 85,652
10,285(R) 0.26 67.05500 2/17/2009 148,207
21
(a) The tranches of options not marked with an "(R)" have a grant date of
January 4, 2001.
The reload options shown were granted on the exercise date(s) of the named
executive officer's original options. The grant dates for the reload
options are as follows: (i) Mr. Rohr's first three tranches of reload
options were granted on February 21, 2001 and his final tranche on August
30, 2001; (ii) Mr. Shack's first two tranches of reload options were
granted on January 8, 2001, his next two tranches of reload options on
February 20, 2001 and his final tranche on June 21, 2001; and (iii) Mr.
Whitford's 6,333 reload options were granted on February 9, 2001, his 5,907
reload options on April 10, 2001 and his 10,285 reload options on August 9,
2001.
The options granted by the Personnel and Compensation Committee on January
4, 2001 normally become exercisable in three equal annual installments,
beginning one year after the grant date, as long as the holder remains an
employee. All reload options normally become exercisable one year after
their grant date.
(b) Nonstatutory stock options with a "reload" feature were first granted to a
select group of senior officers by the Personnel and Compensation
Committee on February 19, 1997. All options granted to the named executive
officers and selected other senior officers by the Committee during 2001
also have a reload feature. If options with a reload feature are exercised
while the holder is still an employee using Common Stock which has been
held for at least six months, the options exercised are replaced or
"reloaded" with a new, at-the-market option for each share of Common Stock
used to satisfy the exercise price and meet any associated tax withholding
obligation. Options can be reloaded only once, so that the reload options
shown in the table cannot be replaced when they are exercised. The reload
option normally will become exercisable in one year and will have the same
remaining term as the option that was exercised.
(c) The exercise price shown equals the average of the high and low sale
prices of a share of the Corporation's Common Stock on the New York Stock
Exchange on the date of the grant.
(d) The date shown in this column is the applicable ten-year expiration date,
but an option may expire prior to that date under certain circumstances
specified in the governing nonstatutory stock option agreement, such as
termination of employment for reasons other than death or retirement.
The expiration date shown for reload options coincides with the expiration
date of the option exercised, regardless of the reload option's grant
date. For example, a reload option received upon the exercise of an option
granted on February 17, 1999 would have the same expiration date of
February 17, 2009 applicable to the original option, regardless of the
date on which the reload option was granted.
(e) The dollar values listed in this column are based upon the Black-Scholes
option pricing model.
The options granted in 2001 to the named executive officers at the
discretion of the Personnel and Compensation Committee [i.e., the options
shown in the table that are not marked by the symbol "(R)"] and to certain
other executive officers include a reload feature. Those options were
valued without regard to the reload feature. The grant of a reload option
is treated for purposes of this table as the automatic grant of a new
option, the value of which is determined on its own terms as of its grant
date. Additional information about reload options is contained in footnote
(b).
22
The chart below shows, by option grant date, the assumptions used to
determine the grant date present value per option. The dollar values shown
in the Individual Option Grants table in the column captioned "Grant Date
Present Value ($)" were calculated by carrying out the dollar value of
each option to four decimal places and rounding the result to the nearest
dollar. The Corporation in no way intends to provide any predictions or
assurances with respect to option or Common Stock values, as some of the
underlying assumptions are highly subjective and in any event the options
are not transferable except upon the death of the optionee. The grant
dates for specific options listed in the Individual Option Grants table
are disclosed in footnote (a).
Annualized Estimated
Grant Market Exercise Risk Free Estimated Dividend Value of
Date Price Price Volatility Rate of Return Useful Life Yield Option
----- ------ -------- ---------- -------------- ----------- -------- ---------
01/04/01 $74.59 $74.59 0.25621 4.95% 5 Years 3.23% $16.22
01/08/01 72.09 72.09 0.25621 4.76% 5 Years 3.23% 15.46
02/09/01 73.25 73.25 0.25621 4.91% 5 Years 3.23% 15.88
02/20/01 72.21 72.21 0.25621 4.98% 5 Years 3.23% 15.75
02/21/01 70.58 70.58 0.25621 5.02% 5 Years 3.23% 15.43
04/10/01 67.08 67.08 0.25842 4.77% 5 Years 3.23% 14.50
06/21/01 68.12 68.12 0.25842 4.83% 5 Years 3.23% 14.79
08/09/01 67.06 67.06 0.25820 4.71% 5 Years 3.23% 14.41
08/30/01 65.55 65.55 0.25820 4.50% 5 Years 3.23% 13.87
Aggregated Option Exercises in 2001 and 2001 Year-End Option Values
This table provides information concerning exercises of nonstatutory stock
options during 2001 by certain of the named executive officers. The table also
shows the number and value of unexercised options, including any reload
options held by the named executive officer, at the end of 2001.
Number of Securities
Underlying Unexercised Value of Unexercised
Options at 2001 In-the-Money Options
Shares Year End (#) at 2001 Year End (a)($)
Acquired on Value ------------------------- -------------------------
Name Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
---- ------------ ------------ ----------- ------------- ----------- -------------
(b) (b)
James E. Rohr 158,166 3,071,021 229,875 562,908 3,721,527 2,649,666
Walter E. Gregg, Jr. 126,733 3,975,117 100,833 263,884 369,924 1,693,713
Joseph C. Guyaux 12,700 533,797 102,263 152,000 569,019 1,080,346
Timothy G. Shack 50,871 1,093,284 45,926 154,764 33,220 810,260
Thomas K. Whitford 32,503 829,482 47,819 147,609 78,729 891,208
--------
(a) An option is in-the-money if the fair market value of the underlying
security exceeds the exercise price of the option.
(b) The dollar values shown were calculated by determining the difference
between: (i) the average of the high and low sale prices of the
Corporation's Common Stock on the New York Stock Exchange on December 31,
2001 (i.e., $56.21); and (ii) the exercise prices of the various options
held by the named executive officer as of December 31, 2001.
Pension Benefits
The Corporation maintains a non-contributory pension plan ("Pension Plan" or
"Plan") for qualifying employees. The Plan is a defined benefit pension plan
under the Employee Retirement Income Security Act of 1974, as amended
("ERISA") and is qualified under Section 401(a) of the Code. The Corporation
and certain of its subsidiaries contribute an actuarially determined amount
necessary to fund the total benefits payable to participants employed by them.
The amount of the Corporation's annual contribution with respect to a specific
participant cannot be readily calculated by the actuaries for the Pension
Plan.
23
Benefits under the Plan are determined as follows: Effective January 1,
1999, a recordkeeping "account" was established for each participant. The
initial account balance was determined as the present value of each
participant's accrued benefit as of December 31, 1998, using the Plan
provisions in effect on December 31, 1998. For each calendar quarter ending
after January 1, 1999, eligible participants receive "Earnings Credits",
expressed as a percentage of Covered Earnings, in accordance with a schedule
based on the participant's age plus years of credited service. In addition,
employees who were at least age 40 and had at least 10 years of credited
service as of January 1, 1999 receive additional quarterly "Transitional
Credits" for up to 10 years.
"Covered Earnings" is defined as an employee's regular earnings plus
eligible variable compensation, such as paid bonuses; deferred bonus payments
are applied to the Corporation's ERISA Excess Pension Plan, discussed below.
Eligible variable compensation for employees is limited to the greater of
$25,000 or 50% of the employee's total eligible variable compensation for the
calendar year. Eligible variable compensation is generally limited to $250,000
for purposes of the 50% calculation, except in the case of a select group of
senior officers.
Participants also receive quarterly "Interest Credits" at the prevailing 30-
year U.S. Treasury Bond rate. The benefit provided to participants in the
Pension Plan as of December 31, 1998 was no less than the benefit they had
accrued as of December 31, 1998, under the Plan rules in effect as of that
date.
The Corporation also maintains two supplemental non-qualified pension plans.
The ERISA Excess Pension Plan provides retirement benefits equal to the
difference, if any, between the maximum benefit allowed under the Code and the
amount that would be provided by the Pension Plan if no limits were applied.
The ERISA Excess Pension Plan also recognizes deferred bonuses that are not
included in the Pension Plan as Covered Earnings.
The Corporation also maintains a separate supplemental retirement benefit
plan applicable to certain officers of the Corporation and its subsidiaries.
Officers who were age 50 and had five years of vesting service as of January
1, 1999 receive benefits based on the formula in effect prior to January 1,
1999. All other officers participating in this plan will receive a benefit
based upon the cash balance pension formula described above, applied to
eligible bonuses.
The estimated total annual benefits (including those payable by both
supplemental non-qualified pension plans) payable upon retirement at the
normal retirement age of 65 for each of the named executive officers are as
follows: Messrs. Rohr ($2,767,097); Gregg ($1,344,547); Guyaux ($749,312);
Shack ($714,454); and Whitford ($744,467). The benefits have been projected
assuming that: (a) each named executive officer's salary remains constant
until retirement; (b) future annual bonuses are assumed to be the same as
those paid in 2001; and (c) the 30-year U.S. Treasury Bond rate until
retirement is 7.0%. The amounts shown are based on the payment method which
would result in the highest annual benefit, if selected by the named executive
officer.
24
COMMON STOCK PERFORMANCE GRAPH
The graph set forth below shows the cumulative total shareholder return
(i.e., price change plus reinvestment of dividends) on the Corporation's Common
Stock during the five-year period ended December 31, 2001, as compared with:
(i) a selected peer group of the Corporation's competitors ("Peer Group"+);
(ii) an overall stock market index, the S&P 500 Index; and (iii) a published
industry index, the S&P Major Regional Banks Index ("S&P Banks"). The yearly
points marked on the horizontal axis of the graph correspond to December 31 of
that year. The stock performance graph assumes that $100 was invested on
January 1, 1997, for the five-year period and that any dividends were
reinvested. The table below the graph shows the resultant compound annual
growth rate ("CGR") for the performance period.
[GRAPH APPEARS HERE]
Assumes $100 investment on January 1, 1997
Total Return=Price change plus reinvestment of dividends
Base
Period 5 Year
1996 1997 1998 1999 2000 2001 CGR
PNC $100 $156.63 $152.98 $129.98 $221.11 $175.21 11.9%
Peer Group+ $100 153.07 172.70 138.48 158.97 163.86 10.4%
S&P 500 Index $100 133.36 171.48 207.56 188.66 166.24 10.7%
S&P Banks $100 150.37 166.13 142.55 182.50 170.14 11.2%
+ The Peer Group represented comprises the following companies: Bank of America
Corporation; The Bank of New York Company, Inc.; Bank One Corporation;
FleetBoston Financial Corporation; KeyCorp; Mellon Financial Corporation;
National City Corporation; PNC; SunTrust Banks, Inc.; U.S. Bancorp; Wachovia
Corporation; and Wells Fargo & Company. Each yearly point for the Peer Group
is determined by calculating the cumulative total shareholder return for each
company in the Peer Group from January 1, 1997 to December 31 of that year
and then using the median of these returns as the yearly plot point. The Peer
Group shown is the Peer Group approved by the Personnel and Compensation
Committee in 2001, but reflects the merger of Wachovia Corporation and First
Union Corporation and the merger of Firstar Corporation and U.S. Bancorp. The
Corporation's 2002 Peer Group includes Fifth Third Bancorp, but does not
include Mellon Financial Corporation.
In accordance with the rules of the SEC, this section, captioned "Common
Stock Performance Graph", shall not be incorporated by reference into any of
the Corporation's future filings made under the Exchange Act or the Securities
Act and shall not be deemed to be soliciting material or to be filed under the
Exchange Act or the Securities Act.
25
VOTING PROCEDURES
Pennsylvania law and the Corporation's By-Laws require the presence of a
quorum to transact business at the annual meeting. A quorum is constituted by
the presence, in person or by proxy, of shareholders entitled to cast at least
a majority of the votes which all shareholders are entitled to cast on the
particular matters to be voted on. Votes withheld from director nominees and
abstentions will be counted in determining whether a quorum has been reached.
Under Pennsylvania law, the act of "voting" does not include either
recording the fact of abstention or failing to vote for a candidate or for
approval or disapproval of a proposal, whether or not the person entitled to
vote characterizes the conduct as voting. In other words, only those who
indicate an affirmative or negative decision on a matter are treated as
voting, so that ordinarily abstention or a mere absence or failure to vote is
not equivalent to a negative decision. A broker-dealer "non-vote" occurs when
a nominee holding shares for a beneficial owner does not vote on a particular
proposal because the nominee does not have discretionary voting power for that
particular item and has not received instructions from the beneficial owner.
With respect to Item 1, the 15 nominees for election as directors who
receive the greatest number of votes cast at the annual meeting, assuming that
a quorum is present, will be elected as directors at the conclusion of the
vote tabulation. A withheld vote on any nominee will not affect the voting
results.
The rules of the New York Stock Exchange state that the total vote cast on
each item which is required by those rules to be voted on by shareholders
represent over 50 percent in interest of the Common Stock and the Voting
Preferred Stock, voting together as a single class. As a result, shares not
voted, abstentions and broker non-votes will have a negative effect on the
satisfaction of that requirement.
Under the rules of the New York Stock Exchange, "routine" items are those
upon which broker-dealers holding shares in street name for their customers
may vote, in their discretion, on behalf of any customers who do not furnish
voting instructions within ten days of the annual meeting. With respect to
non-routine items that come before the annual meeting for a vote, such broker-
dealers would not be able to vote without first receiving voting instructions
from their customers. These broker "non-votes" would not be considered in the
calculation of the majority of the votes cast and therefore would have no
effect on the vote with respect to a non-routine item, except as otherwise
explained in the preceding paragraph.
The Corporation has adopted a policy that all proxies, ballots, voting
instructions from employee benefit plan participants and voting tabulations
that identify the particular vote of a shareholder or benefit plan participant
be kept permanently confidential and not be disclosed to the Corporation, its
directors, officers or employees except: (i) as necessary to meet legal
requirements or to pursue or defend legal actions; (ii) to allow the Judge of
Election to certify the results of the vote; (iii) when expressly requested by
a shareholder or benefit plan participant; or (iv) in the event of a contested
proxy solicitation. The Corporation has confirmed with its independent vote
tabulator and Judge of Election that its procedures will be consistent with
the foregoing policy.
26
INDEPENDENT AUDITORS
At its meeting on February 15, 2001, the Board of Directors approved the
recommendation of the Audit Committee for the appointment of Ernst & Young LLP
to audit the consolidated financial statements of the Corporation for 2001.
In addition to serving as the independent auditor of the Corporation's 2001
consolidated financial statements, Ernst & Young LLP executes the Corporation's
internal audit program under the direction of PNC's corporate audit staff.
Ernst & Young LLP also provides various tax and nonattest and advisory services
to the Corporation. Additional details about the nature of these services and
the fees that the Corporation paid to Ernst & Young LLP for such services
provided during 2001 are set forth below.
Under rule amendments regarding auditor independence adopted by the SEC,
beginning August 5, 2002 independent accountants will no longer be permitted to
provide audit clients with certain non-audit services. Accordingly, PNC has
decided to have separate internal and independent audit providers commencing
with fiscal 2002. Ernst & Young LLP has acted as independent auditor with
respect to the Corporation's 2001 financial statements and will continue to
provide various internal audit, tax, and nonattest and advisory services to the
Corporation. PNC has engaged Deloitte & Touche LLP as the Corporation's
principal accountants to audit the Corporation's 2002 financial statements.
These actions were recommended by the Audit Committee and approved by the
Corporation's Board of Directors on December 18, 2001.
Ernst & Young LLP's reports on the Corporation's financial statements for the
past two fiscal years did not contain an adverse opinion or a disclaimer of
opinion and were not qualified or modified as to uncertainty, audit scope or
accounting principles. During the two most recent fiscal years and any
subsequent interim period preceding the date of this proxy statement, (i) there
were no disagreements with Ernst & Young LLP on any matter of accounting
principles or practices, financial statement disclosure, or auditing scope or
procedure, which disagreements, if not resolved to the satisfaction of Ernst &
Young LLP, would have caused Ernst & Young LLP to make a reference to the
subject matter of the disagreement in connection with its reports in the
financial statements for such years, and (ii) there were no reportable events
as defined in Item 304 of Regulation S-K. The Corporation has provided Ernst &
Young LLP with a copy of the preceding disclosure prior to filing this proxy
statement with the SEC. Ernst & Young LLP has provided a letter to the
Corporation stating that it agrees with the statements made in the disclosure.
Representatives of Ernst & Young LLP and Deloitte & Touche LLP are expected
to be present at the annual meeting with the opportunity to make a statement if
they desire to do so and to be available to respond to appropriate questions.
Audit Fees
The Corporation paid fees of approximately $3.9 million to Ernst & Young LLP
for the 2001 annual audit, including the audit of the consolidated financial
statements, timely quarterly reviews, audits of consolidated subsidiaries,
review and consultation connected with certain SEC filings, and meetings with
the Audit Committee of the Board of Directors.
Financial Information Systems Design and Implementation Fees
The Corporation did not pay any financial information systems design and
implementation fees to Ernst & Young LLP during 2001.
27
All Other Fees
The Corporation paid fees of approximately $14.94 million to Ernst & Young
LLP for all other services provided by it during 2001. Included in that amount
is approximately $12.32 million for various audit-related services such as
internal audit services, services related to SEC registration statements and
various SAS 70 reports, consultation on accounting standards, other statutory
audits, and due diligence matters. The balance was paid for various tax and
nonattest and advisory services. For tax consulting matters and various other
tax services, including sales and use tax refund reviews, research and
development credit opportunities, international tax matters, state-related tax
matters and other compliance services, the Corporation paid Ernst & Young LLP
$646,000. Nonattest and advisory services, and the related fees paid by the
Corporation to Ernst & Young LLP, included: implementation assistance related
to a vendor software package to allow for the improved management of cash
balances ($272,000); review services related to certain float/reserve
requirements ($224,000); assistance on various insurance-related matters
($121,000); and litigation advisory assistance and data validation services
($1,096,000). Fees for various other nonattest and advisory services were
$261,000. The Audit Committee has considered the compatibility of nonaudit
services with the auditor's independence.
28
REPORT OF THE AUDIT COMMITTEE
The Board of Directors of the Corporation has appointed an Audit Committee
composed of five directors, each of whom is independent as defined in the New
York Stock Exchange listing standards.
The Board of Directors has adopted a written charter for the Audit Committee.
The Audit Committee's job is one of oversight as set forth in its Charter. It
is not the duty of the Audit Committee to prepare the Corporation's financial
statements, to plan or conduct audits, or to determine that the Corporation's
financial statements are complete and accurate and are in accordance with
generally accepted accounting principles. The Corporation's management is
responsible for preparing the Corporation's financial statements and for
maintaining internal control. The independent auditors are responsible for
auditing the financial statements and for expressing an opinion as to whether
those audited financial statements fairly present the financial position,
results of operations, and cash flows of the Corporation in conformity with
generally accepted accounting principles.
The Audit Committee has reviewed and discussed the Corporation's audited
consolidated financial statements with management and with Ernst & Young LLP,
the Corporation's independent auditors for 2001.
The Audit Committee has discussed with Ernst & Young LLP the matters required
to be discussed by Statement on Auditing Standards No. 61.
The Audit Committee has received from Ernst & Young LLP the written
statements required by Independence Standards Board Standard No. 1,
Independence Discussions with Audit Committees, and has discussed Ernst &
Young's independence with Ernst & Young, and has considered the compatibility
of nonaudit services with the auditor's independence.
Based on the review and discussions referred to above, the Audit Committee
has recommended to the Board of Directors that the audited consolidated
financial statements be included in the Corporation's Annual Report on Form 10-
K for the year ended December 31, 2001 for filing with the Securities and
Exchange Commission.
THE AUDIT COMMITTEE
Helge H. Wehmeier, Chairman
George A. Davidson, Jr.
David F. Girard-diCarlo
Bruce C. Lindsay
Jane G. Pepper
Report of the Audit Committee
In accordance with the rules of the SEC, the Report of the Audit Committee
shall not be incorporated by reference into any of the Corporation's future
filings made under the Exchange Act or the Securities Act, and shall not be
deemed to be soliciting material or to be filed with the SEC under the Exchange
Act or the Securities Act.
29
LEGAL PROCEEDINGS
Several putative class action complaints were filed during 2002 in the
United States District Court of the Western District of Pennsylvania against
the Corporation, James E. Rohr, its Chairman, President and Chief Executive
Officer, Robert L. Haunschild, its Senior Vice President and Chief Financial
Officer, and Ernst & Young LLP, the independent auditor of the Corporation's
2001 consolidated financial statements, alleging violations of federal
securities laws related to disclosures regarding 2001 financial results, three
transactions completed by PNC during 2001 with subsidiaries of a third party
financial institution and related matters, and seeking unquantified damages on
behalf of putative classes of persons who purchased the Corporation's Common
Stock, attorneys' fees and other expenses. Certain of the complaints also name
Thomas H. O'Brien, the Corporation's retired Chairman, Walter E. Gregg Jr.,
its Vice Chairman, and/or an Executive Vice President as additional
defendants. Management believes there are substantial defenses to the lawsuits
and intends to defend them vigorously. As required by the Corporation's By-
Laws, the Corporation has agreed to advance the expenses of each individual
defendant in connection with these lawsuits subject to his undertaking to
repay all amounts so advanced if it is ultimately determined that he is not
entitled to be indemnified for them.
SHAREHOLDER PROPOSALS AND NOMINATIONS
Eligible shareholders may submit proposals to be considered for inclusion in
the Corporation's 2003 proxy materials for the 2003 annual meeting of
shareholders if they do so in accordance with the applicable SEC rules. Any
such proposals must be in writing and received by the Corporate Secretary at
the principal executive offices of the Corporation no later than November 30,
2002, in order to be considered for inclusion in the Corporation's 2003 proxy
materials. For information on how to submit the name of a person to be
considered by the Committee on Corporate Governance for possible nomination as
a director, please see the paragraph discussing the Committee's
responsibilities on page 4.
Director nominations and proposals for action at an annual meeting of
shareholders may be made otherwise only: (i) pursuant to the Corporation's
notice of such meeting; (ii) by the presiding officer; (iii) by or at the
direction of a majority of the Board of Directors; or (iv) by one or more
shareholders in accordance with the applicable rules of the SEC and the
governing By-Law provisions.
A shareholder may make a nomination for the election of a director or a
proposal for action at an annual meeting only if written notice is received by
the Corporate Secretary not later than: (i) 90 days prior to the annual
meeting (which, for the 2003 annual meeting, would mean no later than January
22, 2003 if the annual meeting is held on April 22, 2003, unless a different
date for such notice has been stated in the Corporation's most recent proxy
materials distributed to shareholders); or (ii) if the annual meeting is to be
held on a date other than the fourth Tuesday in April, the close of business
on the tenth day following the first public disclosure of the meeting date.
Public disclosure of the date of any annual meeting may be made in a filing
with the SEC, in any notice given to the New York Stock Exchange or in a news
release reported by any national news service.
Each shareholder notice shall include: (i) as to the shareholder giving the
notice and the beneficial owner, if any, on whose behalf the notice is given
(A) the name and address of such shareholder and of such beneficial owner, and
(B) the class and number of shares of the stock of the Corporation that are
owned of record and beneficially by such shareholder and such beneficial
owner; and (ii) a representation that the shareholder is a beneficial owner of
stock of the Corporation entitled to vote at such meeting and intends to be
present at the meeting in person or by proxy to make such nomination or
proposal.
Each notice of nomination for the election of a director from a shareholder
also shall set forth: (i) the name and address of the person to be nominated;
(ii) a description of all arrangements or understandings between the
shareholder and the nominee and any other person or persons (naming such
person or persons) pursuant to which the nomination is to be made by the
shareholder; (iii) such other information regarding the nominee as would be
required to be included in proxy materials filed under the applicable rules of
the SEC had the nominee been nominated by the Board of Directors; and (iv) the
written consent of the nominee to serve as a director of the Corporation, if
so elected.
30
Each notice of a proposal for action at an annual meeting from a shareholder
also shall set forth a brief description of the proposal, the reasons for
making such proposal, and any direct or indirect interest of the shareholder,
or any person on whose behalf the shareholder is acting, in making such
proposal.
If the Corporate Secretary receives notice of a shareholder proposal that
complies with the governing By-Law provisions on or prior to the required date
and if such proposal is properly presented at the 2003 annual meeting of
shareholders, the proxies appointed by the Corporation may exercise
discretionary authority in voting on such proposal if, in the Corporation's
proxy statement for such meeting, the Corporation advises shareholders of the
nature of such proposal and how the proxies appointed by the Corporation
intend to vote on such proposal, unless the shareholder submitting the
proposal satisfies certain SEC requirements, including the mailing of a
separate proxy statement to the Corporation's shareholders.
The presiding officer of the meeting may refuse to permit any nomination for
the election of a director or proposal to be made at an annual meeting by a
shareholder who has not complied with all of the governing By-Law procedures,
including receipt of the required notice by the Corporate Secretary by the
date specified. If a shareholder proposal is received by the Corporation after
the required notice date but the presiding officer of the meeting nevertheless
permits such proposal to be made at the 2003 annual meeting of shareholders,
the proxies appointed by the Corporation may exercise discretionary authority
when voting on such proposal.
Questions about these requirements, or notices mandated by them, may be
directed to: Corporate Secretary, The PNC Financial Services Group, Inc., One
PNC Plaza, 249 Fifth Avenue, Pittsburgh, Pennsylvania 15222-2707.
OTHER MATTERS
The Board of Directors knows of no other business to be presented at the
meeting. If, however, any other business should properly come before the
meeting, or any adjournment thereof, it is intended that the proxy will be
voted with respect thereto in accordance with the best judgment of the persons
named in the proxy.
By Order of the Board of Directors,
/s/ Thomas R. Moore
Thomas R. Moore
Corporate Secretary
31
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The PNC Financial Services Group, Inc.
P.O. Box 1150
Pittsburgh, PA 15230-1150
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Submit Voting Instructions by Submit Voting Instructions by Submit Voting Instructions by
TELEPHONE INTERNET MAIL
Call Toll-Free using a Access the Website and Return the proxy/instruction
touch-tone telephone: cast your vote: card below in the postage-paid
1-800-542-1160 http://www.votefast.com envelope provided.
----------------------------- ----------------------------- -------------------------------
SUBMIT VOTING INSTRUCTIONS 24 HOURS A DAY, 7 DAYS A WEEK!
PLEASE SUBMIT YOUR VOTING INSTRUCTIONS AS SOON AS POSSIBLE.
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Your Control Number is:
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PLEASE FOLD AND DETACH CARD AT PERFORATION BEFORE MAILING.
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THE PNC FINANCIAL SERVICES GROUP, INC. PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE ANNUAL
MEETING OF SHAREHOLDERS ON APRIL 23, 2002.
James E. Rohr, Walter E. Gregg, Jr. and Thomas R. Moore, and each of them with
full power to act alone and with full power of substitution, are hereby
authorized to represent the undersigned at The PNC Financial Services Group,
Inc. Annual Meeting of Shareholders to be held on April 23, 2002, or at any
adjournment thereof, and to vote, as indicated on the reverse side, the shares
of Common Stock and/or Preferred Stock which the undersigned would be entitled
to vote if personally present at said meeting. The above named individuals are
further authorized to vote such stock upon any other business as may properly
come before the meeting, or any adjournment thereof, in accordance with their
best judgment.
If you are a participant in the The PNC Financial Services Group, Inc. Incentive
Savings Plan, this proxy also serves as a voting instruction card and directs
PNC Bank, N.A., as Trustee of The PNC Financial Services Group, Inc. Incentive
Savings Plan to vote all the shares credited to your account as indicated on the
reverse side at the Annual Meeting of Shareholders to be held on April 23, 2002
and at any adjournment(s) thereof.
Date: , 2002
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Signature
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Signature
Please sign exactly as your name appears
to the left. Joint owners should each sign.
When signing on behalf of a corporation or
partnership or as attorney, executor,
administrator, trustee or guardian, please
give full title as such.
============================= ADMISSION TICKET =================================
Please bring this ticket to the Annual Meeting,
Notice of Annual Meeting of Shareholders
THE PNC FINANCIAL SERVICES GROUP, INC.
2002 Annual Meeting of Shareholders
For the purpose of considering and acting upon the election
of 15 directors to serve until the next annual meeting and
until their successors are elected and qualified and such
other business as may properly come before the meeting or
any adjournment thereof.
Tuesday, April 23, 2002
11:00 a.m. Eastern Time
One PNC Plaza, 15th Floor
249 Fifth Avenue
Please Admit Pittsburgh, Pennsylvania Non-Transferable
================================================================================
PLEASE FOLD AND DETACH HERE.
For your comments:
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You have the option to access future annual reports, proxy statements, and other
proxy solicitation materials over the Internet, instead of receiving those
documents in paper form. Participation is voluntary. If you give your consent,
in the future when such material is available over the Internet, you will
receive notification which will contain the Internet location where the material
is available. The material will be presented in PDF format. There is no cost
to you for this service other than any charges imposed by your Internet
provider, telephone and/or cable company. Once you give your consent, it will
remain in effect until you inform us otherwise in writing. You may revoke your
consent, or request paper copies of the material, at any time by notifying PNC's
Corporate Secretary in writing at One PNC Plaza, 249 Fifth Avenue - 21st Floor,
Pittsburgh, PA 15222-2707.
To give your consent, follow the prompts when you vote by telephone or over the
Internet or check the appropriate box located at the bottom of the attached
proxy card when you vote by mail.
PLEASE FOLD AND DETACH HERE.
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THE PNC FINANCIAL SERVICES GROUP, INC.
The Board of Directors recommends a vote FOR all nominees listed in Item 1.
All shares, including full and partial shares of stock credited to your Plan
account, will be voted as directed below. In the absence of instructions, all
shares (including unallocated shares) will be voted FOR all nominees listed in
Item 1 or in the manner required or permitted by the governing Plan documents.
1. ELECTION OF DIRECTORS
(01) Chellgren (02) Clay (03) Davidson (04) Girard-diCarlo (05) Gregg
(06) Johnson (07) Lindsay (08) O'Brien (09) Pepper (10) Rohr
(11) Steffes (12) Strigl (13) Usher (14) Washington (15) Wehmeier
[ ] FOR ALL NOMINEES LISTED ABOVE [ ] WITHHOLD AUTHORITY TO
(EXCEPT AS MARKED TO THE VOTE FOR ALL NOMINEES
CONTRARY BELOW). LISTED ABOVE.
If you wish to withhold authority to vote for any individual nominee, write
that nominee's name or number in the space provided below.
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[ ] Will attend Meeting [ ] Will use Webcast [ ] Will use Teleconference
[ ] I consent to access future annual reports, proxy statements and other
proxy soliciting material over the Internet as described above.
PLEASE SIGN ON THE REVERSE SIDE AND RETURN PROMPTLY.