SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------
SCHEDULE 14A INFORMATION
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
x Definitive Proxy Statement
_ Definitive Additional Materials
_ Soliciting Materials Pursuant to section 240.14a-11(c) or
section 240.14a-12
- -------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- -------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
PAYMENT OF FILING FEE (Check the appropriate box):
x $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
_ $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
_ Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11: *
4) Proposed maximum aggregate value of transaction:
* Set forth the amount on which the filing fee is calculated and state how
it was determined.
_ 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 Previous Paid:
2) Form, Schedule or Registration Statement
No.:
3) Filing Party:
4) Date Filed:
PNC BANK CORP. THOMAS H. O'BRIEN
Fifth Avenue and Wood Street Chairman and Chief Executive Officer
Pittsburgh, PA 15265
[LOGO OF PNC BANK]
March 21, 1994
Dear Shareholder:
You will find enclosed the notice of meeting, proxy statement and proxy for the
annual meeting of shareholders of PNC Bank Corp., which will be held on
Tuesday, April 26, 1994, on the 15th floor of One PNC Plaza, in Pittsburgh,
Pennsylvania, beginning at 11:00 a.m.
Please review the enclosed material and complete, sign, date and return the
proxy card whether you plan to attend or not so that the matters coming before
the meeting can be acted upon.
We look forward to meeting our shareholders and welcome the opportunity to
discuss the business of your company with you.
Cordially,
/S/ Thomas H. O'Brien
Thomas H. O'Brien
[LOGO OF PNC BANK]
PNC BANK CORP.
ONE PNC PLAZA
PITTSBURGH, PENNSYLVANIA 15265
March 21, 1994
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
APRIL 26, 1994
To The Shareholders:
The annual meeting of the shareholders of PNC Bank Corp. will be held on the
15th floor of One PNC Plaza, Fifth Avenue and Wood Street, Pittsburgh,
Pennsylvania, on Tuesday, April 26, 1994, beginning at 11:00 a.m., for the
purpose of considering and acting upon the following matters:
(1) A proposal to approve the PNC Bank Corp. 1994 Annual Incentive Award
Plan;
(2) The election of fifteen directors to serve until the next annual meeting
and until their successors are elected and qualified; and
(3) Such other business as may properly come before the meeting or any
adjournment thereof.
Shareholders of record at the close of business on March 7, 1994 are entitled
to receive notice of, and to vote at, the meeting.
A proxy statement, form of proxy and self-addressed envelope are enclosed.
Please complete, date and sign the proxy. Return it promptly in the envelope
provided, which requires no postage if mailed in the United States. If you
attend the meeting, you may then withdraw your proxy and vote in person.
By Order of the Board of Directors
/s/ William F. Strome
William F. Strome
Corporate Secretary
[LOGO OF PNC BANK]
PNC BANK CORP.
ONE PNC PLAZA
PITTSBURGH, PENNSYLVANIA 15265
March 21, 1994
PROXY STATEMENT
FOR ANNUAL MEETING OF SHAREHOLDERS TO BE HELD
APRIL 26, 1994
The enclosed proxy is being solicited by the Board of Directors of PNC Bank
Corp. ("Corporation") for use at the annual meeting of shareholders to be held
April 26, 1994, 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 $10,000 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 enclosed proxy is revocable at any time prior to the actual voting of
such proxy by the filing of an instrument revoking it, or a duly executed proxy
bearing a later date, with the Corporate Secretary of the Corporation. In the
event your proxy is mailed and you attend the meeting, you may revoke your
proxy and cast your vote personally. All properly executed proxies delivered
pursuant to this solicitation will be voted at the meeting in accordance with
instructions, if any. Unless otherwise directed, proxies will be voted in favor
of the proposal to approve the PNC Bank Corp. 1994 Annual Incentive Award Plan,
as described beginning on page 2, and in favor of the election as directors of
the persons named on pages 6 and 7.
The proxy statement and form of proxy were first mailed to shareholders on or
about March 21, 1994.
The Board of Directors has fixed the close of business on March 7, 1994 as
the record date for determining shareholders entitled to receive notice of and
to vote at the meeting. On that date, there were issued and outstanding
235,093,735 shares of the Corporation's $5.00 par value common stock ("Common
Stock") and the following shares of the Corporation's preferred stock entitled
to vote at the meeting: 20,490 shares of $1.80 Cumulative Convertible Preferred
Stock-Series A ("Preferred Stock-A"); 9,297 shares of $1.80 Cumulative
Convertible Preferred Stock-Series B ("Preferred Stock-B"); 423,761 shares of
$1.60 Cumulative Convertible Preferred Stock-Series C ("Preferred Stock-C") and
522,650 shares of $1.80 Cumulative Convertible Preferred Stock-Series D
("Preferred Stock-D").
Holders of each share of convertible 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 the
holders of Preferred Stock-C and Preferred Stock-D being entitled to 4 votes
per 2.4 shares. The holders of Common Stock are entitled to one vote per share.
Holders of record of the Common Stock and voting preferred stock will vote
together as a single class at the meeting, as described in the section
captioned "Voting Procedures" beginning on page 22. The presence in person or
by proxy of the holders of a majority in voting power of the Common Stock and
the voting preferred stock will constitute a quorum for the transaction of
business at the meeting.
1
THE CORPORATION WILL PROVIDE WITHOUT CHARGE TO EACH BENEFICIAL OWNER OF ITS
SHARES, UPON SUCH SHAREHOLDER'S WRITTEN REQUEST, A COPY (WITHOUT EXHIBITS) OF
THE CORPORATION'S ANNUAL REPORT ON FORM 10-K REQUIRED TO BE FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION FOR THE YEAR ENDED DECEMBER 31, 1993.
REQUESTS FOR COPIES SHOULD BE ADDRESSED TO DOUGLAS H. BURR, DIRECTOR,
ACCOUNTING POLICY AND REPORTING, PNC BANK CORP., ONE PNC PLAZA, PITTSBURGH,
PENNSYLVANIA 15265. THE ANNUAL REPORT ON FORM 10-K IS NOT PART OF THE PROXY
SOLICITATION MATERIALS.
PROPOSAL TO APPROVE THE
PNC BANK CORP. 1994 ANNUAL INCENTIVE AWARD PLAN
The Corporation is asking shareholders to approve the PNC Bank Corp. 1994
Annual Incentive Award Plan ("Incentive Plan"). The purposes of the Incentive
Plan are to provide cash bonus opportunities to eligible officers and to
promote the identification of their interests with those of the Corporation's
shareholders through the payment of bonuses subject to the achievement of
specified performance goals. The Incentive Plan is substantially the same as
the Corporation's existing annual incentive award program.
REASONS FOR THE PROPOSAL
The Corporation has paid cash bonuses to its executives for a number of years
as part of its executive compensation program. The bonus program has been
substantially the same since 1987, and the Personnel and Compensation Committee
of the Corporation's Board of Directors believes that the program continues to
fulfill its purposes. Under applicable Pennsylvania law, the payment of such
cash compensation to officers and employees is a matter within the authority of
the Board of Directors (or a committee thereof) and does not require the
approval of shareholders.
As discussed in the Personnel and Compensation Committee Report on Executive
Compensation beginning on page 10 of this proxy statement ("Committee Report"),
the Internal Revenue Code was recently amended to add a new Section 162(m),
which disallows federal income tax deductions for certain executive
compensation in excess of $1 million per year ("$1 million limit"). Under
Section 162(m), compensation that qualifies as "performance-based compensation"
is not subject to the $1 million limit. One of the conditions to qualify cash
bonuses as "performance-based compensation" is shareholder approval of the
material terms of the plan under which the bonuses are paid.
In order to allow the Corporation to grant annual incentive awards that
qualify as "performance-based compensation" under Section 162(m), the Board of
Directors has adopted the Incentive Plan, subject to shareholder approval.
Although the Incentive Plan allows the grant of awards intended to qualify as
"performance-based compensation", awards that do not so qualify and therefore
may not be deductible compensation expense for the Corporation also may be
granted under the plan. There is no current intent to grant awards which may be
non-deductible, but the Incentive Plan permits the grant of such awards in
order to preserve the flexibility which is an important element of the
Corporation's executive compensation program.
DESCRIPTION OF THE INCENTIVE PLAN
The following summary of the material aspects of the Incentive Plan is
qualified in its entirety by reference to the full text of the Incentive Plan,
a copy of which is set forth as Exhibit "A" to this proxy statement. Unless
otherwise specified, capitalized terms have the meaning assigned to them in the
Incentive Plan.
The Incentive Plan permits the grant of "Incentive Awards" to salaried
employees of the Corporation or its subsidiaries. Although approximately 16,900
individuals meet this description, participation in the Corporation's existing
incentive award bonus program historically has been limited to the
approximately 600 officers who are members of the Corporation's Key Management
and Senior Executive Groups, which are comprised of persons considered to have
the potential to contribute significantly to the financial success of the
Corporation. It is expected that awards under the Incentive Plan would be
similarly limited, but there is no requirement to that effect. Employees who
receive awards under the Incentive Plan are referred to as
2
"Participants". Directors of the Corporation who are not salaried employees of
the Corporation or a subsidiary are not eligible to participate in the
Incentive Plan.
The Incentive Plan is administered by the Personnel and Compensation
Committee of the Board or such other committee of directors as may be
designated by the Board in the future ("Committee"). The Committee, in its sole
discretion, determines which eligible officers receive Incentive Awards, the
Performance Goals applicable to such awards, the Target Award of each award,
and the other terms and conditions of awards. None of the current members of
the Committee is eligible to participate in the Incentive Plan. The Committee
may, in its discretion, authorize the Corporation's Chief Executive Officer to
act on its behalf, except with respect to matters relating to such Chief
Executive Officer.
An "Incentive Award" granted under the Incentive Plan is a contingent award
that may entitle a Participant to a cash payment equal to the Participant's
"Target Award," as increased or decreased to reflect the relative level of
attainment of Performance Goals established by the Committee with respect to
the "Award Period". The "Award Period" applicable to an Incentive Award is the
calendar year, except to the extent the Committee determines otherwise. A
Participant's Target Award may in no event exceed the greater of: (a) 100% of
his or her base salary as of the later of (i) the first day of the applicable
Award Period, or (ii) the date of grant of the Incentive Award; or (b) the
total dollar amount of the Participant's base salary during the Award Period.
The Incentive Plan authorizes the Committee to grant Incentive Awards under
which payment is based upon any one or more of the following Performance Goals:
(a) earnings per share, (b) return on average equity in relation to a peer
group of bank holding companies or other entities designated by the Committee
("Peer Group"), (c) return on average assets in relation to the Peer Group, or
(d) such other performance goals as may be established by the Committee, which
may be based on earnings, earnings growth, revenues, expenses, stock price,
market share, charge-offs, reductions in nonperforming assets, return on
assets, equity or investment, regulatory compliance, satisfactory internal or
external audits, improvement of financial ratings, achievement of balance sheet
or income statement objectives, or any other objective goals established by the
Committee, and may be absolute in their terms or measured against or in
relationship to other companies comparably, similarly or otherwise situated.
Such Performance Goals may be particular to a Participant or the division,
department, branch, line of business, Subsidiary or other unit in which the
Participant works, or may be based on the performance of the Corporation
generally, and may cover such period as may be specified by the Committee. As
stated in the Committee Report, since 1987 the Committee has based annual
incentive awards on the same three performance goals: earnings per share,
return on average equity in relation to a peer group and return on average
assets in relation to the same peer group.
After the end of an Award Period, the Committee determines the extent to
which Performance Goals have been achieved and authorizes the Corporation to
make Incentive Award payments to Participants in accordance with the terms of
the awards. If the Committee determines that Performance Goal achievement has
been at the target level established by the Committee for the Award Period, a
Participant is generally eligible for an Incentive Award payment equal to the
Target Award attributable to that Performance Goal, subject to the right of the
Committee (or, if authorized by the Committee, the Chief Executive Officer) to
decrease or eliminate the amount of the payment or cancel an award. If the
achievement of applicable Performance Goals is below the minimum level
specified by the Committee, no Incentive Award payments are made to
Participants. The terms of an Incentive Award may provide for an Incentive
Award payment in excess of a Participant's Target Award if Performance Goal
achievement is in excess of the target levels established by the Committee. The
Incentive Plan establishes 150% of the Target Award as the maximum amount that
can be paid based on Performance Goal achievement in excess of target levels.
Unless otherwise determined by the Committee or provided in the Incentive Plan,
no Incentive Award payments are made to a Participant unless the Participant is
employed by the Corporation or a Subsidiary as of the date of payment.
The Board may amend, modify or terminate the Incentive Plan in any respect at
any time without the consent of Participants. Unless sooner terminated by the
Board, to the extent necessary to ensure that Incentive Award payments made to
executives covered by Section 162(m) may be deductible thereunder, the
3
Incentive Plan will terminate as of the date of the first meeting of the
Corporation's shareholders occurring during 1999, unless the term of the plan
is extended and reapproved at such shareholders' meeting. No Incentive Awards
may be granted under the Incentive Plan after its termination. Once the
Incentive Plan is approved by shareholders, termination of the Incentive Plan
would not affect any Incentive Awards outstanding on the date of termination
and such awards would continue to be subject to the terms of the Incentive Plan
as in effect immediately prior to its termination.
CONTINGENT INCENTIVE AWARDS TO DATE
Set forth in the table below is information relating to contingent Incentive
Awards granted by the Committee on January 6, 1994, for the Award Period
beginning January 1, 1994 and ending December 31, 1994. The potential dollar
value of each award set forth in the table represents the Target Award granted
to each of the Participants named in the table. The actual amount paid to any
Participant may be more or less than the Target Award for the reasons described
below. The actual amount paid will not exceed 150% of the Target Award.
NEW PLAN BENEFITS
PNC BANK CORP.
1994 ANNUAL INCENTIVE AWARD PLAN
Target Award
Dollar Number
Name and Position Value ($)* of Units
- ----------------- ------------ --------
Thomas H. O'Brien
Chairman and Chief
Executive Officer 850,000 N/A
James E. Rohr
President 334,750 N/A
Walter E. Gregg, Jr.
Executive Vice President 206,250 N/A
Richard C. Caldwell
Executive Vice President 152,500 N/A
Joe R. Irwin
Executive Vice President 150,000 N/A
Executive Officer Group 2,819,912 N/A
Non-Executive Director
Group 0 N/A
Non-Executive Officer
Employee Group 11,604,403 N/A
If the 1994 Target Award amounts shown in the table above had been in effect
under the Incentive Plan for the 1993 Award Period, the aggregate incentive
award payments which would have been made to the named executive officers would
not have varied materially from the 1993 amounts shown in the Bonus column of
the Summary Compensation Table on page 16. Payments under the Incentive Awards
reported in the above table are based upon the Corporation's level of
achievement during 1994 of the following Performance Goals established by the
Committee: the Corporation's return on average assets, measured in relation to
a Peer Group of 26 bank holding companies; the Corporation's return on average
equity, measured in relation to the same Peer Group; and the Corporation's
earnings per share, measured on an absolute basis. The Peer Group is the same
as the peer group described in the annual incentive award section of the
Committee Report, and may change during 1994 as a result of acquisitions and
similar events.
- --------
*THE ACTUAL AMOUNT OF ANY AWARD PAYMENT FOR THE 1994 AWARD PERIOD MAY BE MORE
OR LESS THAN THE DOLLAR AMOUNTS SHOWN IN THE TABLE AND WILL BE BASED ON THE
CORPORATION'S ACHIEVEMENT OF SPECIFIED FINANCIAL PERFORMANCE GOALS DURING 1994.
THE DOLLAR VALUES SHOWN ARE PROVIDED FOR PURPOSES OF ILLUSTRATION ONLY, AS
REQUIRED BY THE RULES OF THE SECURITIES AND EXCHANGE COMMISSION.
4
One-third of the Target Award for each such Incentive Award is allocated to
each of the three Performance Goal components. If the Corporation achieves the
minimum Performance Goal level established by the Committee for a component,
the Participant is eligible for 50% of the Target Award for that component. If
Performance Goal achievement for a component is at the target level, the
Participant is eligible for 100% of the Target Award for that component. If
Performance Goal achievement for a component equals or exceeds the maximum
level established by the Committee, the Participant is eligible for 150% of the
Target Award for that component. The total Incentive Award payment to be made
to a Participant is equal to the sum of the awards payable for each component.
In the Committee's sole discretion (which discretion has been delegated by the
Committee to the Corporation's Chief Executive Officer, except with respect to
awards made to Messrs. O'Brien, Rohr and Gregg), the amount of a Participant's
Incentive Award payment may be decreased or eliminated to reflect individual
performance.
Information cannot be provided with respect to future Incentive Awards that
may be granted to any individual or group of individuals since the grant of
Incentive Awards is within the discretion of the Committee.
Although not part of the Incentive Plan, payments may also be made in 1995
under the Special Transitional Incentive Plan ("Transitional Plan") adopted by
the Committee in 1991 in connection with the Corporation's reorganization of
its operations along functional lines. In order to provide a special incentive
to maintain the Corporation's financial performance during the reorganization,
the Transitional Plan offers fourteen of the Corporation's most senior
executives, including the individuals named in the foregoing table other than
Mr. O'Brien, the opportunity to receive shares of incentive stock under the
Corporation's 1992 Long-Term Incentive Award Plan at the end of a three year
period comprised of fiscal years 1992, 1993 and 1994, plus an amount of cash
approximating 20% of the value of the incentive shares. The maximum number of
shares awarded under the Transitional Plan will have a value equal to each
executive's awards under the annual incentive award plan for those years.
Awards under the Transitional Plan will be made by the Committee based on the
recommendation of the Chief Executive Officer, which recommendation will be
based on whether the target performance goals under the Corporation's annual
incentive award plan were achieved for each year in the three year transition
period and whether, in his judgment, the reorganization has been completed
successfully. The Committee also will consider whether an award should be made
to the Chief Executive Officer and, if so, the amount of the award. The
Committee will stipulate, as a condition of the award, the deferred payment of
awards under the Transitional Plan to the extent necessary for the Corporation
to treat all payments under the Transitional Plan as deductible compensation
expense for federal income tax purposes.
SHAREHOLDER APPROVAL REQUIRED
Approval of the Incentive Plan requires the affirmative vote of a majority of
the votes entitled to be cast at the annual meeting by the holders of the
Common Stock and the voting preferred stock, voting together as a single class,
and present at the meeting in person or by proxy. See "Voting Procedures",
beginning on page 22. The Incentive Plan and all Incentive Awards granted
thereunder will be cancelled unless the Incentive Plan is approved by the
Corporation's shareholders.
If the shareholders of the Corporation do not approve the Incentive Plan, the
Board of Directors might nonetheless decide to continue the Corporation's
annual incentive award program based on a determination that doing so is in the
best interests of the Corporation. In such event, however, payments made to
certain of the Corporation's executives may not be deductible for federal
income tax purposes under Section 162(m) of the Internal Revenue Code.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THIS PROPOSAL.
5
ELECTION OF DIRECTORS
INFORMATION CONCERNING NOMINEES
The By-Laws of the Corporation provide that the number of directors shall be
not fewer than five nor more than thirty-six as from time to time shall be
determined by the Board of Directors or the shareholders. The Board has acted
to fix at fifteen the number of directors to be elected at the annual meeting
of shareholders. The persons named below are nominees for election as directors
to hold office until the next annual meeting of shareholders and the election
and qualification of their successors.
The proxies solicited hereby, unless directed to the contrary therein, will
be voted for the nominees named below. All of the nominees named below are now
directors of the Corporation. All of the 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 persons acting under said
proxy in accordance with the recommendations of the Board of Directors. The
table below sets forth: the names of the nominees for election as directors of
the Corporation; their principal occupations; the year they first became
directors of the Corporation or any predecessor corporation; and their
directorships of certain other companies. All nominees have held the position
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.
Directorships in Companies,
Other than the Corporation,
Director Filing Reports with the
Name Age Principal Occupation Since Securities and Exchange Commission
- ---- --- -------------------- -------- ----------------------------------
Robert N. Clay 47 President of Clay Holding Company 1987 None
(thoroughbred breeding)
William G. Copeland 68 Chairman of the Board of Provident 1989 Bell Atlantic Corporation
Mutual Holding Company (life
insurance and financial services)
George A. Davidson, Jr. 55 Chairman and Chief Executive 1988 Consolidated Natural Gas Company;
Officer of Consolidated Natural B.F. Goodrich
Gas Company (public utility
holding company)
C. G. Grefenstette 66 Chairman and Chief Executive Officer 1989 None
of The Hillman Company (diversi-
fied operations and investments)
W. Craig McClelland 59 President and Chief Operating Officer 1985 Union Camp Corporation;
of Union Camp Corporation (pulp Allegheny Ludlum Corporation;
and paper manufacturing) Quaker State Corporation
Thomas Marshall 65 Chairman and Chief Executive 1989 Allegheny Ludlum Corporation
Officer of Aristech Chemical
Corporation (chemicals)
Donald I. Moritz 66 Chairman and Chief Executive Officer 1985 Equitable Resources, Inc.
of Equitable Resources, Inc. (energy
company--gas utility)
Thomas H. O'Brien 57 Chairman and Chief Executive Officer 1983 Bell Atlantic Corporation;
of the Corporation and Chairman Hilb, Rogal and Hamilton Company
of PNC Bank, National Association
Jackson H. Randolph 63 Chairman, President and Chief Executive 1988 The Cincinnati Gas &
Officer of The Cincinnati Gas & Electric Electric Company;
Company (public utility--gas and electric) Cincinnati Financial Corporation
6
Directorships in Companies,
Other than the Corporation,
Director Filing Reports with the
Name Age Principal Occupation Since Securities and Exchange Commission
- ---- --- -------------------- -------- ----------------------------------
James E. Rohr 45 President of the Corporation and 1989 Allegheny Ludlum Corporation;
President and Chief Executive Officer Student Loan Marketing Association
of PNC Bank, National Association
Roderic H. Ross 63 Chairman, President and Chief Executive 1979 Hunt Manufacturing Company
Officer of Keystone State Life Insur-
ance Company (insurance company)
Vincent A. Sarni 65 Chairman of the Executive Committee, 1989 PPG Industries, Inc.;
Pittsburgh Baseball Associates Hershey Foods Corporation;
(professional baseball organization) Amtrol, Inc.; LTV Steel, Inc.
Richard P. Simmons 62 Chairman and Chairman of the Executive 1976 Allegheny Ludlum Corporation;
Committee of Allegheny Ludlum Corporation Consolidated Natural Gas Company;
(specialty metals) USAir Group, Inc.
Thomas J. Usher 51 President, U.S. Steel Group of USX 1992 USX Corporation
Corporation (energy, steel and diversified business)
Helge H. Wehmeier 51 President and Chief Executive Officer of 1992 None
Miles Inc. (specialty chemicals, pharmaceuticals,
and imaging and graphic systems)
BOARD AND COMMITTEES
The Board of Directors of the Corporation has five standing committees: an
Audit Committee, a Loan and Investment Committee, a Nominating Committee, a
Personnel and Compensation Committee and an Executive Committee.
The Audit Committee is responsible for assisting the Board of Directors in
fulfilling its statutory and fiduciary responsibilities for the audit function
of the Corporation and its subsidiaries and in monitoring its accounting and
financial reporting practices; determining that the Corporation has adequate
administrative, operational and internal accounting controls and that the
Corporation is operating in accordance with its prescribed procedures and codes
of conduct; determining that the Corporation has in place policies and
procedures to enable it to comply with applicable laws and regulations and that
such compliance is occurring; and providing general oversight for the internal
and external audit function. In making its determinations, the Committee is
entitled, under its charter, to rely on assurances provided by the
Corporation's internal auditors, independent accountants, General Counsel, and
Chief Compliance Counsel. Its functions include recommending to the Board of
Directors the appointment of the independent auditor and reviewing with the
general auditor and the independent auditor their annual audit plans and
monitoring their progress during the year. The Committee is presently comprised
of Mrs. Clifford and Messrs. Grefenstette (Chairman), Clay, Copeland, Davidson,
Moritz, Usher and Wehmeier. Mrs. Clifford is not standing for re-election.
The Loan and Investment Committee is responsible for reviewing and approving
(when appropriate) loan and asset and liability management policies and reports
of compliance therewith; reviewing credit policy and asset and liability
management officer committee activities; reviewing reports regarding lending,
credit and investment activities; reviewing reports regarding various
subsidiaries engaged in funding or securities activities; reviewing reports of
supervisory activity directed to the Board of Directors by bank regulatory
authorities pertaining to lending, funding and investment related activities;
and approving the issuance of debt securities by the Corporation or any of its
subsidiaries. The Committee is presently comprised of Messrs. McClelland
(Chairman), Marshall, Randolph, Rohr, Sarni, and Simmons.
The Nominating Committee is responsible for recommending to the Board of
Directors persons to be nominated for election as directors of the Corporation.
In performing this function, the Committee considers director nominees
recommended by shareholders. Such recommendations should be submitted in
writing to the Corporate Secretary, PNC Bank Corp., One PNC Plaza, Pittsburgh,
Pennsylvania 15265, and include the
7
name, age, citizenship, residence, qualifications and directorships and other
positions held by the proposed nominee in business organizations. The
Nominating Committee is presently comprised of Mrs. Clifford and Messrs.
Davidson (Chairman), Copeland, McClelland, Randolph, Sarni, Simmons and
Wehmeier. Mrs. Clifford is not standing for re-election.
The Personnel and Compensation Committee is responsible for recommending to
the Board of Directors the persons to be elected as Chairman, President, and
Vice Chairmen of the Corporation and establishing the compensation of the
executive officers of the Corporation. The Committee also makes recommendations
to the Board of Directors regarding the adoption of employee benefit, bonus,
incentive compensation or similar plans and is responsible for the
administration of most of these plans. The Committee is presently comprised of
Messrs. Marshall (Chairman), Clay, Copeland, Moritz, Ross and Usher.
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 comprised of Messrs. Simmons
(Chairman), Clay, Grefenstette, Marshall, McClelland, Moritz, O'Brien, Randolph
and Ross.
The Board of Directors of the Corporation met nine times in 1993. The
Executive Committee met five times. The Audit Committee, the Loan and
Investment Committee, and the Personnel and Compensation Committee each met
four times. The Nominating Committee did not meet in 1993, but did meet in
February 1994 to recommend the persons listed on pages 6 and 7 to the Board of
Directors of the Corporation for nomination as Directors at the annual meeting.
In 1993, each nominee for re-election attended at least 75% of the combined
total of meetings of the Board of Directors and meetings of each committee of
the Board on which such director served.
COMPENSATION OF DIRECTORS
Executive officers of the Corporation who are 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-officer
directors of the Corporation are compensated for their 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 $32,000 for board membership
and, in accordance with the terms of the Corporation's 1992 Director Share
Incentive Plan, a number of shares of Common Stock having a fair market value
on the date of the award equal to $5,000. In addition, the chairman of each
standing committee receives a $3,000 annual retainer fee, with the exception of
the chairman of the Nominating Committee, who receives a $1,000 annual retainer
fee.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth information concerning beneficial ownership of
the Corporation's Common Stock, as of January 14, 1994, by each director and
nominee for election as a director, each of the five executive officers named
in the Summary Compensation Table on page 16 and all directors and executive
officers of the Corporation, as a group. The number of shares shown as
beneficially owned by each director and executive officer is determined under
the rules of the Securities and Exchange Commission ("SEC") and the information
is not necessarily indicative of beneficial ownership for any other purpose.
Under the SEC's rules, beneficial ownership includes any shares as to which the
individual has sole or shared voting power or investment power and also any
shares which the individual has the right to acquire within 60 days of January
14, 1994, through the exercise of any option, warrant or right.
8
Unless otherwise indicated, each person has sole investment and voting power
with respect to the shares set forth in the following table:
SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
Amount and nature
Name of beneficial ownership Percent of class*
- ---- ----------------------- -----------------
Richard C. Caldwell 100,402(/1/)(/2/) --
Robert N. Clay 2,163 --
Patricia J. Clifford** 1,730 --
William G. Copeland 3,043 --
George A. Davidson, Jr. 7,722 --
C. G. Grefenstette 465,019(/3/) 0.2
Walter E. Gregg, Jr. 65,531(/1/)(/2/) --
Joe R. Irwin 145,300(/1/)(/2/) --
W. Craig McClelland 2,482 --
Thomas Marshall 28,662 --
Donald I. Moritz 3,691(/4/) --
Thomas H. O'Brien 688,574(/1/)(/2/)(/4/) 0.3
Jackson H. Randolph 10,348 --
James E. Rohr 315,010(/1/)(/2/)(/4/) 0.1
Roderic H. Ross 3,742 --
Vincent A. Sarni 12,553 --
Richard P. Simmons 49,050(/4/)(/5/) --
Thomas J. Usher 958 --
Helge H. Wehmeier 773 --
Directors and executive officers as a group (29 persons). 2,749,818(/2/) 1.2
- --------
* Percentage numbers are shown only for holdings which equal or exceed 0.1% of
the class. As of January 14, 1994, there were 234,743,206 shares of the
Corporation's Common Stock issued and outstanding. Where necessary,
percentages were calculated by adding shares subject to exercisable stock
options to the foregoing number.
** Incumbent director not standing for re-election.
(1) Includes shares held in the Corporation's Incentive Savings Plan, a
qualified employee benefit defined contribution plan.
(2) Includes shares subject to exercisable stock options held by the executive
officer(s). The shares subject to such options are as follows, for Messrs.
O'Brien (521,000), Rohr (257,000), Gregg (60,000), Caldwell (97,400), and
Irwin (93,000). The aggregate number of shares subject to such options for
the remaining ten executive officers is 703,900.
(3) The amount listed for Mr. Grefenstette includes 142,000 shares held in a
trust of which Mr. Grefenstette is one of three co-Trustees; in that
fiduciary capacity he shares voting and dispositive power over the Trust's
assets with the other co-Trustees. The amount listed for Mr. Grefenstette
also includes 316,000 shares owned by Wilmington Securities, Inc., an
indirect wholly-owned subsidiary of The Hillman Company, which is
controlled by the Trust. The amount listed for Mr. Grefenstette, however,
does not include 448,000 shares owned by The Hillman Foundation Inc.; Mr.
Grefenstette, who is a Vice President and Director of the Foundation,
disclaims beneficial ownership of that holding.
(4) Includes shares held jointly and/or indirectly.
9
(5) The amount listed for Mr. Simmons includes 3,000 shares held by him in a
fiduciary capacity as the Trustee of the R. P. Simmons Family Foundation.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
As of March 14, 1994, the following persons are known to the Corporation to
be the beneficial owners of more than five percent of the Corporation's Common
Stock. In preparing the table below, the Corporation has relied, without
further investigation, on information contained on the Schedule 13G filed
jointly by the reporting persons with the SEC under the Securities Exchange Act
of 1934 (the "Act") and dated February 11, 1994. The shares reported by The
Capital Group, Inc. relate to those attributable to two wholly-owned operating
subsidiaries, including the shares reported by the Capital Research and
Management Company ("Capital Research"). Neither the Capital Group nor its
affiliates own any shares of the Corporation's Common Stock directly. The
shares reported are owned by accounts under the discretionary investment
management of the subsidiaries identified in footnote (1); no one such managed
account owns five percent or more of the Corporation's Common Stock.
Name and Address Amount and Nature Percent of
of Beneficial Owner of Beneficial Ownership Class
-------------------- ----------------------- ----------
The Capital Group, Inc.(/1/) 20,453,500(/2/) 8.72%
Capital Research and
Management Company
333 South Hope Street
Los Angeles, CA 90071
- --------
(1) The securities being reported relate to those attributable to two wholly-
owned operating subsidiaries of The Capital Group, Inc.: (i) Capital
Research, an Investment Adviser registered under Section 203 of the
Investment Advisers Act of 1940; and (ii) Capital Guardian Trust Company, a
Bank as defined in Section 3(a)(6) of the Act.
(2) The Capital Group, Inc. reports sole voting power as to 3,122,500 shares
and sole dispositive power as to 20,453,500 shares. These shares do not
include any shares as to which Capital Research reports sole voting power,
but do include 16,510,000 shares as to which Capital Research reports sole
dispositive power. Beneficial ownership as to all shares reported is
disclaimed by the reporting persons pursuant to Rule 13d-4 under the Act.
As of December 31, 1993, the trust divisions of the Corporation's subsidiary
banks were deemed to be the beneficial owners of an aggregate of 17,196,771
shares of Common Stock, representing 7.34% of outstanding Common Stock; no one
subsidiary bank's trust division was the beneficial owner of five percent or
more of outstanding Common Stock. All of such shares are held in a fiduciary or
representative capacity in numerous separate accounts for the benefit of other
persons. The bank subsidiaries had the power to vote or direct the voting of a
portion of said shares as follows: 16,210,540 sole; 830,532 shared. The bank
subsidiaries had the power to dispose or direct the disposition of a portion of
said shares as follows: 11,581,781 sole; 2,001,108 shared.
COMPENSATION OF EXECUTIVE OFFICERS
PERSONNEL AND COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
INTRODUCTION
The compensation program for executive officers was established and is
administered by the Personnel and Compensation Committee of the Board of
Directors of the Corporation (the "Committee"), which is composed of only
independent outside directors. The Committee is responsible for reviewing and
approving the terms of the compensation paid to executive officers of the
Corporation. The primary purposes of the compensation program are to attract,
motivate and retain executive personnel critical to the long-term success of
the Corporation.
10
The compensation decisions of the Committee are guided by recommendations of
the Corporation's Chief Executive Officer (except for decisions regarding his
personal compensation) and the senior human resources executive. Their
recommendations are based primarily upon published descriptive or comparative
information regarding the compensation practices of other banking institutions
developed by independent, nationally recognized compensation consulting firms;
also considered is more specific compensation information developed by an
independent, nationally recognized compensation consulting firm retained by the
Corporation (the "Compensation Consultant").
The executive compensation program has three core components: base salary, an
annual incentive award and a long-term incentive award. The Summary
Compensation Table following this report shows all of the significant
components of the Corporation's compensation program (except for pension
benefits and certain welfare benefits such as life, disability and medical
insurance) for fiscal years 1991, 1992 and 1993 for the Corporation's Chief
Executive Officer and the next four most highly compensated executive officers.
The factors and criteria used for the compensation reported for 1993 regarding
Mr. O'Brien and the four named executive officers for each of the three
components are described below.
In connection with its review of the Corporation's executive compensation
program, the Committee has confirmed with the Compensation Consultant that the
program remains competitive and effectively serves the purposes for which it
was established. Having completed our review, we continue to believe that the
Corporation's executive compensation program will attract, motivate and retain
executive officers who are capable of making significant contributions to the
long-term success of your company, while also tying the interests of executive
officers to those of our shareholders. As this report will explain, the linkage
between the interests of the executive officers and shareholders increases at
successively higher levels of management, as a greater proportion of an
executive officer's total compensation is directly tied to the Corporation's
financial and Common Stock price performance.
The Committee also recently reviewed certain components of the compensation
program in light of changes to the Internal Revenue Code which limit the
deductibility of various types of compensation paid to a corporation's top
executives. The nature of these changes and the Committee's response to them
will be discussed later in this report.
BASE SALARY
The value of an executive officer's position for base salary purposes is
based on an annual formal assessment by internal human resources personnel of
the position's complexity and level of responsibility; its importance to the
Corporation in relation to other executive positions; and the competitiveness
of an executive's total compensation. Once the executive officer's position is
assessed and reviewed, it is assigned an existing corporate job grade which has
a salary range approximating the salary practices of other banking
institutions. Except for Mr. O'Brien, information regarding such salary
practices is derived from an analysis prepared by internal human resources
personnel of survey data published by independent, nationally recognized
compensation consulting firms. This survey data focuses on bank industry-wide
salary information and therefore does not necessarily include the same group of
banking institutions included in the peer group index used for the Common Stock
performance graphs beginning on page 20. With respect to Mr. O'Brien, the base
salary analysis focused on eighteen of the nation's largest bank holding
companies with lines of business comparable to those of the Corporation. The
Committee agrees with the Corporation's senior human resources executive that
this narrowed comparative focus is more relevant in this instance, because the
scope of a chief executive officer's responsibilities among those banking
institutions is relatively uniform. Using the same group as a source of base
salary comparative data for other executive officers, including the
Corporation's next four most highly compensated executive officers, would not
be as relevant, because the scope of their responsibilities, as compared to
similar officers of other banking institutions, varies widely.
In general, the Corporation attempts to maintain its base salary structure at
the middle of the appropriate competitive marketplace. As a result, targeted
positioning of actual salaries will be at the middle of an executive officer's
salary range. Subject to the approval of the Committee, the level of base pay
for the
11
Corporation's next four most highly compensated executive officers within their
appropriate salary ranges (whether above or below the middle of the appropriate
salary range) is determined on the basis of the Chief Executive Officer's
assessment of each executive's performance, experience and other relevant
factors, such as demonstrated leadership, job knowledge, management skills, and
years of service with the Corporation.
In the case of Mr. O'Brien, the Committee reviewed in December 1992 the
above-described analysis prepared by internal human resources personnel and an
independent compensation consulting firm. Based on this analysis and the
Committee's assessment of Mr. O'Brien's experience and job performance, Mr.
O'Brien's 1993 base salary was established at the approximate midpoint of his
salary range.
ANNUAL INCENTIVE AWARD
The annual incentive award plan is intended to focus the efforts of executive
officers on the attainment of specific performance objectives which will
promote the overall success of the Corporation. The target amount payable to an
executive officer as an annual incentive award is, like base salary, a function
of the officer's salary grade, expressed as a percentage of base salary; the
percentage amount of the award generally increases as the executive officer's
salary grade increases. The Committee continues to believe that this annual
incentive system is the most appropriate means by which shareholder and
executive officer interests can be linked through performance measures that are
within the relative control of the executive officers. With respect to annual
incentive awards for 1994, please refer to the description of the Incentive
Plan beginning on page 2 of this proxy statement.
For 1993 awards (as in every other year since the inception of the plan in
1987), the Chief Executive Officer established, subject to Committee approval,
equally weighted target performance goals for each of three financial measures:
earnings per share on an absolute basis, which is related to the Corporation's
profit plan; return on average assets; and return on average equity. Each of
the return on average assets and return on average equity targets required the
Corporation to be ranked in the 75th percentile relative to a banking
institution peer group in order for executive officers to receive 100% of the
target annual incentive award. The achievement of target performance goals is
intended to result in the payment of above-median annual incentive awards,
based on an analysis of survey data across the banking industry published by
independent, nationally recognized compensation consulting firms. For each of
the three goals, performance above or below the target would result in the
payment of more or less, respectively, than the target award. Performance below
established minimum targets, or thresholds, might have resulted in no annual
incentive award. In 1990, for example, none of the minimum thresholds was
achieved; therefore, no annual incentive award payments were made to any
officers for that year.
For 1993 comparative purposes, the banking institution peer group used to
establish the return on average asset and return on average equity performance
goals consisted of money center banking institutions with significant retail
banking businesses, virtually all super-regional banking institutions, and
certain regional banking institutions which compete in markets served by the
Corporation. This peer group has been substantially unchanged since the
inception of the annual incentive award plan. Upon the Chief Executive
Officer's recommendation, the Committee confirmed the composition and continued
use of this banking institution peer group for the 1993 awards.
For 1993, the Corporation met or exceeded the earnings per share, return on
average assets, and return on average equity targets; consequently, in
accordance with the terms of the plan, the amounts generally paid to the
executive officers participating in the plan equalled 135% of the target
amount. None of the performance goals was readjusted or waived by the
Committee.
The 1993 amount listed for Mr. O'Brien in the Bonus column of the Summary
Compensation Table on page 16 exceeds the formula-driven amount by 48% to
reflect the Committee's assessment of the importance of Mr. O'Brien's
contribution to the Corporation's 1993 financial results. In adjusting Mr.
O'Brien's 1993 annual incentive award payment, the Committee considered, but
did not formally weight, each of the following factors: higher levels of net
income and earnings per share, compared to 1992; an overhead ratio which is
consistently among the lowest of major bank holding companies in the United
States; continuing
12
declines in nonperforming assets and net charge-offs; the Corporation's ability
to increase the dividend on its Common Stock during 1993; and Mr. O'Brien's
role in designing and implementing the Corporation's new marketing strategy.
An important consideration in determining Mr. O'Brien's 1993 annual incentive
award (as well as his base salary) was the Committee's assessment of his
ability to help increase the Corporation's value for shareholders over several
different time periods. The performance graphs beginning on page 20 show
cumulative shareholder returns for three, five and ten year periods, which are
all within the span of Mr. O'Brien's tenure as an executive officer of the
Corporation.
LONG-TERM INCENTIVE AWARD
The third element of the Corporation's compensation program for executive
officers is provided through the 1992 Long-Term Incentive Award Plan (the
"Long-Term Incentive Plan"). When making grants in 1993, the Committee
confirmed with the senior human resources executive and the Compensation
Consultant its view that stock option grants continue to be an effective way to
link directly the financial interests of executive officers with those of
shareholders. The Long-Term Incentive Plan is intended to focus the efforts of
executive officers on performance which will increase the value of the
Corporation for its shareholders. Participation in the Long-Term Incentive
Plan, therefore, is limited to those executive officers and managers who are in
positions which can affect the long-term success of the Corporation.
Pursuant to the Long-Term Incentive Plan, the Committee may grant incentive
stock options within the meaning of the Internal Revenue Code of 1986, as
amended (the "Code") and may grant nonstatutory stock options to senior
executives to purchase shares of Common Stock at an exercise price per share
not less than the fair market value of a share on the date of grant.
In addition, the Committee may grant stock appreciation rights independently
or in tandem with stock option grants. Stock appreciation rights ("SARs")
entitle the holder, upon exercise, to elect to receive in cash, Common Stock or
a combination thereof, the excess of the fair market value of a specified
number of shares of Common Stock over the fair market value of such shares of
Common Stock at the time of grant, or, in the case of a related option (which
must be surrendered upon exercise of the related right), the exercise price
provided in the related option.
The Committee may also grant performance units independently or in connection
with the grant of nonstatutory stock options. At the time of grant, the
Committee will establish performance goals for a specified period, which goals
may be particular to a grantee, or the department, branch, subsidiary or other
unit in which the grantee works, or may be based on the performance of the
Corporation generally. The amount realized upon exercise of performance units
by the grantee will depend upon the extent to which the performance goals for
the specified period have been achieved. Options, SARs and performance units
generally may not be exercised less than one year nor more than ten years after
the date of grant.
Finally, the Committee may grant incentive shares to senior executives.
Incentive share awards consist of shares of Common Stock issued or to be issued
at such times, subject to achievement of such performance or other goals and on
such other terms and conditions that the Committee shall deem appropriate and
specify in an agreement relating thereto.
For 1993, the Committee granted only nonstatutory stock options. The table
captioned "Option/SAR Grants In 1993" following this report sets forth certain
information for 1993 concerning the stock options granted under the Long-Term
Incentive Plan to each of the named executive officers.
As with the determination of annual incentive awards, a formula-driven
approach is used when making annual grants under the Long-Term Incentive Plan;
as a result, the Committee does not consider the number of options currently
held by an officer in determining the size of an option award. First, an option
is valued, and then a number of options is granted so that the aggregate option
value of that year's grant places the executive officer in approximately the
75th percentile of the United States banking industry as a whole with respect
to long-term compensation, based on a survey of long-term compensation
practices prepared by an
13
independent, nationally recognized compensation consulting firm. The United
States banking industry as a whole, rather than the base salary survey data and
banking institution peer group discussed earlier in this report, is used for
this purpose due to the greater availability of relevant long-term compensation
survey information.
In 1993, the value of stock option grants was determined by use of the Black-
Scholes valuation model. The appropriateness of this model for this purpose was
confirmed by the Committee; for a description of the assumptions used in this
valuation model, please see footnote (c) to the "Option/SAR Grants in 1993"
table on page 18. For 1993, the number of options granted to Mr. O'Brien and
the other named executive officers was calculated in accordance with this
formula.
NEW TAX LIMITATION
As noted in the introduction to this report, a limitation on the tax
deductibility of certain executive compensation in excess of $1 million was
recently added to the Code. This new limitation, which is contained in Section
(S)162(m) of the Code, applies to compensation earned by the Corporation's
executive officers in tax years beginning on or after January 1, 1994.
Even though the Internal Revenue Service issued proposed regulations on
December 15, 1993 implementing this limitation, the Committee was aware that
these regulations have no binding effect until they are issued in final form.
Nevertheless, the Committee reviewed the Corporation's executive compensation
program in light of the new $1 million deductibility cap and decided on a
course of action which it considered to be in the best interests of the
Corporation.
During the Committee's deliberations on this issue, it received advice from
the Compensation Consultant, outside legal counsel, and the Corporation's legal
and human resources staffs. When reviewing the alternatives available and the
advice it received, the Committee was guided by its desire to minimize the
Corporation's non-deductible compensation expense, while maintaining, to the
extent possible, the flexibility which the Committee believes to be an
important element of the Corporation's executive compensation program.
A brief summary of the Section 162(m) provisions may be helpful to our
shareholders. The new law denies a tax deduction to any publicly held
corporation for compensation paid to any "covered employee" to the extent that
the compensation for the taxable year exceeds $1 million, subject to certain
exceptions. The term "covered employee" includes those executive officers shown
on the compensation tables following this report.
One of the exceptions from the deductibility cap is for compensation which is
"performance-based". Compensation will qualify for this exception only if
various conditions are satisfied. For example, the compensation must be paid
under one or more pre-established performance goals established by a
compensation committee which consists solely of outside directors. There are
also shareholder disclosure and approval requirements, as well as a requirement
for the compensation committee to certify that the performance goals have been
satisfied before the compensation is paid.
The Internal Revenue Service has taken the position that a pre-established
performance goal must be stated in terms of an objective formula or standard.
This formula or standard must preclude any discretion to increase the
compensation otherwise payable upon the attainment of the performance goal.
With these considerations in mind, the Committee focused on the application
of Section 162(m) to the following elements of the Corporation's executive
compensation program: the annual incentive award; the Long-Term Incentive Plan;
and the Special Transitional Incentive Plan established in 1991. The first two
of these elements have been discussed in detail earlier in this report. The
final element provides for the potential payment of incentive shares under the
Long-Term Incentive Plan and cash to a group of fourteen officers during 1995,
upon the recommendation of the Chief Executive Officer, which is expected to be
based on the achievement of the three target performance goals under the annual
incentive award plan for each of 1992, 1993 and 1994 and the Chief Executive
Officer's judgment as to the successful completion of the Corporation's
transition to a line of business structure. Any payment must be approved by the
Committee. The Special Transitional Incentive Plan is described in more detail
on page 5 of this proxy statement.
14
Set forth below is a summary of the Committee's decisions with respect to
each of these three elements, in light of the application of Section 162(m) of
the Code:
.Annual incentive award. In order to allow the Committee to make awards under
the annual incentive award program that qualify under the "performance-based
compensation" exception to the $1 million limit, the 1994 Annual Incentive
Award Plan is being submitted for shareholder approval. The plan is discussed
beginning on page 2 and a copy of the plan is attached to this proxy statement
as Exhibit "A". The Committee's members unanimously support the Board's
recommendation of a vote FOR approval of the plan.
.1992 Long-Term Incentive Award Plan. In order to qualify awards under the
plan for the "performance-based compensation" exception, this plan was amended
in order to limit the maximum number of shares or units as to which grants or
awards may be made to any participant in any one of the Corporation's taxable
years to 250,000 shares or units. Prior to this amendment, the plan did not
contain such a limitation.
.Special Transitional Incentive Plan. The Committee currently expects that
payments, if any, pursuant to this program will be made each year in
installments up to the amount fully deductible for those executives who are
subject to the deductibility cap. The installment payments will continue until
the full amount due to the executive is paid; any remaining payments will be
deferred until the executive retires or is no longer a covered employee for
purposes of Section 162(m).
SUMMARY
The Committee remains dedicated to ensuring that the Corporation's
compensation program for executive officers is properly designed to:
.Attract, motivate, and retain officers who are capable of making significant
contributions to the long-term success of the Corporation;
.Maintain a base salary structure by reference to the middle of the
appropriate competitive marketplace;
.Link annual incentive awards with specific performance targets such as
earnings per share, return on average assets, and return on average equity;
.Provide long-term incentive awards with incentive opportunities at
approximately the 75th percentile of competitor organizations; and
.Align the interests of executive officers with those of shareholders by
providing stock ownership opportunities to those officers.
With the assistance of internal human resources personnel, the Committee will
continue to review and evaluate the Corporation's executive compensation
program at least annually. When appropriate, the Committee will also continue
to consult with independent, nationally recognized compensation consultants,
law firms, and accounting firms with respect to the design of the program and
its effectiveness in attaining the goals set by the Committee.
MEMBERS OF THE COMMITTEE:
Thomas Marshall (Chairman)
Robert N. Clay
William G. Copeland
Donald I. Moritz
Roderic H. Ross
Thomas J. Usher
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Certain directors, nominees and executive officers and/or their associates,
including certain members of the Personnel and Compensation Committee and their
respective associates, were customers of and had transactions with the
Corporation or its subsidiaries during 1993. Transactions which 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 normal risk of collectibility or present other
unfavorable features.
15
SUMMARY COMPENSATION TABLE*
The Summary Compensation Table shows, for the Corporation's fiscal years
1991 through 1993, the compensation paid or awarded to Mr. O'Brien, the
Corporation's Chairman and Chief Executive Officer, and the Corporation's next
four most highly compensated executive officers; the inclusion of the four
executive officers other than Mr. O'Brien in this group was based on salary
and bonus earned during 1993. Mr. O'Brien and the other four executive
officers are referred to collectively 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 10.
ANNUAL COMPENSATION LONG TERM COMPENSATION
---------------------------------------- ------------------------------------
AWARDS PAYOUTS
--------------------- --------------
SECURITIES
RESTRICTED UNDERLYING LONG TERM ALL
OTHER STOCK OPTIONS/ INCENTIVE PLAN OTHER
NAME & PRINCIPAL POSITION** YEAR SALARY ($) BONUS ($) ANNUAL COMP($) AWARDS ($) SARS (#) PAYOUTS ($) COMP ($)
- --------------------------- ---- ---------- --------- -------------- ---------- ---------- -------------- --------
(a) (b) (c) (d) (e)(f)
THOMAS H. O'BRIEN
Chairman & CEO
PNC Bank Corp. 1993 800,000 1,200,000 2,711 0 95,000 0 136,623
1992 800,000 1,000,000 11,698 0 108,000 0 129,055
1991 725,000 550,000 0 120,000 0
JAMES E. ROHR
President
PNC Bank Corp. 1993 450,000 400,000 11,035 0 65,000 0 85,004
1992 400,000 325,000 1,986 0 74,000 0 43,529
1991 345,000 200,000 0 82,000 0
WALTER E. GREGG, JR.
Executive Vice President
PNC Bank Corp. 1993 335,000 298,486 822 0 44,000 0 61,179
1992 300,000 216,000 882 0 50,000 0 57,966
1991 265,542 157,500 0 30,000 0
RICHARD C. CALDWELL
Executive Vice President
PNC Bank Corp. 1993 290,000 195,750 0 0 26,500 0 25,417
1992 276,000 165,600 0 0 30,000 0 20,223
1991 262,500 131,250 0 23,000 0
JOE R. IRWIN
Executive Vice President
PNC Bank Corp. 1993 280,000 226,800 2,741 0 26,500 0 50,563
1992 255,000 183,000 4,160 0 30,000 0 43,814
1991 235,000 130,000 0 26,000 0
- ----
*Footnotes to the Summary Compensation Table are set forth on page 17.
**Principal positions shown are as of December 31, 1993.
16
FOOTNOTES TO SUMMARY COMPENSATION TABLE
(a) Bonus amounts shown represent payments made pursuant to the Corporation's
annual incentive award plan for services performed in the year shown and
are based on three measures of the Corporation's financial performance for
that year (i.e., return on average assets and return on average equity
relative to a banking peer group and earnings per share on an absolute
basis).
(b) Amounts shown represent reimbursement for certain tax liabilities. None of
the named executive officers received perquisites or other personal
benefits, securities, or property during 1993 or 1992 which, in the
aggregate, cost the Corporation the lesser of either $50,000 or 10% of the
named executive officer's salary and bonus earned during that year.
Perquisites and other personal benefits which 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
Securities and Exchange Commission. In accordance with a transition rule
adopted by the Securities and Exchange Commission, amounts of "Other Annual
Compensation" are not shown for the Corporation's 1991 fiscal year.
(c) None of the named executive officers had any restricted stock holdings as
of December 31, 1993.
(d) No stock appreciation rights ("SARs"), performance units, or incentive
shares were granted in any of the years shown.
(e) In accordance with a transitional rule adopted by the Securities and
Exchange Commission, amounts of "All Other Compensation" are not shown for
the Corporation's 1991 fiscal year.
(f) The amount shown for each named executive officer for 1993 includes the
dollar value ($8,994) of matching contributions of the Corporation's Common
Stock made pursuant to the Corporation's Incentive Savings Plan, a
qualified employee benefit defined contribution plan. Also included are
1993 contributions made to the Corporation's Supplemental Incentive Savings
Plan, a non-qualified employee benefit defined contribution plan, for
Messrs. O'Brien ($36,237), Rohr ($18,006), Gregg ($11,106), Caldwell
($8,406), and Irwin ($7,806). Finally, the amounts shown also include the
1993 net premiums paid by the Corporation in connection with its Key
Executive Equity Plan, a split-dollar insurance arrangement, on behalf of
Messrs. O'Brien ($91,392), Rohr ($58,004), Gregg ($41,079), Caldwell
($8,017) and Irwin ($33,763).
17
OPTION/SAR GRANTS IN 1993
This table provides information on stock options granted to the named
executive officers in 1993. Only nonstatutory stock options were granted in
1993 under the Corporation's 1992 Long-Term Incentive Award Plan.
INDIVIDUAL GRANTS--1993
Number of % of Total
Securities Options/SARs
Underlying Granted to Grant Date
Options/SARs Employees Exercise or Base Expiration Present
Name Granted (#) in 1993 Price ($/Sh) Date Value ($)
---- ------------ ------------ ---------------- ---------- ----------
(a) (b) (c)
THOMAS H. O'BRIEN 95,000 4.98% 29.25 12/16/03 769,500
JAMES E. ROHR 65,000 3.41% 29.25 12/16/03 526,500
WALTER E. GREGG, JR. 44,000 2.31% 29.25 12/16/03 356,400
RICHARD C. CALDWELL 26,500 1.39% 29.25 12/16/03 214,650
JOE R. IRWIN 26,500 1.39% 29.25 12/16/03 214,650
- ------
(a) Options were granted on December 16, 1993 and will become exercisable on
December 16, 1994.
(b) Exercise price shown equals the average of the high and low prices of the
Corporation's Common Stock on the New York Stock Exchange on December 16,
1993.
(c) The values listed in this column are based upon the Black-Scholes option
pricing model. The assumptions used to determine these values are as
follows: market price ($29.25), exercise price ($29.25), volatility (.329),
risk free rate of return (5.83%), option term (10 years), and dividend
yield (4.38%). No attrition adjustment was made in arriving at an option
value. All of the assumptions disclosed were used solely for purposes of
the Black-Scholes option pricing model and the Corporation in no way
intends to provide any predictions or assurances with respect to any of the
factors for which assumptions were made. Disclosure of these assumptions is
being made solely to comply with SEC rules. The actual value which a named
executive officer may realize upon the exercise of an option will depend
upon the excess of the fair market value of a share of the Corporation's
Common Stock over the exercise price on the date the option is exercised.
As a result, there is no assurance that the value ultimately realized by a
named executive officer, if any, will be at or near the estimated grant
date present values calculated by the option pricing model.
18
AGGREGATED OPTION/SAR EXERCISES IN 1993 AND 1993 YEAR-END OPTION/SAR VALUES
This table provides information concerning exercises of stock options during
1993 by the named executive officers. The table also shows the number and value
of unexercised stock options or SARs at the end of 1993.
Number of Securities
Underlying Unexercised Value of Unexercised,
Shares Options/SARs At 1993 In-the-Money Options/
Acquired on Value Year-End (#) SARs at 1993 Year-End
Name Exercise (#) Realized Exercisable Unexercisable Exercisable Unexercisable
---- ------------ ---------- ----------- ------------- ----------- -------------
(a) (b)(c) (d)
THOMAS H. O'BRIEN 95,000 $2,025,000 521,000 95,000 $3,848,142 0
JAMES E. ROHR 36,000 636,750 257,000 65,000 1,654,213 0
WALTER E. GREGG, JR. 34,000 424,000 60,000 44,000 153,125 0
RICHARD C. CALDWELL 0 0 97,400 26,500 994,662 0
JOE R. IRWIN 10,000 101,250 93,000 26,500 564,716 0
- ------
(a) The dollar values shown were calculated by determining the difference
between the fair market value of the Corporation's Common Stock underlying
the options and the exercise price of the options at the time of exercise.
(b) Options or SARs are in-the-money if the fair market value of the underlying
security exceeds the exercise or base price of the option or SAR.
(c) The dollar values shown were calculated by determining the difference
between: (i) the average of the high and low prices of the Corporation's
Common Stock on the New York Stock Exchange on December 31, 1993 (i.e.,
$29.125) and (ii) the respective exercise prices of the various exercisable
options held by the named executive officer as of December 31, 1993.
(d) The values shown in this column are all zero because the exercise price of
the options granted on December 16, 1993, which do not become exercisable
until December 16, 1994, is $29.25, while the average of the high and low
prices of the Corporation's Common Stock on the New York Stock Exchange on
December 31, 1993 was $29.125. In other words, the options granted in 1993
were not in-the-money as of December 31, 1993.
19
COMMON STOCK PERFORMANCE GRAPHS
The first graph set forth below shows the cumulative shareholder return
(i.e., price change plus reinvestment of dividends) on the Corporation's Common
Stock during the five year period ended December 31, 1993 as compared to: (i)
an overall stock market index, the S&P 500 Index; and (ii) a peer group index,
the S&P Major Regional Bank Index ("S&P Banks"). In addition to the five year
performance graph, which is required by SEC rules, similar presentations for
three and ten year periods have been included to provide additional perspective
on the Corporation's Common Stock performance. The stock performance graphs
assume that $100 was invested on January 1 of 1989, 1991 and 1984,
respectively, for the five, three, and ten year periods and also shows the
resultant compound growth rate ("CGR") for each performance period. The yearly
points marked on the horizontal axis of each graph correspond to December 31 of
that year.
CUMULATIVE TOTAL RETURNS FOR FIVE YEARS
[GRAPH APPEARS HERE]
COMPARISON OF FIVE YEAR CUMULATIVE RETURN
AMONG PNC, S&P 500 INDEX AND S&P BANKS INDEX
Measurement period
(Fiscal year Covered) PNC BANK S&P 500 S&P BANKS
- --------------------- -------- ------- ---------
Measurement PT -
12/31/88 $100 $100 $100
FYE 12/31/89 $109.70 $131.69 $122.14
FYE 12/31/90 $ 61.36 $127.60 $ 87.12
FYE 12/31/91 $139.45 $166.47 $155.86
FYE 12/31/92 $175.93 $179.15 $198.47
FYE 12/31/93 $186.15 $197.21 $210.41
ASSUMES $100 INVESTMENT ON JANUARY 1, 1989 TOTAL RETURN=PRICE CHANGE PLUS
REINVESTMENT OF DIVIDENDS
CUMULATIVE TOTAL RETURNS FOR THREE YEARS
[GRAPH APPEARS HERE]
COMPARISON OF THREE YEAR CUMULATIVE RETURN
AMONG PNC, S&P 500 INDEX AND S&P BANKS INDEX
Measurement period
(Fiscal year Covered) PNC BANK S&P 500 S&P BANKS
- --------------------- -------- ------- ---------
Measurement PT -
12/31/90 $100 $100 $100
FYE 12/31/91 $227.27 $130.47 $178.89
FYE 12/31/92 $286.72 $140.41 $227.81
FYE 12/31/93 $303.39 $154.56 $241.52
ASSUMES $100 INVESTMENT ON JANUARY 1, 1991 TOTAL RETURN=PRICE CHANGE PLUS
REINVESTMENT OF DIVIDENDS
20
CUMULATIVE TOTAL RETURNS FOR TEN YEARS
[GRAPH APPEARS HERE]
COMPARISON OF TEN YEAR CUMULATIVE RETURN
AMONG PNC, S&P 500 INDEX AND S&P BANKS INDEX
Measurement period
(Fiscal year Covered) PNC BANK S&P 500 S&P BANKS
- --------------------- -------- ------- ---------
Measurement PT -
12/31/83 $100 $100 $100
FYE 12/31/84 $113.77 $106.22 $ 89.94
FYE 12/31/85 $179.94 $139.83 $108.18
FYE 12/31/86 $218.87 $165.86 $111.24
FYE 12/31/87 $205.01 $174.45 $ 89.81
FYE 12/31/88 $228.39 $203.43 $113.84
FYE 12/31/89 $250.54 $267.88 $139.04
FYE 12/31/90 $140.13 $259.57 $ 99.18
FYE 12/31/91 $318.48 $338.65 $177.43
FYE 12/31/92 $401.80 $364.45 $225.95
FYE 12/31/93 $425.18 $401.18 $239.54
ASSUMES $100 INVESTMENT ON JANUARY 1, 1984
TOTAL RETURN=PRICE CHANGE PLUS
REINVESTMENT OF DIVIDENDS
PENSION BENEFITS
The Corporation maintains a non-contributory pension plan ("Pension Plan")
for employees which is a defined benefit 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 total benefits
payable to participants employed by them. The amount of the Corporation's
annual contribution to this Plan with respect to a specified participant cannot
readily be calculated by the actuaries for the Pension Plan. Benefits under the
Pension Plan are based on the average of the highest base salary for five
consecutive years during the last ten years of credited service ("final average
compensation"), and are subject to limitations imposed by ERISA and the Code.
Retirement benefits under the Pension Plan are calculated as follows: (i)
1.3% of the final average compensation for each year of credited service up to
25 years, plus (ii) 1% of the final average compensation for each year of
credited service over 25, plus (iii) 0.45% of the final average compensation in
excess of the participant's social security covered compensation (determined as
of the year of retirement) for each year of credited service up to 35 years.
A supplemental benefit plan applicable to all employees of the Corporation
and its subsidiaries provides retirement benefits equal to the difference, if
any, between the maximum benefit allowed under the Code and the amount provided
by the Pension Plan. Under the provisions of two separate but substantially
identical supplemental benefit plans, officers who received cash payments in
connection with annual incentive awards (or cash bonuses under prior cash
compensation plans) are eligible for additional retirement benefits based upon
the additional payment under the Pension Plan that eligible officers would
receive if cash payments made in connection with annual incentive awards were
included in determining final average compensation for purposes of calculating
such eligible officers' pension benefits.
The following table sets forth the estimated annual benefits payable upon
normal retirement (age 65) pursuant to the provisions of the Pension Plan as
supplemented by the various plans described above to persons in the indicated
final average compensation and credited years of service classifications.
21
Estimated Annual Benefits for Credited Years of Service Indicated
Final Average ------------------------------------------------------------------
Compensation 15 20 25 30 35
------------ -- -- -- -- --
$ 300,000 $ 77,109 $ 102,812 $ 128,515 $ 149,718 $ 170,921
500,000 129,609 172,812 216,015 251,718 287,421
700,000 182,109 242,812 303,515 353,718 403,921
900,000 234,609 312,812 391,015 455,718 520,421
1,100,000 287,109 382,812 478,515 557,718 636,921
1,300,000 339,609 452,812 566,015 659,718 753,421
1,500,000 392,109 522,812 653,515 761,718 869,921
1,700,000 444,609 592,812 741,015 863,718 986,421
1,900,000 497,109 662,812 828,515 965,718 1,102,921
2,100,000 549,609 732,812 916,015 1,067,718 1,219,421
2,300,000 602,109 802,812 1,003,515 1,169,718 1,335,921
2,500,000 654,609 872,812 1,091,015 1,271,718 1,452,421
2,700,000 707,109 942,812 1,178,515 1,373,718 1,568,921
Amounts reported in the Summary Compensation Table on page 16 under the
columns captioned "Annual Compensation--Salary" and "Annual Compensation--
Bonus" would be included in the calculation of final average compensation. The
executive officers included in such table have accumulated the following
credited years of service: Messrs. O'Brien (31), Rohr (21), Gregg(19), Caldwell
(4) and Irwin (31). The estimated annual pension benefits shown above are based
on a single life annuity payment method, and assume that the benefits are
payable beginning at age 65. The normal form of payment for a married person is
the joint and survivor annuity, which provides a lower annual pension during
the combined lives of the person and spouse. The estimated annual benefits
listed in the Pension Plan Table are not subject to any deduction for Social
Security benefits or other offset amounts.
VOTING PROCEDURES
Under SEC rules, boxes are provided on the proxy card for shareholders to
mark if they wish to vote for, against, or abstain regarding Item 1, the
proposal to approve the PNC Bank Corp. 1994 Annual Incentive Award Plan.
Similarly, boxes and a designated blank space are provided for shareholders who
wish to vote for all nominees for director listed in Item 2, withhold authority
for all nominees, or withhold authority for designated nominees.
Pennsylvania law and the Corporation's By-Laws require the presence of a
quorum for 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 upon. At a duly organized annual meeting, the Corporation's By-Laws
provide that, except as otherwise specified in the Corporation's Articles of
Incorporation or provided by law, each matter shall be decided by a majority of
the votes entitled to be cast on such matters by the shareholders present at
the meeting in person or by proxy. Votes withheld from director nominees and
abstentions will be counted in determining whether a quorum has been reached,
but the failure to execute and return a proxy will result in a shareholder not
being considered present at the meeting.
Assuming a quorum has been reached, a determination must be made as to the
results of the vote on Item 1 and Item 2. With respect to Item 1, the proposal
to approve the 1994 Annual Incentive Award Plan must be approved by a majority
of the votes entitled to be cast by the shareholders present at the meeting in
person or by proxy.
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
22
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. With
respect to the proposal to approve the PNC Bank Corp. 1994
Annual Incentive Award Plan, however, an abstention or a failure to vote by a
shareholder present at the meeting in person or by proxy will have the same
effect as a vote against the proposal.
With respect to Item 2, the fifteen nominees for election as directors who
receive the greatest number of votes cast at the annual meeting, assuming that
a quorum is present, shall be elected as directors at the conclusion of the
vote tabulation. A withheld vote on any nominee will not affect the voting
results.
Under the rules of the New York Stock Exchange, both Item 1 and Item 2 are
treated as "routine" items 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. In the event, however, that a non-routine item should 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 treated as being present at the meeting and therefore
would not be considered in the calculation of the majority of the votes
entitled to be cast.
INDEPENDENT AUDITORS
At its meeting on February 24, 1994, the Board of Directors approved the
recommendation of the Audit Committee for the appointment of Ernst & Young to
audit the financial statements of the Corporation for 1994.
Ernst & Young performed audit services for the Corporation during 1993 which
included an audit of annual financial statements, interim reviews of quarterly
financial statements, review and consultation connected with filings with the
SEC, internal control reviews required by regulatory authorities and certain
contractual agreements, consultation on tax, financial accounting and reporting
matters, and meetings with the Audit Committee of the Board of Directors of the
Corporation.
Representatives of Ernst & Young 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.
CERTAIN REPORTS
Section 16(a) of the Act requires the Corporation's directors, certain of 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
persons), 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. During 1993, to the best of the Corporation's
knowledge, all required reports were filed on a timely basis, with one
exception. One transaction involving the purchase of 100 shares of the
Corporation's Common Stock by Walter L. West, an executive officer of the
Corporation, was reported for him on a timely filed SEC Form 5 ("Annual
Statement of Changes in Beneficial Ownership") in February 1994, rather than on
a SEC Form 4 ("Statement of Changes in Beneficial Ownership") which otherwise
would have been due in December 1993. In making these statements, the
Corporation has relied on the written representations of its directors and
executive officers and copies of the reports provided to the Corporation.
SUBMISSION OF SHAREHOLDER PROPOSALS
Shareholders may submit proposals to be considered for shareholder action at
the 1995 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 of the Corporation no later than November 23, 1994 in order
to be considered for inclusion in the Corporation's 1995 proxy materials.
23
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/ William F. Strome
William F. Strome
Corporate Secretary
24
EXHIBIT "A"
PNC BANK CORP.
1994 ANNUAL INCENTIVE AWARD PLAN
1. GENERAL PURPOSE OF PLAN
The PNC Bank Corp. 1994 Annual Incentive Award Plan is designed to assist PNC
Bank Corp. and its Subsidiaries in attracting, retaining and providing
incentives to Eligible Employees and to promote the identification of their
interests with those of the Corporation's shareholders by providing for the
payment of Incentive Awards subject to the achievement of specified Performance
Goals.
2. DEFINITIONS
Terms not otherwise defined herein shall have the following meanings:
2.1. "Award Period" means the calendar year, except to the extent the
Committee determines otherwise.
2.2. "Board" means the Board of Directors of the Corporation.
2.3. "Code" means the Internal Revenue Code of 1986, as amended.
2.4. "Committee" means the committee appointed by the Board to establish and
administer the Plan as provided herein. Unless otherwise determined by the
Board, the Personnel and Compensation Committee of the Board shall be the
Committee.
2.5. "Corporation" means PNC Bank Corp. and its successors and assigns and
any corporation which shall acquire substantially all of its assets.
2.6. "Covered Employee" means a "covered employee" within the meaning of
Section 162(m) of the Code.
2.7. "Eligible Employee" means an employee described in Section 4 hereof.
2.8. "Incentive Award" means a contingent award made to a Participant that,
subject to Section 5.3 hereof, entitles the Participant to a cash payment equal
to such Participant's Target Award for an Award Period, as increased or
decreased to reflect the relative level of attainment of Performance Goals
established by the Committee for an Award Period and such other factors as the
Committee may determine.
2.9. "Participant" means any Eligible Employee who receives an Incentive
Award under the Plan for an Award Period.
2.10. "Performance Goals" means (a) earnings per share, (b) return on average
equity in relation to a peer group (the "Peer Group") of bank holding companies
or other entities designated by the Company (c) return on average assets in
relation to the Peer Group, or (d) such other performance goals as may be
established by the Committee which may be based on earnings, earnings growth,
revenues, expenses, stock price, market share, charge-offs, reductions in non-
performing assets, return on assets, equity or investment, regulatory
compliance, satisfactory internal or external audits, improvement of financial
ratings, achievement of balance sheet or income statement objectives, or any
other objective goals established by the Committee, and may be absolute in
their terms or measured against or in relationship to other companies
comparably, similarly or otherwise situated. Such performance goals may be
particular to a Participant or the division, department, branch, line of
business, Subsidiary or other unit in which the Participant works, or may be
based on the performance of the Corporation generally, and may cover such
period as may be specified by the Committee.
A-1
2.11. "Plan" means the PNC Bank Corp. 1994 Annual Incentive Award Plan.
2.12. "Subsidiary" means a corporation of which at least 50% of the total
combined voting power of all classes of stock is owned by the Corporation,
either directly or through one or more other Subsidiaries.
2.13. "Target Award" means the dollar amount to be paid to a Participant if
the Committee determines that the Corporation has achieved the target
Performance Goals established by the Committee for an Award Period. A
Participant's Target Award shall in no event exceed the greater of: (a) 100% of
a Participant's base salary as of the later of (i) the first day of the
applicable Award Period, or (ii) the date of grant of the Incentive Award; or
(b) the total dollar amount of the Participant's base salary during the Award
Period. The amount actually paid to a Participant pursuant to an Incentive
Award shall be based upon the Participant's Target Award, as adjusted to
reflect the relative level of attainment of the Performance Goals established
by the Committee and such other factors as the Committee may determine.
3. ADMINISTRATION
The Plan shall be administered by the Committee. The Committee shall have
plenary authority, in its discretion, to determine the terms of all Incentive
Awards, including, without limitation, the Eligible Employees to whom, and the
time or times at which, awards are made, the amount of a Participant's Target
Award, the Award Period to which each Incentive Award shall relate, the actual
dollar amount to be paid pursuant to an Incentive Award, the Performance Goals
to which payment of awards will be subject, and when payments pursuant to
Incentive Awards shall be made (which payments may, without limitation, be made
during or after an Award Period on a deferred basis or in installments). In
making such determinations, the Committee may take into account the nature of
the services rendered by the respective Eligible Employees, their present and
potential contributions to the success of the Corporation and its Subsidiaries,
and such other factors as the Committee in its discretion shall deem relevant.
Subject to the express provisions of the Plan, the Committee shall have plenary
authority to interpret the Plan, to prescribe, amend and rescind rules and
regulations relating to it and to make all other determinations deemed
necessary or advisable for the administration of the Plan. The determinations
of the Committee pursuant to its authority under the Plan shall be conclusive
and binding. The Committee may, in its discretion, authorize the Chief
Executive Officer of the Corporation to act on its behalf, except with respect
to matters relating to such Chief Executive Officer.
4. ELIGIBILITY
Incentive Awards may be granted only to salaried employees of the Corporation
or a Subsidiary.
5. INCENTIVE SHARE AWARDS; TERMS OF AWARDS; PAYMENT
5.1. The Committee shall, in its sole discretion, determine which Eligible
Employees shall receive Incentive Awards. For each Award Period with respect to
which the Committee determines to make Incentive Awards, the Committee shall by
resolution establish one or more Performance Goals applicable to such awards,
the Target Award of each award, and the other terms and conditions of the
awards. Such Performance Goals and other terms and conditions shall be
established by the Committee in its sole discretion as it shall deem
appropriate and in the best interests of the Corporation.
5.2. After the end of each Award Period for which the Committee has granted
Incentive Awards, the Committee shall determine the extent to which the
Performance Goals established by the Committee for the Award Period have been
achieved and shall authorize the Corporation to make Incentive Award payments
to Participants in accordance with the terms of the awards. If the achievement
of applicable Performance Goals is below the minimum level specified by the
Committee, no Incentive Award payments shall be made to Participants. In no
event shall the amount paid to a Participant in accordance with the terms of an
Incentive Award by reason of Peformance Goal achievement in excess of target
levels, or for any other reason, exceed the Participant's Target Award amount
by more than 50%. Unless otherwise determined by the Committee, no Incentive
Award payments shall be made to a Participant unless the Participant is
employed by the Corporation or a Subsidiary as of the date of payment.
A-2
5.3 The Committee may at any time, in its sole discretion, cancel an
Incentive Award or reduce or eliminate the amount payable pursuant to the terms
of an Incentive Award without the consent of a Participant.
5.4 Incentive Award payments shall be subject to applicable federal, state
and local withholding taxes and other applicable withholding in accordance with
the Corporation's payroll practices as from time-to-time in effect.
6. TRANSFERABILITY
Incentive Awards shall not be subject to the claims of creditors and may not
be assigned, alienated, transferred or encumbered in any way other than by will
or pursuant to the laws of descent and distribution.
7. TERMINATION OR AMENDMENT
The Board may amend, modify or terminate the Plan in any respect at any time
without the consent of Participants.
8. EFFECTIVENESS OF PLAN AND AWARDS
The Plan and Incentive Awards granted hereunder shall be void ab initio
unless the Plan is approved by a vote of the Corporation's shareholders at the
first shareholders' meeting of the Corporation following adoption of the Plan
by the Board.
9. EFFECTIVE DATE; TERM OF THE PLAN
The Plan shall be effective as of January 1, 1994. Unless sooner terminated
by the Board pursuant to Section 7, to the extent necessary to ensure that
Incentive Award payments made to Covered Employees may be deductible for
federal income tax purposes, the Plan shall terminate as of the date of the
first meeting of the Corporation's shareholders occurring during 1999, unless
the term of the Plan is extended and reapproved at such shareholders' meeting.
No Incentive Awards may be awarded under the Plan after its termination.
Termination of the Plan shall not affect any Incentive Awards outstanding on
the date of termination and such awards shall continue to be subject to the
terms of the Plan notwithstanding its termination.
10. INDEMNIFICATION OF COMMITTEE
In addition to such other rights of indemnification as they may have as
Directors or as members of the Committee, each of the members of the Committee
shall be indemnified by the Corporation against the reasonable expenses,
including attorneys' fees, actually and reasonably incurred in connection with
the defense of any action, suit or proceeding, or in connection with any appeal
therein, to which they or any of them may be a party by reason of any action
taken or failure to act under or in connection with the Plan or any Incentive
Award granted hereunder, and against all amounts reasonably paid by them in
settlement thereof or paid by them in satisfaction of a judgment in any such
action, suit or proceeding to the maximum extent permitted by law.
11. GENERAL PROVISIONS
11.1. The establishment of the Plan shall not confer upon any Eligible
Employee any legal or equitable right against the Corporation or any
Subsidiary, except as expressly provided in the Plan.
11.2. The Plan does not constitute an inducement or consideration for the
employment of any Eligible Employee, nor is it a contract between the
Corporation, or any Subsidiary and any Eligible Employee. Participation in the
Plan shall not give an Eligible Employee any right to be retained in the employ
of the Corporation or any Subsidiary.
11.3. Nothing contained in this Plan shall prevent the Board or Committee
from adopting other or additional compensation arrangements, subject to
shareholder approval if such approval is required, and such arrangements may be
either generally applicable or applicable only in specific cases.
11.4. The Plan shall be governed, construed and administered in accordance
with the laws of the Commonwealth of Pennsylvania.
A-3
PNC BANK CORP.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS FOR USE AT THE ANNUAL MEETING
OF SHAREHOLDERS
APRIL 26, 1994--11:00 AM
PLACE: ONE PNC PLAZA, PITTSBURGH, PA
Thomas H. O'Brien, Walter E. Gregg, Jr. and William F. Strome, and each of them
with full power to act alone and with full power of substitution, are hereby
authorized to represent the shareholder named on the reverse side hereof
("shareholder") at the annual meeting of shareholders of PNC Bank Corp. to be
held on April 26, 1994, or at any adjournment thereof, and to vote, as
indicated on the reverse side hereof, the number of shares of Common Stock
and/or Preferred Stock which the shareholder would be entitled to vote if
personally present at said meeting. The above named individuals, and each of
them with full power to act alone, 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.
THIS PROXY MAY BE REVOKED BY GIVING THE SECRETARY OF THE MEETING WRITTEN NOTICE
OF REVOCATION OR A SUBSEQUENTLY DATED PROXY AT ANY TIME BEFORE THE VOTING OF
THE SHARES REPRESENTED BY THIS PROXY, OR BY CASTING A BALLOT AT THE MEETING.
THIS PROXY IS CONTINUED ON THE REVERSE SIDE. PLEASE SIGN ON THE REVERSE SIDE
AND RETURN PROMPTLY.
- -------------------------------
COMMENTS/ADDRESS CHANGE: PLEASE MARK COMMENT/ADDRESS BOX ON REVERSE SIDE
[X] PLEASE MARK
YOUR VOTES
AS THIS
---------------- ----------------------------
COMMON/PREFERRED DIVIDEND REINVESTMENT SHARES
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEM 1 AND FOR ALL
NOMINEES LISTED IN ITEM 2. ALL SHARES WILL BE VOTED AS INSTRUCTED
BELOW. IN THE ABSENCE OF AN INSTRUCTION TO THE CONTRARY, ALL
SHARES WILL BE VOTED FOR ITEM 1 AND/OR FOR ALL NOMINEES LISTED IN
ITEM 2.
ITEM 1--Proposal to FOR AGAINST ABSTAIN
approve the PNC Bank [_] [_] [_]
Corp. 1994 Annual
Incentive Award Plan.
ITEM 2--Election of Directors: FOR ALL WITHHELD
Messrs. Clay, Copeland, NOMINEES FOR ALL
Davidson, Grefenstette, [_] [_]
McClelland, Marshall, Moritz,
O'Brien, Randolph, Rohr, Ross,
Sarni, Simmons, Usher, and
Wehmeier (or any substitute
nominee in case of
unavailability).
[_] FOR ALL NOMINEES, EXCEPT AS INDICATED BELOW:
- --------------------------------------------------
(Write nominee name(s) in the space provided above
to withhold authority.)
WILL ATTEND MEETING [_]
COMMENTS/ADDRESS [_]
CHANGE PLEASE MARK
THIS BOX IF YOU HAVE
WRITTEN COMMENTS/ADDRESS
CHANGE ON THE REVERSE SIDE.
SIGNATURE(S) --------------------------------------------- DATE: -----------
PLEASE SIGN AS NAME APPEARS HEREON. 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.
PNC BANK CORP.
ANNUAL MEETING OF SHAREHOLDERS
APRIL 26, 1994--11:00 AM
PLACE: ONE PNC PLAZA, PITTSBURGH, PA
INSTRUCTION CARD
To: PNC Bank, N.A., Trustee of PNC Bank Corp. Incentive Savings Plan and PNC
Bank, Ohio, N.A., Trustee of the PNC Bank Corp. Employee Stock Ownership Plan.
The signatory on the reverse side hereof, a Participant having Common Stock
and/or Preferred Stock of PNC Bank Corp. credited to my account, does hereby
instruct each Trustee to vote the number of shares indicated hereon at the
annual meeting of shareholders to be held on April 26, 1994, or any adjournment
thereof, as indicated.
THIS CARD IS CONTINUED ON THE REVERSE SIDE. PLEASE SIGN ON THE REVERSE SIDE AND
RETURN PROMPTLY.
- -------------------------------
COMMENTS/ADDRESS CHANGE: PLEASE MARK COMMENT/ADDRESS BOX ON REVERSE SIDE
[X] PLEASE MARK
YOUR VOTES
AS THIS
----------------
COMMON/PREFERRED
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEM 1 AND FOR ALL
NOMINEES LISTED IN ITEM 2. ALL SHARES WILL BE VOTED AS INSTRUCTED
BELOW. IN THE ABSENCE OF AN INSTRUCTION TO THE CONTRARY, ALL
SHARES WILL BE VOTED IN THE MANNER REQUIRED OR PERMITTED BY THE
GOVERNING PLAN DOCUMENTS.
ITEM 1--Proposal to approve the PNC FOR AGAINST ABSTAIN
Bank Corp. 1994 Annual Incentive Award Plan. [_] [_] [_]
ITEM 2--Election of Directors: FOR ALL WITHHELD
Messrs. Clay, Copeland, Davidson, Grefenstette, NOMINEES FOR ALL
McClelland, Marshall, Moritz, O'Brien, [_] [_]
Randolph, Rohr, Ross, Sarni, Simmons,
Usher, and Wehmeier (or any substitute
nominee in case of unavailability).
FOR ALL NOMINEES, EXCEPT AS INDICATED BELOW:
- --------------------------------------------
(Write nominee name(s) in the space provided above
to withhold authority.)
WILL ATTEND MEETING [_]
COMMENTS/ADDRESS [_]
CHANGE PLEASE MARK
THIS BOX IF YOU HAVE
WRITTEN COMMENTS/ADDRESS
CHANGE ON THE REVERSE SIDE.
SIGNATURE ------------------------------------------------ DATE ----------
PNC BANK CORP. THOMAS H. O'BRIEN
Fifth Avenue and Wood Street Chairman and Chief Executive
Pittsburgh, PA 15265 Officer
LOGO OF PNC BANK
March 21, 1994
Dear Shareholder:
You will find enclosed the notice of meeting, proxy statement and proxy for the
annual meeting of shareholders of PNC Bank Corp., which will be held on
Tuesday, April 26, 1994, on the 15th floor of One PNC Plaza, in Pittsburgh,
Pennsylvania, beginning at 11:00 a.m.
Please review the enclosed material and complete, sign, date and return the
proxy card whether you plan to attend or not so that the matters coming before
the meeting can be acted upon.
We look forward to meeting our shareholders and welcome the opportunity to
discuss the business of your company with you.
Cordially,
/s/ Thomas H. O'Brien
- ---------------------
Thomas H. O'Brien
TO: Participants in the PNC Bank Corp. Incentive Savings Plan and the PNC
Bank Corp.Employee Stock Ownership Plan
Under the provisions of the PNC Bank Corp. Incentive Savings and
Employee Stock Ownership Plans, shares of stock of PNC Bank Corp. credited
to your account are to be voted by the Trustee in accordance with your
written direction. Any shares in the Incentive Savings Plan for which the
Trustee does not receive instruction are to be voted by the Trustee in the
same manner as the Trustee votes the majority of the same class of shares.
Any shares in the Employee Stock Ownership Plan for which the Trustee does
not receive instructions are to be voted by the Trustee in the same
proportion as the Trustee votes the shares for which instructions were
received for the same class of shares.
The attached material relates to matters to be voted on at the 1994
annual meeting of shareholders. The number of shares for which you can
give voting instructions appears on the enclosed Instruction Card. Please
complete and sign the Instruction Card and return it in the envelope
provided. Thank you.
PNC Bank, Ohio, National PNC Bank, National
Association,Trustee Association, Trustee
PNC Bank Corp. PNC Bank Corp.
Employee Stock Incentive Savings Plan
Ownership Plan