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<SEC-DOCUMENT>0000950128-03-000346.txt : 20030313
<SEC-HEADER>0000950128-03-000346.hdr.sgml : 20030313
<ACCEPTANCE-DATETIME>20030313160131
ACCESSION NUMBER: 0000950128-03-000346
CONFORMED SUBMISSION TYPE: 10-K
PUBLIC DOCUMENT COUNT: 16
CONFORMED PERIOD OF REPORT: 20021231
FILED AS OF DATE: 20030313
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: PNC FINANCIAL SERVICES GROUP INC
CENTRAL INDEX KEY: 0000713676
STANDARD INDUSTRIAL CLASSIFICATION: NATIONAL COMMERCIAL BANKS [6021]
IRS NUMBER: 251435979
STATE OF INCORPORATION: PA
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: 10-K
SEC ACT: 1934 Act
SEC FILE NUMBER: 033-35026
FILM NUMBER: 03602551
BUSINESS ADDRESS:
STREET 1: ONE PNC PLAZA
STREET 2: 249 FIFTH AVE
CITY: PITTSBURGH
STATE: PA
ZIP: 15265
BUSINESS PHONE: 4127621553
MAIL ADDRESS:
STREET 1: ONE PNC PLAZA
STREET 2: FIFTH AVENUE & WOOD STREET
CITY: PITTSBURGH
STATE: PA
ZIP: 15265
FORMER COMPANY:
FORMER CONFORMED NAME: PNC BANK CORP /PA/
DATE OF NAME CHANGE: 19930428
FORMER COMPANY:
FORMER CONFORMED NAME: PNC FINANCIAL CORP /PA/
DATE OF NAME CHANGE: 19930412
FORMER COMPANY:
FORMER CONFORMED NAME: PNC BANK CORP
DATE OF NAME CHANGE: 19930505
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-K
<SEQUENCE>1
<FILENAME>j9925001e10vk.txt
<DESCRIPTION>PNC FINANCIAL SERVICES 10-K
<TEXT>
<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2002
COMMISSION FILE NUMBER 1-9718
THE PNC FINANCIAL SERVICES GROUP, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
PENNSYLVANIA 25-1435979
- -------------------------------------------------------------- ------------------------------------
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
</TABLE>
ONE PNC PLAZA
249 FIFTH AVENUE
PITTSBURGH, PENNSYLVANIA 15222-2707
-----------------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES, INCLUDING ZIP CODE)
Registrant's telephone number, including area code - (412) 762-2000
--------------
Securities registered pursuant to Section 12(b) of the Act:
-----------------------------------------------------------
<TABLE>
<CAPTION>
Name of Each Exchange
Title of Each Class on Which Registered
- ------------------- -----------------------
<S> <C>
COMMON STOCK, PAR VALUE $5.00 New York Stock Exchange
$1.60 CUMULATIVE CONVERTIBLE PREFERRED STOCK-SERIES C, PAR VALUE $1.00 New York Stock Exchange
$1.80 CUMULATIVE CONVERTIBLE PREFERRED STOCK-SERIES D, PAR VALUE $1.00 New York Stock Exchange
SERIES G JUNIOR PARTICIPATING PREFERRED SHARE PURCHASE RIGHTS New York Stock Exchange
</TABLE>
Securities registered pursuant to Section 12(g) of the Act:
-----------------------------------------------------------
$1.80 CUMULATIVE CONVERTIBLE PREFERRED STOCK - SERIES A, PAR VALUE $1.00
$1.80 CUMULATIVE CONVERTIBLE PREFERRED STOCK - SERIES B, PAR VALUE $1.00
8.25% CONVERTIBLE SUBORDINATED DEBENTURES DUE 2008
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark if the disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. X
---
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act). Yes X No
--- ---
The aggregate market value of the registrant's outstanding voting common stock
held by nonaffiliates on June 28, 2002, determined using the per share closing
price on that date on the New York Stock Exchange of $52.28, was approximately
$14.8 billion. There is no non-voting common equity of the registrant
outstanding.
Number of shares of registrant's common stock outstanding at February 28, 2003:
282,825,171
DOCUMENTS INCORPORATED BY REFERENCE
Portions of The PNC Financial Services Group, Inc. Annual Report to Shareholders
for 2002 ("Annual Report to Shareholders") are incorporated by reference into
Parts I, II, III and IV and portions of the definitive Proxy Statement of The
PNC Financial Services Group, Inc. to be filed pursuant to Regulation 14A for
the annual meeting of shareholders to be held on April 22, 2003 ("Proxy
Statement") are incorporated by reference into Part III of this Form 10-K. The
incorporation by reference herein of portions of the Proxy Statement shall not
be deemed to specifically incorporate by reference the information referred to
in Items 306(c), 306(d) and 402(a)(8) and (9) of Regulation S-K.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
PART I
Item 1 Business 3
Item 2 Properties 9
Item 3 Legal Proceedings 10
Item 4 Submission of Matters to a Vote of Security
Holders 10
Executive Officers of the Registrant 11
PART II
Item 5 Market for Registrant's Common Equity and
Related Stockholder Matters 11
Item 6 Selected Financial Data 12
Item 7 Management's Discussion and Analysis of
Financial Condition and Results of Operations 12
Item 7A Quantitative and Qualitative Disclosures About
Market Risk 12
Item 8 Financial Statements and Supplementary Data 12
Item 9 Changes in and Disagreements With Accountants
on Accounting and Financial Disclosure 12
PART III
Item 10 Directors and Executive Officers of the Registrant 12
Item 11 Executive Compensation 12
Item 12 Security Ownership of Certain Beneficial Owners
and Management and Related Stockholder Matters 12
Item 13 Certain Relationships and Related Transactions 13
Item 14 Controls and Procedures 13
PART IV
Item 15 Exhibits, Financial Statement Schedules, and
Reports on Form 8-K 13
SIGNATURES 15
CERTIFICATIONS 16
EXHIBIT INDEX E-1
</TABLE>
PART I
Forward-Looking Statements: From time to time The PNC Financial Services Group,
Inc. ("PNC" or "Corporation") has made and may continue to make written or oral
forward-looking statements with respect to the Corporation's outlook or
expectations for earnings, revenues, expenses, capital levels, asset quality or
other future financial or business performance, strategies and expectations and
the impact of legal, regulatory and supervisory matters on the Corporation's
business operations and performance. This Annual Report on Form 10-K ("Form
10-K") also includes forward-looking statements. Forward-looking statements are
typically identified by words or phrases such as "believe," "feel," "expect,"
"anticipate," "intend," "outlook," "estimate," "forecast," "project,"
"position," "target," "assume," "achievable," "potential," "strategy," "goal,"
"objective," "plan," "aspiration," "outcome," "continue," "remain," "maintain,"
"seek," "strive," "trend," and variations of such words and similar expressions,
or future or conditional verbs such as "will," "would," "should," "could,"
"might," "can," "may" or similar expressions.
The Corporation cautions that forward-looking statements are subject to numerous
assumptions, risks and uncertainties, which change over time. Actual results
could differ materially from those anticipated in forward-looking statements and
future results could differ materially from historical performance.
Forward-looking statements speak only as of the date they are made, and the
Corporation assumes no duty and does not undertake to update forward-looking
statements.
The factors discussed elsewhere in this report and the following factors, among
others, could cause actual results to differ materially from those anticipated
in forward-looking statements or from historical performance:
(1) changes in political, economic or industry conditions, the interest
rate environment or financial and capital markets, which could result in: a
deterioration in credit quality, increased credit losses, and increased
funding of unfunded loan commitments and letters of credit; an adverse
effect on the allowances for credit losses and unfunded loan commitments and
letters of credit; a reduction in demand for credit or fee-based products
and services; a reduction in net interest income, value of assets under
management and assets serviced, value of private equity investments and of
other debt and equity investments, value of loans held for sale or value of
other on-balance-sheet and off-balance-sheet assets; or changes in the
availability and terms of funding necessary to meet PNC's liquidity needs;
(2) relative and absolute investment performance of assets under management;
(3) the introduction, withdrawal, success and timing of business initiatives
and strategies, decisions regarding further reductions in balance sheet
leverage, the timing and pricing of any sales of loans held for sale, and
PNC's inability to realize cost savings or revenue enhancements, or to
implement integration plans relating to or resulting from mergers,
acquisitions, restructurings and divestitures;
(4) customer borrowing, repayment, investment and deposit practices and their
acceptance of PNC's products and services;
(5) the impact of increased competition;
(6) how PNC chooses to redeploy available capital, including the extent and
timing of any share repurchases and investments in PNC businesses;
(7) the inability to manage risks inherent in PNC's business;
(8) the unfavorable resolution of legal proceedings or government inquiries;
the impact of increased litigation risk from recent regulatory
developments; and the impact of reputational risk created by recent
regulatory developments on such matters as business generation and
retention, the ability to attract and retain management, liquidity and
funding;
(9) the denial of insurance coverage for claims made by PNC;
(10) an increase in the number of customer or counterparty delinquencies,
bankruptcies or defaults that could result in among other things, increased
credit and asset quality
2
<PAGE>
risk, a higher provision for credit losses and reduced profitability;
(11) the impact, extent and timing of technological changes, the adequacy of
intellectual property protection and costs associated with obtaining rights
in intellectual property claimed by others;
(12) actions of the Federal Reserve Board;
(13) the impact of legislative and regulatory reforms and changes in accounting
policies and principles;
(14) the impact of the regulatory examination process, the Corporation's failure
to satisfy the requirements of written agreements with regulatory agencies,
and regulators' future use of supervisory and enforcement tools; and
(15) terrorist activities and international hostilities, including the
situations surrounding Iraq and North Korea, which may adversely affect the
general economy, financial and capital markets, specific industries, and
the Corporation.
Some of the above factors are described in more detail in the "Risk Factors"
section of the "Financial Review" included on pages 48 through 53 of the Annual
Report to Shareholders, and factors relating to interest rate risk, operational
risk, trading activities, financial and other derivatives and off-balance sheet
activities are discussed in the "Risk Management" section of the "Financial
Review" included on pages 53 through 61 of the Annual Report to Shareholders.
Factors relating to credit risk and liquidity are discussed in the "Consolidated
Balance Sheet Review" section of the "Financial Review" included on pages 40
through 48 of the Annual Report to Shareholders. The Annual Report to
Shareholders is incorporated herein by reference. Other factors are described
elsewhere in this Form 10-K and the Annual Report to Shareholders.
ITEM 1 - BUSINESS
BUSINESS OVERVIEW The Corporation is a bank holding company registered under the
Bank Holding Company Act of 1956, as amended ("BHC Act") and a financial holding
company under the Gramm-Leach-Bliley Act ("GLB Act"). PNC was incorporated under
the laws of the Commonwealth of Pennsylvania in 1983 with the consolidation of
Pittsburgh National Corporation and Provident National Corporation. Since 1983,
PNC has diversified its geographical presence, business mix and product
capabilities through strategic bank and nonbank acquisitions and the formation
of various nonbanking subsidiaries.
The Corporation is one of the largest diversified financial services companies
in the United States, operating businesses engaged in regional community
banking; wholesale banking, including corporate banking, real estate finance and
asset-based lending; wealth management; asset management and global fund
processing services. The Corporation and its subsidiaries provide certain
products and services nationally and others in PNC's primary geographic markets
in Pennsylvania, New Jersey, Delaware, Ohio and Kentucky. The Corporation and
its subsidiaries also provide certain banking, asset management and global fund
processing services internationally. At December 31, 2002, the Corporation's
consolidated total assets, deposits and shareholders' equity were $66.4 billion,
$45.0 billion and $6.9 billion, respectively. In the context of this Business
Overview, financial and other information by segment is included in "Note 26
Segment Reporting" of the "Notes To Consolidated Financial Statements" included
on pages 100 and 101 of the Annual Report to Shareholders and incorporated
herein by reference. Information on certain acquisitions and divestitures is
included in "Note 2 NBOC Acquisition" and "Note 4 Discontinued Operations"
included on pages 81 and 83, respectively, of the Annual Report to Shareholders
and is incorporated herein by reference.
REVIEW OF BUSINESSES Information relating to the Corporation's businesses, which
reflect its operating structure during 2002, is set forth under the captions
"Overview" and "Review of Businesses" in the "Financial Review" included on
pages 28 through 37 of the Annual Report to Shareholders and is incorporated
herein by reference.
SUBSIDIARIES The corporate legal structure currently consists of two subsidiary
banks, with their subsidiaries, and over 70 active nonbank subsidiaries. PNC
Bank, National Association ("PNC Bank"), headquartered in Pittsburgh,
Pennsylvania, is the Corporation's principal bank subsidiary. At December 31,
2002, PNC Bank had total consolidated assets representing approximately 90% of
the Corporation's consolidated assets. For additional information on
subsidiaries, see Exhibit 21 to this Form 10-K, which is incorporated herein by
reference.
STATISTICAL DISCLOSURE BY BANK HOLDING COMPANIES The following statistical
information is included on the indicated pages of the Annual Report to
Shareholders and is incorporated herein by reference:
<TABLE>
<CAPTION>
Pages of
Annual
Report to
Shareholders
-----------------
<S> <C>
Average Consolidated Balance Sheet And Net Interest Analysis 110-111
Analysis of Year-To-Year Changes In Net Interest Income 109
Book Values Of Securities 45 and 85
Maturities And Weighted-Average Yield of Securities 86
Loan Types 41 and 87
Loan Maturities And Interest Sensitivity 113
Nonaccrual, Past Due and Restructured Loans 41, 42, 74 and 88
Potential Problem Loans and Loans Held for Sale 41-42
Summary of Loan Loss Experience 43, 44 and 112
Allocation of Allowance for Credit Losses 43, 44 and 112
Average Amount and Average Rate Paid on Deposits 110-111
Time Deposits of $100,000 or More 92 and 113
Selected Consolidated Financial Data 26-27
Short-Term Borrowings 113
</TABLE>
RISK FACTORS & MANAGEMENT The Corporation is subject to a number of risk factors
including, among others: business and economic conditions; the successful
execution of the Corporation's 2001 strategic repositioning; changes in the
underlying factors, assumptions and estimates inherent in the Corporation's
critical accounting policies and judgments; compliance with applicable standards
established by supervisory
3
<PAGE>
and regulatory bodies; monetary and other policies; competition;
disintermediation; and risk relating to asset management performance, fund
servicing, acquisitions, and terrorist activities and international hostilities.
These factors, and others, could impact the Corporation's business, financial
condition and results of operations. In the normal course of business, the
Corporation assumes various types of risk, which include, among others, credit
risk, market risk, interest rate risk, liquidity risk, operational risk, and
risk associated with trading activities, financial and other derivatives and
"off-balance-sheet" activities. PNC has risk management processes designed to
provide for risk identification, measurement and monitoring.
Risk factors are described in more detail in the "Credit Risk", "Liquidity" and
"Risk Factors" sections of the "Financial Review" included on pages 43 through
46, 46 through 48, and 48 through 53, respectively, of the Annual Report to
Shareholders, which is incorporated herein by reference. The Corporation's risk
management processes are described in more detail in the "Risk Management"
section of the "Financial Review" included on pages 53 through 61 of the Annual
Report to Shareholders, which is incorporated herein by reference. Also, see the
Forward-Looking Statements section at the beginning of Part I of this Form 10-K
for certain other factors that could cause actual results to differ materially
from forward-looking statements or historical performance.
EFFECT OF GOVERNMENTAL, MONETARY AND OTHER POLICIES The activities and results
of operations of bank holding companies and their subsidiaries are affected by
monetary, tax and other policies of the government and its agencies, including
the Board of Governors of the Federal Reserve System ("Federal Reserve Board").
An important function of the Federal Reserve Board is to regulate the national
supply of bank credit. The Federal Reserve Board employs open market operations
in U.S. Government securities, changes in the discount rate on bank borrowings
and changes in reserve requirements on bank deposits to implement its monetary
policy objectives. These instruments of monetary policy are used in varying
combinations to influence the overall level of bank loans, investments and
deposits, the interest rates charged on loans and paid for deposits, the price
of the dollar in foreign exchange markets and the level of inflation. The
Federal Reserve Board's policies influence the rates of interest that PNC
charges on loans and pays on borrowings and interest-bearing deposits and can
also affect the value of on-balance-sheet and off-balance-sheet financial
instruments. Those policies also influence, to a significant extent, the cost of
funding for the Corporation. It is not possible to predict the nature or timing
of future changes in monetary, tax and other policies or the effect that they
may have on the Corporation's activities and results of operations.
IMPACT OF INFLATION The assets and liabilities of the Corporation are primarily
monetary in nature. Accordingly, future changes in prices do not affect the
obligations to pay or receive fixed and determinable amounts of money. During
periods of inflation, monetary assets lose value in terms of purchasing power
and monetary liabilities have corresponding purchasing power gains. The concept
of purchasing power, however, is not an adequate indicator of the effect of
inflation on banks because it does not take into account changes in interest
rates, which are an important determinant of the Corporation's earnings. A
discussion of interest rate risk is set forth under the caption "Interest Rate
Risk" in the "Risk Management" section of the "Financial Review" included on
pages 53 through 55 of the Annual Report to Shareholders, and is incorporated
herein by reference.
SUPERVISION AND REGULATION
OVERVIEW
The Corporation and its subsidiaries are subject to numerous governmental
regulations, some of which are highlighted below and in "Note 3 Regulatory
Matters" of the "Notes To Consolidated Financial Statements" included on pages
82 and 83 of the Annual Report to Shareholders, which is incorporated herein by
reference. Applicable laws and regulations restrict permissible activities and
investments and require compliance with protections for loan, deposit,
brokerage, fiduciary, mutual fund and other customers, among other things. They
also restrict the Corporation's ability to repurchase stock or to receive
dividends from its bank subsidiaries and impose capital adequacy requirements.
The consequences of noncompliance can include substantial monetary and
nonmonetary sanctions.
In addition, the Corporation and its subsidiaries are subject to comprehensive
examination and supervision by, among other regulatory bodies, the Federal
Reserve Board and the Office of the Comptroller of the Currency ("OCC"). These
regulatory agencies generally have broad discretion to impose restrictions and
limitations on the operations of a regulated entity where the agencies
determine, among other things, that such operations are unsafe or unsound, fail
to comply with applicable law or are otherwise inconsistent with laws and
regulations or with the supervisory policies of these agencies. This supervisory
framework could materially impact the conduct, growth and profitability of the
Corporation's operations.
The Corporation and certain of its subsidiaries are also subject to regulation
by the Securities and Exchange Commission ("SEC") by virtue of the Corporation's
status as a public company and due to the nature of certain of its businesses.
There are numerous rules governing the regulation of financial services
institutions and their holding companies. Accordingly, the following discussion
is general in nature and does not purport to be complete or to describe all of
the laws and regulations that apply to the Corporation and its subsidiaries.
The discussion below begins by presenting a general description of the principal
regulations affecting the Corporation. It then summarizes key regulatory
developments that took place in 2002, including ongoing adverse
4
<PAGE>
consequences. The general regulatory description should be reviewed in light of
these 2002 developments.
GENERAL
As a bank holding company and, as discussed below, a "financial holding
company," the Corporation is subject to supervision and regular inspection by
the Federal Reserve Board. The Federal Reserve Board's prior approval is
required whenever the Corporation proposes to acquire all or substantially all
of the assets of any bank or thrift, to acquire direct or indirect ownership or
control of more than 5% of the voting shares of any bank or thrift, or to merge
or consolidate with any other bank holding company or thrift holding company.
When reviewing bank acquisition applications for approval, the Federal Reserve
Board considers, among other things, each subsidiary bank's record in meeting
the credit needs of the communities it serves in accordance with the Community
Reinvestment Act of 1977, as amended ("CRA"). At December 31, 2002, both of the
Corporation's bank subsidiaries, PNC Bank and PNC Bank, Delaware, were rated
"outstanding" with respect to CRA.
The GLB Act, which was enacted on November 12, 1999 and portions of which became
effective on March 11, 2000, permits a qualifying bank holding company to become
a financial holding company and thereby to affiliate with financial companies
engaging in a broader range of activities than had previously been permitted for
a bank holding company. Permitted affiliates include securities underwriters and
dealers, insurance companies and companies engaged in other activities that are
determined by the Federal Reserve Board, in consultation with the Secretary of
the Treasury, to be "financial in nature or incidental thereto" or are
determined by the Federal Reserve Board unilaterally to be "complementary" to
financial activities. A bank holding company may elect to become a financial
holding company if each of its subsidiary banks is "well capitalized," is "well
managed," and has at least a "satisfactory" CRA rating. The Corporation became a
financial holding company as of March 13, 2000.
The Federal Reserve Board is the "umbrella" regulator of a financial holding
company. In addition, the financial holding company's operating entities, such
as its subsidiary broker-dealers, investment managers, investment companies,
insurance companies and banks, are also subject to the jurisdiction of various
federal and state "functional" regulators.
The Corporation's subsidiary banks and their subsidiaries are subject to
supervision and examination by applicable federal and state banking agencies,
including the OCC with respect to PNC Bank and the Federal Deposit Insurance
Corporation ("FDIC") and the Delaware Office of the State Bank Commissioner with
respect to PNC Bank, Delaware. One aspect of this regulation is that the
Corporation's subsidiary banks are subject to various federal and state
restrictions on their ability to pay dividends to PNC Bancorp, Inc., the parent
of the subsidiary banks, which in turn may affect the ability of PNC Bancorp,
Inc. to pay dividends to the Corporation. These dividends constitute the
principal source of the Corporation's revenue and cash flow at the parent
company level. Without regulatory approval, the amount available for the payment
of dividends by PNC Bank and PNC Bank, Delaware was approximately $460 million
at December 31, 2002. The Corporation's subsidiary banks are also subject to
federal laws limiting extensions of credit to their parent holding company and
nonbank affiliates as discussed in "Note 3 Regulatory Matters" of the "Notes To
Consolidated Financial Statements" included on pages 82 and 83 of the Annual
Report to Shareholders, which is incorporated herein by reference.
Under Federal Reserve Board policy, a bank holding company is expected to act as
a source of financial strength to each of its subsidiary banks and to commit
resources to support each such bank. Consistent with the "source of strength"
policy for subsidiary banks, the Federal Reserve Board has stated that, as a
matter of prudent banking, a bank holding company generally should not maintain
a rate of cash dividends unless its net income available to common shareholders
has been sufficient to fully fund the dividends and the prospective rate of
earnings retention appears to be consistent with the corporation's capital
needs, asset quality and overall financial condition.
In addition to dividends from PNC Bank and PNC Bank, Delaware, other sources of
parent company liquidity for the Corporation include cash and short-term
investments, as well as dividends and loan repayments from other subsidiaries.
As of December 31, 2002, the Corporation had approximately $719 million in funds
available from its cash and short-term investments or other funds available from
unrestricted subsidiaries. The Corporation currently has available funds to pay
dividends at current rates through 2003.
Subsidiary banks are also limited by law and regulation in the scope of
permitted activities and investments. Subsidiary banks and their operating
subsidiaries may engage in any activities that are determined by the OCC to be
part of or incidental to the business of banking. The GLB Act, however, permits
a national bank, such as PNC Bank, to engage in expanded activities through the
formation of a "financial subsidiary." PNC Bank has filed a financial subsidiary
certification with the OCC and may thus engage through a financial subsidiary in
any activity that is financial in nature or incidental to a financial activity
with certain exceptions, including insurance underwriting, insurance
investments, real estate investment or development, and merchant banking.
In order to qualify to establish or acquire a financial subsidiary, PNC Bank and
each of its depository institution affiliates must be "well capitalized" and
"well managed" and may not have a less than "satisfactory" CRA rating. In
addition, the total assets of all financial subsidiaries of a national bank may
not exceed the lesser of $50 billion or 45% of the parent bank's total assets. A
national bank that is one of the largest 50 insured banks in the United States,
such as PNC
5
<PAGE>
Bank, must also have issued debt with certain minimum ratings. In addition to
calculating its risk-based capital information from its consolidated financial
statements, a national bank with one or more financial subsidiaries must also be
"well capitalized" after excluding from its assets and equity all equity
investments, including retained earnings, in a financial subsidiary, and the
assets of the financial subsidiary from the bank's consolidated assets. Any
published financial statement for a national bank with a financial subsidiary
must provide risk-based capital information under both methods described above.
The bank must also have policies and procedures to assess financial subsidiary
risk and protect the bank from such risks and potential liabilities.
As a regulated financial services firm, the Corporation's relationships and good
standing with its regulators are of fundamental importance to the continuation
and growth of the Corporation's businesses. The Federal Reserve Board, OCC, SEC,
and other domestic and foreign regulators have broad enforcement powers, and
powers to approve, deny, or refuse to act upon applications or notices of the
Corporation or its subsidiaries to conduct new activities, acquire or divest
businesses or assets, or reconfigure existing operations. In addition, the
Corporation and its bank subsidiaries are subject to examination by various
regulators, which results in examination reports and ratings (which are not
publicly available) that can impact the conduct and growth of the Corporation's
businesses. These examinations consider not only compliance with applicable laws
and regulations, but also capital levels, asset quality and risk, management
ability and performance, earnings, liabilities, and various other factors. An
examination downgrade by any of the Corporation's federal bank regulators
potentially can result in the imposition of significant limitations on the
activities and growth of the Corporation and its subsidiaries.
For example, as subsidiaries of a financial holding company under the GLB Act,
the nonbank subsidiaries of the Corporation are allowed to conduct new financial
activities or acquire nonbank financial companies with after-the-fact notice to
the Federal Reserve Board. In addition, the Corporation's nonbank subsidiaries
(and financial subsidiaries of the Corporation's subsidiary banks) are now
permitted to engage in certain activities that were not permitted for banks and
bank holding companies prior to enactment of the GLB Act, and to engage in
certain activities that previously were permitted, all on less restrictive
terms. Among other activities, the Corporation currently relies on its status as
a financial holding company to conduct mutual fund distribution activities,
merchant banking activities, and underwriting and dealing activities.
To continue to qualify for financial holding company status, the Corporation's
subsidiary banks must maintain "well capitalized" capital ratios, examination
ratings of "1" or "2" (on a scale of 1 to 5), and certain other criteria that
are incorporated into the definition of "well managed" under the Bank Holding
Company Act and Federal Reserve Board rules. If the Corporation were no longer
to qualify for this status, it could not continue to enjoy the after-the-fact
notice process for new nonbanking activities and nonbanking acquisitions, and
would be required promptly to enter into an agreement with the Federal Reserve
Board providing a plan for the Corporation's subsidiary bank(s) to meet the
"well capitalized" and "well managed" criteria. The Federal Reserve Board would
have broad authority to limit the activities of the Corporation. Failure to
satisfy the criteria within a six-month period could result in a requirement
that the Corporation conform its existing nonbanking activities to activities
that were permissible prior to the enactment of the GLB Act. If a subsidiary
bank of the Corporation failed to maintain a "satisfactory" or better rating
under the CRA, the Corporation could not commence new activities or make new
investments in reliance on the GLB Act.
In addition, if the Corporation's subsidiary banks were no longer "well
capitalized" and "well managed" within the meaning of the Bank Holding Company
Act and Federal Reserve Board rules (which take into consideration capital
ratios, examination ratings and other factors), the expedited processing of
certain types of Federal Reserve Board applications would not be available to
the Corporation. Moreover, examination ratings of "3" or lower, lower capital
ratios than peer group institutions, regulatory concerns regarding management,
controls, assets, operations or other factors, can all potentially result in
practical limitations on the ability of a bank or bank holding company to engage
in new activities, grow, acquire new businesses, repurchase its stock or pay
dividends, or continue to conduct existing activities.
Certain subsidiaries of the Corporation's BlackRock, Inc. subsidiary
("BlackRock") have qualified as "financial subsidiaries," as described above, of
PNC Bank. If a subsidiary bank of the Corporation were to fail to meet the "well
capitalized" or "well managed" and related criteria, PNC Bank would be required
to enter into an agreement with the OCC to correct the condition. The OCC would
have the authority to limit the activities of the bank. If the condition were
not corrected within six months or within any additional time granted by the
OCC, PNC Bank could be required to conform the activities of its financial
subsidiaries to activities in which a national bank could engage directly. In
addition, if the bank or any insured depository institution affiliate receives a
less than satisfactory CRA examination rating, PNC Bank would not be permitted
to engage in any new activities or to make new investments in reliance on the
financial subsidiary authority.
The federal banking agencies possess broad powers to take corrective action as
deemed appropriate for an insured depository institution and its holding
company. The extent of these powers depends upon whether the institution in
question is considered "well capitalized," "adequately capitalized,"
"undercapitalized," "significantly undercapitalized" or "critically
undercapitalized." Generally, the smaller an institution's capital base in
relation to its total assets, the greater the scope and severity of the
agencies' powers, ultimately permitting the agencies to appoint a receiver for
the
6
<PAGE>
institution. Business activities may also be influenced by an institution's
capital classification. For instance, only a "well capitalized" depository
institution may accept brokered deposits without prior regulatory approval and
an "adequately capitalized" depository institution may accept brokered deposits
only with prior regulatory approval. At December 31, 2002, both of the
Corporation's subsidiary banks exceeded the required ratios for classification
as "well capitalized." Additional discussion of capital adequacy requirements is
set forth under the caption "Capital" in the "Financial Review" and in "Note 3
Regulatory Matters" of the "Notes to Consolidated Financial Statements" on pages
47 and 48 and pages 82 and 83, respectively, of the Annual Report to
Shareholders, which sections are incorporated herein by reference.
Regulatory matters could also increase the cost of FDIC deposit insurance
premiums to an insured bank. Both of the Corporation's subsidiary banks are
insured by the FDIC and subject to premium assessments. Since 1996, the FDIC has
not assessed banks in the most favorable capital and assessment risk
classification categories for insurance premiums for most deposits, due to the
favorable ratio of the assets in the FDIC's deposit insurance funds to the
aggregate level of insured deposits outstanding. This has resulted in
significant cost savings to all insured banks. Recent costs to the FDIC in
resolving several large bank and savings institution receiverships, however,
have caused this ratio to decline to the point that the FDIC may be required in
the near future to once again begin to assess deposit insurance premiums against
insured banks in the most favorable capital and assessment risk classification
categories. Deposit insurance premiums are assessed as a percentage of the
deposits of the insured institution. If the FDIC assesses premiums for all
deposits, it would impose a significant cost to all insured banks, including the
Corporation's subsidiary banks, reducing the net spread between deposit and
other bank funding costs and the earnings from assets and services of the bank,
and thus the net income of the bank. FDIC deposit insurance premiums are "risk
based", therefore, higher fee percentages would be charged to banks that have
lower capital ratios or higher risk profiles. These risk profiles may take into
account weaknesses that are found by the primary banking regulator through its
examination and supervision of the bank. A negative evaluation by the FDIC or a
bank's primary federal banking regulator, as a result, could increase the costs
to a bank and result in an aggregate cost of deposit funds higher than that of
competing banks in a lower risk category.
The Corporation's subsidiary banks are subject to "cross-guarantee" provisions
under federal law that provide that if one of these banks fails or requires FDIC
assistance, the FDIC may assess a "commonly-controlled" bank for the estimated
losses suffered by the FDIC. Such liability could have a material adverse effect
on the financial condition of any assessed bank and the Corporation. While the
FDIC's claim is junior to the claims of depositors, holders of secured
liabilities, general creditors and subordinated creditors, it is superior to the
claims of shareholders and affiliates, such as the Corporation.
The Corporation's subsidiaries are subject to regulatory requirements imposed by
the Federal Reserve Board and other federal and state agencies. The
Corporation's registered broker-dealer subsidiaries, including one of
BlackRock's subsidiaries, are regulated by the SEC and either by the OCC or the
Federal Reserve Board. They are also subject to rules and regulations
promulgated by the National Association of Securities Dealers, Inc. ("NASD"),
among others. Three subsidiaries, including one of BlackRock's subsidiaries, are
registered as commodity pool operators with the Commodity Futures Trading
Commission ("CFTC") and the National Futures Association ("NFA"), and are
subject to regulation by them.
Several of the Corporation's subsidiaries, including certain BlackRock
subsidiaries, are registered with the SEC as investment advisers and, therefore,
are subject to the requirements of the Investment Advisers Act of 1940 and the
SEC's regulations thereunder. The principal purpose of the regulations
applicable to investment advisers is the protection of clients and the
securities markets, rather than the protection of creditors and stockholders of
investment advisers. The regulations applicable to investment advisers cover all
aspects of the investment advisory business, including limitations on the
ability of investment advisers to charge performance-based or non-refundable
fees to clients, record-keeping, operating, marketing and reporting
requirements, disclosure requirements, limitations on principal transactions
between an adviser or its affiliates and advisory clients, as well as general
anti-fraud prohibitions. The Corporation's investment advisory subsidiaries also
may be subject to certain state securities laws and regulations. In addition,
the Corporation's investment adviser subsidiaries, such as certain BlackRock
subsidiaries, that are investment advisors to registered investment companies
and other managed accounts are subject to the requirements of the Investment
Company Act of 1940 and the SEC's regulations thereunder.
Additional legislation, changes in rules promulgated by the SEC, other federal
and state regulatory authorities and self-regulatory organizations, or changes
in the interpretation or enforcement of existing laws and rules may directly
affect the method of operation and profitability of investment advisers. The
profitability of investment advisers could also be affected by rules and
regulations which impact the business and financial communities in general,
including changes to the laws governing taxation, antitrust regulation and
electronic commerce.
Under various provisions of the federal securities laws (including in particular
those applicable to broker-dealers, investment advisers and registered
investment companies and their service providers), a determination by a court or
regulatory agency that certain violations have occurred at a company or its
affiliates can result in a limitation of permitted activities, disqualification
to continue to conduct certain
7
<PAGE>
activities and an inability to rely on certain favorable exemptions. Certain
types of infractions and violations can also affect a public company in its
timing and ability expeditiously to issue new securities into the capital
markets. In addition, expansion of activities of a broker-dealer generally
requires approval of the New York Stock Exchange and/or NASD, and regulators may
take into account a variety of considerations in acting upon such applications,
including internal controls, capital, management experience and quality, and
supervisory concerns.
For additional information about the regulation of BlackRock, see the discussion
under the "Regulation" section of Item 1. Business in BlackRock's most recent
Annual Report on Form 10-K, which may be obtained electronically at the SEC's
home page at www.sec.gov.
2002 REGULATORY DEVELOPMENTS
On July 18, 2002, the SEC, with the Corporation's consent, entered an Order
Instituting Public Administrative Proceedings Pursuant to Section 8A of the
Securities Act of 1933 and 21C of the Securities Exchange Act of 1934, Making
Findings and Imposing Cease-and-Desist Order ("Commission Order") in connection
with three 2001 transactions that gave rise to a financial statement restatement
announced by the Corporation on January 29, 2002. In consenting to the entry of
the Commission Order and the SEC's jurisdiction, the Corporation did not admit
or deny the SEC's findings. Collateral consequences from entry of the Commission
Order include the loss of "safe harbor" protection for forward-looking
statements under the Private Securities Litigation Reform Act for three years
from the date of the Commission Order and the potential for restrictions on the
licenses, registrations, and regulatory approvals of the Corporation's
subsidiaries engaged in broker-dealer and other regulated financial businesses
and impacting the status of the Corporation's subsidiaries as government
contractors. The potential restrictions are considered unlikely to be imposed.
On the same date, the Corporation announced that it had entered into a written
agreement with the Federal Reserve Bank of Cleveland ("Federal Reserve") and
that its principal subsidiary, PNC Bank, had entered into a written agreement
with the OCC. These agreements (together, the "Regulatory Agreements") address
such issues as risk, management and financial controls. As a result of entering
into the Regulatory Agreements, the Corporation and PNC Bank were required to
obtain approval of the Federal Reserve and the OCC, respectively, prior to
adding new directors or employing new senior executive officers, and were
prohibited from making "golden parachute payments," as defined in applicable
regulations, without prior regulatory approval. PNC Bank also was subject to
increases in deposit insurance premium assessments and regulatory examination
fees.
The Corporation and PNC Bank were also advised by the Federal Reserve Board and
the OCC, respectively, that the Corporation and PNC Bank no longer satisfied
financial holding company and financial subsidiary requirements for purposes of
the GLB Act. The Corporation and PNC Bank entered into agreements with the
Federal Reserve and the OCC, respectively, that required the Corporation and PNC
Bank to provide a plan for the Corporation's subsidiary bank, PNC Bank, to meet
the "well capitalized" and "well managed" criteria within a 180 day period from
receipt of the notices. During that interim period, the Corporation and PNC Bank
were prohibited from engaging in new activities or making new investments in
reliance on the regulatory procedures and powers pursuant to the GLB Act without
prior approval of the Federal Reserve or the OCC, respectively. The failure to
satisfy the requirements of the agreements could have resulted in the
Corporation's and PNC Bank's loss of powers allowed under the GLB Act.
As of December 19, 2002, the Federal Reserve notified the Corporation, and the
OCC notified PNC Bank, that the Corporation and PNC Bank were in full compliance
with the financial holding company and financial subsidiary requirements,
respectively, for purposes of the GLB Act, reflecting that PNC Bank now met both
the "well capitalized" and "well managed" criteria. This removed the limitations
placed in July 2002 on the Corporation's engaging in new activities or making
new investments and on PNC Bank's financial subsidiary activities. However, the
Regulatory Agreements remain in place, and the Corporation and PNC Bank,
respectively, in certain circumstances must continue to obtain prior approval
from the Federal Reserve or the OCC, respectively, before making acquisitions or
engaging in new activities.
The Federal Reserve and the OCC also notified the Corporation and PNC Bank,
respectively, that, as of December 19, 2002, the Corporation and PNC Bank were
no longer required to obtain approval of the Federal Reserve and the OCC,
respectively, prior to adding new directors or employing new senior executive
officers, and, in general, were not prohibited from making "golden parachute
payments." Also, PNC Bank is no longer subject to increased regulatory
examination fees. In addition, the FDIC has informed PNC Bank that, as of
January 1, 2003, the bank was no longer subject to increases in deposit
insurance premium assessments because it has been returned to the most favorable
assessment risk classification category.
Under applicable regulations, as long as the Corporation remains subject to the
Regulatory Agreement with the Federal Reserve, the Corporation must obtain prior
regulatory approval to repurchase its common stock in amounts that exceed 10
percent of consolidated net worth in any 12-month period. The Corporation has
incurred, and may continue to incur, additional operating costs in connection
with compliance with the Regulatory Agreements including, among others,
incremental staff and continued higher legal and consulting expenses. Further,
the reputational risk created by the Commission Order and the Regulatory
Agreements could still have an impact on such matters as business generation and
retention, the ability to attract and retain management, liquidity and funding.
8
<PAGE>
The Corporation believes that it has made substantial progress to date in
enhancing its risk management and governance practices and improving its
regulatory relations, while addressing the various requirements set forth in the
Regulatory Agreements. There can be no assurance, however, as to the precise
timing for determining that all required corrective actions have been taken to
the appropriate satisfaction of the Federal Reserve and the OCC. The Board and
senior management team are committed to the goal of establishing the Corporation
as an industry leader in the areas of governance, corporate conduct, risk
management and regulatory relations, and to meeting all of the Corporation's
commitments to its regulators. While the Corporation believes that substantial
progress has been made in this pursuit to date, the Corporation also recognizes
that this remains an important ongoing effort requiring dedication and a
commitment of resources at all levels of the institution.
COMPETITION The Corporation and its subsidiaries are subject to intense
competition from various financial institutions and from "nonbank" entities that
engage in similar activities without being subject to bank regulatory
supervision and restrictions. This is particularly true as the Corporation
expands nationally and internationally beyond its primary geographic region,
where expansion requires significant investments to penetrate new markets and
respond to competition, and as the Corporation and other entities expand their
activities pursuant to the GLB Act, as discussed above.
In making loans, the subsidiary banks compete with traditional banking
institutions as well as consumer finance companies, leasing companies and other
nonbank lenders. Loan pricing and credit standards are under competitive
pressure as lenders seek to deploy capital and a broader range of borrowers have
access to capital markets. Traditional deposit activities are subject to pricing
pressures and customer migration as a result of intense competition for consumer
investment dollars. The Corporation's subsidiary banks compete for deposits with
not only other commercial banks, savings banks, savings and loan associations
and credit unions, but also insurance companies and issuers of commercial paper
and other securities, including mutual funds. Various nonbank subsidiaries
engaged in investment banking, private equity and venture capital activities
compete with commercial banks, investment banking firms, merchant banks,
insurance companies, venture capital firms and other investment vehicles. In
providing asset management services, the Corporation's subsidiaries compete with
many investment management firms, large banks and other financial institutions,
brokerage firms, mutual fund complexes, and insurance companies.
The ability to access and use technology is an increasingly important
competitive factor in the financial services industry. Technology is not only
important with respect to delivery of financial services, but in processing
information. Each of the Corporation's businesses consistently must make
technological investments to remain competitive.
See "Supervision and Regulation," "Competition," "Disintermediation," "Asset
Management Performance" and "Fund Servicing" within the "Risk Factors" section
of the "Financial Review" included on pages 51 and 52 of the Annual Report to
Shareholders, which is incorporated herein by reference.
EMPLOYEES Average full-time equivalent employees totaled approximately 23,900
for full year 2002, and were approximately 23,800 for the month of December
2002.
SEC REPORTS The Corporation is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended ("Exchange Act"), and in accordance
with the Exchange Act, PNC files annual, quarterly and current reports, proxy
statements, and other information with the SEC. PNC's SEC File Number is 1-9718.
You may read and copy any document PNC files with the SEC at the SEC's Public
Reference Room at 450 Fifth Street NW, Washington, D.C. 20549. You can obtain
information on the operation of the Public Reference Room by calling the SEC at
1-800-SEC-0330. The SEC also maintains an Internet site that contains reports,
proxy and information statements, and other information regarding issuers that
file electronically with the SEC, including PNC's filings. The address of the
SEC's website is http://www.sec.gov. Copies of such materials can also be
obtained at prescribed rates from the public reference section of the SEC at 450
Fifth Street NW, Washington, D.C. 20549.
The Corporation makes its annual report on Form 10-K, quarterly reports on Form
10-Q, current reports on Form 8-K, and amendments to those reports filed or
furnished to the SEC pursuant to Section 13(a) or 15(d) of the Exchange Act
available free of charge on or through the Corporation's Internet site as soon
as reasonably practicable after it files such material with, or furnishes it to,
the SEC. The Corporation's Internet address is http://www.pnc.com.
ITEM 2 - PROPERTIES
The executive and administrative offices of the Corporation and PNC Bank are
located at One PNC Plaza, Pittsburgh, Pennsylvania. The thirty-story structure
is owned by PNC Bank. The Corporation and PNC Bank occupy the entire building.
In addition, PNC Bank owns a thirty-four story structure adjacent to One PNC
Plaza, known as Two PNC Plaza, that houses additional office space.
The Corporation and its subsidiaries own or lease numerous other premises for
use in conducting business activities. The facilities owned or occupied under
lease by the Corporation's subsidiaries are considered by management to be
adequate. Additional information pertaining to the Corporation's properties is
set forth in "Note 13 Premises, Equipment and Leasehold Improvements" of the
"Notes To Consolidated Financial Statements" included on page 89 of the Annual
Report to Shareholders, which is incorporated herein by reference.
9
<PAGE>
ITEM 3 - LEGAL PROCEEDINGS
The several putative class action complaints filed during 2002 in the United
States District Court for the Western District of Pennsylvania were consolidated
in a Consolidated Class Action Complaint filed on October 4, 2002 brought on
behalf of purchasers of the Corporation's common stock between July 19, 2001 and
July 18, 2002. The Consolidated Class Action Complaint names as defendants the
Corporation, the Chairman and Chief Executive Officer, the former Chief
Financial Officer, the Controller, and the Corporation's independent auditors
for 2001 and seeks unquantified damages, interest, attorneys' fees and other
expenses. The Consolidated Class Action Complaint alleges violations of federal
securities laws related to disclosures regarding the three 2001 transactions
that gave rise to a financial statement restatement announced by the Corporation
on January 29, 2002, and related matters. The Corporation and all other
defendants have filed a motion to dismiss this lawsuit. Management believes
there are substantial defenses to this lawsuit and intends to defend it
vigorously. The impact of the final disposition of this lawsuit cannot be
assessed at this time.
In August 2002, the Department of Labor began a formal investigation of the
Administrative Committee of the Corporation's Incentive Savings Plan ("Plan") in
connection with the Committee's conduct relating to the Corporation's common
stock held by the Plan and the Corporation's restatement of earnings for 2001.
Both the Administrative Committee and the Corporation are cooperating fully with
the investigation. The impact of the final disposition of this investigation
cannot be assessed at this time.
The Corporation received a letter from a shareholder in 2002 demanding that the
Corporation take action against parties allegedly responsible for the events
giving rise to the SEC consent order filed on July 18, 2002 and that it consider
action against directors of the Corporation who approved certain bonus payments.
Management referred this demand to the Board of Directors. The Corporation has
recently been advised that the shareholder does not intend to pursue claims
derivatively on behalf of the Corporation at this time.
In February 2002, Washington Mutual Bank, FA, the buyer of the Corporation's
residential mortgage banking business, filed a lawsuit against the Corporation
in the Superior Court of the State of California for the County of Los Angeles
alleging various state law claims relating to certain closing date purchase
price adjustments in dispute between the parties and seeking compensatory
damages with respect to certain of the disputed matters, unquantified punitive
damages, and declaratory and other relief. The Corporation filed a motion in the
litigation to compel arbitration in accordance with the provisions of the
purchase agreement and to stay the litigation pending that determination, which
was granted by the Court. On January 9, 2003, the Corporation and the buyer
agreed to a settlement of all issues in dispute between them in connection with
the sale of the Corporation's residential mortgage banking business. The
settlement has been reported in the fourth quarter of 2002 by the Corporation in
discontinued operations, and resulted in a net loss on sale of business, net of
tax, for 2002 of $16 million.
On January 14, 2003, an arbitration panel of the National Association of
Securities Dealers, Inc. ("NASD") issued an award against J.J.B. Hilliard, W.L.
Lyons, Inc. ("Hilliard Lyons"), a subsidiary of the Corporation, and certain of
its employees with respect to a claim filed by First of Michigan Corporation
(now Fahnestock & Co., Inc.) arising out of Hilliard Lyons' hiring of brokers
and support staff from First of Michigan Corporation ("First of Michigan") in
late 1997 and spring 1998. The events underlying First of Michigan's claim all
occurred prior to the Corporation's acquisition of Hilliard Lyons in December
1998. The panel awarded First of Michigan $22 million (actual damages of $16
million and prejudgment interest and costs of $6 million), resulting in a fourth
quarter 2002 pretax charge at the Corporation of $10 million, after taking into
account the application of related reserves and accruals.
The Corporation and persons to whom the Corporation may have indemnification
obligations, in the normal course of business, are subject to various other
pending and threatened legal proceedings in which claims for monetary damages
and other relief are asserted. Management does not anticipate that the ultimate
aggregate liability, if any, arising out of such other legal proceedings will
have a material adverse effect on the Corporation's financial position, although
at the present time, management is not in a position to determine whether any
pending or threatened legal proceedings will have a material adverse effect on
the Corporation's results of operations in any future reporting period.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None during the fourth quarter of 2002.
10
<PAGE>
EXECUTIVE OFFICERS OF THE REGISTRANT Information regarding each executive
officer of the Corporation as of March 10, 2003 is set forth below. Each
executive officer held the position or positions indicated or another executive
position with the same entity or one of its affiliates for the past five years
unless otherwise indicated below.
<TABLE>
<CAPTION>
Year
Name Age Positions with Corporation Employed(1)
- ---- --- ---------------------------- -----------
<S> <C> <C> <C>
James E. Rohr 54 Chairman and Chief Executive 1972
Officer(2)
Joseph C. Guyaux 52 President 1972
William S. Demchak 40 Vice Chairman and Chief
Financial Officer 2002
William C. Mutterperl 56 Vice Chairman 2002
Joseph J. Whiteside 61 Vice Chairman 2002
Timothy G. Shack 52 Executive Vice President and 1976
Chief Information Officer
Thomas K. Whitford 47 Executive Vice President and 1990
Chief Risk Officer
John J. Wixted, Jr. 51 Senior Vice President and 2002
Chief Regulatory Officer
Michael J. Hannon 46 Senior Vice President and 1982
Chief Credit Policy Officer
Robert C. Barry, Jr. 60 Senior Vice President and 1997
Director of Finance
Richard J. Johnson 46 Senior Vice President and 2002
Director of Finance
Samuel R. Patterson 44 Controller 1986
Helen P. Pudlin 53 Senior Vice President and 1989
General Counsel
</TABLE>
- ---------------
(1) Where applicable, refers to year employed by predecessor company.
(2) Also serves as a Director of the Corporation.
William S. Demchak joined the Corporation as Vice Chairman and Chief Financial
Officer in September 2002. From 1997 to May 2002, he served as Global Head of
Structured Finance and Credit Portfolio for J.P. Morgan Chase & Co.
William C. Mutterperl joined the Corporation as Vice Chairman in October 2002.
From August 2002 to October 2002, he was a Partner in the business law division
of the international law firm of Brown Rudnick Berlack Israels LLP. From
February 2002 to May 2002, he served as Executive Director of the Independent
Oversight Board for Arthur Andersen LLP, headed by former Federal Reserve
Chairman Paul Volcker. From April 1985 to December 2001, he served as Executive
Vice President, or another executive position, General Counsel and Secretary to
FleetBoston Financial Corp.
Joseph J. Whiteside joined the Corporation as Vice Chairman in October 2002.
From 2001 to 2002 he served as Chairman and Chief Executive Officer for Homeside
Lending, Inc. From 1996 to 2001 he served as Executive Vice President for
National Australia Bank.
John J. Wixted, Jr. joined the Corporation as Senior Vice President and Chief
Regulatory Officer in August 2002. From 1996 to 2002 he served as Senior Vice
President for Banking Supervision and Regulation for the Federal Reserve Bank of
Chicago.
Richard J. Johnson joined the Corporation as Senior Vice President and Director
of Finance in December 2002. From 1999 to 2002 he served as President and Chief
Executive Officer for J.P. Morgan Services. From 1996 to 1998 he served as Chief
Financial Officer for J.P. Morgan Europe.
PART II
ITEM 5 - MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Corporation's common stock is listed on the New York Stock Exchange and is
traded under the symbol "PNC." At the close of business on February 28, 2003,
there were 51,754 common shareholders of record.
Holders of common stock are entitled to receive dividends when declared by the
Board of Directors out of funds legally available therefor. The Board of
Directors may not pay or set apart dividends on the common stock until dividends
for all past dividend periods on any series of outstanding preferred stock have
been paid or declared and set apart for payment. The Board presently intends to
continue the policy of paying quarterly cash dividends. However, the amount of
any future dividends will depend on earnings, the financial condition of the
Corporation and other factors, including contractual restrictions and applicable
government regulations and policies (such as those relating to the ability of
bank and nonbank subsidiaries to pay dividends to the parent company).
Management expects that the parent company will have sufficient liquidity
available to pay dividends at current rates through 2003.
The Federal Reserve Board has the power to prohibit the Corporation from paying
dividends without its approval. Further discussion concerning dividend
restrictions and restrictions on loans or advances from bank subsidiaries to the
parent company is set forth under the caption "Supervision and Regulation" in
Part I, Item 1 of this Form 10-K, under the caption "Liquidity" in the
"Consolidated Balance Sheet Review" section of the "Financial Review" included
on page 46 of the Annual Report to Shareholders, and in "Note 3 Regulatory
Matters" of the "Notes To Consolidated Financial Statements" included on pages
82 and 83 of the Annual Report to Shareholders, each of which is incorporated
herein by reference.
Additional information relating to the common stock is set forth under the
caption "Common Stock Prices/Dividends Declared" on page 113 of the Annual
Report to Shareholders, which is incorporated herein by reference.
11
<PAGE>
Information regarding the Corporation's compensation plans under which equity
securities of the registrant are authorized for issuance as of December 31, 2002
is included in the table under Item 12 of this Form 10-K.
ITEM 6 - SELECTED FINANCIAL DATA
The information set forth under the caption "Selected Consolidated Financial
Data" in the "Financial Review" on pages 26 and 27 of the Annual Report to
Shareholders and under the caption "Average Consolidated Balance Sheet and Net
Interest Analysis" in the "Statistical Information" on pages 110 and 111 of the
Annual Report to Shareholders is incorporated herein by reference.
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The discussion of the Corporation's financial condition and results of
operations set forth under the section "Financial Review" on pages 26 through 66
of the Annual Report to Shareholders is incorporated herein by reference.
ITEM 7A - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The information set forth in the "Risk Management" section in the "Financial
Review" on pages 53 through 61 of the Annual Report to Shareholders is
incorporated herein by reference.
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The "Report of Deloitte & Touche LLP, Independent Auditors," "Consolidated
Financial Statements," "Notes To Consolidated Financial Statements" and
"Selected Quarterly Financial Data" on pages 67, 68 through 71, 72 through 107,
and 108, respectively, of the Annual Report to Shareholders are incorporated
herein by reference.
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
(a) Previously reported.
(b) None.
PART III
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information regarding directors and nominees required by this item is set forth
under the caption "Election of Directors - Information Concerning Nominees" in
the Proxy Statement filed for the annual meeting of shareholders to be held on
April 22, 2003 and is incorporated herein by reference.
Information regarding compliance with Section 16(a) of the Securities Exchange
Act of 1934 is set forth under the caption "Section 16(a) Beneficial Ownership
Reporting Compliance" in the Proxy Statement filed for the annual meeting of
shareholders to be held on April 22, 2003 and is incorporated herein by
reference.
Information regarding executive officers of the Corporation is included in Part
I of this Form 10-K under the caption "Executive Officers of the Registrant."
ITEM 11 - EXECUTIVE COMPENSATION
The information required by this item is set forth under the captions "Election
of Directors - Compensation of Directors" and "Compensation of Executive
Officers," excluding the information set forth under the caption "Personnel and
Compensation Committee Report," in the Proxy Statement filed for the annual
meeting of shareholders to be held on April 22, 2003 and is incorporated herein
by reference.
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
The information required by this item regarding security ownership of certain
beneficial owners and management is set forth under the captions "Security
Ownership of Directors, Nominees and Executive Officers" and "Security Ownership
of Certain Beneficial Owners" under the heading "Security Ownership of
Directors, Nominees and Executive Officers" in the Proxy Statement filed for the
annual meeting of shareholders to be held on April 22, 2003 and is incorporated
herein by reference.
Information regarding the Corporation's compensation plans under which equity
securities of the registrant are authorized for issuance as of December 31, 2002
is included in the table which follows. Additional information regarding these
plans is included in "Note 22 Stock-Based Compensation Plans" of the "Notes To
Consolidated Financial Statements" included on pages 96 and 97 of the Annual
Report to Shareholders and is incorporated herein by reference.
12
<PAGE>
EQUITY COMPENSATION PLAN INFORMATION AT DECEMBER 31, 2002
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
(a) (b) (c)
Number of securities
Weighted-average remaining available for
Number of securities to exercise price of future issuance under
be issued upon exercise outstanding equity compensation plans
of outstanding options, options, warrants (excluding securities
warrants and rights and rights reflected in column (a))
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
EQUITY COMPENSATION PLANS APPROVED BY SECURITY HOLDERS
1997 Long-Term Incentive Award Plan (Note 2)
Stock Options 15,540,719 $55.33
Incentive Share Awards 63,500 N/A
- ----------------------------------------------------------------------------------------------------------------------------------
Subtotal 15,604,219 4,479,088
- ----------------------------------------------------------------------------------------------------------------------------------
1996 Executive Incentive Award Plan
Incentive Awards N/A 245,392
Employee Stock Purchase Plan 200,000 (Note 1) 1,975,504
1992 Director Share Incentive Plan N/A 375,239
Central Incentive Compensation Plan N/A 5,058
- ----------------------------------------------------------------------------------------------------------------------------------
Total approved by security holders 15,804,219 7,080,281
- ----------------------------------------------------------------------------------------------------------------------------------
EQUITY COMPENSATION PLANS NOT APPROVED BY SECURITY HOLDERS None N/A None
- ----------------------------------------------------------------------------------------------------------------------------------
Total 15,804,219 7,080,281
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
N/A - not applicable
Note 1 - 85% of the lower of the fair market value on the first or last day of
each six-month offering period.
Note 2 - The maximum number of Shares that may be issued or as to which grants
or awards may be made under the Incentive Plan (excluding Shares issued pursuant
to grants or awards made prior to February 20, 1997) is (i) 10,141,853 Shares
plus (ii) as of January 1 of each calendar year commencing with 1998 an
additional number of Shares equal to 1.5% of the total issued shares of Common
Stock (including reacquired Shares) at the end of the immediately preceding
calendar year. However, no more than 3% of the total issued Shares of Common
Stock (including reacquired Shares) at the end of the immediately preceding
calendar year is cumulatively available for grants and awards made in any
calendar year. In addition, Incentive Share awards granted during any calendar
year may not exceed 20% of the maximum number of Shares available for grants and
awards made during such calendar year.
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is set forth under the captions
"Transactions Involving Directors and Executive Officers" and "Legal
Proceedings" in the Proxy Statement filed for the annual meeting of shareholders
to be held on April 22, 2003 and is incorporated herein by reference.
ITEM 14 - CONTROLS AND PROCEDURES
The information set forth under the caption "Internal Controls and Disclosure
Controls and Procedures" in the "Financial Review" on page 61 of the Annual
Report to Shareholders is incorporated herein by reference.
PART IV
ITEM 15 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
FINANCIAL STATEMENTS The following report of independent auditors and
consolidated financial information of the Corporation included in the Annual
Report to Shareholders are incorporated herein by reference.
<TABLE>
<CAPTION>
Pages of
Annual
Report to
Financial Statements Shareholders
- -------------------- ------------
<S> <C>
Report of Deloitte & Touche LLP, Independent Auditors 67
Consolidated Statement Of Income for the three years
ended December 31, 2002 68
Consolidated Balance Sheet as of December 31, 2002
and 2001 69
Consolidated Statement Of Shareholders' Equity for the
three years ended December 31, 2002 70
Consolidated Statement Of Cash Flows for the three
years ended December 31, 2002 71
Notes To Consolidated Financial Statements 72-107
Selected Quarterly Financial Data 108
- --------------------------------------------------------------------
</TABLE>
No financial statement schedules are being filed.
13
<PAGE>
The report of the Corporation's former independent auditors follows:
REPORT OF ERNST & YOUNG LLP,
INDEPENDENT AUDITORS
Shareholders and Board of Directors
The PNC Financial Services Group, Inc.
We have audited the accompanying consolidated balance sheet of The PNC Financial
Services Group, Inc. and subsidiaries as of December 31, 2001 and 2000, and the
related consolidated statements of income, shareholders' equity, and cash flows
for each of the three years in the period ended December 31, 2001. These
financial statements are the responsibility of The PNC Financial Services Group,
Inc.'s management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of The PNC Financial
Services Group, Inc. and subsidiaries at December 31, 2001 and 2000, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 2001, in conformity with accounting
principles generally accepted in the United States.
/s/ Ernst & Young LLP
- ------------------------
Pittsburgh, Pennsylvania
March 1, 2002
REPORTS ON FORM 8-K The following reports on Form 8-K were filed during the
quarter ended December 31, 2002.
On November 14, 2002, the Corporation filed a Form 8-K which included
information under Item 9 Regulation FD Disclosure related to certifications of
the Corporation's Chairman and Chief Executive Officer and Vice Chairman and
Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002. Conformed copies of such
certifications were filed as Exhibits with this Form 8-K filing.
On December 19, 2002, the Corporation filed a Form 8-K which included
information under Item 5 Other Events and Regulation FD Disclosure related to a
news release regarding notification from the Federal Reserve Bank of Cleveland
that the Corporation was in full compliance with the financial holding company
and financial subsidiary requirements under the Gramm-Leach-Bliley Act. A copy
of the news release was filed as an Exhibit with this Form 8-K filing.
EXHIBITS The exhibits listed on the Exhibit Index on pages E-1 through E-3 of
this Form 10-K are filed herewith or are incorporated herein by reference.
14
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
THE PNC FINANCIAL SERVICES GROUP, INC.
(Registrant)
By: /s/ William S. Demchak
- ---------------------------------------------
William S. Demchak
Vice Chairman and Chief Financial Officer
March 13, 2003
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of The PNC Financial
Services Group, Inc. and in the capacities indicated on March 13, 2003.
<TABLE>
<CAPTION>
Signature Capacities
- ------------------------------- ---------------------------------------------
<S> <C>
/s/ James E. Rohr Chairman, Chief Executive Office and Director
- ------------------------------- (Principal Executive Officer)
James E. Rohr
/s/ William S. Demchak Vice Chairman and Chief Financial Officer
- ------------------------------- (Principal Financial Officer)
William S. Demchak
/s/ Samuel R. Patterson Controller
- ------------------------------- (Principal Accounting Officer)
Samuel R. Patterson
* Paul W. Chellgren; Robert N. Clay; J.
Gary Cooper; George A. Davidson, Jr.;
Richard B. Kelson; Bruce C. Lindsay;
Anthony A. Massaro; Thomas H. O'Brien;
Jane G. Pepper; Lorene K. Steffes; Dennis
F. Strigl; Stephen G. Thieke; Thomas J.
Usher; Milton A. Washington; and Helge H.
Wehmeier
*By: /s/ Thomas R. Moore
-----------------------------------------
Thomas R. Moore, Attorney-in-Fact,
pursuant to Powers of Attorney filed
herewith
</TABLE>
15
<PAGE>
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
I, James E. Rohr, certify that:
1. I have reviewed this annual report on Form 10-K of The PNC Financial
Services Group, Inc.;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this annual report
is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this annual report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officer and I have indicated in this
annual report whether there were significant changes in internal controls
or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
Date: March 13, 2003
/s/ James E. Rohr
- -----------------
James E. Rohr
Chairman and Chief Executive Officer
CERTIFICATION OF CHIEF FINANCIAL OFFICER
I, William S. Demchak, certify that:
1. I have reviewed this annual report on Form 10-K of The PNC Financial
Services Group, Inc.;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this annual report
is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this annual report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
16
<PAGE>
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officer and I have indicated in this
annual report whether there were significant changes in internal controls
or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
Date: March 13, 2003
/s/ William S. Demchak
- ----------------------
William S. Demchak
Vice Chairman and Chief Financial Officer
17
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
No. Description Method of Filing+
- ------- --------------------------------------------- -----------------------------------
<S> <C> <C>
3.1 Articles of Incorporation of the Corporation, Incorporated herein by reference to
as amended and restated as of April 24, 2001. Exhibit 3.1 of the Corporation's
Quarterly Report on Form 10-Q for
the quarter ended March 31, 2001.
3.2 By-Laws of the Corporation, as amended and Filed herewith.
restated.
4.1 There are no instruments with respect to
long-term debt of the Corporation and its
subsidiaries that involve securities
authorized under the instrument in an
amount exceeding 10 percent of the total
assets of the Corporation and its
subsidiaries on a consolidated basis. The
Corporation agrees to provide the SEC with
a copy of instruments defining the rights
of holders of long-term debt of the
Corporation and its subsidiaries on
request.
4.2 Terms of $1.80 Cumulative Convertible Incorporated herein by reference to
Preferred Stock, Series A. Exhibit 3.1 of the Corporation's
Quarterly Report on Form 10-Q for the
quarter ended March 31, 2001.
4.3 Terms of $1.80 Cumulative Convertible Incorporated herein by reference to
Preferred Stock, Series B. Exhibit 3.1 of the Corporation's
Quarterly Report on Form 10-Q for the
quarter ended March 31, 2001.
4.4 Terms of $1.60 Cumulative Convertible Incorporated herein by reference to
Preferred Stock, Series C. Exhibit 3.1 of the Corporation's
Quarterly Report on Form 10-Q for the
quarter ended March 31, 2001.
4.5 Terms of $1.80 Cumulative Convertible Incorporated herein by reference to
Preferred Stock, Series D. Exhibit 3.1 of the Corporation's
Quarterly Report on Form 10-Q for the
quarter ended March 31, 2001.
4.6 Terms of Series G Junior Participating Incorporated herein by reference to
Preferred Stock. Exhibit 3.1 of the Corporation's
Quarterly Report on Form 10-Q for the
quarter ended March 31, 2001.
4.7 Rights Agreement between the Corporation and Incorporated herein by reference to
The Chase Manhattan Bank dated May 15, 2000. Exhibit 1 to the Corporation's
Report on Form 8-A filed May 23, 2000.
4.8 First Amendment to Rights Agreement between Filed herewith.
the Corporation, The Chase Manhattan Bank,
and Computershare Investor Services, LLC
dated January 1, 2003.
10.1 The Corporation's Supplemental Executive Incorporated herein by reference to
Retirement Plan, as amended. Exhibit 10.1 of the Corporation's
Quarterly Report on Form 10-Q for the
quarter ended June 30, 2002.*
10.2 The Corporation's ERISA Excess Pension Plan, Incorporated herein by reference to
as amended as of January 1, 1999. Exhibit 10.2 of the Corporation's
Annual Report on Form 10-K for the
year ended December 31, 1999 ("1999
Form 10-K").*
10.3 The Corporation's Key Executive Equity Incorporated herein by reference to
Program, as amended. Exhibit 10.3 of the Corporation's
Quarterly Report on Form 10-Q for the
quarter ended June 30, 2002.*
10.4 The Corporation's Supplemental Incentive Incorporated herein by reference to
Savings Plan, as amended as of January 1, Exhibit 10.4 of the Corporation's
1999. 1999 Form 10-K.*
</TABLE>
E-1
<PAGE>
<TABLE>
<CAPTION>
Exhibit
No. Description Method of Filing+
- ------- --------------------------------------------- -----------------------------------
<S> <C> <C>
10.5 The Corporation's 1997 Long-Term Incentive Award Filed herewith.*
Plan, as amended.
10.6 The Corporation's 1996 Executive Incentive Award Incorporated herein by reference to
Plan, as amended. Exhibit 10.6 of the Corporation's
Quarterly Report on Form 10-Q for
the quarter ended June 30, 2001.*
10.7 PNC Bank Corp. and Affiliates Deferred Compensation Incorporated herein by reference to
Plan, as amended and restated. Exhibit 10.7 of the Corporation's
Quarterly Report on Form 10-Q for
the quarter ended March 31, 2002.*
10.8 Form of Change in Control Severance Agreement. Incorporated herein by reference to
Exhibit 10.17 of the Corporation's
Annual Report on Form 10-K for the
year ended December 31, 1996 ("1996
Form 10-K"). *
10.9 Forms of Amendment to Change in Control Severance Incorporated herein by reference to
Agreements. Exhibit 10.9 of the Corporation's
Annual Report on Form 10-K for the
year ended December 31, 2000.*
10.10 Forms of Second Amendment to Change in Control Incorporated herein by reference to
Severance Agreements. Exhibit 10.15 of the Corporation's
Quarterly Report on Form 10-Q for
the quarter ended September 30, 2001.*
10.11 1992 Director Share Incentive Plan. Incorporated herein by reference to
Exhibit 10.13 of the Corporation's
1999 Form 10-K.*
10.12 The Corporation's Directors Deferred Compensation Incorporated by reference to Exhibit
Plan. 10.1 of the Corporation's Quarterly
Report on Form 10-Q for the quarter
ended September 30, 1996.*
10.13 The Corporation's Outside Directors Deferred Stock Incorporated herein by reference to
Unit Plan. Exhibit 10.15 of the Corporation's
1999 Form 10-K.*
10.14 Trust Agreement between PNC Investment Corp., as Filed herewith.*
settlor, and Hershey Trust Company, as trustee.
10.15 Employment Agreement between the Corporation and Filed herewith.*
Joseph J. Whiteside.
10.16 The Corporation's Incentive Savings Plan, as amended Filed herewith.
as of January 1, 2001.
10.17 First Amendment to the Corporation's Incentive Filed herewith.
Savings Plan.
10.18 Second Amendment to the Corporation's Incentive Filed herewith.
Savings Plan.
10.19 The Corporation's Employee Stock Purchase Plan, as Incorporated herein by reference to
amended. Exhibit 99 of the Corporation's
Quarterly Report on Form 10-Q for the
quarter ended September 30, 2001.
10.20 BlackRock, Inc. 2002 Long Term Retention and Incorporated by reference to BlackRock,
Incentive Plan. Inc.'s Quarterly Report on Form 10-Q
(Commission File No. 001-15305) for
the quarter ended September 30, 2002
("BlackRock Third Quarter 2002 Form
10-Q").
10.21 Share Surrender Agreement, dated October 10, 2002, Incorporated by reference to the
among BlackRock, Inc., PNC Asset Management, BlackRock Third Quarter 2002 Form 10-Q.
Inc., and The PNC Financial Services Group, Inc.
10.22 Initial Public Offering Agreement, dated Incorporated by reference to BlackRock,
September 30, 1999, among BlackRock, Inc., The PNC Inc.'s Registration Statement on Form
Financial Services Group, Inc., formerly PNC Bank S-1 (Registration No. 333-78367), as
Corp., and PNC Asset Management, Inc. amended, originally filed with the SEC
on May 13, 1999.
10.23 Amendment No. 1 to the Initial Public Offering Incorporated by reference to the
Agreement, dated October 10, 2002, among The PNC BlackRock Third Quarter 2002 Form 10-Q.
Financial Services Group, Inc., PNC Asset
Management, Inc. and BlackRock, Inc.
10.24 Amended and Restated Stockholders Agreement, dated Incorporated by reference to BlackRock,
September 30, 1999, by and among BlackRock, Inc., Inc.'s Registration Statement on Form
PNC Asset Management, Inc. and certain employees S-1 (Registration No. 333-78367), as
of BlackRock, Inc. and its affiliates. amended, originally filed with the SEC
on May 13, 1999.
10.25 Amendment No. 1 to the Amended and Restated Incorporated by reference to the
Stockholders Agreement, dated October 10, 2002, BlackRock Third Quarter 2002 Form 10-Q.
by and among BlackRock, Inc., PNC Asset
Management, Inc. and certain employees of
BlackRock, Inc. and its affiliates.
</TABLE>
E-2
<PAGE>
<TABLE>
<CAPTION>
Exhibit
No. Description Method of Filing +
- ------- ---------------------------------------------------- -----------------------------------
<S> <C> <C>
12.1 Computation of Ratio of Earnings to Fixed Charges. Filed herewith.
12.2 Computation of Ratio of Earnings to Fixed Charges Filed herewith.
and Preferred Dividends.
13 Excerpts from the Corporation's Annual Report to Filed herewith.
Shareholders for the year ended December 31,
2002. Such Annual Report, except for the portions
thereof that are expressly incorporated by
reference herein, is furnished for information of
the SEC only and is not deemed to be "filed" as
part of this Form 10-K.
21 Schedule of Certain Subsidiaries of the Corporation. Filed herewith.
23.1 Consent of Deloitte & Touche LLP, independent Filed herewith.
auditors for the Corporation.
23.2 Consent of Ernst & Young LLP, former independent Filed herewith.
auditors for the Corporation.
24 Powers of Attorney. Filed herewith.
99.1 Agreement between The PNC Financial Services Group, Incorporated herein by reference to
Inc. and Federal Reserve Bank of Cleveland. Exhibit 99.1 of the Corporation's
Current Report on Form 8-K dated
July 18, 2002.
99.2 Form of Agreement between PNC Bank, National Incorporated herein by reference to
Association and Office of the Comptroller of the Exhibit 99.2 of the Corporation's
Currency. Current Report on Form 8-K dated
July 18, 2002.
99.3 Form of Order of the Securities and Exchange Incorporated herein by reference to
Commission Instituting Public Administrative Exhibit 99.3 of the Corporation's
Proceedings Pursuant to Section 8A of the Current Report on Form 8-K dated
Securities Act of 1933 and 21C of the Securities July 18, 2002.
Exchange Act of 1934, Making Findings and Imposing
Cease-and-Desist Order.
</TABLE>
- ---------------
+ Incorporated document references to filings by the Corporation are to SEC
File No. 1-9718.
* Denotes management contract or compensatory plan.
Copies of these Exhibits may be obtained electronically at the SEC's home page
at www.sec.gov or from the public reference section of the SEC, at prescribed
rates, at 450 Fifth Street NW, Washington, D.C. 20549. Copies may also be
obtained by any shareholder, without charge, upon written request addressed to
Computershare Investor Services, Post Office Box 3504, Chicago, Illinois
60690-3504, by calling (800) 982-7652 or via e-mail at
web.queries@computershare.com.
E-3
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-3.2
<SEQUENCE>3
<FILENAME>j9925001exv3w2.txt
<DESCRIPTION>AMENDED AND RESTATED BY-LAWS
<TEXT>
<PAGE>
EXHIBIT 3.2
BY-LAWS
OF
THE PNC FINANCIAL SERVICES GROUP, INC.
AMENDED AND RESTATED AS OF NOVEMBER 21, 2002
================================================================================
ARTICLE I. PRINCIPAL OFFICE
The principal office of the Corporation shall be located at One PNC
Plaza, Pittsburgh, Pennsylvania.
ARTICLE II. SHAREHOLDERS
1. ANNUAL MEETING
1.1 TIME AND PLACE.
An annual meeting of the shareholders for the election of
directors and the transaction of such other business as may properly come before
the meeting shall be held at 11 a.m. on the fourth Tuesday in April of each
year, or on such other date or hour as may be fixed by the Board of Directors.
1.2 NOMINATIONS AND OTHER BUSINESS.
(a) Nominations for the election of directors and other
proposals for action at an annual meeting of shareholders may be made only (i)
pursuant to the Corporation's notice of such meeting, (ii) by the presiding
officer, (iii) by or at the direction of a majority of the Board of Directors,
or (iv) by one or more shareholders in accordance with applicable rules of the
Securities and Exchange Commission and the provisions of this Section 1.2.
(b) A nomination for the election of a director or a proposal
for action at an annual meeting may be made by a shareholder only if written
notice of such nomination or proposal has been received by the Secretary of the
Corporation at its principal office not later than (i) 90 days prior to such
annual meeting (unless a different date for such notice has been stated in the
Corporation's most recent proxy materials distributed to shareholders), or (ii)
if the annual meeting is to be held on a date other than the fourth Tuesday in
April, the close of business on the tenth day following the first public
disclosure of the date of such meeting. The first public disclosure of the date
of any annual meeting of shareholders shall be when public disclosure of such
meeting date is first made in a filing by the Corporation with the Securities
and Exchange Commission, in any notice given to the New York Stock Exchange, or
in a news release reported by any national news service.
<PAGE>
By-Laws - The PNC Financial Services Group, Inc.
Page 2
(c) Each such notice from a shareholder shall set forth: (i)
as to the shareholder giving the notice and the beneficial owner, if any, on
whose behalf the notice is given (A) the name and address of such shareholder
and of such beneficial owner, and (B) the class and number of shares of the
Corporation which are owned of record and beneficially by such shareholder and
such beneficial owner; and (ii) a representation that the shareholder is a
beneficial owner of stock of the Corporation entitled to vote at such meeting
and intends to be present at the meeting in person or by proxy to make such
nomination or proposal.
(d) Each notice of nomination for the election of a director
from a shareholder also shall set forth: (i) the name and address of the person
to be nominated; (ii) a description of all arrangements or understandings
between the shareholder and the nominee and any other person or persons (naming
such person or persons) pursuant to which the nomination is to be made by the
shareholder; (iii) such other information regarding the nominee as would be
required to be included in proxy materials filed under applicable rules of the
Securities and Exchange Commission had the nominee been nominated by the Board
of Directors; and (iv) the written consent of the nominee to serve as a director
of the Corporation if so elected.
(e) Each notice of a proposal for action at an annual meeting
from a shareholder also shall set forth a brief description of the proposal, the
reasons for making such proposal, and any direct or indirect interest of the
shareholder, or any person on whose behalf the shareholder is acting, in making
such proposal.
(f) The presiding officer of the meeting may refuse to permit
any nomination for the election of a director or proposal to be made at an
annual meeting by a shareholder who has not complied with all of the foregoing
procedures.
2. SPECIAL MEETINGS
Special meetings of the shareholders may be called, at any time, only
by the Board of Directors, the Chairman of the Board, the President, or a Vice
Chairman of the Board. Only business brought before the meeting (a) pursuant to
the Corporation's notice of such meeting, (b) by the presiding officer, or (c)
by or at the direction of a majority of the Board of Directors, shall be
conducted at a special meeting of the shareholders.
3. PLACE OF MEETINGS
Meetings of the shareholders shall be held at the principal office of
the Corporation or at such other place as the Board of Directors may designate.
4. NOTICE OF MEETINGS
Written notice of every meeting of the shareholders shall be given to
each shareholder of record entitled to vote at the meeting at least five days
prior to the day named for the meeting, unless a greater period of notice is
required by law. The notice shall state the day, time and place
<PAGE>
By-Laws - The PNC Financial Services Group, Inc.
Page 3
of such meeting and the general nature of the business to be transacted. Notice
of a meeting may be waived in writing and attendance at a meeting shall itself
constitute a waiver of notice of the meeting.
5. QUORUM
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 matter shall constitute a quorum for the purpose of considering
such matter. At a duly organized meeting, except as may be otherwise specified
in the Articles of Incorporation or provided by law, each matter shall be
decided upon receiving the affirmative vote of a majority of the votes cast by
all shareholders entitled to vote thereon and, if any shareholders are entitled
to vote thereon as a class, upon receiving the affirmative vote of a majority of
the votes cast by the shareholders entitled to vote as a class.
6. RECORD DATE
The Board of Directors may fix a record date not more than ninety days
prior to the date of any meeting of shareholders, or the date fixed for the
payment of any dividend or distribution, or the date for the allotment of rights
or the date when any change or conversion or exchange of shares will be made or
go into effect. Only such shareholders as shall be shareholders of record at the
close of business on the record date shall be entitled to notice of, or to vote
at such meeting or to receive such allotment of rights or to exercise such
rights, as the case may be.
ARTICLE III. DIRECTORS
1. BOARD OF DIRECTORS
The business and offices of the Corporation shall be managed by the
Board of Directors, which shall consist of not less than five nor more than
thirty-six members as shall be established from time to time by the Board of
Directors.
2. TERM OF OFFICE
After elected by the shareholders, directors shall hold office until
the next succeeding annual meeting and until their successors shall have been
elected and qualified.
3. VACANCY
Vacancies in the Board of Directors, including vacancies resulting from
an increase in the number of directors, may be filled by a majority of the
remaining directors though less than a quorum, and any director so elected shall
serve until the next annual meeting of the shareholders and until a successor
shall have been elected and qualified.
<PAGE>
By-Laws - The PNC Financial Services Group, Inc.
Page 4
4. ORGANIZATION
As soon as practicable after the annual meeting of shareholders at
which they were elected, the Board of Directors shall meet for the purpose of
electing officers and the transaction of such other business as may be properly
brought before the meeting.
5. REGULAR MEETINGS
Regular meetings of the Board of Directors may be held without notice
at such times and at such places as the Board of Directors, by resolution, shall
establish. When a regular meeting falls on a business holiday, it shall be held
on the preceding or next following business day, as the Chief Executive Officer
shall select.
6. SPECIAL MEETINGS
Special meetings of the Board of Directors may be called by the
Chairman of the Board, the Chief Executive Officer, the President, any Vice
Chairman, or at the written request of any three directors. Notice of special
meetings shall be given to each director personally or in writing, or by
telephone, not later than during the day immediately preceding the day of such
meeting and shall include the general nature of the business to be transacted at
the meeting.
7. QUORUM
A majority of the directors shall constitute a quorum for the
transaction of business, and the acts of a majority of the directors present at
a meeting at which a quorum is present shall be the acts of the Board of
Directors. One or more directors may participate in a meeting of the Board of
Directors, or in a meeting of a Committee of the Board of Directors by means of
communication facilities enabling all persons participating in the meeting to
hear each other.
8. ACTION WITHOUT A MEETING
Any action which may be taken at a meeting of the Board of Directors
may be taken without a meeting if a written consent or consents setting forth
the action so taken is signed by all the directors and filed with the Corporate
Secretary.
9. COMPENSATION OF DIRECTORS
Directors shall be compensated for their services and reimbursed for
their meeting attendance expenses, in such manner and at such time as the Board
of Directors may determine.
<PAGE>
By-Laws - The PNC Financial Services Group, Inc.
Page 5
ARTICLE IV. OFFICERS
1. DESIGNATION
The officers of the Corporation shall be a Chairman of the Board, a
President, one or more Vice Chairmen, one or more Vice Presidents of whom one or
more may be designated Senior Executive Vice President, Executive Vice President
or Senior Vice President, a Corporate Secretary, a Treasurer, a Controller, a
General Auditor and such other officers, as the Board of Directors, the
Chairman, the President, or the Vice Chairman may from time to time designate.
The Board of Directors shall designate from among the Chairman of the Board,
President, and Vice Chairmen, one of those officers to be the Chief Executive
Officer. All officers having the rank of Senior Vice President or higher shall
be elected by the Board of Directors and shall hold office during the pleasure
of the Board of Directors. All other officers shall be appointed by the Chief
Executive Officer, or, in his absence, by such other officer or officers as may
be designated by the Board of Directors, and such appointments shall be reported
to the Board of Directors.
2. RESPONSIBILITIES OF THE SENIOR OFFICERS
2.1 CHIEF EXECUTIVE OFFICER
The Chief Executive Officer of the Corporation shall preside
at all meetings of the shareholders and the Board of Directors, and shall be ex
officio a member of all Committees except the Audit Committee, the Nominating
and Governance Committee, and the Personnel and Compensation Committee. Subject
to the direction of the Board of Directors, the Chief Executive Officer shall
have the general supervision of the policies, business and operations of the
Corporation, and of the other officers, agents and employees of the Corporation
and, except as otherwise provided in these By-Laws or by the Board of Directors,
shall have all the other powers and duties as are usually incident to the Chief
Executive Officer of a corporation. In the absence of the Chief Executive
Officer, his or her rights shall be held and duties shall be performed by such
other officer or officers as shall be designated by the Board of Directors.
2.2 CHAIRMAN, PRESIDENT AND VICE CHAIRMAN
The Chairman, the President and the Vice Chairman if not
designated as the Chief Executive Officer shall have such duties and powers as
may be assigned to them from time to time by the Board of Directors or the Chief
Executive Officer.
2.3 VICE PRESIDENTS
The Executive Vice Presidents, Senior Vice Presidents and the
Vice Presidents, if such are elected, shall have the duties and powers as may
from time to time be assigned to them by the Board of Directors, or by the Chief
Executive Officer in the absence of any assignment by the Board of Directors.
Any reference in these By-Laws to a Vice President will apply equally to an
Executive Vice President or a Senior Vice President unless the context requires
otherwise.
<PAGE>
By-Laws - The PNC Financial Services Group, Inc.
Page 6
2.4 TREASURER
The Treasurer shall be responsible for the funding of the
Corporation and for all moneys, funds, securities, fidelity and indemnity bonds
and other valuables belonging to the Corporation; and shall perform such other
duties as may be assigned to him from time to time by the Board of Directors or
the Chief Executive Officer.
2.5 CORPORATE SECRETARY
The Corporate Secretary shall: attend the meetings of the
shareholders, of the Board of Directors, of the Executive Committee, and of such
other Board Committees, if any, as have not appointed another person as
secretary of that Committee; keep minutes thereof in suitable minute books; have
charge of the corporate records and papers and the corporate seal; have charge
of the stock and transfer records of the Corporation; keep a record of all
shareholders and give notices of all meetings of shareholders, special meetings
of the Board of Directors and of its Committees; and have such other duties as
the Board of Directors or the Chief Executive Officer shall assign.
2.6 CONTROLLER
The Controller, if a Controller is elected, shall cause to be
kept proper records of the transactions of the Corporation; shall be responsible
for the preparation of financial and tax reports required of the Corporation;
and shall perform such other duties as may be assigned to him or her from time
to time by the Board of Directors or by the Chief Executive Officer.
2.7 GENERAL AUDITOR
The General Auditor shall have charge of auditing the books,
records and accounts of the Corporation and shall report directly to the Audit
Committee of the Board of Directors.
2.8 ASSISTANT OFFICERS
Each assistant officer as shall be elected shall assist in the
performance of the duties of the officer to whom he is assistant and shall
perform such duties in the absence of the officer. He shall perform such
additional duties as the Board of Directors, the Chief Executive Officer, or the
officer to whom he is assistant, may from time to time assign to him.
3. INCUMBENCY
Any officer elected by the Board of Directors may be removed by the
Board of Directors whenever, in its best judgment, the best interest of the
Corporation will be served thereby, without prejudice however to any contract
rights the person so removed may have with the Corporation or any of its
subsidiaries.
<PAGE>
By-Laws - The PNC Financial Services Group, Inc.
Page 7
ARTICLE V. COMMITTEES
1. STANDING COMMITTEES
The Standing Committees which shall be appointed from time to time by
the Board of Directors shall be the Executive Committee, the Audit Committee,
the Nominating and Governance Committee, the Personnel and Compensation
Committee, the Credit Committee and the Finance Committee. The Board of
Directors may appoint such other Committees as the Board of Directors shall deem
advisable.
1.1 EXECUTIVE COMMITTEE
The Executive Committee shall consist of its Chair, who shall
be appointed by the Board of Directors on the recommendation of the Nominating
and Governance Committee, the Corporation's Chief Executive Officer, and such
other directors, not fewer than five, as shall from time to time be appointed by
the Board of Directors on the recommendation of the Nominating and Governance
Committee or by the Chief Executive Officer. The Committee shall meet at such
time or times as may be fixed by the Board of Directors, or upon the call of its
Chair or the Chief Executive Officer. In the absence of the Committee Chair, the
Chief Executive Officer shall act as Committee Chair unless the Board of
Directors shall appoint some other director. In all instances which the
Committee shall deem necessary or appropriate, the Committee shall have and may
exercise all of the powers and authority of the Board of Directors so far as may
be permitted by law. All acts done and powers conferred by the Committee from
time to time shall be deemed to be, and may be certified as being, done and
conferred under authority of the Board of Directors. Five directors shall
constitute a quorum.
1.2 AUDIT COMMITTEE
The Board of Directors shall appoint the members of the Audit
Committee annually on the recommendation of the Nominating and Governance
Committee. The Committee shall consist of not less than three directors nor more
than eight. The Board of Directors shall, on the recommendation of the
Nominating and Governance Committee, appoint one of the members of the Committee
to serve as Committee Chair. The Committee Chair will have authority to act on
behalf of the Committee between meetings. The Committee may appoint a secretary,
who need not be a director. The Committee shall meet on the call of its Chair or
as the Committee determines, but not less frequently than quarterly. The duties
and responsibilities of the Committee shall be established by the Board of
Directors.
<PAGE>
By-Laws - The PNC Financial Services Group, Inc.
Page 8
1.3 NOMINATING AND GOVERNANCE COMMITTEE
The Board of Directors shall appoint annually the members of
the Nominating and Governance Committee, consisting of not fewer than three
directors, none of whom shall be an officer or former officer of the
Corporation. The Board of Directors shall, on the recommendation of the
Nominating and Governance Committee, appoint one of the members of the Committee
to serve as Committee Chair. The Committee may appoint a secretary, who need not
be a director. The duties and responsibilities of the Committee shall be
established by the Board of Directors.
1.4 PERSONNEL AND COMPENSATION COMMITTEE
The Board of Directors shall appoint annually, on the
recommendation of the Nominating and Governance Committee, the members of the
Personnel and Compensation Committee consisting of not fewer than three
directors, none of whom shall be an officer or former officer of the
Corporation. Further, upon appointment and at all times during his or her tenure
on the Committee, each Committee member must satisfy such standards of
independence as may be prescribed for purposes of any federal securities, tax or
other laws relating to the Committee's duties and responsibilities. The
Committee Chair shall be appointed by the Board of Directors on the
recommendation of the Nominating and Governance Committee. The Committee may
also appoint a secretary, who need not be a director, and may delegate to the
Committee Chair such power and authority as the Committee deems to be
appropriate, except such powers and authorities as may be required by law to be
exercised by the whole Committee or by a sub-committee of at least two members.
The duties and responsibilities of the Committee shall be established by the
Board of Directors.
1.5 CREDIT COMMITTEE
The Board of Directors shall appoint annually, on the
recommendation of the Nominating and Governance Committee, the members of the
Credit Committee consisting of not less than five directors, including no more
than two officer-directors. The Committee Chair shall be appointed by the Board
of Directors, on the recommendation of the Nominating and Governance Committee,
and shall not be an officer of the Corporation. The Committee may appoint a
secretary, who need not be a director. The duties and responsibilities of the
Committee shall be established by the Board of Directors.
1.6 FINANCE COMMITTEE
The Board of Directors shall appoint annually, on the
recommendation of the Nominating and Governance Committee, the members of the
Finance Committee consisting of not less than five directors, including no more
than two officer-directors. The Committee Chair shall be appointed by the Board
of Directors on the recommendation of the Nominating and Governance Committee,
and shall not be an officer of the Corporation. The Committee may appoint a
secretary, who need not be a director. The duties and responsibilities of the
Committee shall be established by the Board of Directors.
<PAGE>
By-Laws - The PNC Financial Services Group, Inc.
Page 9
2. OTHER COMMITTEES; SUBCOMMITTEES
The Board of Directors may authorize the appointment of such other
Committees as it shall deem advisable. Unless otherwise stated in its Committee
Charter, each Committee shall have the authority to form and delegate authority
to subcommittees of one or more Committee members when appropriate.
3. MINUTES
The Executive Committee and the Audit Committee shall keep minutes of
their meetings, and such minutes shall be submitted at a regular meeting of the
Board of Directors, and any action taken by the Board of Directors with respect
thereto shall be entered in the minutes of the Board of Directors. All other
Committees shall keep minutes of their meetings which shall be accessible to
inspection by the Board of Directors at all times.
4. PROCEDURE
Except as otherwise expressly provided for herein or in the Committee's
charter, each Committee may appoint a secretary, who need not be a director,
adopt its own rules of procedure and, unless the Board of Directors has acted
with respect thereto, determine the date, place and hour for its meetings. In
the absence of any other provision herein or in the Committee's charter to the
contrary, a majority of the members of any Committee shall constitute a quorum,
and the action of a majority of the members in attendance at a Committee meeting
shall constitute the action of the body. Notice of meetings shall be given to
each Committee member personally, or in writing addressed to the address of the
director appearing on the books of the Corporation, on or before the day
preceding the meeting.
5. ATTENDANCE
In the absence or disqualification of any member of a Committee, the
members thereof present at any meeting and not disqualified from voting, whether
or not they constitute a quorum, may unanimously appoint another director to act
at the meeting in place of any absent or disqualified member, provided that said
director meets all of the qualifications for a member of that Committee as set
forth in these By-Laws and in the Committee's charter.
ARTICLE VI. STOCK CERTIFICATES
1. SIGNATURES
Certificates of stock of the Corporation shall be signed by the
Chairman of the Board, the Chief Executive Officer, the President, any Vice
Chairman, or any Vice President and shall be countersigned by the Corporate
Secretary, the Treasurer, or any Assistant Corporate Secretary or Assistant
Treasurer, and shall be sealed with the seal of the Corporation, which may be a
facsimile. Where any such stock certificate is signed manually by a transfer
agent or a registrar, the signatures of the officers may be facsimiles.
<PAGE>
By-Laws - The PNC Financial Services Group, Inc.
Page 10
2. TRANSFERS
The shares of stock of the Corporation shall be transferable only on
its books upon surrender of the stock certificate for such shares properly
endorsed. The Board of Directors shall have power to appoint one or more
Transfer Agents and Registrars for the transfer and registration of certificates
of stock of any class, and may require that stock certificates shall be
countersigned and registered by one or more such Transfer Agents and Registrars.
3. LOST OR DESTROYED CERTIFICATES
If a stock certificate shall be lost, stolen or destroyed, the
shareholder may file with the Corporation an affidavit stating the circumstances
of the loss, theft or destruction and may request the issuance of a new
certificate. He shall give to the Corporation a bond which shall be in such sum,
contain such terms and provisions and have such surety or sureties as the Board
of Directors may direct. The Corporation may thereupon issue a new certificate
replacing the certificate lost, stolen or destroyed.
ARTICLE VII. DIRECTOR LIABILITY LIMITATION AND INDEMNIFICATION
1. LIMITATION OF DIRECTOR LIABILITY
A director of the Corporation shall, to the maximum extent permitted by
the laws of the Commonwealth of Pennsylvania, have no personal liability for
monetary damages for any action taken, or any failure to take any action as a
director, provided that this Section 1, Article VII shall not eliminate the
liability of a director in any case where such elimination is not permitted by
law.
2. INDEMNIFICATION
Each person who at any time is or shall have been a director or officer
of the Corporation, or is serving or shall have served at the request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, and his heirs, executors
and administrators, shall be indemnified by the Corporation in accordance with
and to the full extent permitted by the laws of the Commonwealth of Pennsylvania
as in effect at the time of such indemnification. The foregoing right of
indemnification shall constitute a contract between the Corporation and each of
its directors and officers and shall not be deemed exclusive of other rights to
which any director, officer, employee, agent or other person may be entitled in
any capacity as a matter of law or under any by-law, agreement, vote of
shareholders or directors, or otherwise. If authorized by the Board of
Directors, the Corporation may purchase and maintain insurance on behalf of any
person to the full extent permitted by the laws of the Commonwealth of
Pennsylvania.
<PAGE>
By-Laws - The PNC Financial Services Group, Inc.
Page 11
The first (1st) paragraph of this Article VII, Section 2 provides
indemnification only to persons who at any time are or shall have been (1)
directors or officers of the Corporation or (2) directors or officers of the
Corporation who are serving or shall have served at the request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise (any such person as
described in (1) or (2) being a "Covered Person").
In connection with any threatened, pending or completed claim, action,
suit or proceeding, whether civil, criminal, administrative, investigative,
legislative or other, including without limitation an action by or in the right
of the Corporation, in which a Covered Person was or is involved (as a party, a
witness, by being threatened to be made a party, or otherwise) (each a
"Proceeding") for which the Covered Person may be entitled to indemnification
under this Article VII, Section 2, the Corporation shall pay the expenses
(including without limitation attorneys' fees and expenses) incurred by such
Covered Person in any such Proceeding in advance of final disposition of such
Proceeding (an "advancement of expenses") upon receipt by the Corporation of an
undertaking, by or on behalf of such Covered Person, to repay all amounts so
advanced if it is ultimately determined by final judicial decision from which
there is no further right to appeal that such Covered Person is not entitled to
be indemnified for such expenses under this Article VII, Section 2 or otherwise.
The Corporation will not, in connection with a Proceeding (or part
thereof) initiated by a Covered Person, advance expenses to such person or,
except as provided in the fifth (5th) paragraph of this Article VII, Section 2,
indemnify such person pursuant to this Article VII, Section 2 unless the
Proceeding (or part thereof) was authorized by the Board of Directors of the
Corporation.
If a written claim for indemnification or advancement of expenses
pursuant to this Article VII, Section 2 is not paid in full by the Corporation
within sixty (60) days after such claim has been received by the Corporation,
the claimant may at any time thereafter bring suit against the Corporation to
recover the unpaid amount of any such claim, and if successful in whole or in
part in any such suit, the claimant shall also be entitled to be paid the
expenses of prosecuting such suit. It shall be a defense to any such suit (other
than a suit to enforce a claim for advancement of expenses where the required
undertaking has been received by the Corporation) that indemnification of the
claimant would not be permitted by applicable law, but the burden of proving
such defense shall be on the Corporation. Neither the failure of the Corporation
(including its Board of Directors, independent legal counsel or shareholders) to
have made a determination prior to the commencement of any suit seeking
indemnification or advancement of expenses pursuant to this Article VII, Section
2 that indemnification or advancement of expenses is proper in the
circumstances, nor a determination by the Corporation (including its Board of
Directors, independent legal counsel or shareholders) that indemnification or
advancement of expenses is not proper in the circumstances, shall, in itself,
create a presumption that the claimant is not entitled to indemnification or
advancement of expenses pursuant to this Article VII, Section 2 or be a defense
to any such suit.
If any provision or provisions of this Article VII, Section 2 are held
to be invalid, illegal or unenforceable for any reason whatsoever: (1) the
validity, legality and enforceability of the remaining provisions of this
Article VII, Section 2 (including without limitation each portion of
<PAGE>
By-Laws - The PNC Financial Services Group, Inc.
Page 12
any paragraph of this Article VII, Section 2 containing any such provision held
to be invalid, illegal or unenforceable that is not itself held to be invalid,
illegal or unenforceable) will not in any way be affected or impaired thereby;
and (2) to the full extent possible, the provisions of this Article VII, Section
2 (including without limitation each such portion of any paragraph of this
Article VII, Section 2 containing any such provision held to be invalid, illegal
or unenforceable) will be construed so as to give effect to the intent
manifested by the provision or provisions held invalid, illegal or
unenforceable.
If a claimant is entitled to indemnification pursuant to the provisions
of this Article VII, Section 2 for some or a portion of the expense, liability
and loss incurred or suffered by such person in connection with any Proceeding
but not for the total amount thereof, the Corporation shall indemnify the
claimant for the portion thereof to which the claimant is entitled.
The rights to indemnification and advancement of expenses set forth in
this Article VII, Section 2: (1) shall be contract rights and such rights shall
continue as to a person who has ceased to be a Covered Person and shall inure to
the benefit of a Covered Person's heirs, executors, administrators and legal
representatives; and (2) shall not be deemed exclusive of any other rights to
which any director, officer, employee, agent or other person may be entitled in
any capacity as a matter of law or under any charter provision, by-law,
agreement, vote of shareholders or directors, or otherwise. Any repeal,
amendment or modification of this Article VII, Section 2 or adoption of any
other provision of the By-Laws or Articles of Incorporation of the Corporation
which has the effect of limiting the rights set forth in this Article VII,
Section 2 shall operate prospectively only and shall not affect any rights or
obligations with respect to actions, omissions, circumstances or events
occurring prior to the adoption of any such repeal, amendment or modification.
Each Covered Person shall be deemed to be serving as such in reliance on the
provisions of this Article VII, Section 2. Nothing in this Article VII, Section
2 shall require the Corporation to take any action that would be prohibited by
applicable law.
3. INDEMNIFICATION OF EMPLOYEES AND AGENTS
The Corporation may provide indemnification and advancement of expenses
to any employee or agent of the Corporation up to the full extent of the
provisions of Article VII, Section 2 of these By-Laws with respect to the
indemnification and advancement of expenses of directors and officers of the
Corporation.
ARTICLE VIII. APPLICATION OF STATUTORY ANTI-TAKEOVER PROVISIONS
The following provisions of Title 15 of the Pennsylvania consolidated
statutes shall not be applicable to the Corporation: (1) Subchapter G of Chapter
25; and (2) Subchapter H of Chapter 25.
<PAGE>
By-Laws - The PNC Financial Services Group, Inc.
Page 13
ARTICLE IX. EXERCISE OF AUTHORITY DURING EMERGENCIES
The Board of Directors or the Executive Committee may from time to time
adopt resolutions authorizing certain persons and entities to exercise authority
on behalf of this Corporation in time of emergency, and in the time of emergency
any such resolutions will be applicable, notwithstanding any provisions as to
the contrary contained in these By-Laws.
ARTICLE X. CHARITABLE CONTRIBUTIONS
The Board of Directors may authorize contributions to community funds,
or to charitable, philanthropic, or benevolent instrumentalities conducive to
public welfare in such sums as the Board of Directors may deem expedient and in
the interest of the Corporation.
ARTICLE XI. AMENDMENTS
These By-Laws may be altered, amended, added to or repealed by a vote
of a majority of the Board of Directors at any regular meeting of the Board of
Directors, or at any special meeting of the Board of Directors called for that
purpose.
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-4.8
<SEQUENCE>4
<FILENAME>j9925001exv4w8.txt
<DESCRIPTION>1ST AMENDMENT TO RIGHTS AGREEMENT
<TEXT>
<PAGE>
EXHIBIT 4.8
FIRST AMENDMENT TO RIGHTS AGREEMENT
This First Amendment (this "Amendment"), dated and effective as of
January 1, 2003 and executed among The PNC Financial Services Group, Inc., a
Pennsylvania corporation, (the "Company"), The Chase Manhattan Bank ("Chase")
and Computershare Investor Services, LLC, ("Computershare"). hereby amends the
Rights Agreement between the Company and Chase, as Rights Agent (the "Current
Rights Agent") dated as of May 15, 2000 (the "Rights Agreement").
W I T N E S S E T H
WHEREAS, the Company and Chase previously entered into the Rights
Agreement, pursuant to which Chase was appointed to serve as the Current
Rights Agent; and
WHEREAS, Chase desires to resign as Current Rights Agent and the
Company desires to accept such resignation and appoint Computershare as
successor Rights Agent pursuant to Section 21 of the Rights Agreement; and
WHEREAS, in connection with the resignation of Chase as Current
Rights Agent and the appointment of Computershare as successor Rights Agent,
the Company, Chase and Computershare desire to amend the Rights Agreement in
certain respects.
Now, THEREFORE, in consideration of the promises and the mutual
agreements herein set forth, the parties hereby agree as follows:
Section 1. RESIGNATION OF RIGHTS AGENT. Chase hereby resigns as
Current Rights Agent under the Rights Agreement and the Company hereby accepts
Chase's resignation.
Section 2. APPOINTMENT OF THE SUCCESSOR RIGHTS AGENT. The Company
hereby appoints Computershare as successor Rights Agent under the Rights
Agreement and Computershare hereby accepts such appointment.
Section 3. WAIVER OF PRIOR WRITTEN NOTICE. The Company, Chase and
Computershare each waive any requirements of prior written notice of a change
of the Rights Agent under the Rights Agreement.
Section 4. AMENDMENT OF RIGHTS AGREEMENT. The Rights Agreement shall
be amended as follows:
(a) "Computershare Investor Services, LLC" shall be substituted
throughout the Rights Agreement, Exhibits and other attachments for "The Chase
Manhattan Bank," including substituting all abbreviations therefor.
(b) Section 1(e) is hereby amended by deleting the definition of
"Business Day" in its entirety and substituting the following definition:
<PAGE>
"Business Day" shall mean any day other than a Saturday,
Sunday, or a day on which the New York Stock Exchange or
banking institutions in the State of Illinois are generally
authorized or obligated by law or executive order to close.
(c) The second sentence of Section 18 is hereby amended by
adding the phrase "of any kind whatsoever" as follows: "The Company also
agrees to indemnify the Rights Agent for, and to hold it harmless against, any
loss, liability, damage, judgment, fine, penalty, claim, demand, settlement,
cost or expense of any kind whatsoever incurred without gross negligence. .."
(d) Section 20(a) is hereby amended by adding the phrase "of its
own choice," as follows: "The Rights Agent may consult with legal counsel of
its own choice (who may be legal counsel for the Company)... "
(e) In Section 21 , the successor Rights Agent combined capital
and surplus requirement of at least $50 million is hereby deleted and replaced
with a combined capital and surplus requirement of at least $5 million.
(f) Section 26 is hereby amended by deleting the address for
notice or demand to be given to the Rights Agent by the Company and
substituting in lieu therefor the following:
Computershare Investor Services, LLC
Two North LaSalle Street
Chicago, Illinois 60602
Attention: Tod Shafer
with a copy to:
Computershare Investor Services, LLC
Two North LaSalle Street
Chicago, Illinois 60602
Attention: Cindy Nisley
(g) Section 31 is hereby amended to reflect that all
provisions regarding the rights, duties, and obligations of the Rights Agent
shall be governed by and construed in accordance with the laws of the State of
Illinois applicable to contracts made and to be performed entirely within such
state.
Section 5. Continued Effectiveness. The parties hereto hereby
acknowledge and agree that, except as specifically supplemented and amended,
changed or modified hereby, the Rights Agreement shall remain in full force
and effect in accordance with its terms.
Section 6. Execution in Counterparts. This Amendment may be executed
in any number of counterparts and each of such counterparts shall for all
purposes be deemed to be an original, and all such counterparts shall together
constitute one and the same instrument.
-2-
<PAGE>
Section 7. Terms. Except as otherwise expressly provided herein, or
unless the context otherwise requires, all terms used herein have the meanings
assigned to them in the Rights Agreement.
[SIGNATURE PAGE FOLLOWS]
-3-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and effective as of the day and year above written.
THE PNC FINANCIAL SERVICES GROUP, INC.
By: /s/ THOMAS R. MOORE
--------------------------------------
Its: CORPORATE SECRETARY
-------------------------------------
THE CHASE MANHATTAN BANK
By: /s/ ERIC R. LEASON
--------------------------------------
Its: VICE PRESIDENT
-------------------------------------
COMPUTERSHARE INVESTOR SERVICES, LLC
By: /s/ TOD SHAFER
--------------------------------------
Its Relationship Manager
-4-
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.5
<SEQUENCE>5
<FILENAME>j9925001exv10w5.txt
<DESCRIPTION>1997 LONG-TERM INCENTIVE AWARD PLAN, AS AMENDED
<TEXT>
<PAGE>
EXHIBIT 10.5
THE PNC FINANCIAL SERVICES GROUP, INC.
1997 LONG-TERM INCENTIVE AWARD PLAN
(AS AMENDED AND RESTATED EFFECTIVE JANUARY 3, 2003)
1. DEFINITIONS
In this Plan, except where the context otherwise indicates, the
following definitions apply.
1.1 "AGREEMENT" means a written agreement between the Corporation and
the recipient evidencing a grant of an Option, Right or Performance Unit or an
award of Incentive Shares under the Plan.
1.2 "BOARD" means the Board of Directors of the Corporation.
1.3 "CODE" means the Internal Revenue Code of 1986, as amended, and the
rules and regulations promulgated thereunder.
1.4 "COMMITTEE" means (a) in the case of grants and awards to Eligible
Persons other than Directors ("Employee Awards"), the Board's Personnel and
Compensation Committee, or such other committee appointed by the Board to
administer Employee Awards, all of the members of which shall be "non-employee
directors" as defined in Rule 16b-3 (b)(3)(i) under the Exchange Act or any
similar successor rule and "outside directors" as defined in Treas. Reg. Section
1.162-27(e)(3) or any similar successor regulation and (b) in the case of grants
and awards to Directors, the Board's Committee on Corporate Governance, unless
otherwise determined by the Board.
1.5 "COMMON STOCK" means the common stock of the Corporation.
1.6 "CORPORATION" means The PNC Financial Services Group, Inc.
1.7 "DATE OF EXERCISE" means the date on which the Corporation receives
notice of the exercise of an Option, Right or Performance Unit in accordance
with the terms of Article 9.
1.8 "DATE OF GRANT" means the date on which an Option, Right or
Performance Unit is granted or Incentive Shares are awarded by the Committee or
such later date as may be specified by the Committee in authorizing the grant or
award.
1.9 "DIRECTOR" means any member of the Board who is not also an
employee of the Corporation or any Subsidiary.
1.10 "ELIGIBLE PERSON" means a Senior Executive or Director.
<PAGE>
1.11 "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
1.12 "FAIR MARKET VALUE" of a Share means the amount equal to the fair
market value of a Share as determined pursuant to a reasonable method adopted by
the Committee in good faith for such purpose.
1.13 "GRANTEE" means an Eligible Person to whom Incentive Shares have
been awarded pursuant to Article 12.
1.14 "INCENTIVE SHARES" means Shares awarded pursuant to the provisions
of Article 12.
1.15 "INCENTIVE STOCK OPTION" means an Option granted under the Plan
that qualifies as an incentive stock option under Section 422 of the Code and
that the Corporation designates as such in the Agreement granting the Option.
1.16 "NONSTATUTORY STOCK OPTION" means an Option granted under the Plan
that is not an Incentive Stock Option.
1.17 "OPTION" means an option to purchase Shares granted under the Plan
in accordance with the terms of Article 6.
1.18 "OPTION PERIOD" means the period during which an Option may be
exercised.
1.19 "OPTION PRICE" means the price per Share at which an Option may be
exercised. The Option Price shall be determined by the Committee, but, unless
otherwise determined by the Committee pursuant to Section 3.7, in no event shall
the Option Price be less than the Fair Market Value per Share determined as of
the Date of Grant.
1.20 "OPTIONEE" means an Eligible Person to whom an Option, Right or
Performance Unit has been granted.
1.21 "PERFORMANCE PERIOD" means the period or periods during which each
performance criterion of a Performance Unit will be measured against the
performance standards established by the Committee and specified in the
Agreement relating thereto.
1.22 "PERFORMANCE UNIT" means a performance unit granted under the Plan
in accordance with the terms of Article 8.
1.23 "PERFORMANCE UNIT EXERCISE PERIOD" means the period during which a
Performance Unit may be exercised.
1.24 "PLAN" means The PNC Financial Services Group, Inc. 1997 Long-Term
Incentive Award Plan, as amended from time to time.
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1.25 "RELATED OPTION" means an Option granted in connection with a
specified Right or Performance Unit.
1.26 "RELATED PERFORMANCE UNIT" means a Performance Unit granted in
connection with a specified Option.
1.27 "RELATED RIGHT" means a Right granted in connection with a
specified Option.
1.28 "RIGHT" means a stock appreciation right granted under the Plan in
accordance with the terms of Article 7.
1.29 "RIGHT PERIOD" means the period during which a Right may be
exercised.
1.30 "SENIOR EXECUTIVE" means any officer or key employee of the
Corporation or a Subsidiary who is designated as a "Senior Executive" pursuant
to Section 3.1.
1.31 "SHARE" means a share of authorized but unissued Common Stock or a
reacquired share of Common Stock.
1.32 "SUBSIDIARY" means a corporation at least 80% of the total
combined voting power of all classes of stock of which is owned by the
Corporation, either directly or through one or more other Subsidiaries, except
that with respect to Nonstatutory Stock Options, Rights, Performance Units and
Incentive Shares granted or awarded after March 27, 2000, such term shall mean a
corporation, bank, partnership, business trust, limited liability company or
other form of business organization which is a consolidated subsidiary of the
Corporation under generally accepted accounting principles.
2. PURPOSE
The Plan is intended to assist in attracting, retaining, and motivating
Eligible Persons of outstanding ability and to promote the identification of
their interests with those of the shareholders of the Corporation.
3. ADMINISTRATION
The Plan shall be administered by the Committee or by the Chairman of
the Committee in the exercise of such authority as the Committee may delegate to
him or her from time to time, provided that Section 162(m)(4)(C) of the Code
does not require action by the Committee as a whole. In addition to any other
powers granted to the Committee, it shall have the following powers, subject to
the express provisions of the Plan:
3.1 to determine in its discretion, or to delegate to the Chairman of
the Board of the Corporation, with respect to officers or key employees of the
Corporation or a Subsidiary who are not executive officers for purposes of
Section 16 of the Exchange Act, the power to determine in his or her discretion,
the Eligible Persons to whom
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Options, Performance Units or Rights shall be granted and to whom Incentive
Shares shall be awarded, the number of Shares to be subject to each Option,
Right, Performance Unit grant, or Incentive Share award, and the terms upon
which Options, Rights or Performance Units may be acquired, exercised, or
forfeited and the terms and conditions of Incentive Share awards;
3.2 to determine all other terms and provisions of each Agreement,
which need not be identical;
3.3 without limiting the generality of the foregoing, to provide in its
discretion in an Agreement:
(i) for an agreement by the Optionee or Grantee to render
services to the Corporation or a Subsidiary upon such terms and
conditions as may be specified in the Agreement, provided that the
Committee shall not have the power under the Plan to commit the
Corporation or any Subsidiary to employ or otherwise retain any
Optionee or Grantee;
(ii) for restrictions on the transfer, sale or other
disposition of Shares issued to the Optionee upon the exercise of an
Option, Right or Performance Unit, or for conditions with respect to
the issuance of Incentive Shares;
(iii) for an agreement by the Optionee or Grantee to resell to
the Corporation, under specified conditions, Shares issued upon the
exercise of an Option, Right or Performance Unit or awarded as
Incentive Shares;
(iv) for the payment of the Option Price upon the exercise of
an Option otherwise than in cash, including without limitation by
delivery of Shares valued at Fair Market Value on the Date of Exercise
of the Option or a combination of cash and Shares; by means of any
attestation procedure approved or ratified by the Committee; or by
delivery of a properly executed exercise notice together with
irrevocable instructions to a broker to promptly deliver to the
Corporation the amount of sale or loan proceeds to pay the exercise
price;
(v) for the deferral of receipt of amounts that otherwise
would be distributed upon exercise of a Performance Unit, the terms and
conditions of any such deferral and any interest or dividend equivalent
or other payment that shall accrue with respect to deferred
distributions, subject to the provisions of Article 11;
(vi) for the forfeiture by any Optionee or Grantee of any
Option, Right, Performance Unit or Incentive Shares upon such terms and
conditions as the Committee may deem advisable from time to time; and
(vii) for the effect of a "change in control," as defined in
the Agreement, of the Corporation on the rights of an Optionee or
Grantee with respect to any Options, Rights, Performance Units or
Incentive Shares;
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3.4 to construe and interpret the Agreements and the Plan;
3.5 to require, whether or not provided for in the pertinent Agreement,
of any person exercising an Option, Right or Performance Unit or acquiring
Incentive Shares, at the time of such exercise or acquisition, the making of any
representations or agreements which the Committee may deem necessary or
advisable in order to comply with applicable securities, tax, or other laws;
3.6 to provide for satisfaction of an Optionee's or Grantee's tax
liabilities arising in connection with the Plan through, without limitation,
retention by the Corporation of shares of Common Stock otherwise issuable on the
exercise of a Nonstatutory Stock Option, Right or Performance Unit or pursuant
to an award of Incentive Shares or through delivery of Common Stock to the
Corporation by the Optionee or Grantee under such terms and conditions as the
Committee deems appropriate, including but not limited to any attestation
procedure approved or ratified by the Committee;
3.7 to provide with respect to any Option (other than a Reload Option,
as hereinafter defined) granted under the Plan on or after January 1, 1997,
that, if the Optionee, while an Eligible Person, exercises the Option or
satisfies any related tax withholding obligation in whole or in part by
surrendering already-owned shares of Common Stock, the Optionee will, subject to
this Section 3.7 and such other terms and conditions as may be imposed by the
Committee, receive an additional option ("Reload Option"). The Reload Option
will be to purchase, at Fair Market Value as of the date the original Option was
exercised, a number of shares of Common Stock equal to the number of whole
shares surrendered by the Optionee to exercise the original Option or to satisfy
any related tax withholding obligation. The Reload Option will be exercisable
only between its Date of Grant and the date of the expiration of the original
Option. A Reload Option shall be subject to such additional terms and conditions
as the Committee shall approve, which terms may provide that the Committee may
cancel the Optionee's right to receive the Reload Option and that the Reload
Option will be granted only if the Committee has not canceled such right prior
to the exercise of the original Option.
3.8 to make all other determinations and take all other actions
necessary or advisable for the administration of the Plan; and
3.9 to delegate to officers or managers of the Corporation or any
Subsidiary the authority to perform administrative functions under the Plan with
respect to grants and awards to Eligible Persons other than Directors, provided
that Section 162(m)(4)(C) of the Code does not require action by the Committee
as a whole with respect to such function.
Any determinations or actions made or taken by the Committee pursuant
to this Article shall be binding and final.
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4. ELIGIBILITY
Options, Rights, Performance Units and Incentive Shares may be granted
or awarded only to Eligible Persons; provided, however, that Directors shall not
be granted Incentive Stock Options.
5. STOCK SUBJECT TO THE PLAN
5.1 The maximum number of Shares that may be issued or as to which
grants or awards may be made under the Plan (excluding Shares issued pursuant to
grants or awards made prior to February 20, 1997) shall not exceed the sum of
(i) 10,141,853 Shares plus (ii) as of January 1 of each calendar year commencing
with 1998 an additional number of Shares (which shall be cumulative from year to
year) equal to one and one-half percent (1.5%) of the total issued shares of
Common Stock (including reacquired Shares) at the end of the immediately
preceding calendar year. Notwithstanding the foregoing, in no event shall more
than three percent (3%) of the total issued shares of Common Stock (including
reacquired Shares) at the end of the immediately preceding calendar year be
cumulatively available for grants and awards made in any calendar year. The
maximum number of Shares as to which grants or awards may be made under the Plan
to one Senior Executive with respect to one calendar year shall be 1,000,000
(250,000 for calendar years 1997 through 1999). Notwithstanding the foregoing,
(a) grants of Incentive Stock Options may not be made with respect to more than
1,000,000 Shares during any calendar year, and (b) Incentive Share awards may
not be granted during any calendar year with respect to more than twenty percent
(20%) of the maximum number of Shares available for grants and awards made
during such calendar year. The limitation provided in the first sentence of this
Section 5.1 is hereinafter called the "Cumulative Limitation;" the limitation
provided in the second sentence is hereinafter called the "Annual Limitation;"
the limitation provided in the third sentence is hereinafter called the
"Individual Limitation;" the limitation provided in clause (a) of the fourth
sentence is hereinafter called the "ISO Limitation;" and the limitation provided
in clause (b) of the fourth sentence is hereinafter called the "Incentive Share
Limitation." For purposes of the Individual Limitation, to the extent consistent
with the requirements of the performance-based compensation exception under
Section 162(m) of the Code, a Reload Option (a) shall be deemed to have been
granted at the same time as, and as a part of, the original Option in respect of
which the Reload Option is granted and (b) shall not be deemed to increase the
number of Shares covered by such original Option.
5.2 If an Option, Right or Performance Unit expires or terminates for
any reason (other than termination by virtue of the exercise of a Related
Option, Related Right or Related Performance Unit, as the case may be) without
having been fully exercised, or if Shares covered by an Incentive Share award
are not issued or are forfeited Shares which had been subject to the Agreement
relating thereto shall for purposes of the Cumulative Limitation (and if granted
or awarded in the same calendar year, then also for purposes of the Annual
Limitation, the ISO Limitation, and the Incentive Share
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Limitation) again become available for the grant of other Options, Rights and
Performance Units or for the award of additional Incentive Shares.
5.3 The Shares issued upon the exercise of a Right or Performance Unit
(or if cash is payable in connection with such exercise, that number of Shares
having a Fair Market Value equal to the cash payable upon such exercise), shall
be charged against the number of Shares issuable under the Plan and shall not
become available for the grant of other Options, Rights and Performance Units or
for the award of Incentive Shares. If the Right referred to in the preceding
sentence is a Related Right, or if the Performance Unit referred to in the
preceding sentence is a Related Performance Unit, the Shares subject to the
Related Option, to the extent not charged against the number of Shares subject
to the Plan in accordance with this Section 5.3, shall for purposes of the
Cumulative Limitation (and if granted in the same calendar year, then also for
purposes of the Annual Limitation) again become available for the grant of other
Options, Rights or Performance Units or for the award of additional Incentive
Shares.
6. OPTIONS
6.1 The Committee is hereby authorized to grant Incentive Stock Options
and Nonstatutory Stock Options to Senior Executives and to grant Nonstatutory
Stock Options to Directors, provided that the number of Options granted to a
Senior Executive during a calendar year shall not exceed the Individual
Limitation when aggregated with other grants or awards made to that Senior
Executive during that calendar year.
6.2 All Agreements granting Options shall contain a statement that the
Option is intended to be either (i) a Nonstatutory Stock Option or (ii) an
Incentive Stock Option.
6.3 The Option Period shall be determined by the Committee and
specifically set forth in the Agreement, provided that an Option shall not be
exercisable until the expiration of at least six months from the Date of Grant
(except that this limitation need not apply in the event of the death or
disability of the Optionee or as otherwise permitted by the Agreement upon a
change in control of the Corporation) or after ten years from the Date of Grant.
6.4 All Incentive Stock Options granted under the Plan shall comply
with the provisions of the Code governing incentive stock options and with all
other applicable rules and regulations.
6.5 All other terms of Options granted under the Plan shall be
determined by the Committee in its sole discretion.
7. RIGHTS
7.1 The Committee is hereby authorized to grant Rights to Eligible
Persons, provided that the number of Rights granted to a Senior Executive during
a calendar year shall not exceed the Individual Limitation when aggregated with
other grants or awards made to that Senior Executive during that calendar year.
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7.2 A Right may be granted under the Plan:
(i) in connection with, and at the same time as, the grant of
an Option to an Eligible Person;
(ii) by amendment of an outstanding Nonstatutory Stock Option
granted under the Plan to an Eligible Person; or
(iii) independently of any Option granted under the Plan.
A Right granted under clause (i) or (ii) of the preceding sentence is a
Related Right. A Related Right may, in the Committee's discretion, apply to all
or a portion of the Shares subject to the Related Option.
7.3 A Right may be exercised in whole or in part as provided in the
Agreement, and, subject to the provisions of the Agreement, entitles its
Optionee to receive, without any payment to the Corporation (other than required
tax withholding amounts), either cash or that number of Shares (equal to the
highest whole number of Shares), or a combination thereof, in an amount or
having a Fair Market Value determined as of the Date of Exercise not to exceed
the number of Shares subject to the portion of the Right exercised multiplied by
an amount equal to the excess of the Fair Market Value per Share on the Date of
Exercise of the Right over either (i) the Fair Market Value per Share on the
Date of Grant of the Right or the base price determined by the Committee
pursuant to Section 3.7 if the Right is not a Related Right, or (ii) the Option
Price as provided in the Related Option if the Right is a Related Right.
7.4 The Right Period shall be determined by the Committee and
specifically set forth in the Agreement, provided, however:
(i) a Right may not be exercised until the expiration of at
least six months from the Date of Grant (except that this limitation
need not apply in the event of the death or disability of the Optionee
or as otherwise permitted by the Agreement upon a change in control of
the Corporation);
(ii) a Right will expire no later than the earlier of (A) ten
years from the Date of Grant, or (B) in the case of a Related Right,
the expiration of the Related Option; and
(iii) a Right that is a Related Right may be exercised only
when and to the extent the Related Option is exercisable.
7.5 The exercise, in whole or in part, of a Related Right shall cause a
reduction in the number of Shares subject to the Related Option equal to the
number of Shares with respect to which the Related Right is exercised.
Similarly, the exercise, in whole or in part, of a Related Option shall cause a
reduction in the number of Shares subject to the Related Right equal to the
number of Shares with respect to which the Related Option is exercised.
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8. PERFORMANCE UNITS
8.1 The Committee is hereby authorized to grant Performance Units to
Eligible Persons, provided that the number of Performance Units granted to a
Senior Executive during a calendar year shall not exceed the Individual
Limitation when aggregated with other grants or awards made to that Senior
Executive during that calendar year.
8.2 Performance Units may be granted under the Plan:
(iv) in connection with, and at the same time as, the grant of
a Nonstatutory Stock Option to an Eligible Person;
(v) by amendment of an outstanding Nonstatutory Stock Option
granted under the Plan to an Eligible Person; or
(vi) independently of any Option granted under the Plan.
A Performance Unit granted under Subparagraph (i) or (ii) of the
preceding sentence is a Related Performance Unit. A Related Performance Unit
may, in the Committee's discretion, apply to all or a portion of the Shares
subject to the Related Option. A Performance Unit may not be granted in
connection with, or by amendment to, an Incentive Stock Option.
8.3 A Performance Unit may be exercised in whole or in part as provided
in the Agreement, and, subject to the provisions of the Agreement, entitles its
Optionee to receive, without any payment to the Corporation (other than required
tax withholding amounts), cash, Shares or a combination of cash and Shares,
based upon the degree to which performance standards established by the
Committee and specified in the Agreement have been achieved. During the
Performance Period, such performance standards may be particular to an Eligible
Person or the department, branch, Subsidiary or other unit in which he works, or
may be based on the performance of the Corporation generally. The performance
standards may be based on earnings or earnings growth; return on assets, equity
or investment; regulatory compliance; satisfactory internal or external audits;
improvement of financial ratings; reduction of nonperforming loans; 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.
8.4 The Performance Unit Exercise Period shall be determined by the
Committee and specifically set forth in the Agreement; provided, however:
(i) A Performance Unit may not be exercised until the
expiration of at least six months from the Date of Grant (except that
this limitation need not apply in the event of the death or disability
of the Optionee or as otherwise permitted by an Agreement upon a change
in control of the Corporation); and
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(ii) a Performance Unit will expire no later than the earlier
of (A) ten years from the Date of Grant, or (B) in the case of a
Related Performance Unit, the expiration of the Related Option.
8.5 Each Agreement granting Performance Units shall specify the number
of Performance Units granted; provided, that the maximum number of Related
Performance Units may not exceed the maximum number of Shares subject to the
Related Option and the number of Performance Units may not exceed the maximum
number of Shares subject to the Related Option and the maximum value of a
Related Performance Unit may not exceed the Fair Market Value of a Share subject
to the Related Option.
8.6 The exercise, in whole or in part, of Related Performance Units
shall cause a reduction in the number of Shares subject to the Related Option
and the number of Performance Units in accordance with the terms of the
Agreement. Similarly, the exercise, in whole or in part, of a Related Option
shall cause a reduction in the number of Related Performance Units equal to the
number of Shares with respect to which the Related Option is exercised.
9. EXERCISE; PAYMENT OF WITHHOLDING TAXES
An Option, Right or Performance Unit may, subject to the provisions of
the Agreement under which it was granted, be exercised in whole or in part by
the delivery to the Corporation of written notice of the exercise, in such form
as the Committee may prescribe, accompanied, in the case of an Option, by full
payment for the Shares with respect to which the Option is exercised, and in the
case of an Option, Right or Performance Unit, full payment for related
withholding taxes, if any. The receipt of Incentive Shares shall be subject to
full payment by the Grantee of any withholding taxes then required to be paid.
10. NONTRANSFERABILITY
Except as the Committee may expressly provide otherwise in or with
respect to an Agreement, including any Agreement in effect as of February 20,
1997, Options, Rights and Performance Units granted under the Plan shall not be
transferable otherwise than by will or the laws of descent and distribution, and
an Option, Right or Performance Unit may be exercised during his or her lifetime
only by the Optionee or, in the event of his or her legal incapacity, by his or
her legal representative. A Related Right or Related Performance Unit is
transferable only when the Related Option is transferable and only with the
Related Option and under the same conditions. An Optionee may also designate a
beneficiary to exercise his or her Options after the Optionee's death, provided
that the Committee has first expressly approved the procedures and forms
necessary to effect such a designation.
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11. DEFERRAL OF AWARDS
If an Optionee so elects in accordance with the terms of an Agreement,
the Optionee may defer any or all of the amount otherwise payable on the
exercise of Performance Units in accordance with the provisions of a deferred
compensation plan maintained by the Corporation or a Subsidiary, provided:
(i) that the Optionee makes such election by delivering to the
Corporation written notice of such election, in such form as the
Committee may from time to time prescribe, prior to the beginning of
the Performance Period;
(ii) that such election shall be irrevocable until at least
six months after termination of the Optionee's employment; and
(iii) that such deferred payment shall be made in accordance
with the provisions of such deferred compensation plan.
12. INCENTIVE SHARE AWARDS
The Committee may, in its sole discretion, grant Incentive Share awards
to Eligible Persons, provided that the number of Incentive Share awards granted
to a Senior Executive during a calendar year shall not exceed the Individual
Limitation when aggregated with other grants or awards made to that Senior
Executive during that calendar year. Incentive Share awards shall entitle an
Eligible Person to receive Shares, to be issued at such times, subject to the
achievement of such performance standards or other goals, in recognition of such
performance or other achievements or for such other purposes, and on such other
terms and conditions, if any, as the Committee shall deem appropriate.
Performance standards may be based on earnings or earnings growth; return on
assets, equity or investment; regulatory compliance; satisfactory internal or
external audits; improvement of financial ratings; reduction of nonperforming
loans; 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. The number of Incentive Share awards made to a Senior
Executive during a calendar year shall not exceed the Individual Limitation when
aggregated with other grants or awards made to that Senior Executive during that
calendar year.
13. CAPITAL ADJUSTMENTS
The number and class of Shares (or the Performance Unit equivalent)
subject to each outstanding Option, Right or Performance Unit or Incentive Share
award, the Option Price, and the aggregate number and class of Shares for which
grants or awards thereafter may be made, the Annual Limitation, the Individual
Limitation, the ISO Limitation, and the Incentive Share Limitation provided for
in Section 5.1, shall be subject to such adjustment, if any, as the Committee in
its sole discretion deems appropriate to reflect
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such events as stock dividends, stock splits, recapitalizations, mergers,
consolidations or reorganizations of or by the Corporation.
14. TERMINATION OR AMENDMENT
The Board or the Committee may amend, alter or terminate this Plan in
any respect, at any time; provided, however, that, after this Plan has been
approved by the Shareholders of the Corporation, no amendment, alteration or
termination of this Plan shall be made by the Board or the Committee without
approval of (i) the Corporation's shareholders to the extent shareholder
approval of the amendment is required by applicable law or regulations or the
requirements of the principal exchange or interdealer quotation system on which
the Common Stock is listed or quoted, and (ii) each affected Optionee if such
amendment, alteration or termination would adversely affect his or her rights or
obligations under any grant or award made prior to the date of such amendment,
alteration or termination.
15. MODIFICATION, EXTENSION AND RENEWAL OF OPTIONS, RIGHTS AND PERFORMANCE
UNITS
Subject to the terms and conditions and within the limitations of the
Plan, the Committee may modify, extend or renew outstanding Options, Rights and
Performance Units, or accept the surrender of outstanding options, rights and
performance units (to the extent not theretofore exercised) granted under the
Plan or under any other plan of the Corporation, a Subsidiary or a company or
similar entity acquired by the Corporation or a Subsidiary, and authorize the
granting of new Options, Rights and Performance Units pursuant to the Plan in
substitution therefor (to the extent not theretofore exercised), and the
substituted Options, Rights and Performance Units may specify a longer term than
the surrendered Options, Rights and Performance Units or have any other
provisions that are authorized by the Plan; provided, however, that the
substituted Options, Rights and Performance Units may not specify a lower
exercise price than the surrendered options, rights and performance units.
Subject to the terms and conditions and within the limitations of the Plan, the
Committee may modify the terms of any outstanding Agreement providing for awards
of Incentive Shares. Notwithstanding the foregoing, however, no modification of
an Option, Right or Performance Unit granted under the Plan, or an award of
Incentive Shares, shall (i) without the consent of the Optionee or Grantee,
adversely affect the rights or obligations of the Optionee or Grantee or (ii)
reduce the exercise price or base price of an Option, Right or Performance Unit.
16. EFFECTIVENESS OF THE PLAN AND AMENDMENTS
The effective date of the Plan was December 17, 1987. The effective
date of any amendment to the Plan will be the date specified by the Board or
Committee, as applicable. Any amendments to the Plan requiring shareholder
approval pursuant to Article 14 are subject to approval by vote of the
shareholders of the Corporation within 12 months after their adoption by the
Board or the Committee. Subject to that approval, any such amendments are
effective on the date on which they are adopted by the Board.
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Options, Rights, Performance Units or Incentive Shares may be granted or awarded
prior to shareholder approval of amendments, but each Option, Right, Performance
Unit or Incentive Share grant or award requiring such amendments shall be
subject to the approval of the amendments by the shareholders. The date on which
any Option, Right, Performance Unit or Incentive Shares granted or awarded prior
to shareholder approval of the amendment shall be the Date of Grant for all
purposes of the Plan as if the Option, Right, Performance Unit or Incentive
Shares had not been subject to approval. No Option, Right or Performance Unit
granted subject to shareholder approval of an amendment may be exercised prior
to such shareholder approval, and any Incentive Share award subject to
shareholder approval of an amendment and any dividends payable thereon are
subject to forfeiture if such shareholder approval is not obtained.
17. TERM OF THE PLAN
Unless sooner terminated by the Board or the Committee pursuant to
Article 14, the Plan shall terminate on February 20, 2007, and no Options,
Rights, Performance Units or Incentive Share awards may be granted or awarded
after termination. The termination shall not affect the validity of any Option,
Right, Performance Unit or Incentive Share awards outstanding on the date of
termination.
18. INDEMNIFICATION OF COMMITTEE
In addition to such other rights of indemnification as they may have as
directors or as members of the Committee, 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 Option, Right,
Performance Unit or Incentive Shares granted or awarded 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, if such
members acted in good faith and in a manner which they believed to be in, and
not opposed to, the best interests of the Corporation.
19. COMPLIANCE WITH SECTION 162(m) OF THE CODE
To the extent that any provision of the Plan or an Agreement, or any
action of the Committee, may result in the application of Section 162(m)(1) of
the Code to compensation payable to a Grantee or Optionee, such provision or
action shall be deemed to be null and void, to the extent permitted by law and
deemed advisable by the Committee. The Committee shall have the authority to
override the application of this Article by an action duly approved or ratified
by the Committee and reflected in the Committee's records.
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20. GENERAL PROVISIONS
20.1 The establishment of the Plan shall not confer upon any Eligible
Person any legal or equitable right against the Corporation, any Subsidiary or
the Committee, except as expressly provided in the Plan.
20.2 All grants and awards under the Plan are subject to the
precondition of an appropriate Agreement signed by the parties.
20.3 Neither the Plan nor any Agreement constitutes inducement or
consideration for the employment or retention of any Eligible Person, nor are
they a contract of employment or retention for a specific term between the
Corporation or any Subsidiary and any Eligible Person. Participation in the Plan
shall not give an Eligible Person any right to be retained in the service of the
Corporation or any Subsidiary.
20.4 The Corporation and its Subsidiaries may assume options, warrants,
or rights to purchase stock issued or granted by other corporations whose stock
or assets shall be acquired by the Corporation or its Subsidiaries, or which
shall be merged into or consolidated with the Corporation or its Subsidiaries.
Neither the adoption of this Plan, nor its submission to the shareholders, shall
be taken to impose any limitations on the powers of the Corporation or its
affiliates to issue, grant, or assume options, warrants, or rights, otherwise
than under this Plan, or to adopt other stock option or restricted stock plans
or to impose any requirement of shareholder approval upon the same.
20.5 Except as the Committee may otherwise provide pursuant to Article
10, or as otherwise required by a deferral election pursuant to Article 11, the
interests of any Eligible Person under the Plan are not subject to the claims of
creditors and may not, in any way, be assigned, alienated or encumbered.
20.6 The Plan shall be governed, construed and administered in
accordance with the laws of the Commonwealth of Pennsylvania, and it is the
intention of the Corporation that Incentive Stock Options granted under the Plan
qualify as such under Section 422 of the Code.
-14-
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.14
<SEQUENCE>6
<FILENAME>j9925001exv10w14.txt
<DESCRIPTION>TRUST AGREEMENT
<TEXT>
<PAGE>
EXHIBIT 10.14
TRUST AGREEMENT
Between
PNC INVESTMENT CORP.,
as Settlor
and
HERSHEY TRUST COMPANY,
as Trustee
<PAGE>
TRUST AGREEMENT
This Agreement is made as of the 20th day of December, 1999, by and
between PNC INVESTMENT CORP., a corporation duly established and existing under
the laws of the State of Delaware (the "Company") and HERSHEY TRUST COMPANY, a
national bank organized under the laws of the United States, with an office in
Hershey, Pennsylvania (the "Trustee").
W I T N E S S E T H:
WHEREAS, the Company, its parent corporation, PNC Bank Corp. (the
"Parent Corporation"), and certain of its subsidiaries and affiliates (the
Parent Corporation and the Company's certain subsidiaries and affiliates
collectively referred to as the "Employers") are or may become obligated under
the employee benefit plans and agreements listed on Attachment A hereto (the
"Plans") to make payments to certain former, present and future employees and
directors (collectively, the "Participants"); and
WHEREAS, for purposes of ensuring that such payments will not be
improperly withheld in the event of a Change in Control of the Parent
Corporation, the Company has been directed to establish a grantor trust (the
"Trust") to provide for the funding of benefit obligations under the Plans;
NOW, THEREFORE, in consideration of the promises and of the mutual
covenants contained herein and intending to be legally bound hereby, the Company
and the Trustee hereby covenant and agree as follows:
SECTION I
TRUST FUND
1.1 NAME OF TRUST
The trust fund referred to herein shall be known as the PNC INVESTMENT
CORP. BENEFIT FUNDING TRUST.
1.2 ESTABLISHMENT OF TRUST FUND
A trust fund (the "Trust Fund") is hereby established with the Trustee
consisting of such sums of money and such other property (including insurance
policies) as may be acceptable to the Trustee as from time to time shall be paid
or delivered to the Trustee in accordance with the terms hereof and for the
purposes hereof. All cash or other property so received, together with the
income therefrom, shall be held, managed and administered by the Trustee
pursuant to the terms of this Agreement without distinction between principal
and income.
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<PAGE>
The Trust is intended to be a "grantor trust," within the meaning of
Section 671 of the Internal Revenue Code of 1986, as amended (the "Code").
The Trustee will record a separate account within the Trust for the
Company and each Employer, and the Trustee will value not only the assets of the
Trust as a whole, but also the assets of each account attributable to the
Company and each Employer. For federal income tax purposes, the Company and each
Employer will be deemed to be the grantor of its separate account; provided,
however, that because the Company and each Employer are members of the same
consolidated return group, a single Form 1041 may be issued to the Parent
Corporation. Payments are to be made from the account in the Trust of the
Company or the Employer employing the employee to whom payments are made.
The insolvency of the Company and each Employer is considered
separately so that, in the event that one Employer, but not the Company or the
other Employers becomes insolvent, the assets in the account of the insolvent
Employer will be identified and held for the benefit of that Employer's
creditors.
For accounting purposes only, separate accounts may be established for
individual Participants in the Plans. Monies allocated to any such individual
accounts shall be distributable only to the Participants for whom the accounts
are established (or to the beneficiaries of such Participants) pursuant to the
provisions of the applicable Plan.
The Trust Fund shall be held separate and apart from other funds of the
Company and shall be used exclusively for the purpose of assuring payment by the
Company and the Employers of future obligations of the Company and the Employers
arising under the Plans, except to the extent otherwise set forth herein.
1.3 DESCRIPTION OF TRUST
The Company represents and agrees that the Trust established under this
Agreement is intended to fund only the Plans. The Trust is, and is intended to
be, a depository arrangement with the Trustee for the setting aside of cash and
other assets of the Company as and when it so determines in its sole discretion
and as required by the terms of Section 3.1 hereof, for the purpose of
satisfying future obligations under the Plans. The Company represents that each
Plan is an excess benefit plan (within the meaning of Section 3(36) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA")), a
benefit arrangement for a select group of management or highly compensated
active and/or former employees (within the meaning of Sections 201(2), 301(a)(3)
and 401(a)(1) of ERISA) or is not covered by ERISA. The Company further
represents that the Plans are not qualified under Section 401 of the Code and,
therefore, are not subject to the Code's requirements applicable to
tax-qualified plans.
1.4 REVOCABILITY
The Trust shall be revocable by the Company, and Participants shall
have no right to any part of the Trust Fund; provided, however, that the Trust
may not be revoked during a "Change
-2-
<PAGE>
in Control Period" (as defined in Section XVII of this Agreement) or after a
"Change in Control" (as defined in Section XVII of this Agreement).
1.5 ACCEPTANCE BY THE TRUSTEE
The Trustee accepts the Trust established under this Trust Agreement on
the terms and subject to the provisions set forth herein, and agrees to
discharge and perform fully and faithfully all of the duties and obligations
imposed upon it under this Trust Agreement.
SECTION II
AUTHORITY
A designated "Representative" appointed by the Company shall have the
authority to act on behalf of the Company, subject to the terms hereof. In its
sole discretion, the Representative may designate one or more individuals to act
on its behalf. The Trustee shall be entitled to deal with the Representative
until notified otherwise by the Company. The Company shall provide the Trustee
with a certified list of the names and specimen signatures of its
Representative, or any individuals designated by the Representative to act on
its behalf, and shall also notify the Trustee in writing, from time to time, of
any changes to the names so provided.
2.1 DISTRIBUTIONS FROM TRUST FUND
The Trustee shall make payments (including the payment of Trust
expenses) and other disbursements from the Trust Fund only upon the express
written instructions of the Representative or as expressly authorized by the
terms of this Agreement. Such payments may be made either directly to the person
or persons specified in such written instructions, or deposited in a checking
account maintained on behalf of the Trust Fund for the purpose of making
payments or disbursements in accordance with the provisions of the Plans.
2.2 INDEMNIFICATION
To the extent permitted by law, the Company shall fully indemnify and
hold the Trustee harmless from any liability and expense incident to any act or
omission by reason of the Trustee's reliance upon, and compliance with, written
instructions issued by the Representative not in contravention of the terms of
the Plans.
2.3 TRUSTEE RESPONSIBILITY FOR PAYMENTS WHEN COMPANY OR EMPLOYER IS (OR IS
DEEMED TO BE) INSOLVENT
(a) If at any time the Trustee has actual knowledge, or has determined
in accordance with Section 2.3(c) below, that the Company or an Employer is
insolvent under the standards set forth in Section 2.3(b) below, the Trustee
shall hold for the benefit of, or deliver upon the order of a court of competent
jurisdiction, any undistributed portion of the Company's or the
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<PAGE>
Employer's Trust Fund account to satisfy the claims of the Company's or the
Employer's general creditors.
(b) The Company or an Employer shall be considered insolvent for
purposes of this Agreement if (i) it is unable to pay its debts as they become
due or (ii) it is subject to a pending proceeding as a debtor under the United
States Bankruptcy Code.
(c) The Company agrees that its Chief Executive Officer or General
Counsel, as from time to time acting, shall have the duty to inform the Trustee
of the Company's or an Employer's insolvency. The Chief Executive Officer or
General Counsel may discharge such obligation through a Representative. If the
Company or a person claiming to be a creditor of the Company or an Employer
alleges in writing to the Trustee that the Company or an Employer has become
insolvent, the Trustee shall independently determine, within 30 days after
receipt of such notice, whether the Company or the Employer is insolvent in
accordance with the standards therefor established in this Agreement, and
pending such determination, shall discontinue all payments from the Trust Fund.
The Company shall cooperate with the Trustee in its investigation. The Trustee
may refuse any request for an analysis of insolvency if such request is received
within 90 days of its concluding a prior analysis. The Trustee shall resume
payments in accordance with the terms of this Agreement only after the Trustee
has determined that the Company or the Employer is not insolvent (or is no
longer insolvent, if the Trustee initially determined the Company or the
Employer to be insolvent). Nothing in this Agreement shall in any way diminish
any rights of any Participant to pursue his or her rights as a general creditor
of the Company or an Employer with respect to benefits under the terms of the
Plans.
(d) Unless the Trustee has received notice or otherwise has actual
knowledge of the Company's or an Employer's insolvency or alleged insolvency,
the Trustee shall have no duty to inquire as to whether the Company or an
Employer is insolvent.
(e) If the Trustee discontinues payments to a person from the Trust
Fund pursuant to Section 2.3(b) above and subsequently resumes such payments,
the first payment to such person following the discontinuance shall include the
aggregate amount of all payments which would have been made to such person in
accordance with the terms of the Plan during such period, less the aggregate
amount of such payments to each person made by or on behalf of the Company or an
Employer during such period, as certified in writing to the Trustee by the
Representative.
SECTION III
EFFECT OF A CIC TRIGGER EVENT OR A CHANGE IN CONTROL
3.1 CONTRIBUTIONS TO THE TRUST
(a) Upon the occurrence of a "CIC Trigger Event" (as defined in Section
XVII of this Agreement) or a Change in Control (if no CIC Trigger Event precedes
the Change in Control), the Parent Corporation shall deliver to the Trustee to
be held in trust hereunder an amount of
-4-
<PAGE>
cash, marketable securities (valued at fair market value), insurance policies or
a combination thereof (the "Required Contribution") equal to the amount that,
together with any amounts already held by the Trust Fund, will be sufficient to
provide for the obligations of the Company and the Employers under the Plans.
Such amount shall be determined by the Parent Corporation in its discretion, but
shall not be less than such amount as would be determined (i) using an annual
interest rate assumption of 6%, (ii) using the UP-84 mortality table for
benefits payable under the Plans three or more years after the date of the
Required Contribution and no mortality assumption for benefits payable less than
three years from the date of the Required Contribution, (iii) assuming that, for
purposes of determining the amount to be transferred to the Trust with respect
to those Plans that are agreements (the "CIC Agreements") providing for the
payment of benefits in the event of certain terminations of employment following
a Change in Control, that all Participants who are covered by such agreements
are terminated without "Cause" (as defined in such agreements) by the Company as
of the first day of the applicable "Coverage Period" (as defined in the
agreements) and (iv) assuming that, for purposes of determining the amount to be
transferred to the Trust with respect to each Plan that is not a CIC Agreement,
that each Participant terminates employment with the Company and the Employers
as of the earliest date as of which the Participant is entitled to begin
receiving benefits under each such Plan (assuming the Participant terminated
employment as of such date). If such Required Contribution is made as the result
of a CIC Trigger Event, such Required Contribution, as adjusted for income and
losses, shall be returned to the Parent Corporation upon the written request of
the Parent Corporation; provided, however, that the Required Contribution may
not be returned to the Parent Corporation during the existence of a Change in
Control Period or after a Change in Control.
(b) At twelve-month intervals commencing twelve months after the date a
Required Contribution is made pursuant to Section 3.1(a) hereof, unless a Change
in Control Period has ceased to exist and no Change in Control has occurred, the
Parent Corporation shall recalculate the Required Contribution that would be
required to be delivered pursuant to Section 3.1(a) hereof assuming a CIC
Trigger Event occurred as of the end of the month immediately preceding such
twelve-month interval date. If the amount so calculated exceeds the fair market
value of the Trust Fund's assets, the Parent Corporation shall promptly (and in
no event later than seven days from the date of such twelve-month interval date)
pay to the Trustee an amount in cash (or marketable securities or any
combination thereof) equal to such excess.
(c) The Chief Executive Officer or the General Counsel of the Parent
Corporation (or one of their designated representatives) shall promptly notify
the Trustee in writing of the occurrence of any of the following: a CIC Trigger
Event, a Change in Control, or the cessation of a Change in Control Period.
After a Change in Control and during the existence of a Change in Control
Period: (i) this Trust shall be irrevocable, as provided in Section 3.2; (ii)
all payments due in accordance with the provisions of the Plans, as determined
by the Trustee in its reasonable judgment, shall be made directly by the Trustee
to Participants; and (iii) the Trustee shall not act upon any direction from the
Company, any Employer (including the Parent Corporation) or the Representative
that is contrary to the foregoing provisions.
(d) The Trustee shall be fully protected in making such payments from
time to time in accordance with the provisions of this Section 3.1 and shall be
charged with no responsibility
-5-
<PAGE>
whatsoever respecting the application of such monies, except as otherwise
required by law.
(e) The Company shall provide the Trustee with copies of all of the
Plan documents, including any amendments thereto.
3.2 PAYMENTS TO THE COMPANY
(a) Prior to a Change in Control and other than during the existence of
a Change in Control Period, the Company or the Representative may direct the
Trustee to pay all or a portion of the Trust Fund to the Company. After a Change
in Control and during the existence of a Change in Control Period, neither the
Company, any Employer (including the Parent Corporation) nor the Representative
shall have any power to direct the Trustee to return to the Company or to pay to
others (other than Participants, their beneficiaries or the general creditors of
the Company or any Employer) any portion of the Trust Fund prior to the complete
satisfaction of the Company's or the Employers' obligations to Participants and
their beneficiaries under the terms of the Plans.
(b) Notwithstanding the provisions of Section 3.2(a), if after a Change
in Control or during a Change in Control Period, the Parent Corporation
determines that a portion of the Trust Fund will never be required to satisfy
such obligations assuming that the Trust Fund earns a zero rate of return, such
portion may be returned to the Parent Corporation if (i) the Trustee is directed
to make such payment by the Company or the Representative and (ii) the Trustee
has satisfied itself that the amount remaining in the Trust Fund will be
sufficient to pay or provide for all future benefits under the Plans using such
assumptions as it deems appropriate in its sole discretion; provided, however,
that no amounts may be returned to the Parent Corporation pursuant to this
Section 3.2 prior to the third anniversary of the date of a Change in Control.
(c) Notwithstanding the foregoing provisions of Section 3.2, the
Representative may, at any time within 60 days of the date of any payment made
by the Company to Participants in satisfaction of the Company's or the
Employers' obligations under the Plans, direct the Trustee to reimburse the
Company for such payments; provided, however, that such reimbursement shall be
made to the Company only to the extent that (i) all amounts due and payable
under the Plans have been paid in full and (ii) the Trustee determines that the
reimbursement of such amounts will not impair the ability of the Trust to fully
fund future benefit payments under the Plans using such assumptions as it deems
appropriate in its sole discretion.
3.3 DISPUTES BETWEEN PARTICIPANT AND TRUSTEE
It is recognized that a Participant may dispute the amount of benefit
paid by the Trustee under one or more Plans, or may assert a right to receive a
benefit payment when the Trustee determines that no payment is due to the
Participant under one or more Plans. In either such event, the Trustee shall
gather information from all sources it may deem appropriate (including the
Company) and shall permit the Participant to make a written submission. After
consideration of all such materials, the Trustee shall provide the Participant
with its decision as rendered in its reasonable judgment. If such decision is
adverse to the Participant's claim, the decision shall be accompanied by a
written explanation of the basis for the Trustee's decision. The Trustee's
-6-
<PAGE>
decision shall be final and binding. During the period that the Trustee is
considering the claim, the Trustee shall make payment of only the amount of
benefits (if any) as to which there is no dispute. If the Trustee then reaches a
decision that the Participant's benefits should have been increased, it shall
make a single sum payment equal to the excess of the revised benefit amount over
the amount actually paid together with simple interest at a rate of 9% per annum
from each benefit payment date to the date of the lump sum payment.
3.4 INSUFFICIENCY OF TRUST FUND
If, as of the date of any payment of Plan benefits from the Trust Fund,
the Trustee determines that the Trust Fund is insufficient to provide for the
payment to Participants of the full amount of their Plan benefits to be paid as
of such date, the amount of Plan benefits paid to each Participant from the
Trust Fund as of such date shall be reduced in proportion to the ratio which the
aggregate fair market value of the Trust Fund bears to the aggregate amount
otherwise payable at that time to each such Participant. At all times the
Company and the Employers shall continue to be fully liable for the payment of
all Plan benefits notwithstanding any insufficiency of the Trust Fund.
SECTION IV
INVESTMENT OF THE TRUST FUND
4.1 GENERAL
Except as otherwise provided herein, the Trustee shall invest and
reinvest the assets of the Trust Fund in accordance with the written directions
of the Representative or its designate.
4.2 APPOINTMENT OF INVESTMENT MANAGERS BY THE COMPANY
Before a Change in Control and other than during a Change in Control
Period, the Company or the Representative, in their sole discretion, may appoint
one or more investment managers (including the Trustee) to manage and control
the assets of the Trust Fund (the "Investment Managers"). Any Investment Manager
so appointed shall be either: (a) an investment adviser registered as such under
the Investment Advisers Act of 1940, as amended; (b) a bank, as defined in that
Act; (c) an insurance company qualified to perform investment management
services under the laws of more than one state; or (d) a subsidiary or affiliate
of the Company authorized to perform investment management services. Any
Investment Manager shall certify in writing that it is qualified to act in such
capacity, and acknowledge that it assumes the fiduciary duties established by
this Agreement.
4.3 ALLOCATION OF ASSETS BY THE COMPANY FOR INVESTMENT
Before a Change in Control and other than during a Change in Control
Period, the Company or the Representative shall direct the manner of allocation
among Investment
-7-
<PAGE>
Managers of assets of the Trust Fund, and may direct the transfer of assets
between Investment Managers on reasonable notice to the Trustee and any affected
Investment Manager. An Investment Manager designated to manage assets allocated
to it shall have exclusive authority to manage, acquire and dispose of such
assets subject to any investment policy that may, from time to time, be
established by the Representative or the Company.
Unless the Trustee participates knowingly in, or knowingly undertakes
to conceal, an act or omission of an Investment Manager, where such act or
omission would be a breach of the fiduciary responsibility of such Investment
Manager, the Trustee shall be under no liability for any loss of any kind which
may result by reason of any action taken by it in accordance with any direction
of such Investment Manager or by reason of its failure to exercise any power or
authority with respect to allocated assets because of the failure of the
Investment Manager to issue proper and timely directions to the Trustee.
4.4 INVESTMENT RESPONSIBILITY OF THE TRUSTEE
After a Change in Control and during any Change in Control Period, the
Trustee shall have responsibility for the management and control of the assets
of the Trust Fund, subject to any investment policy (a "Pre-CIC Investment
Policy") established by the Company or the Representative prior to the
commencement of the Change in Control Period or the Change in Control (if no
Change in Control Period precedes the Change in Control). After a Change in
Control and during any Change in Control Period, the Trustee may continue to
retain or terminate the services of any Investment Manager previously appointed
by the Company or the Representative, and in its sole discretion, exercise the
powers described in Sections 4.2 and 4.3 hereof (without regard to the
limitation on the exercise all of such powers by the Company or the
Representative to periods prior to a Change in Control and other than during a
Change in Control Period) subject to the terms of any Pre-CIC Investment Policy.
4.5 INVESTMENT POWERS OF TRUSTEE
In addition to any power granted under any statute or laws pertaining
to the investment of trust assets, the Trustee's investment powers shall
include, but shall not be limited to, the investment of trust assets in the
following:
(a) bonds or other obligations of the United States of America, and any
agencies thereof, or any bonds or other obligations which are directly or
indirectly guaranteed by the United States, or any agency thereof;
(b) open-end or closed-end investment companies that offer investment
funds, the assets of which correspond to those described under (a) above with at
least $10 billion under management;
(c) savings accounts, certificates of deposit and other types of time
deposits with any financial institution or quasi-financial institution whose
combined capital and surplus is not less than $1 billion, including the
Trustee's banking department; and
-8-
<PAGE>
(d) to the extent permitted by applicable law, any collective, common
or pooled trust
fund operated by the Trustee, the assets of which primarily correspond to those
described under (a) above, but which also may include bonds or obligations of
non-governmental issuers which are rated among the top three ratings categories
of any nationally recognized rating agency. The provisions of any such
collective, common or pooled investment trust shall be incorporated herein by
reference during, but only during the period that any portion of this Trust Fund
is a part of such trust.
Prior to a Change in Control and other than during any Change in
Control Period, the Trustee shall exercise the powers set forth in this Section
4.5 only in accordance with the directions of the Representative or its
designee. After a Change in Control and during any Change in Control Period the
Trustee shall have full discretion to exercise the powers set forth in this
Section 5, subject to the terms of any Pre-CIC Investment Policy.
4.6 ADMINISTRATIVE POWERS OF THE TRUSTEE
The Trustee is authorized and empowered to:
(a) sell, exchange, convey, transfer or otherwise dispose of, any
property, real or personal, held in the Trust Fund and to make any sale by
private contract or public auction, and for cash or credit, or partly for cash
and partly for credit, and no person dealing therewith shall be bound to see the
application of the purchase money or to inquire into the validity, expediency or
propriety of any such sale or disposition;
(b) vote in person or by proxy any stocks, bonds or other securities
held in the Trust Fund, without any obligation to inquire as to or follow the
wishes of the Company or the Representative with respect to such voting;
(c) exercise any rights appurtenant to any such stocks, bonds or other
securities for the conversion thereof into other stocks, bonds or securities, or
to exercise rights or options to subscribe for or purchase additional stocks,
bonds or other securities, and to make any and all necessary payments with
respect to such conversion or exercise;
(d) join in, dissent from or oppose the reorganization,
recapitalization, consolidation, sale or merger of corporations or properties of
which the Trust Fund may hold stocks, bonds or other securities or in which it
may be interested, upon such terms and conditions as may be deemed advisable, to
pay any expenses, assessments or subscriptions in connection therewith, and to
accept any securities or property, whether or not trustees would be authorized
to invest in such securities or property, which may be issued upon any such
reorganization, recapitalization, consolidation, sale or merger and thereafter
to hold the same without any duty to sell;
(e) borrow or raise monies from any lender, excluding the Trustee in
its corporate capacity, if permitted by law, for the benefit of the Trust Fund
and in conjunction with its duties under this Agreement, in such amount and upon
such terms and conditions as may be deemed advisable; and for any sums so
borrowed to issue promissory notes and to secure the repayments thereof by
mortgaging or pledging all or any part of the Trust Fund except any common,
-9-
<PAGE>
collective or pooled trust units which may be held in the Trust Fund; and no
person lending money to the Trust Fund shall be bound to see to the application
of the money loaned or to inquire into the validity, expediency or propriety of
any such borrowing;
(f) cause any investment of the Trust Fund to be registered in, or
transferred into, the Trustee's name or the names of a nominee or nominees, or
to retain such investment unregistered or in a form permitting transfer by
delivery, provided that the books and records of the Trustee shall at all times
show that all such investments are part of the Trust Fund;
(g) purchase or otherwise acquire and make payment therefor from the
Trust Fund any bond or other form of guarantee or surety required by any
authority having jurisdiction over this Trust Fund and its operation, or
believed to be in the best interests of the Trust Fund, except the Trustee or
Investment Manager may not obtain any insurance whose premium obligation extends
to the Trust Fund which would protect the Trustee or Investment Manager against
their liability for breach of fiduciary duty;
(h) defend against or participate in any legal actions involving the
Trust Fund in the manner and to the extent it deems advisable, the costs of any
such defense or participation to be borne by the Trust Fund unless paid by the
Company; provided, however, that the Trustee or Investment Manager shall not be
entitled to costs if either shall have committed a breach of fiduciary duty;
(i) compromise, compound and settle any debt or obligation due to the
Trust Fund and to reduce the rate of interest on, to extend or otherwise modify,
or to foreclose upon default or otherwise enforce any such obligation; or
(j) enforce any right, obligation or claim in its absolute discretion
and in general to protect in any way the interest of the Trust Fund, either
before or after default with respect to any such right, obligation or claim, and
in case it shall consider such action in the best interest of the Trust Fund, in
its absolute discretion to abstain from the enforcement of any right, obligation
or claim and to abandon any property, whether real or personal, which at any
time may be held by it.
The Trustee shall at all times be authorized and empowered to exercise
all of the powers listed in this Section 4.6; provided that, prior to a Change
in Control and other than during the existence of a Change in Control Period the
Trustee shall exercise the powers described in clauses (b), (d), (e), (h), (i)
and (j) of this Section 4.6 only if it has not received direction from the
Representative, otherwise it shall be obligated to follow the direction of the
Representative.
SECTION V
DIVERSIFICATION
Prior to a Change in Control and other than during the existence of a
Change in Control
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<PAGE>
Period, the Company or its Representative shall be solely responsible for the
manner in which investments of the Trust Fund are prudently diversified. After a
Change in Control and during the existence of a Change in Control Period, the
Trustee shall be responsible for the manner in which Trust Fund investments are
prudently diversified, subject to any Pre-CIC Investment Policy.
The Trustee shall have no liability or responsibility for the
diversification of the investments of the Trust Fund: (a) held in any account
under the direction of an Investment Manager or (b) when the Trust Fund is
managed in accordance with the written directions of the Representative or its
designee.
SECTION VI
FIDUCIARY RESPONSIBILITY
The Representative, the Trustee, and any designated Investment Manager
shall, under those circumstances where each or any of them are charged with the
responsibility for the investment management of assets of the Trust Fund,
discharge their duties as provided in this Agreement with the care, skill,
prudence and diligence under the circumstances then prevailing that a prudent
person acting in a like capacity and familiar with such matters would use in the
conduct of an enterprise of a like character with the like aims and by
diversifying the investments held hereunder so as to minimize the risk of large
losses, unless under the circumstances, it would clearly not be prudent to do
so; provided, however, that the Representative, the Trustee, or any designated
Investment Manager does not guarantee (a) the Trust Fund in any manner against
investment loss or depreciation in asset value or (b) the adequacy of the Trust
Fund to meet and discharge all or any liabilities of the Plans.
The Representative, the Trustee, or any designated Investment Manager
may, in its discretion, keep such portion of the Trust Fund in cash or cash
balances as it may deem reasonably necessary from time to time, and shall keep
such portion of the Trust Fund in cash or cash balances as may be required to
meet contemplated payments from the Trust Fund. No liability shall accrue for
any interest on any cash balances so maintained.
The Representative, or the Trustee is specifically authorized to
appoint ministerial agents as to part or all of the Trust Fund and functions
incident thereto where, in its sole discretion, such delegation is necessary,
appropriate or desirable to facilitate the operations of the Trust Fund and
consistent with the purposes of the Trust Fund.
-11-
<PAGE>
SECTION VII
TAXES AND TRUSTEE'S COMPENSATION
7.1 TRUSTEE'S COMPENSATION
The Trustee shall be entitled to such reasonable compensation for
services rendered as mutually agreed upon in writing with the Company, and shall
be reimbursed for all reasonable expenses (except those arising from a breach of
fiduciary duty) incurred by the Trustee as a result of the performance of its
duties hereunder, including, but not limited to, legal and accounting expenses
incurred as a result of disbursements and payments made by the Trustee, and
reasonable compensation for agents, counsel or other services rendered to the
Trustee by third parties, and expenses incident thereto. Any such compensation,
and reimbursement for any such expenses shall be paid by the Trust Fund to the
Trustee, unless paid by the Company.
7.2 TAXES
The Trustee shall notify the Representative of any tax assessments that
it receives on any property held in the Trust Fund, and, unless notified to the
contrary by the Representative within 90 days, shall either pay or pay over to
the Company funds sufficient to cover such assessments if so directed by the
Representative. If the Representative notifies the Trustee within said period
that such assessments are invalid or that they should be contested, the Trustee
shall take whatever action is indicated in the notice received from the
Representative, including contesting the assessment or litigating any claims.
Notwithstanding anything herein to the contrary, the Company shall at
all times be responsible for the payment and reporting of taxes due on the
income and gains of the Trust Fund, and for the withholding, payment, and
reporting of any and all taxes withheld from payments from the Trust Fund to
Participants under the Plans (or to their designated beneficiaries). The Trustee
shall notify the Company or its Representative of the income and gains of the
Trust Fund in order to facilitate the Company's responsibilities in regard to
such payment and reporting of taxable income of the Trust Fund. The Trustee
shall pay over to the Company such sums as may be required for payment of
withholding tax obligations with respect to benefit payments under the Plans
made by the Trustee from the Trust Fund; provided, however, that no amounts
shall be paid from the Trust Fund with respect to withholding tax obligations
other than those that arise as of the date of actual payment of benefits from
the Trust Fund to a Participant. The Company shall notify the Trustee of any and
all amounts to be withheld from any payments to be made to individual
Participants (or to their designated beneficiaries) and issue directions to the
Trustee regarding payment over to the Company of such sums so withheld. The
Trustee shall have no duty or obligation to determine the actual taxable income
to be paid by the Company on the income and gains of the Trust Fund, or of any
amount of federal, state, or local income taxes to be withheld, reported, or
paid by, or on behalf, of any Participant or their designated beneficiaries.
However, it shall be the duty of the Trustee to file, or cause to be filed, any
fiduciary tax return that may be required under Section 671 of the Code.
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<PAGE>
SECTION VIII
BOOKS, RECORDS AND ACCOUNTS
The Trustee shall keep accurate and detailed accounts of all
investments, receipts and disbursements and other transactions hereunder
(including those transactions related to accounts under the management of a
designated Investment Manager) and all such accounts, books and records relating
thereto shall be open at all reasonable times to inspection and audit by any
person designated by the Representative within a reasonable time period
following the close of each fiscal year of the Trust Fund, and within 120 days,
or such other agreed upon time, following the removal or resignation of the
Trustee or the termination of the Trust, the Trustee shall file with the
Representative a certified written report setting forth all investments,
receipts and disbursements, and other transactions effected during the fiscal
year, or other period from the close of the preceding report to the date of such
removal, resignation or termination, including a description of all securities
and investments then held in the Trust Fund, and such other information
customarily provided by the Trustee.
Upon the expiration of 180 days following the close of a fiscal year of
the Trust Fund for which an annual accounting is filed, or 90 days from the date
of filing of any interim accounting, the Trustee shall, to the extent permitted
by law, be forever released and discharged from any liability or accountability
to anyone for clerical errors apparent on the face of such accounting.
No Participant or beneficiary under the Plans, shall have the right to
demand or be entitled to any accounting by the Trustee, other than those to
which they may be entitled under the law.
Notwithstanding any other provision hereof or of the Plans, the Trustee
shall not be subject to any liability for any act or omission, regardless of its
nature, after three years following the date on which a plaintiff had actual
knowledge of such act or omission; provided, however, that in the case of fraud
or concealment the Trustee may be held liable at any time within six years after
the date of discovery of such error or omission.
The Trustee shall determine the fair market value of the Trust Fund in
its customary manner at such times as may be required by the Representative, or
in order to carry out the provisions of the Plans.
All records and accounts maintained by the Trustee with respect to the
Trust Fund shall be preserved for such period as may be required under any
applicable law. Upon the expiration of any such retention period, the Trustee
shall have the right to destroy such records and accounts after first notifying
the Company or the Representative in writing of its intention, and transferring
to the Company or to the Representative any such books, records, and accounts as
requested. The Trustee shall have the right to preserve all books, records, or
accounts in original form, or on microfilm, magnetic tape, or any other similar
process.
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<PAGE>
SECTION IX
RESIGNATION AND REMOVAL OF TRUSTEE
The Trustee may be removed by the Company at any time upon written
notice to the Trustee to that effect; provided, however, that after a Change in
Control or during the existence of a Change in Control Period the Trustee may
not be removed by the Company without the written consent of at least 75% of the
Participants as of the date of removal who were Participants as of the day
preceding the Change in Control or the commencement of the Change in Control
Period (if removal or the Trustee is to occur during a Change in Control
Period). The Trustee may resign as Trustee of the Trust Fund upon written notice
to that effect delivered to the Company.
Such removal or resignation shall become effective as of the last day
of the month which coincides with or next follows the expiration of 90 days from
the date of the delivery of such written notice, unless an earlier or later date
is agreed upon by the Company and the Trustee.
In the event of removal or resignation, a successor trustee shall be
appointed by the Company to become Trustee as of the time such removal or
resignation becomes effective; provided, however, that after a Change in Control
and during the existence of a Change in Control Period any appointment of a
successor trustee must be approved in writing by at least 75% of the
Participants as of the date of appointment who were Participants as of the day
preceding the Change in Control or the commencement of the Change in Control
Period (if the appointment is to occur during the Change in Control Period). No
successor trustee appointed hereunder shall be held responsible or liable for
the acts or omissions of its predecessor trustee.
Upon the appointment of a successor trustee, the retiring Trustee shall
endorse, transfer, assign, convey and deliver to the successor trustee all of
the funds, securities and other property then held by it in the Trust Fund,
except such amounts as it may consider necessary to cover its compensation and
its expenses in connection with the settlement of its accounts and the delivery
of the Trust Fund to the successor trustee. The balance remaining of any amount
so reserved shall be transferred and paid over to the successor trustee promptly
upon settlement of its accounts, subject to the right of the retiring Trustee to
retain any property deemed unsuitable by it for transfer until such time as
transfer can be made.
Nothing herein shall be construed to deny the Trustee the right to a
settlement of its accounts either by: (a) a receipt and release executed by the
Company or (b) settlement by order of a court of competent jurisdiction.
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<PAGE>
SECTION X
AMENDMENT AND TERMINATION
10.1 PRIOR TO A CHANGE IN CONTROL AND OTHER THAN DURING A CHANGE IN CONTROL
PERIOD
Prior to a Change in Control and other than during a Change in Control
Period, the Company may from time to time amend, in whole or in part, any or all
of the provisions of this Trust Agreement without the consent of any
Participant; provided, however, that (a) no amendment shall be made to this
Trust Agreement or the Plans that will cause this Trust Agreement, the Plans or
the assets of the Trust Fund to be governed by or subject to Part 2, 3 or 4 of
Title I of ERISA, (b) no amendment will be made that will cause the assets of
the Trust Fund to be taxable to Participants prior to the distribution of
benefits therefrom and (c) no amendment shall increase the duties or
responsibilities of the Trustee, unless the Trustee consents thereto in writing.
10.2 FOLLOWING A CHANGE IN CONTROL OR DURING A CHANGE IN CONTROL PERIOD
Following a Change in Control and during the existence of a Change in
Control Period, this Trust Agreement may be amended (subject to the restrictions
set forth in Section 10.1) only with the prior written consent of 75% of the
Participants as of the date of the amendment who were Participants immediately
preceding the Change in Control or the Change in Control Period (if the
amendment occurs during a Change in Control Period). Upon receipt of a request
from the Company for an amendment, the Trustee shall be responsible for
attempting to secure such consents in a timely fashion, and unless ordered by a
court of competent jurisdiction, shall not reveal to the Company or to any other
person any information concerning such consents, except whether the required
majority has been achieved.
10.3 COMPLIANCE WITH ERISA AND THE CODE
Notwithstanding anything in this Section X to the contrary, this Trust
Agreement and the Plans shall be amended from time to time (without the consent
of any Participant) to (a) maintain the "unfunded" status of the Plans for
purposes of ERISA and the Code, (b) maintain the Trust as a "grantor trust" for
purposes of the Code, (c) ensure that contributions to the Trust by the Company
will not result in the recognition of income by Participants and that income and
gains of the Trust Fund will not constitute taxable income to the Trust or
Participants and (d) ensure that benefits paid to Participants from the Trust
Fund will be deductible by the Company in the year of payment (but only to the
extent that any such amendment does not result in a material detriment to
Participants).
10.4 EXECUTION OF AMENDMENTS
The Company and the Trustee shall execute such amendments to this Trust
Agreement as shall be necessary to give effect to any amendment made pursuant to
this Article X.
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<PAGE>
10.5 WINDING UP
To the extent not revoked in accordance with the provisions of this
Trust Agreement, the Trust Fund shall remain in existence until the Plans are
terminated and all benefits payable thereunder are paid to Participants or their
designated beneficiaries. Upon payment of or provision for all such benefits
pursuant to the terms of the Plans, this Trust Fund shall be terminated and any
assets remaining in the Trust Fund shall be distributed to the Company, pursuant
to the directions of the Representative.
In making such distribution, the Trustee shall presume that such
distribution is in full compliance with, and is not in violation of, any
applicable law regulating the termination of the Plans, and the Trustee may
require the Company or the Representative to furnish it with evidence that such
distribution does not violate any applicable law. The Company shall assume all
liability of any kind whatsoever arising from any such distribution made by the
Trustee to the Company or at the direction of the Representative as a result of
the termination of the Plans, and shall indemnify and save harmless from any
attempt to impose any liability on the Trustee with respect to such
distributions.
In no event shall this Trust continue for a period longer than 21 years
following the date of death of the last surviving individual who is a
Participant in any of the Plans on the date of execution of this Trust
Agreement.
SECTION XI
CONSOLIDATION OR MERGER
Any corporation into which the Trustee may be merged or with which it
may be consolidated, or any corporation resulting from any merger or
consolidation to which the Trustee is a party, or any corporation succeeding to
the trust business of the Trustee, shall become the successor of the Trustee
hereunder, without the execution or filing of any instrument or the performance
of any further act on the part of the parties thereto.
SECTION XII
SPENDTHRIFT TRUST
The rights, benefits, and payments of any Participant or designated
beneficiary payable under the Plans and the assets of the Trust Fund shall not
be subject in any manner to anticipation, sale, assignment, alienation,
transfer, pledge, encumbrance, or charge, voluntary or involuntary, by any
Participant or beneficiary. Any attempt by a Participant or beneficiary to
anticipate, alienate, sell, transfer, assign, pledge, encumber, or charge the
same shall be void. The assets of the Trust Fund shall not in any manner be
liable for or subject to the debts,
-16-
<PAGE>
contracts, liabilities, engagements, or torts of any Participant or beneficiary
entitled to benefits under the Plans and such benefits shall not be considered
an asset of a Participant or a beneficiary in the event of his or her insolvency
or bankruptcy.
SECTION XIII
PARTICIPATING EMPLOYERS
13.1 ADOPTION OF TRUST BY AFFILIATED EMPLOYERS
The Company may from time to time consent to the participation in this
Trust by any of its subsidiaries or affiliates (referred to above as the
"Employers"). The Company may require, as a condition of the joining of the
Trust by any such entity, that such entity take such action as is necessary to
establish that any plan arrangement or agreement which such entity maintains (or
is a party to) meets the criteria described in Section 1.3, and may adopt a
supplement or supplements to this Trust setting forth the identity of the plan,
arrangement or agreement involved and special rules, if any, as to the interests
of persons covered by such other plan.
13.2 ACTIONS BY AFFILIATES
Any subsidiary or affiliate participating hereunder shall become a
party to the Trust and become an "Employer" hereunder when its Board of
Directors delivers a resolution to the Company approving such action along with
an adoption agreement, in the form prescribed by the Representative, executed by
its officers. A copy thereof shall be filed with the Trustee. Any such Employer
shall contribute its allocable share to the cost of maintaining and
administering the Trust so long as it remains a party to the Trust.
13.3 COMPANY AMENDS ON BEHALF OF ALL EMPLOYERS
The Company shall have the right to amend the Trust Agreement on behalf
of all Employers. However, all of the other provisions of this Trust Agreement
(specifically including, but not limited to, Sections 1.3, 2.3 and 3.3) shall
apply to the separate share of the Trust Fund attributable to an Employer,
mutatis mutandis.
13.4 ANY EMPLOYER MAY TERMINATE
The right is reserved by each Employer to terminate the Trust with
respect to its separate account within the Trust; provided, however, that after
a Change in Control and during the existence of a Change in Control Period, an
Employer may not terminate the Trust with respect to Participants who were
Participants immediately prior to the CIC Trigger Event or the Change in Control
(if no CIC Trigger Event precedes the Change in Control). In the event that any
Employer shall withdraw or shall be deemed to have withdrawn from participation
in all of the Plans, the Representative shall instruct the Trustee in writing as
to the disposition to be made pursuant to the Plans of that portion of the Trust
Fund held for employees of such Employer.
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<PAGE>
Any corporation into which an Employer may merge, or with which it may be
consolidated, or any corporation resulting from such merger or consolidation or
which otherwise succeeds to substantially all of the assets of such entity shall
be and shall continue as that entity for all purposes of this Trust Agreement
without the execution or filing of any additional instrument or the performance
of any further act; provided, that it continues to meet the definition of
"Employer" as set forth in this Trust Agreement.
SECTION XIV
CHOICE OF LAW
This Trust Agreement shall be construed and enforced, to the extent
possible, according to the laws of the Commonwealth of Pennsylvania, and all
provisions hereof shall be administered according to the laws of said state and
any federal laws, regulations or rules which may from time to time be
applicable.
SECTION XV
NECESSARY PARTIES; THIRD-PARTY BENEFICIARIES
(a) To the extent permitted by law, prior to a Change in Control and
other than during the existence of a Change in Control Period, only the Trustee
and the Company shall be necessary parties in any application to the courts for
an interpretation of this Trust Agreement or for an accounting by the Trustee,
and no Participant or designated beneficiary under the Plans, or other person
having an interest in the Trust Fund, shall be entitled to any notice or service
of process. Any final judgment entered in such an action or proceedings shall,
to the extent permitted by law, be conclusive upon all persons claiming under
this Trust Agreement or the Plans.
(b) To the extent permitted by law, upon the occurrence of a Change in
Control and during the existence of a Change in Control Period, only the
Trustee, the Company and the Parent Corporation shall be necessary parties in
any application to the courts for an interpretation of this Trust Agreement or
for an accounting by the Trustee, and no Participant or designated beneficiary
under the Plans, or other person having an interest in the Trust Fund, shall be
entitled to any notice or service of process. Any final judgment entered in such
an action or proceedings shall, to the extent permitted by law, be conclusive
upon all persons claiming under this Trust Agreement or the Plans.
(b) Participants in the Plans are intended to be third-party
beneficiaries of this Agreement and shall be entitled to enforce the terms of
this Agreement to the same extent as a party hereto.
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<PAGE>
SECTION XVI
SUCCESSORS TO THE COMPANY AND THE EMPLOYERS
In addition to any obligations imposed by law upon any successor(s) to
the Company and the Employers, the Company and the Employers shall be obligated
to require any successor(s) (whether direct or indirect, by purchase, merger,
consolidation, operation of law, or otherwise) to all or substantially all of
the business and/or assets of the Company and the Employers to expressly assume
and agree to perform this Agreement in the same manner and to the same extent
that the Company and the Employers would be required to perform it if no such
succession had taken place; in the event of such a succession, references to
"Company" and "Employers" herein shall thereafter be deemed to include such
successor(s).
SECTION XVII
DEFINITIONS
17.1 A "CHANGE IN CONTROL" means a change of control of the Parent Corporation
of a nature that would be required to be reported in response to Item 6(e) of
Schedule 14A of Regulation 14A (or in response to any similar item on any
similar schedule or form) promulgated under the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), whether or not the Parent Corporation is then
subject to such reporting requirement; provided, however, that without
limitation, a Change in Control shall be deemed to have occurred if:
(a) any Person, excluding employee benefit plans of the Parent
Corporation, is or becomes the "beneficial owner" (as defined in Rules 13d-3 and
13d-5 under the Exchange Act or any successor provisions thereto), directly or
indirectly, of securities of the Parent Corporation representing 20% or more of
the combined voting power of the Parent Corporation's then outstanding
securities; provided, however, that such an acquisition of beneficial ownership
representing between 20% and 40%, inclusive, of such voting power shall not be
considered a Change in Control if the Board of Directors of the Parent
Corporation (the "Board") approves such acquisition either prior to or
immediately after its occurrence;
(b) the Parent Corporation consummates a merger, consolidation, share
exchange, division or other reorganization or transaction of the Parent
Corporation (a "Fundamental Transaction") with any other corporation, other than
a Fundamental Transaction that results in the voting securities of the Parent
Corporation outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into voting securities of
the surviving entity) at least 60% of the combined voting power immediately
after such Fundamental Transaction of (i) the Parent Corporation's outstanding
securities, (ii) the surviving entity's outstanding securities or (iii) in the
case of a division, the outstanding securities of each entity resulting from the
division;
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<PAGE>
(c) the shareholders of the Parent Corporation approve a plan of
complete liquidation or winding-up of the Parent Corporation or an agreement for
the sale or disposition (in one transaction or a series of transactions) of all
or substantially all of the Parent Corporation's assets;
(d) as a result of a proxy contest, individuals who prior to the
conclusion thereof constituted the Board (including for this purpose any new
director whose election or nomination for election by the Parent Corporation's
shareholders in connection with such proxy contest was approved by a vote of at
least two-thirds of the directors then still in office who were directors prior
to such proxy contest) cease to constitute at least a majority of the Board
(excluding any Board seat that is vacant or otherwise unoccupied);
(e) during any period of 24 consecutive months, individuals who at the
beginning of such period constituted the Board (including for this purpose any
new director whose election or nomination for election by the Parent
Corporation's shareholders was approved by a vote of at least two-thirds of the
directors then still in office who were directors at the beginning of such
period) cease for any reason to constitute at least a majority of the Board
(excluding any Board seat that is vacant or otherwise unoccupied); or
(f) the Board determines that a Change in Control has occurred.
Notwithstanding anything to the contrary herein, a divestiture or
spin-off of a subsidiary or division of the Parent Corporation shall not by
itself constitute a "Change in Control."
17.2 "CIC FAILURE" means the following:
(a) with respect to a CIC Trigger Event described in Section 17.4(a),
the Parent Corporation's shareholders vote against the transaction approved by
the Board or the agreement to consummate the transaction is terminated; or
(b) with respect to a CIC Trigger Event described in Section 17.4(b),
the proxy contest fails to replace or remove a majority of the members of the
Board.
17.3 "CHANGE IN CONTROL PERIOD" means the period beginning on the date of a CIC
Trigger Event and ending on the earlier of the date of a CIC Failure or the
occurrence of a Change in Control; provided, however, that a Change in Control
Period shall not terminate if subsequent to the commencement of the Change in
Control Period another CIC Trigger Event occurs and a CIC Failure has not
occurred with respect to that CIC Trigger Event.
17.4 "CIC TRIGGER EVENT" means the occurrence of either of the following:
(a) the Board or the Parent Corporation's shareholders approve a
transaction described in Section 17,1(b) hereof; or
(b) the commencement of a proxy contest in which any Person seeks to
replace or
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<PAGE>
remove a majority of the members of the Board.
17.5 "PERSON" shall have the meaning given in Section 3(a)(9) of the Exchange
Act and shall also include any syndicate or group deemed to be a "person" under
Section 13(d)(3) of the Exchange Act.
IN WITNESS WHEREOF, and intending to be legally bound hereby, the
parties hereto have caused their duly authorized officers to execute and deliver
this Trust Agreement as of the day and year first above noted.
PNC INVESTMENT CORP.
/s/ Robert L. Haunschild
--------------------------
Robert L. Haunschild
Chair, President & Treasurer
HERSHEY TRUST COMPANY
By: /s/ Lise M. Shelren
--------------------------
Accepted and agreed to, intending to be legally bound, by PNC Bank Corp. with
respect to its obligations hereunder.
PNC BANK CORP.
By: /s/ William E. Rosner
--------------------------
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<PAGE>
ATTACHMENT "A"
PLANS
PNC Bank Corp. Supplemental Incentive Savings Plan
PNC Bank Corp. Supplemental Retirement Savings Plan
PNC Bank Corp. Supplemental Executive Retirement Plan
PNC Bank Corp. ERISA Excess Pension Plan
PNC Bank Corp. Key Executive Equity Program
PNC Bank Corp. and Affiliates Deferred Compensation Plan
PNC Bank Corp. Director's Deferred Compensation Plan
PNC Bank Corp. Directors Retirement Plan
PNC Bank Corp. Outside Directors Deferred Stock Unit Plan
Pittsburgh National Bank Deferred Director's Fees
All Change in Control Severance Agreements entered into between PNC Bank Corp.
and executives of PNC Bank. Corp. and its subsidiaries and affiliates
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.15
<SEQUENCE>7
<FILENAME>j9925001exv10w15.txt
<DESCRIPTION>EMPLOYMENT AGREEMENT
<TEXT>
<PAGE>
EXHIBIT 10.15
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") is entered into this 10th
day of January, 2003, (the "Effective Date"), between The PNC Financial
Services Group, Inc. and PNC Bank, National Association (together referred to
herein as "PNC") and Joseph Whiteside ("Executive").
In consideration of the representations and promises made herein, the parties
hereto agree as follows:
1. Agreement to Employ. PNC agrees to employ Executive, and
Executive hereby accepts employment with PNC, upon the terms and conditions
set forth in this Agreement. Executive understands that PNC is subject to the
requirements of the Federal Deposit Insurance Corporation ("FDIC"), which
prohibit employment of any person who has been convicted of, plead guilty to,
or entered into a pretrial disposition with regard to a crime involving
dishonesty (including the sale, manufacture or distribution of controlled
substances, or the intent to do so), breach of trust, or money laundering,
absent a waiver from the FDIC. Executive further understands and agrees that
this offer of employment is contingent upon no such waiver being necessary
with respect to Executive. If a waiver from the FDIC is necessary before
Executive's employment with PNC could continue, this Agreement shall be
voidable at the sole discretion of PNC.
2. Duties. Executive will hold the title of Vice Chairman of
PNC, and will serve as Special Advisor to the Chairman and CEO of PNC ("CEO").
In such capacity, he will provide counsel and advice to the CEO. He will also
work on projects assigned to him and shall perform such other duties
consistent with the duties for which he is hired that may be reasonably
designated or assigned to him from time to time by the CEO. Executive
represents that he is not aware of any current restriction upon his ability to
perform such duties on behalf of PNC, and shall immediately notify the Company
in writing of any such restriction that is threatened or imposed during his
employment hereunder.
3. Other Business Interests. Executive shall devote his full
working time, energy and attention to the business of PNC. Other than as
expressly approved in advance by PNC and any appropriate regulatory agencies,
Executive will not, during the term of this Agreement, engage in any other
business activity. However, Executive may invest or supervise the investment
of his personal assets (including, without limitation, financial investments
and rental property) in such form or manner as will not conflict with his
duties under this Agreement.
4. Compensation. For all services to be rendered by Executive
hereunder, PNC shall compensate Executive as follows:
<PAGE>
a. Base Salary. PNC will pay Executive base salary at
the annualized rate of $425,000 ("Base Salary"). Base Salary will be paid in
accordance with PNC's customary payroll policy.
b. Bonuses. Executive is 'eligible to receive the
following bonus:
(i) Executive will receive, upon employment, a
bonus of $205,000; and,
(ii) Executive will be eligible to receive, a
performance bonus payable in March of 2004, based upon performance in 2003
("Performance Bonus"). The Performance Bonus target will be 125% of
Executive's annualized Base Salary, with the actual amount paid based upon
Executive's accomplishments during the preceding calendar year, as determined
at the sole discretion of PNC: Provided, however, that the minimum bonus paid
to Executive in March of 2004 will be $200,000. Subject to the Acceleration of
Payments section set forth below, the Performance Bonus Will not be earned by
Executive unless he remains employed by PNC on the date similar bonuses are
paid in March of 2004. The opportunity to receive the Performance Bonus will
be in lieu of any and all other bonus participation by Executive.
c. Restricted Shares. Upon employment Executive will
receive 20,000 shares of restricted stock, subject to signing a restricted
stock agreement prepared by PNC ("Restricted Stock Agreement"). With the
exceptions that (i) it will contain a provision allowing Executive to fully
vest in the restricted stock in two years, and (ii) it is subject to
accelerated vesting under the Acceleration of Payments section set forth below,
the Restricted Stock Agreement will contain PNC's standard terms and
conditions for such agreements, including non-solicitation and no hire
provisions. This grant will be made under and pursuant to the terms and
condItions of PNC's 1997 Long Term Incentive Plan ("LTIP").
d. Stock Options. Executive will be granted an option,
upon employment, to purchase 20,000 shares of PNC's stock subject to signing a
stock option agreement prepared by PNC. Thereafter, Executive is eligible to
participate in the next normal annual grant of options, which is anticipated
to occur in January of 2003, at which time he will receive the option to
purchase 65,000 shares of PNC stock. Both the 20,000 share grant and the
65,000 share grant will vest one year after the date of grant. Stock option
grants are subject to the terms and conditions of the LTIP, as well as the
relevant Stock Option Agreements that include non~ solicitation and no hire
provisions. The opportunity to receive the restricted shares and stock options
referred to in subsections 4(c) and (d) of this Agreement is in lieu of any
and all other participation by Executive in offerings under PNC's LTIP.
e. Perquisite Allowance. Upon employment, and again
twelve months thereafter if he is still employed by PNC at that time,
Executive will receive a lump sum perquisite payment of $13,000.
-2-
<PAGE>
f. Vacation. Executive will be entitled to accrue
vacation beginning with his date of hire, and to use such vacation, in
accordance with PNC's vacation policy. Because this is an Agreement for a
specific term, Executive understands and agrees that be will not receive any
payment for unused vacation if his employment ends at the end of the term of
this Agreement. In addition, if payment is made to Executive under the
Acceleration of Payments provision set forth below, such payment is presumed
to incorporate all vacation entitlement, and no additional vacation payment
will be made to Executive upon such termination of his employment from PNC.
g. Standard Benefit Plans. Executive will also be
eligible to participate in PNC's standard welfare benefits plans, 401(k) plan,
life and other insurance plans, and Employee Stock Purchase Plan, in
accordance with the terms and conditions of the respective plans and programs.
Given the specific term of this Agreement and the Acceleration of Payments
section set forth below, this Agreement is deemed to be in lieu of, and not in
addition to, any payments Executive might otherwise be eligible to receive
under PNC's Displaced Employee Assistance Plans, the PNC Severance Plan,
and/or PNC's short-term and long-term disability programs.
h. Acceleration of Payments. If the employment
relationship with Executive is terminated sooner than two years after his date
of hire, for reasons other than resignation by Executive or termination for
Cause by PNC, Executive will receive the following lump sum payments Within 30
days of his termination date: (i) the remainder of(A) minus (B), where (A) is
$850,000 and (B) is the sum of all salary payments made to Executive under
subsection 4(a) above for work performed through his last day of PNC
employment (ii) $200,000, if the Performance Bonus has not already been paid
to Executive as of his termination date; and, (iii) the difference on
Executive's last day of employment with PNC, if any, between the closing price
and the grant price of any outstanding unvested shares of PNC stock previously
granted to Executive under and pursuant to the terms and conditions of the
LTIP and the respective Stock Option Agreements signed by him and PNC
(provided, however, that in the event Executive's employment is terminated
during a change in control coverage period, this subsection (iii) will be
superceded by the provisions of the Stock Option Agreements). In addition,
vesting of the 20,000 restricted shares referred to in subsection 4(c), above,
shall be accelerated to Executive's date of termination from PNC employment.
All Accelerated payments provided for in this subsection "h" are contingent
upon Executive timely signing and not revoking the valid waiver and release
agreement described in Section 13, below.
i. Change in Control. If a "Change in Control" occurs
while Executive is still employed by PNC under this Agreement and his
employment with PNC is terminated sooner than two years after his date of
hire, in lieu of any payments otherwise owed to Executive pursuant to
subsections (h)(i) and (ii) of this section 4 he will receive a payment within
30 days of his separation from PNC employment. Such payment will be the
greater of x or y, where x is $ 1,250,000 and y is the sum of $850,000 plus
two times the bonus Executive received in Mach of 2004: Provided, however,
that if such termination occurs within 24 months of his 65th birthday, this
payment will be reduced by the monthly prorata portion (x or y, as applicable,
divided by 24) of such payment times the number of months less than 24 that
remain between the date of termination and Executive's 65th birthday. For the
purposes of this subsection "i," the
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definition of a Change in Control will be the same as that used in Annex "A" to
PNC's standard Stock Option Agreement during 2002.
If any portion of this payment becomes subject to the Excise
Tax, PNC will pay to Executive an additional amount (the "Gross-Up Payment")
such that the net amount retained from the Gross-Up Payment after deduction of
all payroll taxes and the Excise Tax shall be equal to the Excise Tax. Provided,
however, that the total of the payments provided by this section 4(i) are
subject to limitation by the excess parachute payment provisions of the Internal
Revenue Code (as such term is defined in Section 280G(b)(1) thereof).
j. Deductions. Compensation paid to Executive by PNC shall
be subject to all legally required withholdings, and to such additional
withholdings as are designated by Executive and permitted under PNC's policies
and procedures applicable to him.
5. Term of Agreement and Employment. This Agreement, and
Executive's employment with PNC, shall be for a period of two years commencing
on his date of hire; Provided, however, that Executive's employment may be
terminated by either party prior thereto, at any time and for any reason. In
such event, termination of this Agreement will be co-terminus with termination
of Executive's employment.
a. Resignation. If Executive resigns from PNC employment at
any time prior to completion of two years after his date of hire, he will
receive payment of all salary earned and vacation accrued through his last day
of employment with PNC. No further compensation will be owed to Executive under
the terms of this Agreement or otherwise, the Acceleration of Payments provision
will be null and void, and the restricted shares referred to in subsection 4(c)
above will be forfeited.
b. Termination for Cause. If Executive's employment with
PNC is terminated by PNC for Cause at any time prior to completion of two years
after his date of hire, he will receive payment of all salary earned and
vacation accrued through his last day of employment with PNC. No further
compensation will be owed to Executive under the terms of this Agreement or
otherwise, the Acceleration of Payments provision will be null and void, and the
restricted shares referred to in subsection 4(c), above, will be forfeited. For
the purposes of this Agreement, "Cause" is defined as any act or omission which
constitutes: (i) gross negligence or willful misconduct in connection with the
business of PNC or PNC's affiliates or subsidiaries, or their successors or
assigns; (ii) fraud, misappropriation, breach of fiduciary duty, felony, theft,
dishonesty, or moral turpitude; (iii) material violation of PNC's Code of
Ethics; (iv) gross neglect of duties and responsibilities; (v) material breach
of Executive's obligations contained in this Agreement; (vi) falsification of
any representation made herein; (vii) entry of any order against Executive by
any government body having regulatory authority with respect to the business of
PNC or any PNC subsidiary or affiliate; or, (viii) any other actions adverse to
the interest of PNC or PNC's affiliates or subsidiaries, or their successors and
assigns, which are similar in nature and severity to any of the actions
described in items (i) through (vi), above; Provided, however, that prior to
being given written notice of employment termination with Cause under (iv) or
(v) hereof, or (viii) hereof if cureable, Executive shall be given thirty days
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advance notice that PNC believes he is in violation of such provision(s),
during which time Executive may seek to cure his acts and/or omissions and, if
successful, obviate the written notice of employment termination with cause; and
Provided further that the standards used to determine Cause under items (i)
through (iv), and (vii), above, shall be the same as the standards applicable
generally to conduct of similarly situated employees of PNC.
c. Termination of Employment for Reasons Other than
Resignation or Cause. If Executive's employment with PNC is terminated for
reasons other than Resignation by Executive or by PNC with Cause, at any time
prior to completion of two years after his date of hire, any additional
compensation to be paid to Executive will be governed by the Acceleration of
Payment provisions set forth above.
6. Property. Upon termination of this Agreement for any reason
whatsoever, Executive shall immediately return to PNC any and all confidential,
proprietary or other property of PNC and PNC's affiliates and subsidiaries, and
their successors or assigns, which is in his/her possession and/or subject to
his/her control.
7. Intellectual Property. Executive shall promptly and fully
disclose to PNC any and all inventions, discoveries, improvements, ideas or
other works of inventorship or authorship, whether or not patentable, that are
conceived and/or reduced to practice by Executive during the term of his
employment by PNC, whether alone or with others, and that are (a) related
directly or indirectly to the business or activities of PNC or PNC subsidiary or
affiliate, or (b) developed with the use of any time, material, facilities or
other resources of PNC or PNC subsidiary or affiliate ("Developments").
Executive agrees to assign and hereby does assign to PNC or its designee all of
his right, title and interest, including copyrights and patent rights, in and to
all Developments. Executive shall perform all actions and execute all
instruments that PNC or any PNC subsidiary or affiliate shall deem necessary to
protect or record PNC's or its designee's interests in the Developments. The
obligations of this Section 7 shall be performed by Executive without further
compensation and shall continue beyond the termination of his employment.
8. Confidentiality. During Executive's employment with PNC and
thereafter, Executive will not disclose or use in any way any confidential
business or technical information or trade secret acquired in the course of such
employment, all of which is the exclusive and valuable property of PNC whether
or not conceived of or prepared by Executive, other than (a) information
generally known in the PNC's industry or acquired from public sources, (b) as
required in the course of PNC employment, (c) as required by any court,
supervisory authority, administrative agency or applicable law, or (d) with the
prior written consent of PNC.
9. Expense Reimbursement. Executive shall be reimbursed by PNC for
the reasonable and necessary business expenses incurred by Executive in the
discharge of his duties, subject to PNC's standard policies and procedures
related to expense reimbursement and approval thereof.
10. Non-Solicitation and No Hire. Executive agrees to comply with
the provisions of this Section 10, beginning on his date of hire and continuing
for a period of three years thereafter.
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Executive further agrees that he has received adequate consideration with
respect to enforcement of Sections 10 and 11 of this Agreement, that such
provisions are reasonable and properly required for the adequate protection of
the business of PNC, and that enforcement of such provisions will not prevent
him from earning a living.
a. Non-Solicitation. Executive shall not, directly or
indirectly, either for Executive's own benefit or purpose or for the benefit or
purpose of any person or entity other than PNC or PNC's subsidiaries or
affiliates, solicit, call on, do business with, or actively interfere with PNC's
or any PNC subsidiary's or affiliate's relationship with, or attempt to divert
or entice away, any person or entity that Executive should reasonably know (i)
is a customer for which PNC or any PNC subsidiary or affiliate provides services
as of the termination of his employment, or (ii) was a customer for which PNC or
any PNC subsidiary or affiliate provided services at any time during the twelve
(12) months preceding termination of his employment from PNC, or (iii) was, as
of the termination of his employment from PNC, considering retention of PNC or
any PNC subsidiary or affiliate to provide services.
(b) No-Hire. Executive shall not, directly or indirectly,
either for Executive's own benefit or purpose or for the benefit or purpose of
any person or entity other than PNC or any PNC subsidiary or affiliate, employ
or offer to employ, call on, or actively interfere with PNC's or any PNC
subsidiary's or affiliate's relationship with, or attempt to divert or entice
away, any employee of PNC or PNC subsidiary or affiliate, nor shall Executive
assist any other person or entity in such activities.
11. Enforcement Provisions. Executive understands and agrees to the
following provisions regarding enforcement of this Agreement.
a. Governing Law and Jurisdiction. The Agreement is
governed by and is to be construed under the laws of the Commonwealth
of Pennsylvania, without regard to conflict of laws rules. Any dispute or claim
arising out of or relating to the Agreement or claim of breach hereof shall be
brought exclusively in the federal court for the Western District of
Pennsylvania or in the Court of Common Pleas of Allegheny County, Pennsylvania.
By execution of the Agreement, Executive and PNC consent to the exclusive
jurisdiction of such courts, and waive any right to challenge jurisdiction or
venue in such courts with regard to any suit, action, or proceeding under or in
connection with the Agreement.
b. Equitable Remedies. A breach of Sections 6, 7, 8 or 10
will cause PNC irreparable harm, and PNC will therefore be entitled to issuance
of immediate, as well as permanent, injunctive relief restraining Executive, and
each and every person and entity acting in concert or participating with
Executive, from initiation and/or continuation of such breach.
c. Tolling Period. If it becomes necessary or desirable for
PNC to seek compliance with any provision of Section 10 by legal proceedings,
the period during which Executive shall comply with each such provision shall
extend for a period of twelve (12) months from the date of the legal order
requiring such compliance.
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d. No Waiver. Failure of PNC to demand strict compliance
with any of the terms, covenants or conditions of the Agreement shall not be
deemed a waiver of such term, covenant or condition, nor shall any waiver or
relinquishment of any such term, covenant or condition on any occasion or on
multiple occasions be deemed a waiver or relinquishment of such term, covenant
or condition.
e. Severability. The restrictions and obligations imposed
by Section 10 are separate and severable, and it is the intent of Executive and
PNC that if any restriction or obligation imposed by any of the provisions of
Section 10 is deemed by a court of competent jurisdiction to be void for any
reason whatsoever, the remaining provisions, restrictions and obligations of
Section 10 shall remain valid and binding upon Executive. Executive and PNC
further agree that the invalidity or unenforceability of any provision or
provisions of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect.
f. Reform. In the event any part of Section 10 is
determined by a court of competent jurisdiction to be unenforceable, it is the
intent of Executive and PNC that said court reduce and reform the provisions
thereof so as to apply the greatest limitations considered enforceable by the
court.
g. Waiver. Executive and PNC hereby waive any right to
trial by jury with regard to any suit, action or proceeding under or in
connection with Section 10 of this Agreement
12. Personnel Policies. Except as specifically modified by this
Agreement, the general personnel policies and practices of PNC (as said policies
may exist from time to time) will apply to Executive with the same force and
effect as to any other similarly situated Executive of PNC.
13. Waiver and Release. Executive acknowledges and agrees that this
Agreement is for a specific term, and that any termination of his employment and
this Agreement prior to completion of two years from his date of hire will be
due solely to the operation of the terms of this Agreement, and not for any
other reason. As to such termination of this Agreement and his employment,
Executive will therefore sign and return an agreement prepared by PNC within
four days after his last day of employment that:
(a) Fully releases and forever discharges PNC and PNC's
subsidiaries and affiliates, and each of their officers, directors, employees
and shareholders, from all liability upon claims of any nature whatsoever based
upon (i) any event that occurred during his employment with PNC, (ii)
termination of this Agreement, and/or (iii) termination of Executive's
employment by PNC, including claims of negligence, breach of contract (except
for breach of this Agreement or the waiver and release agreement), violation of
federal, state or local laws which prohibit discrimination on the basis of race,
color, national origin, religion, sex, age, veteran status, disability or
retaliation, the Age Discrimination in Employment Act of 1967, as amended, and
the laws enforced by any other federal, state or local agencies, including
claims under the
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Pennsylvania Human Relations Act, as amended. Executive further waives any claim
or right to payment of attorneys' fees or expenses;
(b) Provides that he will not file, or permit to be filed in
his name or on his behalf, any lawsuit in court against any of the persons or
entities released in this section 13, (other than for breach of this Agreement
or to challenge this waiver and release under the Age Discrimination in
Employment Act), based upon (i) any event that occurred during his employment
with PNC, (ii) termination of this Agreement, and/or (iii) termination of
Executive's employment by PNC; and,
(c) Provides that, while the waiver and release does not
prevent Executive from filing a Charge with the Equal Employment Opportunity
Commission ("EEOC"), if any charge, complaint, lawsuit or administrative claim
is filed in Executive's name or on his behalf with the EEOC or any other
administrative agency or organization, or in any other forum, against any of the
persons or entities released in this paragraph, based upon (i) any event which
occurred during his employment with PNC, (ii) the termination of this
Agreement, and/or (iii) termination of his employment by PNC, Executive will not
seek or accept any personal relief, including but not limited to any award of
monetary damages or reinstatement to his employment with PNC; Provided, however,
that this provision shall not apply to a claim for damages under the Age
Discrimination in Employment Act. If successful on such claim any monetary
damages obtained by Executive would be offset by the monies paid under this
Agreement.
14. Entire and Final Agreement. This Agreement Shall supersede any
and all oral or written representations, understandings and agreements of the
parties with respect to their employment relationship (including, but
not limited to all correspondence, memoranda and term sheets), and it contains
the entire agreement of the parties with respect to those matters (with the
exception of any other agreements duly executed by the parties after this
Agreement is effective). Once signed by the parties hereto, this Agreement may
only be modified in writing, signed by the Executive and a duly authorized
officer of PNC.
15. Assignment. Neither this Agreement nor any of the rights,
obligations or interests arising hereunder may be assigned by Executive. Neither
this Agreement nor any of the rights, obligations or interests arising hereunder
may be assigned by PNC without the prior written consent of Executive, to a
person or entity other than an affiliate or subsidiary of PNC, or their
successors; Provided, however, that any successor must expressly assume all of
PNC's obligations and liabilities to Executive under this Agreement for it to
remain in effect.
16. Section Headings. The section headings contained in this
Agreement are inserted for purposes of convenience only, and shall not affect
the meaning or interpretation of this Agreement.
17. Execution in Counterparts. Two copies of this Agreement shall be
executed by the parties hereto, with one executed copy to be retained by each
party. Each such copy shall be
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considered an original for all purposes.
IN WITNESS WHEREOF, PNC and Executive have signed this Agreement below,
intending to be legally bound hereby.
BY THE PNC FINANCIAL SERVICES
GROUP, INC.
/s/ WILLIAM E. ROSNER Dated: 1-9-03
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/s/ J.J. WHITESIDE Dated: 1/10/03
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Executive
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</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.16
<SEQUENCE>8
<FILENAME>j9925001exv10w16.txt
<DESCRIPTION>INCENTIVE SAVINGS PLAN
<TEXT>
<PAGE>
EXHIBIT 10.16
THE PNC FINANCIAL SERVICES GROUP, INC.
INCENTIVE SAVINGS PLAN
(AMENDED AND RESTATED EFFECTIVE AS OF JANUARY 1, 2001)
<PAGE>
THE PNC FINANCIAL SERVICES GROUP, INC.
INCENTIVE SAVINGS PLAN
TABLE OF CONTENTS
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INTRODUCTORY STATEMENT.......................................................................1
ARTICLE I DEFINITIONS...................................................................2
1.1 Account.......................................................................2
1.2 Account Balance...............................................................2
1.3 Administrative Committee......................................................2
1.4 Beneficiary...................................................................2
1.5 BlackRock Stock...............................................................2
1.6 Board.........................................................................2
1.7 Code..........................................................................2
1.8 Compensation..................................................................2
1.9 Corporation...................................................................4
1.10 Corporation Stock.............................................................4
1.11 Deposit Account...............................................................4
1.12 Effective Date................................................................4
1.13 Elective Contribution.........................................................4
1.14 Elective Contribution Account.................................................4
1.15 Elective Contribution Agreement...............................................4
1.16 Elective Deferrals............................................................4
1.17 Eligible Employee.............................................................4
1.18 Employee......................................................................5
1.19 Employer......................................................................5
1.20 Employer Contribution.........................................................5
1.21 Employer Contribution Account.................................................5
1.22 Entry Date....................................................................5
1.23 ERISA.........................................................................5
1.24 Highly Compensated Employee...................................................5
1.25 Hourly Employee...............................................................6
1.26 Hour of Service...............................................................6
1.27 Investment Fund...............................................................6
1.28 Matching Contribution.........................................................7
1.29 Matching Contribution Account.................................................7
1.30 Non-highly Compensated Employee...............................................7
1.31 Participant...................................................................7
1.32 Participating Employer........................................................7
1.33 Plan..........................................................................7
1.34 Plan Administrator............................................................7
1.35 Plan Manager..................................................................7
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1.36 Plan Year.....................................................................7
1.37 Prior Plan....................................................................7
1.38 Related Entity................................................................8
1.39 Rollover Account..............................................................8
1.40 Rollover Amount...............................................................8
1.41 Salaried Employee.............................................................8
1.42 Spouse........................................................................8
1.43 Total Disability..............................................................8
1.44 Trust........................................................................ 8
1.45 Trust Agreement...............................................................9
1.46 Trust Fund....................................................................9
1.47 Trustee.......................................................................9
1.48 Valuation Date................................................................9
1.49 Year of Eligibility Service...................................................9
ARTICLE II PARTICIPATION IN THE PLAN....................................................10
2.1 Eligibility to Participate...................................................10
2.2 Participation upon Reemployment..............................................12
2.3 Designation of Beneficiaries.................................................12
ARTICLE III CONTRIBUTIONS................................................................14
3.1 Elective Contributions.......................................................14
3.2 Employer Contributions.......................................................15
3.3 Matching Contributions.......................................................16
3.4 Rollover Contributions.......................................................16
ARTICLE IV PARTICIPANT ACCOUNTS.........................................................18
4.1 Maintenance of Accounts for Each Participant.................................18
ARTICLE V VESTING......................................................................19
5.1 Vesting......................................................................19
ARTICLE VI INVESTMENT OPTIONS...........................................................20
6.1 Participant Investment Elections.............................................20
6.2 Other Restrictions on Availability of Investment Funds.......................21
6.3 Transfer of Assets...........................................................21
6.4 Records......................................................................22
6.5 Participant Interest in Trust Fund...........................................22
6.6 Valuation of Investment Funds................................................22
6.7 Allocation of Expenses.......................................................23
6.8 Allocation of Earnings and Losses............................................23
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ARTICLE VII LIMITATIONS ON CONTRIBUTIONS.................................................24
7.1 Maximum Amount of Elective Contributions.....................................24
7.2 Deductibility................................................................25
7.3 Limitation on Annual Additions...............................................25
7.4 Actual Deferral Percentage Test..............................................27
7.5 Actual Contribution Percentage Test..........................................30
7.6 Multiple Use Test............................................................31
ARTICLE VIII DISTRIBUTION OF BENEFITS.....................................................32
8.1 Time of Distribution.........................................................32
8.2 Minimum Distributions........................................................33
8.3 Latest Commencement of Benefits..............................................34
8.4 Method of Payment............................................................34
8.5 Medium of Distribution.......................................................35
8.6 Payment to Minors and Incompetents...........................................35
8.7 Direct Rollover Provisions...................................................36
ARTICLE IX IN-SERVICE WITHDRAWALS DURING EMPLOYMENT.....................................38
9.1 Regular Withdrawals..........................................................38
9.2 Hardship Withdrawals.........................................................38
9.3 Funding of Withdrawals.......................................................40
9.4 Withdrawals Permitted under Certain Prior Plans..............................40
ARTICLE X LOANS TO PARTICIPANTS........................................................41
10.1 Authorization of Loans.......................................................41
10.2 Minimum Requirements for Loans...............................................41
10.3 Disclosure of Terms of Loan Program to Participants..........................44
ARTICLE XI ALLOCATION OF FIDUCIARY RESPONSIBILITIES AND DUTIES..........................45
11.1 Corporation..................................................................45
11.2 Administrative Committee.....................................................45
11.3 Trustee......................................................................45
11.4 Investment Managers..........................................................46
11.5 No Joint Fiduciary Responsibilities..........................................47
ARTICLE XII ADMINISTRATION OF PLAN.......................................................48
12.1 Administrative Committee.....................................................48
12.2 Duties and Powers............................................................48
12.3 Plan Manager.................................................................49
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12.4 Standard of Conduct..........................................................49
12.5 Delegation...................................................................49
12.6 Meetings.....................................................................50
12.7 Rules and Decisions..........................................................50
12.8 Compensation and Payment of Expenses.........................................51
12.9 Insurance....................................................................51
12.10 Resignation and Removal......................................................51
12.11 Disqualification.............................................................52
12.12 Claims Procedure.............................................................52
ARTICLE XIII PARTICIPATING EMPLOYERS......................................................54
13.1 Adoption of Plan by Participating Employers..................................54
13.2 Actions by Subsidiaries or Affiliates........................................54
13.3 Corporation Amends on Behalf of All Employers................................54
13.4 Any Employer May Terminate...................................................54
ARTICLE XIV AMENDMENT, MERGER AND TERMINATION............................................55
14.1 Amendment....................................................................55
14.2 Merger and Consolidation of Plan, Transfer of Plan Assets....................55
14.3 Discontinuance of Contributions and Termination of Plan......................56
ARTICLE XV MISCELLANEOUS................................................................57
15.1 Exclusive Benefit of Participants and Beneficiaries..........................57
15.2 Employment Rights............................................................58
15.3 Spendthrift Clause...........................................................59
15.4 Employer's Successor.........................................................59
15.5 Legal Actions................................................................59
15.6 Power to Interplead..........................................................60
15.7 Unclaimed Amounts............................................................60
15.8 Construction of Plan.........................................................60
15.9 USERRA and Code Section 414(u) Compliance....................................61
ARTICLE XVI TOP HEAVY PROVISIONS.........................................................62
16.1 Definitions of Terms Used in This Article XVI................................62
16.2 Determination of Top Heavy and Super Top Heavy Status........................65
16.3 Right to Participate in Allocation of Employer's Contributions...............65
16.4 Minimum Employer Contribution Allocation.....................................66
ARTICLE XVII EMPLOYEE STOCK OWNERSHIP PLAN................................................68
17.1 Definitions of Terms Used in This Article XVII...............................68
17.2 Effective Date of ESOP.......................................................68
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17.3 Participating Employer Contributions.........................................69
17.4 Participant Contributions....................................................70
17.5 Investment of ESOP Assets....................................................70
17.6 Purchases of Corporation Stock...............................................70
17.7 Sales of Corporation Stock...................................................70
17.8 Exempt Loans.................................................................71
17.9 Allocations to Participants' Accounts........................................74
17.10 Allocable Shares.............................................................75
17.11 Accounting for Allocations...................................................76
17.12 Form of Distribution.........................................................77
17.13 Voting Corporation Stock.....................................................77
ANNEX I PAY CODES
ANNEX II PARTICIPATING EMPLOYERS
ANNEX III PRIOR PLANS AND PROTECTED BENEFITS
</TABLE>
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THE PNC FINANCIAL SERVICES GROUP, INC.
INCENTIVE SAVINGS PLAN
INTRODUCTORY STATEMENT
The PNC Financial Services Group, Inc. (formerly known as PNC Bank Corp.),
a Pennsylvania corporation (the "Corporation"), sponsors The PNC Financial
Services Group, Inc. Incentive Savings Plan (formerly known as the PNC Bank
Corp. Incentive Savings Plan) (the "Plan").
Effective as of January 1, 2001 (and other effective dates set forth
herein), the Corporation desires to amend and restate the Plan in its entirety
to (i) incorporate previously adopted amendments, (ii) comply with and reflect
certain changes made by applicable legislation and (iii) make certain clarifying
and other changes.
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ARTICLE I
DEFINITIONS
The following words and phrases as used herein shall have the following
meanings, unless a different meaning clearly is required by the context.
1.1 "Account" means the sum of a Participant's Deposit Account, Elective
Contribution Account, Employer Contribution Account, Matching Contribution
Account and Rollover Account.
1.2 "Account Balance" means the entire amount allocated to the Participant's
Account in the Trust Fund.
1.3 "Administrative Committee" means the committee appointed by the Board or
its delegate to administer the Plan.
1.4 "Beneficiary" means the person or persons or trust or estate designated by
a Participant under Section 2.3 of the Plan.
1.5 "BlackRock Stock" means the Class A common stock of BlackRock, Inc.
1.6 "Board" means the board of directors of the Corporation as from time
to time designated, any committee of the Board to which the Board duly delegates
its duties and authority hereunder, or any other authorized delegate of the
Board or any committee thereof.
1.7 "Code" means the Internal Revenue Code of 1986, as amended.
1.8 "Compensation" means the total compensation received by a Participant
from the Employer, including wages, salaries, commissions and fees for
professional services actually rendered in the course of employment with the
Employer. Compensation shall include any salary reductions provided for under
Code Sections 125, 132, 402(a)(8) and 402(h), including,
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but not limited to, Elective Contributions. Compensation shall not include
severance pay, Employer Contributions or Matching Contributions to this Plan
(but shall include Elective Contributions) and employer contributions to any
pension plan or welfare plan sponsored by the Employer.
Compensation shall not include variable pay such as annual bonus amounts in
excess of the greater of (i) $25,000 or (ii) 50 percent of such variable pay,
provided that for a Participant who is not a member of the corporate executive
group, variable pay shall not exceed $250,000. For this purpose, Annex I
contains a list of all pay codes that are treated as Compensation for purposes
of the Plan, including those that are treated as variable pay. For this purpose,
the corporate executive group means the group designated as such by the
Corporation.
Compensation does not include any amounts imputed into a Participant's
gross income for federal income tax purposes by a provision of the Code,
including, but not limited to, (i) any amounts required to be reported as wages
on a Participant's Form W-2 as a result of Employee expense reimbursements (such
as moving expenses), (ii) director's fees, (iii) amounts realized under Code
Section 83 from the transfer of property, except to the extent includible in
income pursuant to the election described in Code Section 83(b), (iv) amounts
realized from the exercise of a nonqualified stock option or when restricted
stock (or property) held by the Participant either becomes freely transferable
or is no longer subject to a substantial risk of forfeiture, (v) payments from a
plan of deferred compensation not qualified under Code Section 401(a), (vi)
amounts realized from the sale, exchange or other disposition of stock acquired
under a qualified stock option and (vii) payments made by an Employer for
group-term life insurance, hospitalization and like benefits, but only to the
extent that the amount are not paid by the Employer on behalf of a Participant
pursuant to the Participant's salary deferral election under a cafeteria plan
described in Code Section 125.
A Participant's Compensation shall not exceed the Code Section 401(a)(17)
limit, as adjusted by the Secretary of the Treasury.
The family aggregation rules of Code Section 401(a)(17) are deleted from
this Plan effective January 1, 1997.
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1.9 "Corporation" means The PNC Financial Services Group, Inc.
1.10 "Corporation Stock" means the common stock of The PNC Financial
Services Group, Inc.
1.11 "Deposit Account" means the account used to record a Participant's
interest in the Plan attributable to certain interests under Prior Plans.
1.12 "Effective Date" means January 1, 2001.
1.13 "Elective Contribution" means the amount contributed by the Employer
under Section 3.1 of the Plan in accordance with an Elective Contribution
Agreement between an Employer and a Participant.
1.14 "Elective Contribution Account" means the account used to record a
Participant's interest in the Plan attributable to Elective Contributions and
certain interests under Prior Plans.
1.15 "Elective Contribution Agreement" means the agreement whereby an
Eligible Employee elects to defer a portion of Compensation under the procedures
set forth in Article III. Such form shall set forth the amount of Compensation
that the Eligible Employee elects to defer and such other information as the
Employer or Administrative Committee may require.
1.16 "Elective Deferrals" means for a taxable year all of a Participant's
(i) elective contributions under a 401(k) plan (including Elective Contributions
under this Plan), (ii) employer contributions to a simplified employee pension
under Code Section 402(h)(1)(B), (iii) employer contributions to a Code section
403(b) annuity contract under a salary reduction agreement and (iv) employee
deductible contributions to a Code section 501(c)(18) trust.
1.17 "Eligible Employee" means any Employee who has satisfied all of the
requirements to become a Participant under Article II, other than execution of
an Elective Contribution
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Agreement. Eligible Employee does not include any Employee who is a leased
employee (as defined in Code Section 414(n)) or a student intern.
1.18 "Employee" means any person who is paid on an hourly basis or salary
basis by an Employer for services rendered for such Employer. Employee does not
include (i) any individual who is covered by a collective bargaining agreement
where retirement benefits were the subject of good faith bargaining shall,
unless the collective bargaining agreement provides for the individual's
inclusion in this Plan, (ii) any person who is receiving only a pension or
severance pay from an Employer, (iii) any individual hired and classified by the
Employer as an independent contractor, or who receives compensation by way of
fee under contract, written or otherwise, even if misclassified by the Employer
as subsequently determined in a judicial or administrative proceeding; and (iv)
a director of an Employer who is not an officer or otherwise an employee of an
Employer without regard to such individual's status for tax or any other
purpose.
1.19 "Employer" means the Corporation, any successors in interest thereto and
any Participating Employer.
1.20 "Employer Contribution" means the amount contributed by the Employer under
Section 3.2 of the Plan.
1.21 "Employer Contribution Account" means the account used to record a
Participant's interest in the Plan attributable to Employer Contributions and
certain interests under Prior Plans.
1.22 "Entry Date" means the first day of each calendar month.
1.23 "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
1.24 "Highly Compensated Employee" means, effective January 1, 1997, any
Employee who (i) performs service for the Employer during the Plan Year or the
immediately preceding Plan Year (the "determination year") and who was, or is, a
five percent owner (as defined in Code
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Section 416(i)(1)) or (ii) for the preceding Plan Year received compensation
from the Employer in excess of $80,000 (as adjusted by the Secretary of the
Treasury) and for such year was a member of the top 20 percent of Employees of
the Employer when ranked on the basis of compensation in accordance with Code
Section 414(q)(4) (the "top-paid group").
A Highly Compensated Employee includes any Employee who separated from
service (or was deemed to have separated) prior to the determination year,
performed no service for the employer during the determination year, and was a
highly compensated active Employee for either the separation year or any
determination year ending on or after the Employee's 55th birthday.
The determination of who is a Highly Compensated Employee, including the
determinations of the number and identity of Employees in the top-paid group and
the compensation that is considered, will be made in accordance with Section
414(q) of the Code and the Treasury Regulations thereunder.
1.25 "Hourly Employee" means an Employee who is paid on an hourly basis.
1.26 "Hour of Service" means, in accordance with Department of Labor Regulation
Section 2530.200b-2, each hour for which an Employee is directly or indirectly
paid, or entitled to be paid by an Employer, regardless of whether employment
duties are performed, and each hour for which back pay, irrespective of
mitigation of damages, has been either awarded or agreed to by an Employer.
These hours shall be credited to an Employee for the computation period during
which the Employee's employment duties were performed, but in the event a
payment is made or due for a reason other than the performance of duties, hours
shall be credited for the computation period during which the absence from work
occurred.
1.27 "Investment Fund" means any of the funds in which a Participant may direct
the investment of the Participant's Account under the Trust Fund. The
Administrative Committee shall have complete and exclusive discretion (i) to
designate the type and number of funds
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among which a Participant may choose to invest the Participant's Account and
(ii) to change the type and number of funds available.
1.28 "Matching Contribution" means the amount contributed by the Employer under
Section 3.3 of the Plan.
1.29 "Matching Contribution Account" means the account used to record the
Participant's interest in the Plan attributable to Matching Contributions and
certain interests under Prior Plans.
1.30 "Non-highly Compensated Employee" means an Employee who is not a Highly
Compensated Employee.
1.31 "Participant" means an Eligible Employee who has satisfied the eligibility
requirements set forth in Article II herein and has executed an Elective
Contribution Agreement that has been accepted by the Administrative Committee.
1.32 "Participating Employer" means a Related Entity approved by the Board or
its delegate to have its employees participate in the Plan. Participating
Employers are listed on Annex II.
1.33 "Plan" means The PNC Financial Services Group, Inc. Incentive Savings Plan.
1.34 "Plan Administrator" means the Corporation.
1.35 "Plan Manager" means the individual designated by the Administrative
Committee to manage the operation of the Plan as herein provided or to whom the
Administrative Committee has duly delegated any of its duties or obligations
hereunder.
1.36 "Plan Year" means the calendar year.
1.37 "Prior Plan" means each of the plans listed on Annex III.
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1.38 "Related Entity" shall mean any entity which, with the Corporation or any
Employer, forms (i) a controlled group of corporations within the meaning of
Code Section 414(b), (ii) a group of trades or businesses under common control
within the meaning of Code Section 414(c) or (iii) an affiliated service group
within the meaning of Code Section 414(m). For purposes of Article VII, however,
the adjustments required by Code Section 415(h) shall be made to such
subsections.
1.39 "Rollover Account" means the account used to record a Participant's
interest in the Plan attributable to a Rollover Amount, if any, and certain
interests under Prior Plans.
1.40 "Rollover Amount" means any rollover amount or rollover contribution
defined in Code Sections 402(c)(4), 403(a)(4) or 408(d)(3) or direct
trustee-to-trustee transfer of an amount that, if distributed, would satisfy
such Code Sections.
1.41 "Salaried Employee" means an Employee who is paid on the basis of annual
salary.
1.42 "Spouse" means the person to whom a Participant is legally married as
determined by the Administrative Committee or its designee.
1.43 "Total Disability" means a medically determinable physical or mental
condition of such severity and probable prolonged duration as to entitle a
Participant to receive disability payments under a long-term disability income
plan maintained by an Employer with respect to that Employee. For Employees not
covered by such a plan, Total Disability shall be determined by the
Administrative Committee using the criteria established by the Corporation's
long-term disability insurance carrier or administrator to determine eligibility
of Employees covered thereby to receive long-term disability income payments.
1.44 "Trust" means the trust established as part of this Plan to hold the assets
of the Plan pursuant to the Trust Agreement.
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1.45 "Trust Agreement" means the agreement or agreements of trust and/or
custodial agreements established as part of this Plan between the Trustee and
the Corporation.
1.46 "Trust Fund" means, collectively, all funds received by the Trustee,
together with all income thereon and increments and profits therefrom, as the
same may be held or invested from time to time as provided for in the Trust
Agreement.
1.47 "Trustee" means PNC Bank, N.A., acting through its trust division, or its
successors in trust, or any additional or successor Trustee as named by the
Corporation.
1.48 "Valuation Date" means each day on which the New York Stock Exchange (or
any other national securities exchange) is open to execute purchases or sales of
securities and on which the Trust Fund is valued.
1.49 "Year of Eligibility Service" means an eligibility computation period
during which an Employee is credited with 1,000 or more Hours of Service. The
eligibility computation period shall be an initial period of 12 consecutive
months beginning on the Employee's date of employment. Subsequent to the initial
12-month period, the eligibility computation period shall be the Plan Year,
beginning with the Plan Year in which the first anniversary of the Employee's
date of employment occurs.
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ARTICLE II
PARTICIPATION IN THE PLAN
2.1 Eligibility to Participate
(a) General Rule
Except as provided below, an Eligible Employee shall become a Participant
on the Entry Date coincident with or next following the date the Participant has
(i) attained the age of 21, (ii) in the case of a Salaried Employee, completed
six consecutive months of service on an elapsed time basis, or, in the case of
an Hourly Employee, completed one Year of Eligibility Service and (iii) executed
an Elective Contribution Agreement.
(b) Transfer to Participating Employer from Nonparticipating Related Entity
or Nonparticipating Collective Bargaining Unit
Each Eligible Employee who transfers to a Participating Employer from a
Related Entity that is not a Participating Employer shall become a Participant
on the Entry Date coincident with or next following the date the Participant
first performs an Hour of Service with the Participating Employer, provided the
Participant has (i) attained the age of 21, (ii) in the case of a Salaried
Employee, completed six consecutive months of service with the Related Entity on
an elapsed time basis, or, in the case of an Hourly Employee, completed one Year
of Eligibility Service with the Related Entity and (iii) executed an Elective
Contribution Agreement.
If an Employee either ceases to be a member of a nonparticipating
collective bargaining unit or is re-employed by a Participating Employer, the
Participant shall be eligible to participate in the Plan on the Entry Date
coincident with or next following the later of (i) the date upon which the
Participant satisfies the eligibility requirements of Section 2.1(a) or (ii) the
date upon which the change in status occurs.
(c) Becoming Employed By Participating Employer Because Related Entity
Elects to Participate or Because of Corporate Transaction
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If an Eligible Employee becomes employed by a Participating Employer in
connection with either a Related Entity electing to be a Participating Employer
or a Participating Employer's merger with another company, acquisition of
another company, or acquisition of any portion of another company as a result of
either an asset or stock purchase or similar transaction then the Eligible
Employee shall become a Participant after executing an Elective Contribution
Agreement on the Entry Date (or other date) coincident with or next following
the earlier of (i) the date set forth in Section 2.1(a) or (ii) the date, if
any, set forth in the Board resolution or in the agreement of merger, sale or
acquisition upon which acquired employees shall commence participation in the
Plan.
(d) Transfer of Participant to Nonparticipating Related Entity or
Nonparticipating Collective Bargaining Unit
If an individual who is a Participant does not terminate employment but is
transferred to a Related Entity that is not a Participating Employer or becomes
a member of a collective bargaining unit that does not participate in the Plan,
then unless the applicable collective bargaining agreement provides otherwise,
during the period that such individual is employed by such Related Entity or is
a member of such collective bargaining unit, the Administrative Committee shall
limit such individual's sharing in the allocation of Employer Contributions, if
any, under the Plan to the extent of the individual's Compensation paid by the
Employer for services rendered while such individual was not employed by such
nonparticipating Related Entity or a member of a collective bargaining unit.
However, during such period, the individual's Account shall continue to share
fully in Trust Fund allocations under Section 6.8.
(e) Certain Hourly Employees
Certain Hourly Employees hired prior to January 1, 1994 and not otherwise
eligible under subsections (a) through (d) above became Participants because
they were deemed to have accumulated more than 1,000 Hours of Service with a
Participating Employer during the period from January 1, 1993 to December 31,
1995 because of changes to administrative and
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recordkeeping processes. No other Hourly Employees are eligible to participate
in the Plan under this subsection (e).
2.2 Participation upon Reemployment
A former Employee who participated in the Plan prior to the Employee's
termination of employment with the Employer shall resume participation in the
Plan effective as of the Employee's date of reemployment; provided that the
Employee's Elective Contributions shall not be resumed, or begin, as the case
may be, until the Entry Date next following the Employee's date of reemployment.
2.3 Designation of Beneficiaries
(a) Procedures for Designating
Each Participant shall have the right to designate a Beneficiary (including
contingent Beneficiaries if the Participant so desires) to receive the interest
of such Participant in the Trust Fund upon the death of such Participant. A
Beneficiary designation must be made in accordance with procedures established
by the Administrative Committee and is not effective unless received by the
Administrative Committee or its designee. A Participant who wishes to designate,
or who previous to marriage has designated, a primary Beneficiary other than the
Participant's Spouse shall furnish to the Administrative Committee the written
consent of the Participant's Spouse, witnessed by a notary public, to such
Beneficiary designation. Unless otherwise specified by law or regulation, the
designation of a nonspousal Beneficiary shall be ineffective absent such
notarized spousal consent.
(b) Change of Beneficiary
Subject to the required spousal consent, a Participant shall have the right
to change or revoke any Beneficiary designation, at any time and from time to
time, by filing a new designation or notice of revocation with the
Administrative Committee. A Spouse's consent
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applies only to the signatory Spouse and does not bind any future Spouse. In the
event the Participant remarries, the new Spouse will be deemed to be the
Beneficiary, unless the procedures set forth above to designate another
Beneficiary are followed with respect to the new Spouse.
(c) Death of Participant with No Beneficiary
If a person designated as a Beneficiary by a Participant fails to survive
the Participant, such designation of that person as Beneficiary shall not be
effective. If a Participant dies without having an effective designation of a
Beneficiary in effect, any payments becoming payable under this Plan by reason
of the Participant's death shall be made, on direction of the Administrative
Committee, in equal shares to and among the person or persons who shall be
shown, to the reasonable satisfaction of the Administrative Committee, to be
within the first of the following five classes of potential Beneficiaries which
shall contain one or more members surviving at the death of the Participant: (i)
the Participant's Spouse, (ii) the Participant's issue, per stirpes, (iii) the
Participant's parents, (iv) the Participant's brothers and sisters or (v) the
Participant's executors or administrators.
(d) Death of Beneficiary while Receiving Payments
If a Beneficiary dies at any time when any amount remains to be paid to the
Beneficiary under this Plan, and if the Participant has not named a successor or
contingent Beneficiary, the remaining benefits shall be paid, on direction of
the Administrative Committee, in equal shares to and among the person or persons
who shall be shown, to the reasonable satisfaction of the Administrative
Committee, to be within the first of the following five classes of potential
Beneficiaries which shall contain one or more members surviving at the death of
the Beneficiary: (i) the Participant's Spouse, (ii) the Participant's issue, per
stirpes, (iii) the Participant's parents, (iv) the Participant's brothers and
sisters or (v) the Participant's executors or administrators.
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ARTICLE III
CONTRIBUTIONS
3.1 Elective Contributions
(a) Amount of Elective Contributions
During the month preceding a Participant's Entry Date into the Plan, an
Eligible Employee may elect, in accordance with the procedures established by
the Administrative Committee or Plan Manager, by entering into an Elective
Contribution Agreement, to cause an Elective Contribution to be made to the Plan
on the Participant's behalf with respect to the Participant's Compensation in an
amount equal to any whole number percentage between one percent and 15 percent,
and effective January 1, 2002, between one percent and 20 percent, of the
Eligible Employee's Compensation.
(b) Payroll Deductions
Elective Contributions made on behalf of Participants shall be collected by
the Employer through deductions from the Participant's Compensation in
accordance with the uniform rules that may be adopted by the Administrative
Committee from time to time. All such contributions shall be paid to the Trustee
by the Employer and shall be credited to the Participant's Elective Contribution
Account.
(c) Change in or Discontinuance of Elective Contributions
Any Participant who has filed an Elective Contribution Agreement may elect
to change the percentage of future Compensation to be contributed to the Plan
for any future payroll period or to discontinue future Elective Contributions.
The Participant must make such election to the designated agent for the
Administrative Committee at such time and in the manner designated in accordance
with guidelines established by the Administrative Committee. Elections shall be
effective on the next pay date, provided the election is made at least nine days
before the pay
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date. A Participant who discontinues Elective Contributions may resume Elective
Contributions by completing and filing a new Elective Contribution Agreement.
3.2 Employer Contributions
(a) Amount of Employer Contributions
Each Employer shall contribute with respect to Participants who are its
Employees such amount as the Board, in its sole discretion, may determine prior
to the end of the Plan Year for which such contribution is made.
(b) Time of Payment of Employer Contributions
Each Employer shall make its Employer Contributions, if any, prior to the
last date for filing (including extensions) such Employer's federal income tax
return for the fiscal year with respect to which such contributions are made.
(c) Profits Not Required under Plan
Employer Contributions may be made to the Plan without regard to its
current or accumulated earnings and profits for the taxable year or years ending
with or within such Plan Year. Notwithstanding the foregoing, the Plan is hereby
designated as a profit sharing plan for purposes of Sections 401(a), 402, 412
and 417 of the Code.
(d) Allocation of Employer Contributions
Employer Contributions shall be allocated to a Participant's Employer
Contribution Account according to the ratio that each such Participant's
Compensation for such Plan Year bears to the aggregate Compensation of all
Participants for the Plan Year.
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3.3 Matching Contributions
(a) Amount of Matching Contributions
Each Employer with respect to each Participant that is its Employee shall
contribute an amount equal to 100 percent of the Participant's Elective
Contributions up to six percent of the Participant's Compensation on each pay
date.
(b) Time of Payment of Matching Contributions
Each Employer shall contribute Matching Contributions with respect to a
Participant to the Plan in accordance with applicable law.
3.4 Rollover Contributions
(a) Written Request
The Plan Manager, pursuant to a written request, may permit either a
Participant or an Employee who has not met the age and service requirements in
Article II of the Plan to contribute a Rollover Amount to the Trust. The written
request shall set forth the amount of such Rollover Amount and contain a
statement, satisfactory to the Plan Manager, that such contribution constitutes
a Rollover Amount.
(b) Status of Rollover Amount Contributed by Non-Participant
In the case of a Rollover Amount contributed by an Employee who is not yet
a Participant, such Employee will not become a Participant until the
requirements of Article II are satisfied. Until such Employee becomes a
Participant, the Employee is not entitled to make or receive contributions under
the Plan or to take loans or withdrawals from the Rollover Account.
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(c) Expenses Incurred in Connection with Rollover
Unless the Plan Manager, in its sole discretion, determines otherwise, any
expenses incurred incident to the transfer or rollover of such property to the
Plan shall be paid by the Participant.
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ARTICLE IV
PARTICIPANT ACCOUNTS
4.1 Maintenance of Accounts for Each Participant
Separate accounts shall be maintained by the Employer in the name of each
Participant for Employer Contributions, Elective Contributions, Matching
Contributions, Rollover Amounts and Deposit Accounts. The maintenance of the
individual accounts is for accounting purposes only, and a segregation of assets
and liabilities of the Trust Fund is not intended.
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ARTICLE V
VESTING
5.1 Vesting
A Participant's interest in the Participant's Account shall be fully vested
at all times, except as provided in Annex III for amounts transferred from
certain Prior Plans. If a Participant's account in a plan maintained by a
Related Entity that has not adopted this Plan is transferred to this Plan on or
after January 1, 1991, the Participant shall become fully vested in any unvested
portion of the amounts transferred from the plan maintained by the Related
Entity.
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ARTICLE VI
INVESTMENT OPTIONS
6.1 Participant Investment Elections
(a) Investment of Deposit Account, Elective Contributions, Employer
Contributions and Rollover Account
Deposit Accounts, Elective Contributions, Employer Contributions and
Rollover Accounts shall be invested at the direction of the Participant in any
or all of the Investment Funds. Each Participant shall designate in accordance
with procedures or mechanisms implemented by the Plan Manager from time to time,
the percentage, in multiples of one percent of Employer Contributions, Elective
Contributions, Rollover Amounts or Deposit Accounts that are to be invested in
each of the available Investment Funds. In the event that a Participant does not
make such designation, the Participant shall be deemed to have elected such
Investment Fund as the Administrative Committee or the Plan Manager may
designate from time to time. Such elections shall remain in effect and apply to
all subsequent Elective Contributions, Employer Contributions and Rollover
Amounts made with respect to such Participant until the election is changed as
provided herein.
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(b) Investment of Matching Contributions
All Matching Contributions shall be invested in Corporation Stock, except
that effective January 1, 2001, in the case of a Participant employed at the
time the Matching Contribution is made by any Participating Employer that is a
subsidiary of BlackRock, Inc., the Matching Contribution shall be invested in
BlackRock Stock. Notwithstanding any other provision of this Plan, a Participant
who has attained the age of 50 may make an election in accordance with
procedures established by the Plan Manager to transfer all or part of the
Matching Contributions made on the Participant's behalf from Corporation Stock
or BlackRock Stock to any other Investment Funds and/or to have future Matching
Contributions invested in the other Investment Funds.
(c) Restrictions on Investment Elections
Investment elections relating to the Corporation Stock and BlackRock Stock
are subject to Corporation's and BlackRock, Inc.'s policies regarding trading of
employer securities, including insider trading policies.
6.2 Other Restrictions on Availability of Investment Funds
In connection with a merger of another plan into this Plan, the transfer of
assets from another plan to this Plan or the transfer of assets from this Plan
to another plan, the Administrative Committee may impose such restrictions on
such elections or the availability of Investment Funds as may be necessary,
appropriate or convenient in order to facilitate such merger or transfer.
6.3 Transfer of Assets
The Administrative Committee shall direct the Trustee to transfer moneys or
other property from the appropriate Investment Fund to another Investment Fund
as may be necessary to carry out the aggregate transfer transactions after the
Administrative Committee has caused
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the necessary entries to be made in the Participants' Accounts in the Investment
Funds and has reconciled offsetting transfer elections, in accordance with
uniform rules established by the Administrative Committee.
6.4 Records
The records of the Plan shall be maintained by the Administrative Committee
and shall accurately disclose the status of each Account. Each Participant shall
be advised generally as of each calendar quarter, but at least once during each
Plan Year, as to the value of the Participant's Account.
6.5 Participant Interest in Trust Fund
Each Participant shall have an undivided proportionate interest in the
Trust Fund. Such interest shall be measured by the proportion that the market
value of the Participant's Account in each Investment Fund bears to the total
market value of all Accounts invested in such Trust Fund as of the date that
interest is being determined.
6.6 Valuation of Investment Funds
The current value of the assets held in each of the Investment Funds and
any other assets held in the Trust shall be determined by the Trustee as of each
Valuation Date. Interests in each Investment Fund shall be valued at their last
public sale price upon the New York Stock Exchange on the Valuation Date, or
upon any other recognized exchange or exchanges, or if no such sale shall have
been reported, and in the case of "over-the-counter" quotations, the last bid
price at the close of business on the Valuation Date. The value of any security
which is not listed or dealt in on any exchange shall be determined as nearly as
may be in the same manner, except that there may be used for the purpose of
obtaining the sale price or the bid price any published quotations in common use
which may be available, or, in the discretion of the Trustee, quotations by a
reputable broker dealing in such securities. Investments that are not currently
quoted shall be appraised at their fair market value in the opinion of the
Trustee.
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6.7 Allocation of Expenses
As of each Valuation Date, the Trustee shall determine the fair market
value of the Trust Fund after first deducting any expenses that have not been
paid by the Employer. Unless paid by the Employer, and subject to such
limitations as may be imposed by ERISA or other applicable law, all costs and
expenses incurred in connection with the general administration of the Plan and
the Trust shall be chargeable to the Trust Fund.
6.8 Allocation of Earnings and Losses
As of each Valuation Date, the Administrative Committee, with the
assistance of the Trustee, shall allocate the net earnings and gains or losses
of each Investment Fund of the Trust Fund in accordance with procedures adopted
by the Administrative Committee.
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ARTICLE VII
LIMITATIONS ON CONTRIBUTIONS
7.1 Maximum Amount of Elective Contributions
(a) Elective Deferral Limit
A Participant's Elective Deferrals for a calendar year under the Plan and
all other plans, contracts or arrangements of the Employer and any Related
Entity may not in the aggregate exceed the limitation in effect for such
calendar year under Code Section 402(g)(1).
(b) Mandatory Distribution of Excess Deferrals
If, for a calendar year, a Participant's Elective Deferrals exceed the
limit above, excess deferrals (and income allocable thereto) will be distributed
to the Participant on or before April 15 of the following calendar year. The
income allocable to the excess deferrals will be determined in accordance with
Section 7.1(d).
(c) Elective Distribution of Excess Deferrals
If, for a calendar year, a Participant's Elective Deferrals do not exceed
the limit above, but would exceed such limit if elective deferrals under plans,
contracts or arrangements or unrelated entities were considered, then the
Participant may request that a portion of the Participant's Elective
Contributions under this Plan be treated as excess deferrals and distributed
pursuant to Section 7.1(b) above. In no event may such amount exceed the lesser
of (i) the amount by which the Participant's total Elective Deferrals exceed the
Code Section 401(g) limit for the calendar year or (ii) the Participant's
Elective Contributions under the Plan for the calendar year.
A Participant's request for distribution of excess deferrals under this
Section must be made in accordance with the procedures established by the
Administrative Committee or Plan
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Manager and filed with the Administrative Committee on or before March 1 of the
calendar year following the calendar year for which the excess deferrals were
made. The request must specify the amount of the Participant's excess deferrals
and be accompanied by a statement that if such amounts are not distributed, the
Participant's Elective Deferrals for the calendar year will exceed the Code
Section 402(g) limit.
(d) Income Allocable to Excess Deferrals
The income allocable to excess deferrals for a calendar year is equal to
allocable gain or loss for the calendar year which is determined by multiplying
the net income (or loss) for the calendar year allocable to Elective
Contributions by a fraction, the numerator of which is the excess deferrals by
the Employee for the taxable year and the denominator of which is the sum of (i)
the Account Balance of the Employee attributable to Elective Contributions as of
the beginning of the calendar year, and (ii) the Employee's Elective
Contributions for the calendar year.
7.2 Deductibility
Elective Contributions, Employer Contributions and Matching Contributions
collectively shall not be in excess of the maximum amount allowable as a
deduction for federal income tax purposes under Section 404 of the Code. For
purposes of determining the maximum deductible contribution, Employer
Contributions shall not include any amount that may be credited to the Plan and
allocated to Participants' Accounts in respect of fees received by the Employer
from any mutual fund it services.
7.3 Limitation on Annual Additions
(a) Amount of Limitation
Notwithstanding any other provision of this Plan, the total annual
additions (as defined in Code Section 415) to the Account of any Participant
under this Plan and any other defined
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contribution plan or plans maintained by the Employer or any Related Entity for
any Plan Year shall not exceed the lesser of (i) 25 percent of the Participant's
compensation (as defined in Code Section 415, which for Plan Years beginning on
or after January 1, 1998, shall include (A) any elective deferral (as defined in
Code Section 402(g)(3)) and (B) any amount that is contributed or deferred by
the Employer at the election of the Employee and that is not includible in the
Employee's gross income by reason of Code Sections 125, 132(f)(4) or 457) or
(ii) $35,000, as adjusted by the Secretary of the Treasury (or, effective for
Plan Years ending on or before December 31, 1994, if greater, one-quarter of the
defined benefit dollar limit in effect for such year under Section 415(b)(1)(A)
of the Code).
(b) Return of Excess Contributions
In the event that Elective Contributions, with respect to any Participant,
exceed the limitations imposed by this Section 7.3, then the excess shall be
paid to such Participant in cash. In the event Employer Contributions and
Matching Contributions exceed the limitations imposed by this Section 7.3 with
respect to any Participant, then the excess first shall be used to reduce
Matching Contributions and the balance shall be carried over to subsequent years
and used to reduce Matching Contributions for such subsequent year or years.
Amounts carried over shall be held in a suspense account (as described in
Article XVII), and shall be invested in any manner the Trustee deems
appropriate.
(c) Combined Defined Benefit and Defined Contribution Plan Limit
For Plan Years ending before December 31, 1999, if an Employee was a
Participant in one or more defined benefit plans and one or more defined
contributions plans maintained by the Employer, the sum of the "defined benefit
plan fraction" and the "defined contribution plan fraction" for any year may not
exceed 1.0.
The defined benefit plan fraction for any year is a fraction (i) the
numerator of which is the Participant's projected annual benefit under all
defined benefit plans maintained by the Employer (determined as of the close of
the Plan Year) and (ii) the denominator of which is the
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lesser of (A) the product of 1.25 multiplied by the dollar limitation in effect
under Code Sections 415(b) and 415(d) for such year or (B) 140 percent of the
Participant's highest average compensation, including any adjustments under Code
Section 415(b) for such year.
The defined contribution plan fraction for any year is a fraction (i) the
numerator of which is the sum of the annual additions to the Participant's
Account as of the close of the Plan Year and (ii) the denominator of which is
the sum of the lesser of the following amounts determined for such year and each
prior year of service with the Employer: (A) the product of 1.25 multiplied by
the dollar limitation determined under Code Sections 415(d) and (b) in effect
for such year (determined without regard to Code Section 415(c)(6)) or (B) 35
percent of the Participant's compensation for such year.
7.4 Actual Deferral Percentage Test
Effective for Plan Years beginning on and after January 1, 2000, the Plan
is intended to satisfy the actual deferral percentage test of Code Section
401(k)(3)(A)(ii) by utilizing the Code's design-based safe harbor. However, for
any Plan Year in which the Plan is not a safe harbor plan, the provisions below
will apply.
(a) Definition of Actual Deferral Percentage
"Actual Deferral Percentage" means the average of the percentages
(calculated separately for each Participant who is eligible to make Elective
Contributions to the Plan) determined by dividing (i) by (ii) where (i) is the
total of the Elective Contributions made for the Plan Year on behalf of each
such Participant and (ii) is such Participant's total W-2 compensation paid by
the Employer for such Plan Year.
If the Plan and any other plan that includes a cash or deferred arrangement
are considered as one plan for purposes of Code Sections 401(a)(4) or 410(b),
the cash or deferred arrangements in such plans shall be treated as one plan for
purposes of calculating the Actual Deferral Percentage.
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If any Highly Compensated Employee who is a Participant in this Plan also
participates in any other cash or deferred arrangement of the Employer, for
purposes of determining the Actual Deferral Percentage for such Employee, all
such cash or deferred arrangements shall be treated as one cash or deferred
arrangement.
(b) Maximum Deferral Percentage
For any Plan Year, the Actual Deferral Percentage for the group of Highly
Compensated Employees for the Plan Year may not exceed the greater of (i) 125
percent of the Actual Deferral Percentage of the group of Non-highly Compensated
Employees for the Plan Year or (ii) 200 percent of the Actual Deferral
Percentage for the group of Non-highly Compensated Employees for the Plan Year,
provided that the Actual Deferral Percentage for the group of Highly Compensated
Employees for the Plan Year may not exceed the Actual Deferral Percentage for
the group of Non-highly Compensated Employees by more than two percentage
points.
This Actual Deferral Percentage test will be performed in accordance with
Code Section 401(k)(3) and Treasury Regulation Section 1.401(k)-l(b).
(c) Correction of Actual Deferral Percentage Test
If the Actual Deferral Percentage test is projected or determined to be
failed for any Plan Year, the Plan Administrator shall correct such failure no
later than 12 months after the end of the Plan Year. The Plan Administrator may
correct any such failure by using any one or combination of correction
procedures described in (1) and (2) below. The decision to use one or more
correction procedures shall be made in the sole discretion of the Plan
Administrator.
(1) Distribution of Excess Contributions
The Plan Administrator may correct a failure of the Actual Deferral
Percentage test for a Plan Year by distributing excess contributions and income
allocated thereto to Highly
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Compensated Employee. Effective January 1, 1997, in the event that there exists
an excess deferral percentage, then the amount of such excess shall be
eliminated by a leveling process under which the Actual Deferral Percentage of
the Highly Compensated Employee with the highest actual deferral ratio is
reduced to the extent required to cause such Highly Compensated Employee's
Actual Deferral Percentage to equal the Actual Deferral Percentage of the Highly
Compensated Employee with the next highest Actual Deferral Percentage. This
process shall be repeated until the excess deferral percentage is completely
eliminated. Once the dollar amount of the excess contributions has been
determined, it must be allocated to the appropriate highly compensated
employees. In order to make this allocation, the following steps are to be
taken:
(A) The elective contributions of the Highly Compensated Employee with
the highest dollar amount of elective contributions are reduced by the amount
required to cause that Highly Compensated Employee's elective contributions to
equal the dollar amount of the elective contributions of the Highly Compensated
Employee with the next highest dollar amount of elective contributions. This
amount is then distributed to the Highly Compensated Employee with the highest
dollar amount. However, if a lesser reduction would equal the total excess
contributions, the lesser reduction amount is distributed.
(B) If the total amount distributed is less than the total excess
contributions, step (A) is repeated.
(2) Qualified Matching Contributions and Qualified Nonelective
Contributions
The Plan Administrator may correct a failure of the Actual Deferral
Percentage test for a Plan Year by (i) designating some or all of the Matching
Contributions for the Plan Year, if any, as qualified matching contributions
and/or (ii) designating some or all of the Employer Contributions for the Plan
Year, if any, as qualified nonelective contributions.
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7.5 Actual Contribution Percentage Test
Effective for Plan Years beginning on and after January 1, 2000, the Plan
is intended to satisfy the actual contribution percentage test of Code Section
401(m)(2)(A) by utilizing the Code's design-based safe harbor. However, for any
Plan Year in which the Plan is not a safe harbor plan, the provisions below will
apply.
(a) Definition of Actual Contribution Percentage
"Actual Contribution Percentage" means the average of the percentages
(calculated separately for each Participant who is eligible to make Elective
Contributions to the Plan determined by dividing (i) by (ii) where (i) is the
total of the Matching Contributions made for the Plan Year on behalf of each
such Participant and (ii) is such Participant's total W-2 compensation paid by
the Employer for such Plan Year.
At the election of the Company, the Actual Contribution Percentage shall be
calculated after taking into account any Elective Contributions made on behalf
of a Participant for the Plan Year, provided that (i) Elective Contributions,
including those treated as Matching Contributions pursuant to this paragraph, do
not exceed the maximum deferral percentage (ii) Elective Contributions,
excluding those treated as Matching Contributions pursuant to this paragraph, do
not exceed the maximum deferral percentage and (iii) except as provided in (i)
above, the Elective Contributions treated as Matching Contributions pursuant to
this subparagraph are not taken into account in determining whether Elective
Contributions exceed the maximum deferral percentage for the Plan Year.
(b) Maximum Contribution Percentage
For any Plan Year, the Actual Contribution Percentage for the group of
Highly Compensated Employees for the Plan Year may not exceed the greater of (i)
1.25 percent of the Actual Contribution Percentage for the group of Non-highly
Compensated Employees for the Plan Year or (ii) 200 percent of the Actual
Contribution Percentage for the group of Non-highly Compensated Employees for
the Plan Year, provided that the Actual Contribution Percentage for the group of
Highly Compensated Employees for the Plan Year may not exceed the Actual
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Contribution Percentage for the group of Non-highly Compensated Employees for
the Plan Year by more than two percentage points.
(c) Elimination of the Excess Aggregate Contributions
Effective for Plan Years beginning on and after January 1, 1997, if the
Actual Contribution Percentage for the group of Highly Compensated Employees
exceeds the maximum contribution percentage described above for a particular
Plan Year, the amount of such excess aggregate contributions shall be eliminated
in the same manner as described in Section 7.4(c) above.
The income allocable to excess aggregate contributions for a calendar year
is equal to allocable gain or loss for the calendar year which is determined by
multiplying the net income (of loss) for the calendar year allocable to Matching
Contributions by a fraction, the numerator of which is the excess aggregate
contributions for the taxable year, and the denominator of which is the Account
Balance of the Employee attributable to Matching Contributions as of the end of
the Plan Year, without regard to any income or loss during such Plan Year.
7.6 Multiple Use Test
To the extent applicable, Code Section 401(m)(9) and Treasury Regulations
thereunder will apply to determine whether a multiple use of the alternative
limitation has occurred.
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ARTICLE VIII
DISTRIBUTION OF BENEFITS
8.1 Time of Distribution
(a) General Rule
Upon a Participant's termination of employment, including because of death
or Total Disability, the Participant will be entitled to a distribution of the
Participant's Account Balance as soon as may be administratively practicable
after receipt by the Administrative Committee of a valid benefit election form
in accordance with the procedures established by the Plan Manager or the
Administrative Committee.
The Administrative Committee shall determine, in accordance with Code
Section 401(k)(10), whether a Participant has terminated employment. A
Participant will not be treated as having terminated employment merely because
the Participant is transferred from a Participating Employer to a
nonparticipating Related Entity or to an entity that is not a Related Entity but
which is ten percent or more owned (directly or indirectly) by the Employer.
Any Employer Contributions and Matching Contributions to which a terminated
Participant is entitled as of the last Valuation Date of the year of
termination, shall be added to the Participant's existing Account, or if the
Participant's Account has already been distributed to the Participant, shall be
distributed as soon as practicable after the date such contributions are made to
the Trust.
(b) Involuntary Cashout
Notwithstanding the above, if a Participant's Account Balance is $3,500 or
less, and effective January 1, 1998, $5,000 or less, the Participant's Account
Balance will be paid to the Participant as soon as administratively practicable
after the Participant's termination of employment.
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Effective for distributions occurring prior to March 22, 1999, a lump sum
cashout could not be made if the Participant's Account Balance exceeded the
cashout limit as of the time of any prior distribution. Effective for
distributions occurring on or after March 22, 1999, notwithstanding the above,
if Participant has begun to receive distributions pursuant to an optional form
of benefit under which at least one scheduled distribution has not yet been
made, and if the Participant's Account Balance at the time of the first
distribution under that optional form of benefit exceeded the cashout limit
currently in effect, then the Participant's Account Balance is deemed to
continue to exceed the cashout limit.
8.2 Minimum Distributions
Notwithstanding the foregoing, effective January 1, 1997, a Participant who
is not a five percent owner (as defined in Code Section 416(i)(1)) and whose
account balance exceeds, effective January 1, 1998, $5,000 as of the
Participant's termination date may elect to defer payment until later than April
1 of the calendar year following the calendar year in which the Participant
attains age 70 1/2. A Participant who is a five percent owner must commence
distributions no later than April 1 of the calendar year following the calendar
year in which the Participant attains age 70 1/2 in accordance with the minimum
distribution rules of Code Section 401(a)(9).
With respect to distributions under the Plan made in calendar years
beginning on or after January 1, 2001, the Plan shall apply the minimum
distribution requirements of Section 401(a)(9) of the Code in accordance with
the regulations under Section 401(a)(9) that were proposed in January 2001,
notwithstanding any provision of the Plan to the contrary. This provision shall
continue in effect until the end of the last calendar year beginning before the
effective date of final regulations under Section 401(a)(9) or such other date
specified in guidance published by the Internal Revenue Service.
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8.3 Latest Commencement of Benefits
Notwithstanding any other provision in this Plan to the contrary, unless a
Participant elects otherwise, distribution of a Participant's Account must
commence no later than 60 days after the close of the Plan Year in which occurs
the later of (i) the date the Participant attains age 65, (ii) the tenth
anniversary of the year in which the Participant commenced participating in the
Plan or (iii) the date on which the Participant terminates employment.
8.4 Method of Payment
(a) Lump Sum or Installments
If a Participant's employment terminates for any reason other than death
and the Participant's Account Balance exceeds the involuntary cashout limit
described in Section 8.1(b), the Participant's Account Balance shall be paid, at
the Participant's election, either in a single lump sum or in periodic
installments over a period not to exceed the lesser of 15 years or the life
expectancy of the Participant (or the joint life expectancy of the Participant
and the Participant's Spouse, if married).
If a Participant's employment terminates by reason of death or if the
Participant's Account Balance does not exceed the involuntary cashout limit
described in Section 8.1(b), the Participant's Account Balance will be paid in a
single lump sum.
(b) Additional Rules Applicable to Installments
In the case of installments, the amount of each payment shall be determined
by dividing the Participant's then Account Balance by the number of installments
remaining unpaid. The Participant shall be permitted to invest the remaining
Account Balance pursuant to the terms of the Plan.
In the case of a Participant who receives a distribution of the
Participant's Account Balance because of Total Disability, who elected to have
the Participant's benefits paid in installments and who then recovers from the
Total Disability and returns to service with an
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Employer, any remaining installment payments will cease and the remainder of the
Participant's Account Balance will be distributed in accordance with this
Article VIII.
(c) Elimination of Optional Forms of Distribution Preserved from Prior
Plans
Participants who formerly were covered by certain Prior Plans were
permitted to receive the portion of the Participant's Account transferred from
the Prior Plan in certain optional forms preserved from the Prior Plans. These
optional forms are eliminated in accordance with Internal Revenue Service
guidance. However, the amendment eliminating the optional forms shall not apply
to a Participant with respect to any distribution with an annuity starting date
that is earlier than 90 days from the date a summary of material modification
describing the amendment is furnished to affected Participants.
8.5 Medium of Distribution
Any amount invested in Corporation Stock or BlackRock Stock on the date of
distribution may be distributed in cash or, at a Participant's election, in
kind. If a Participant does not have an election form on file with the
Administrative Committee regarding the medium of distribution, the portion of
the Participant's Account invested in Corporation Stock or BlackRock Stock will
be distributed in cash.
8.6 Payment to Minors and Incompetents
In the event any payment due under the terms of the Plan is to be made to a
minor or incompetent person, such payment may be made for the person's benefit
or in any of the following ways as the Administrative Committee shall determine
in its sole discretion: (i) directly to such minor or incompetent person, (ii)
to the legally appointed guardian of such minor or incompetent person or (iii)
to any person or institution maintaining such minor or incompetent person.
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8.7 Direct Rollover Provisions
(a) Definition of Terms Used in This Section 8.7
The following words or phrases as used herein shall have the following
meanings, unless a different meaning clearly is required by the context.
Otherwise, capitalized terms used in this Section 8.7 have the meanings assigned
to them in Article I.
(1) "Distributee" means (i) an Employee, (ii) former Employee,
(iii) an Employee's or former Employee's surviving Spouse and (iv) an Employee's
or former Employees' Spouse or former Spouse who is the alternate payee under a
"qualified domestic relations order," as defined in Code Section 414(p) and
ERISA Section 206(d)(3)(B), are Distributees with regard to the interest of the
Spouse or former Spouse.
(2) "Eligible Retirement Plan" means any of the following that accepts
the Distributee's Eligible Rollover Distribution: (i) an individual retirement
account described in Section 408(a) of the Code, (ii) an individual retirement
annuity described in Section 408(b) of the Code, (iii) an annuity plan described
in Section 403(a) of the Code or (iv) a qualified trust described in Section
401(a) of the Code. However, in the case of an Eligible Rollover Distribution to
the surviving Spouse, an Eligible Retirement Plan is an individual retirement
account or individual retirement annuity.
(3) "Eligible Rollover Distribution" means any distribution of all or
any portion of the balance to the credit of the Distributee, except that an
Eligible Rollover Distribution does not include (i) any distribution that is one
of a series of substantially equal periodic payments (not less frequently than
annually) made for the life (or life expectancy) of the Distributee or the joint
lives (or joint life expectancies) of the Distributee and the Distributee's
designated Beneficiary, or for a specified period of ten years or more, (ii) any
distribution to the extent such distribution is required under Section 401(a)(9)
of the Code or (iii) the portion of any distribution that is not includible in
gross income (determined without regard to the exclusion for net unrealized
appreciation with respect to Employer securities).
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(b) Distributee's Election
Notwithstanding any other provision of the Plan, a Distributee may elect to
have, at the time and in the manner prescribed by the Administrative Committee,
any portion of an Eligible Rollover Distribution paid directly to an Eligible
Retirement Plan specified by the Distributee in a direct rollover. The
Administrative Committee may, however, in its discretion, limit a Distributee to
a single direct rollover for each Eligible Rollover Distribution. Furthermore,
the Administrative Committee may prescribe additional procedures for a
Distributee to elect a direct rollover of an Eligible Rollover Distribution.
(c) Timing of Direct Rollover
If a distribution is one to which Code Sections 401(a)(11) and 417 do not
apply, such distribution may commence less than 30 days after the notice
required under Treasury Regulation Section 1.411(a)-11(c), provided that (i) the
Administrative Committee clearly informs the Participant that the Participant
has a right to a period of at least 30 days after receiving the notice to
consider the decision of whether or not to elect a distribution and a particular
distribution option and (ii) the Participant after receiving the notice,
affirmatively elects a distribution.
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ARTICLE IX
IN-SERVICE WITHDRAWALS DURING EMPLOYMENT
9.1 Regular Withdrawals
A Participant may request a withdrawal from the Participant's Deposit
Account and/or Employer Contribution Account. To be eligible for such a
withdrawal, the funds must have been in the Plan for two complete Plan Years,
unless such funds are attributable to Employee after-tax contributions to a
Prior Plan that were not matched by an Employer. Requests for withdrawal must be
made in accordance with procedures established by the Plan Manager. Such
withdrawals may be made only once in any 12-month period. Any amount so
withdrawn may not be repaid or recontributed.
9.2 Hardship Withdrawals
(a) Procedures and Funds Available
Upon the application of a Participant in accordance with the procedures
established by the Plan Manager, the Plan Manager may authorize the Trustee to
make a hardship withdrawal to a Participant if the Participant has an immediate
and heavy financial need that cannot be reasonably satisfied from other
resources of the Participant. To ensure that the Plan operates in a uniform and
nondiscriminatory manner, a hardship withdrawal will only be granted if
described in Sections 9.2(b) and (c). Withdrawals under this Section 9.2 shall
be limited to the amount credited to the Participant's Elective Contribution
Account, Matching Contribution Account or Rollover Account and to the amount
credited to a Participant's Deposit Account and Employer Contribution Account
that could not be withdrawn under Section 9.2(a) above.
(b) Events That Are Deemed To Constitute Immediate and Heavy Financial
Need
For purposes of this Section, the following events will be deemed to
constitute an immediate and heavy financial need:
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(1) expenses for medical care (as that term is defined in Code Section
213(d)) previously incurred by the Participant, Participant's Spouse or
dependent of the Participant or necessary for these persons to obtain medical
care as described in Section 213(d) of the Code;
(2) payment of tuition, related educational fees, and room and board
expenses for the next 12 months of post-secondary education of a Participant,
Participant's Spouse or dependent;
(3) costs directly related to the purchase of a Participant's
principal residence (excluding mortgage payments); or
(4) payments necessary to prevent the Participant from being either
evicted from the Participant's principal residence or having the mortgage on it
foreclosed.
(c) Circumstances That Are Deemed To Illustrate a Lack of Alternative
Resources
For purposes of this section, a Participant will be deemed to lack
alternative resources if the Participant represents, on a form to be supplied by
the Plan Manager, that:
(1) the hardship withdrawal does not exceed the amount reasonably
required to meet the financial need created by the hardship (including any
amounts necessary to pay any federal, state or local income taxes or penalties
reasonably anticipated to result from the distribution);
(2) the Participant has exhausted all other in-service distributions
from the Plan, and is precluded from receiving any further loans from the Plan
because of the limits set forth in Code Section 72(p); and
(3) the need cannot be reasonably satisfied (i) through reimbursement
or compensation by insurance or otherwise, (ii) by liquidation of the employee's
assets, (iii) by
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cessation of Elective Contributions or employee's contributions under the Plan
or (iv) by other distributions or nontaxable loans from plans maintained by the
Employer or by any other Employer or by borrowing from commercial sources on
reasonable terms.
(d) Cessation of Contributions
Any Participant who receives a hardship withdrawal shall be suspended from
making and receiving contributions in the Plan and any other deferred
compensation plan of the Corporation (whether qualified or nonqualified and
whether sponsored by the Corporation or a Related Entity) and in any stock
option, stock purchase or similar plan sponsored by the Employer (or a Related
Entity) for a period of 12 months from the effective date of the hardship
distribution, and effective January 1, 2002, for a period of six months from the
effective date of the hardship distribution. Such suspension shall prohibit the
Participant from making Elective Contributions to the Plan and from receiving
Employer Contributions and Matching Contributions. In addition, the Participant
may not make Elective Contributions for the taxable year immediately following
the taxable year of the hardship withdrawal in excess of the limit under Code
Section 402(g) for such next taxable year less the amount of such Participant's
Elective Contributions for the taxable year of the hardship withdrawal.
9.3 Funding of Withdrawals
In the event a withdrawal is less than the total amount credited to a
Participant's Account, and if such Account is invested under more than one
Investment Fund, then the amount withdrawn from such Account shall be charged to
each Investment Fund in the same proportion that the net credit balance in the
Account then the subject of withdrawal bears to the combined credit balance in
all Investment Funds in which such Account is invested.
9.4 Withdrawals Permitted under Certain Prior Plans
Annex III describes additional withdrawal provisions applicable to amounts
transferred from certain Prior Plans.
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ARTICLE X
LOANS TO PARTICIPANTS
10.1 Authorization of Loans
Upon the application of a Participant who is currently employed by the
Employer in accordance with the procedures established by the Plan Manager, the
Plan Manager may authorize the Trustee to make a loan to the Participant. The
Administrative Committee shall establish uniform and nondiscriminatory rules,
which it shall apply in a consistent manner, to determine whether a loan shall
be approved. Loan applications must be on a form authorized and furnished by the
Plan Manager and will be approved only if the loan (i) meets the requirements
contained in Section 10.2 of this Plan, (ii) is a loan that is available on a
reasonably equivalent basis to all Participants who are "parties in interest" as
defined under ERISA Section 3(14), (iii) bears a reasonable rate of interest and
(iv) is adequately secured.
10.2 Minimum Requirements for Loans
To the extent the Plan Manager authorizes loans to Participants, all such
loans shall meet the following requirements and such other terms as the
Administrative Committee may establish from time to time.
(a) Principal Amount
The principal amount of a loan to a Participant shall not exceed the lesser
of (i) $50,000, reduced by the excess, if any, of the highest outstanding loan
balance owed by the Participant during the one-year period ending on the date
before the date the loan was made, over the outstanding balance of any loan from
the Plan to the Participant on the date on which such loan was made or (ii) 50
percent of such Participant's Account.
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(b) Minimum Amount
No loan shall be for less than $500.
(c) Maximum Term
The term of repayment of any loan shall be determined by the Administrative
Committee, but in no event may it exceed five years unless such loan principal
is used to acquire any dwelling unit which is used or within a reasonable period
of time is to be used (determined at the time the loan is made) as the principal
residence of the Participant, in which case the term of repayment of the loan
may be extended for as much as 15 years.
(d) Number of Loans
A Participant may not have more than two outstanding loans at any time. All
loans shall be made effective as of the last day of any quarter or such other
date as may be determined by the Plan Manager to be administratively
practicable.
(e) Funding of Loans
Unless otherwise specified by a borrowing Participant, loans shall be
funded by a pro rata liquidation of the borrowing Participant's interest in each
of the Investment Funds.
(f) Interest Rate
The rate of interest charged on a loan will be the prime rate of interest
as announced by PNC Bank, N.A., on the last business date of the month preceding
the date the Participant submits the loan application.
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(g) Repayment
The loan shall be repaid by payroll withholding over its term in level
installment payments in each payroll period. As a condition precedent to
approval of the loan, the Participant shall be required to authorize irrevocably
payroll withholding in the amount of each installment. Notwithstanding anything
herein to the contrary, no loan amount shall be permitted if the Plan Manager
determines pursuant to uniform standards adopted from time to time that the
borrowing Participant does not have the financial capability to repay such loan
(through payroll withholding or otherwise).
(h) Repayment Allocations
Loan repayments shall be deposited in accordance with the borrowing
Participant's current investment election with respect to current contributions,
including any investment election required by this Plan with respect to Matching
Contributions.
(i) Default
If a Participant shall fail to make any installment payment on the loan
under this Section within 60 days after the due date, the Plan Manager shall
have the discretion to accelerate repayment of said loan and demand immediate
repayment of the principal and interest on said loan then due. If the
Participant fails to comply with such demand within 30 days of receipt thereof,
the Plan Manager shall have the discretion to reduce the vested amounts in the
Participant's Account by the amount of the unpaid principal and interest to the
extent permitted by law. The Plan Manager may also execute on any additional
security posted by such Participant, to the extent permitted by law.
(j) Collateral
The loan shall be secured by 50 percent of a Participant's nonforfeitable
Account Balance. To the extent that any additional security is required, the
security posted must be
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something in addition to and supporting the Participant's promise to pay, which
is pledged to the Plan in such a manner that it may be sold, foreclosed upon or
otherwise disposed of upon default as defined in Section 10.2(i), the value and
liquidity of which additional security is such that it may reasonably be
anticipated that loss of principal and interest will not result from the loan.
The adequacy of such additional security will be determined in light of the type
and amount of security which would be required in the case of an otherwise
identical transaction in a normal commercial setting between unrelated parties
on arm's length terms.
(k) Termination of Employment
The outstanding balance of any loan granted to a Participant who terminates
employment with the Employer for any reason shall be immediately repayable to
the Plan together with interest then due. If not repaid, the outstanding balance
of the loan plus interest will be deducted from the payment of a Participant's
Account prior to distribution.
10.3 Disclosure of Terms of Loan Program to Participants
The Administrative Committee or its designee shall communicate to
Participants, as soon as may be reasonably practicable through the summary plan
description or such other written medium as the Administrative Committee shall,
in its sole discretion, deem advisable, the following information: (i) the
identity of the person and positions authorized to administer the Participant
loan program, (ii) the procedure for applying for loans, (iii) the basis on
which loans will be provided or denied, (iv) the limitations contained in
Section 10.2 on the types and amount of loans offered, (v) the procedure under
the program for determining a reasonable rate of interest, (vii) the types of
collateral which may secure a Participant's loan and (vii) the events
constituting default and the steps that will be taken to preserve Plan assets in
the event of such default.
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ARTICLE XI
ALLOCATION OF FIDUCIARY RESPONSIBILITIES AND DUTIES
11.1 Corporation
The Corporation shall be the Plan Administrator with the sole
responsibility for administration of the Plan. With respect to administrative
matters, the Corporation shall act through the Administrative Committee.
11.2 Administrative Committee
The Administrative Committee is designated as the agent of the Employer and
shall have the exclusive authority to control and manage the operations and
administration of the Plan and to direct the Trustee to make disbursements from
the Trust Fund as more fully set forth in Articles VIII and IX. The
Administrative Committee shall provide the Trustee with such information as is
necessary for the Trustee to carry out its fiduciary responsibilities under
ERISA with respect to the investment and administration of the Trust Fund. The
Trustee shall have no responsibility or duties for the administration of the
Plan, other than as provided herein or delegated to it by the Administrative
Committee and accepted by it in writing.
11.3 Trustee
The Trustee shall have the authority and discretion to manage and control
the Trust Fund to the extent provided in the Trust Agreement, but does not
guarantee the Trust Fund in any manner against investment loss or depreciation
in asset value, or guarantee the adequacy of the Trust Fund to meet and
discharge all or any liabilities of the Plan. The Trustee shall have no right or
duty to require payment of any contribution, or to inquire into the amount or
method of determining the amount of any contribution, and shall be accountable
only for funds and property actually received by it. The Trustee shall not be
liable for the making, retention or sale of any investment or reinvestment made
by it, as herein provided, or for any loss to, or diminution of the Trust Fund
or for any other loss or damage which may result from the
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discharge of its duties hereunder except to the extent it is judicially
determined that the Trustee has failed to exercise the care, skill, prudence and
diligence under the circumstances then prevailing that a prudent man acting in a
like capacity and familiar with such matters would use in the conduct of an
enterprise of a like character and like aims.
The duties and obligations of the Trustee with respect to the Trust Fund
shall be limited to those expressly imposed upon it in this Plan and the Trust
Agreement.
11.4 Investment Managers
The Administrative Committee, by means of a written direction executed by
any member acting on behalf of a majority of the members and delivered to the
Trustee, shall have the authority to direct the Trustee that a specified amount
or portion of the Trust shall not be subject to the investment management of the
Trustee, but shall instead be administered by an investment manager in
accordance with the written investment directions of such designated investment
manager or the Administrative Committee. The Administrative Committee may
appoint as an investment manager any entity described in ERISA Section 3(38).
To the extent that investments are so directed, the entity giving such
directions shall be a named fiduciary acting in the capacity of an investment
manager within the meaning of Sections 402(c)(3) and 403(a) of ERISA, and the
Trustee shall have no greater liability or responsibility with respect to such
investments than it would have if the entity giving such directions were an
investment manager. Upon receipt of a written direction from an entity
authorized to give such a direction, the Trustee shall follow the instruction
for the acquisition or disposition of the investment assets specified therein,
or the segregation and management or investment delegation of the portion of the
Trust specified therein, but such instructions shall not have the effect of
requiring the Trustee to violate any law or regulation governing the acquisition
or disposition of such investment assets or the segregation and management or
investment delegation relating to such portion of the Trust. Securities or other
investment assets may be purchased or sold by orders placed directly with
brokers by any entity designated by the Administrative Committee as
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having such authority, and all such purchases or sales shall be executed as
though made by the Trustee pursuant to instructions from such entity.
With regard to any investments which are so directed, the Trustee shall
have no right or duty to: (i) question any instructions received from any entity
authorized to give such directions, (ii) review any investments held in the
Trust at the direction of such an entity, nor (iii) make any recommendations
whatsoever to the Administrative Committee or any such other entity regarding
retention or sale or any other matter relating to such investments. The Trustee
shall not be liable to any person for any action resulting from compliance with
the instructions of the Administrative Committee or of any entity designated by
the Administrative Committee to give such instructions, and the Trustee shall be
indemnified and saved harmless by the Employers from and against any and all
liability to which the Trustee may be subjected by reason of any such act or
failure of the Administrative Committee or any such other entity to act,
including all expenses reasonably incurred in its defense.
11.5 No Joint Fiduciary Responsibilities
The Plan and the Trust Agreement are intended to allocate to each named
fiduciary the individual responsibility for the prudent execution of the
functions assigned to the fiduciary, and none of such responsibilities or any
other responsibility shall be shared by two or more of such named fiduciaries
unless such sharing shall be provided by a specific provision of the Plan or
Trust Agreement. Whenever one named fiduciary is required by the Plan or Trust
Agreement to follow the directions of another named fiduciary, the two named
fiduciaries shall not be deemed to have been assigned a shared responsibility,
but the responsibility of the named fiduciary giving the directions shall be
deemed that fiduciary's sole responsibility, and the responsibility of the named
fiduciary receiving those directions shall be to follow them insofar as such
instructions are on their face proper under applicable law.
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ARTICLE XII
ADMINISTRATION OF PLAN
12.1 Administrative Committee
The general administration of the Plan and the responsibility for carrying
out the provisions of the Plan shall be placed with the Administrative
Committee. The Administrative Committee shall consist of no less than three
persons appointed by the Board or its delegate. Vacancies thereon shall be
filled in the same manner as appointments. Each person appointed as a member of
the Administrative Committee shall signify the person's acceptance by filing a
written acceptance with the secretary of the Administrative Committee. The
Administrative Committee as a whole or any of its members may serve in more than
one fiduciary capacity with respect to the Plan.
12.2 Duties and Powers
The Administrative Committee, or its delegate, shall keep such records as
are necessary for the efficient operation of the Plan or as may be required by
law and shall provide for the preparation and filing of such forms or reports as
may be required to be filed with any governmental agency or department and with
the Participants or Beneficiaries. The Administrative Committee shall have all
powers necessary to carry out the provisions of the Plan and to satisfy the
requirements of any applicable law. The powers shall include, by way of
illustration and not limitation, discretionary authority to (i) construe and
interpret the Plan in accordance with uniform rules and regulations, (ii)
determine questions of fact, law and mixed questions of fact and law, (iii)
determine the eligibility of any person to participate in the Plan, the right of
any person to benefits and the amount, manner and time of payment of any
benefit, in accordance with the provisions of the Plan, (iv) prescribe
procedures to be followed by Participants in filing applications for benefits,
making elections and designating Beneficiaries, (v) issue directions to the
Trustee in connection with all matters within its discretion and in accordance
with the terms of the Plan, (vi) prepare and furnish to Employees, Participants,
Beneficiaries and governmental agencies, all descriptions, reports, forms or
other documents
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required to be furnished or filed under ERISA, the Code or regulations
promulgated thereunder, (vii) appoint and retain individuals to assist in the
administration of the Plan, including such legal, clerical, accounting and
actuarial service as it may require or as may be required by any applicable law
or laws and (viii) require from Employees, Employers, Participants and
Beneficiaries such information as shall be necessary for the proper
administration of the Plan.
12.3 Plan Manager
The Administrative Committee may designate a person or persons, who may or
may not be members of the Administrative Committee, to be the Plan Manager. The
Plan Manager shall be responsible for the day-to-day administration of the Plan
and for such other duties and responsibilities as are delegated by the
Administrative Committee. In addition to the duties specified elsewhere in this
document, the Plan Manager shall (i) be responsible for establishing and
communicating to the Participants and Beneficiaries the procedures for filing
claims for benefits, (ii) maintain and update from time to time the annexes to
the Plan and (iii) determine and record, in the case of plans merged into this
Plan, the Accounts in which a Participant's prior plan accounts are merged.
12.4 Standard of Conduct
The Administrative Committee and its delegates shall discharge their duties
with respect to the Plan solely in the interest of the Participants and
Beneficiaries and shall do so with the care, skill, prudence and diligence under
the circumstances then prevailing that a prudent man acting in a like capacity
and familiar with such matters would use in the conduct of an enterprise of like
character and with like aims. The Administrative Committee shall at all times
act in accordance with the Plan documents and any applicable law.
12.5 Delegation
The Administrative Committee shall elect a chair from among its members and
a secretary who may, but need not, be a member. Among their other duties, the
chair shall cause
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to be kept and the secretary shall keep a written record of all meetings and
actions taken by the Administrative Committee. The Administrative Committee may
appoint such subcommittees with such powers as it shall determine and may
authorize one or more of its members or any agent to execute and/or deliver any
instrument or make any payment on its behalf.
12.6 Meetings
The Administrative Committee shall hold meetings upon such notice, at such
place and at such times as it may decide, provided that a meeting shall be held
at least once each Plan Year. A meeting may be held in any manner as may be
determined by the Administrative Committee, but in any event, where not all
members are physically present, the actions of the Administrative Committee
shall be reduced to writing and sent to all members within ten days of the date
of the meeting. A majority of the Administrative Committee shall constitute at
least one-half of the appointed members of the Administrative Committee, and any
action that the Plan authorizes or requires the Administrative Committee to take
shall require the written approval or affirmative vote of a majority of its then
members, but not less than two, unless authority to take such action has been
delegated or allocated as provided herein. A dissenting member must register
dissent with the member's reasons for dissenting in writing delivered to the
other members and the Employer within seven days after the member has knowledge
of any action or failure to act by the majority or a delegate shall not be
responsible for any such action or failure to act.
12.7 Rules and Decisions
The Administrative Committee shall endeavor to act by general rules so as
not to discriminate in favor of any person and may from time to time adopt such
rules and regulations for the administration of the Plan and the transaction of
its business as the Administrative Committee shall determine to be necessary to
fulfill its duties and obligations or as may be required by law. Subject to the
provisions of this Plan relating to appeal procedure, the decisions and records
of the Administrative Committee shall be conclusive and binding upon the
Employer, Participants and Beneficiaries.
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12.8 Compensation and Payment of Expenses
Unless otherwise determined by the Corporation, the members of the
Administrative Committee shall serve without compensation for services as such
but all administrative costs and expenses of the Plan, including the expenses of
the Administrative Committee, shall be paid by the Trust to the extent not paid
by the Corporation or may be reimbursed to the Corporation to the extent so paid
by the Corporation. Such expenses shall include any expenses incident to the
functioning of the Administrative Committee, including, but not limited to, fees
of accountants, counsel and other specialists, and other costs of administering
the Plan.
12.9 Insurance
The Employer shall indemnify or provide and maintain appropriate insurance
coverage for the Employer and the Administrative Committee, its members, and its
delegates and appointees (other than persons who are independent of the Employer
and are rendering services to the Plan for a fee) from any claim, loss, damage,
liability and expense (including reasonable attorneys' fees) arising by reason
of their acts or failure to act concerning this Plan, except where such acts or
failure to act involves any willful misconduct or gross negligence.
12.10 Resignation and Removal
Any member of the Administrative Committee may resign by giving 30 days
written notice to the Chief Executive Officer of the Corporation and secretary
of the Administrative Committee. Any member of the Administrative Committee may
be removed by the Chief Executive Officer and such removal shall be effective at
such time as is provided in the written notice from the Chief Executive Officer.
Vacancies in the Administrative Committee arising by resignation, removal, death
or otherwise will be filled by the Chief Executive Officer. The Administrative
Committee shall remain fully operative pending the filling of any vacancy, and
the remaining members of the Administrative Committee shall retain the authority
necessary to carry out their duties under the Plan.
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12.11 Disqualification
Neither the Plan Manager nor any member of the Administrative Committee
shall participate in the consideration of any matter or question under the Plan
that specifically relates to the Plan Manager or Administrative Committee member
or to any other persons entitled to benefit payments because of such Plan
Manager's or Administrative Committee member's participation under the Plan.
12.12 Claims Procedure
(a) Claim for Benefits
Any claim for benefits under the Plan shall be filed with the chair of the
Administrative Committee. If a claim is wholly or partially denied by the chair,
written notice of such denial shall be sent to the claimant within 90 days (or
180 days if unusual circumstances exist) after the receipt of the claim. Such
notice shall contain (i) the specific reason or reasons for the denial, (ii)
specific reference to pertinent Plan provisions on which the denial was based,
(iii) a description of any additional material or information needed for the
claimant to perfect the claim and an explanation of why such material or
information is necessary and (iv) an explanation of the Plan's claim review
procedure.
(b) Review Procedures
Within 60 days after receipt of a written notice of denial, the claimant
may file with the chairman of the Administrative Committee a written request for
review of the chair's decision. At the time a review is filed, the claimant or
the claimant's duly authorized representative may submit issues and comments in
writing and may review any pertinent documents. Within 60 days (or 120 days if
unusual circumstances exist) after receipt of a request for review, the entire
Administrative Committee shall render a written decision to the claimant, in
language calculated to be understood by the claimant, containing the reasons for
the decision and specific references to the pertinent Plan provision on which
the decision was based.
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(c) Exhaustion of Remedies
No legal action with respect to a claim for benefits under the Plan shall
be instituted unless the claimant shall have first exhausted the claims
procedure set forth in this Section 12.12. Notwithstanding the preceding, if a
Participant or Beneficiary fails to file a claim or request for review in the
manner specified herein, such claim or request shall be waived, and the
Participant or Beneficiary will be barred from reasserting such claim.
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ARTICLE XIII
PARTICIPATING EMPLOYERS
13.1 Adoption of Plan by Participating Employers
The Corporation may from time to time consent to the participation in this
Plan and in the Trust by any of its subsidiaries or affiliates. The Corporation
may require, as a condition of the joining of the Plan by any such entity, that
such entity take such action as is necessary to consolidate with the Trust Fund
the funds applicable to any tax-qualified defined contribution plan which such
entity maintains, and to that end may adopt a supplement or supplements to this
Plan setting forth special rules as to the interests of persons covered by such
other plan.
13.2 Actions by Subsidiaries or Affiliates
Any such subsidiary or affiliate so participating hereunder shall become a
party to the Plan and to the Trust and become a Participating Employer hereunder
when the Board approves such participation. Any such Participating Employer
shall contribute its allocable share to the cost of maintaining and
administering the Plan so long as it remains a party to the Plan and Trust.
13.3 Corporation Amends on Behalf of All Employers
The Corporation shall have the right to amend the Plan and Trust on behalf
of all Employers.
13.4 Any Employer May Terminate
The right is reserved by each Employer to terminate the Plan with respect
to Participants who are employed by it. In the event the Plan should terminate
with respect to one Employer hereunder, the Administrative Committee shall cause
an accounting to be made as to the portion of the Trust Fund applicable to
Participants who are employed by the Employer terminating its participation. The
portion so determined shall be allocated to such Participants of the terminating
Employer and those deriving benefits through such Participants.
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ARTICLE XIV
AMENDMENT, MERGER AND TERMINATION
14.1 Amendment
The Corporation, acting through its Board or a delegate of the Board,
reserves the right at any time and from time to time, to modify or amend in
whole or in part, any or all of the provisions of the Plan, and to give such
amendment retroactive or prospective effect, including amendments adjusting
Participants' Accounts to comply with subsequent changes in the applicable law
and regulations in order to retain the approval of this Plan by the Internal
Revenue Service as a qualified profit sharing plan. Such amendments or
modifications may and shall be retroactive to such date as may be necessary to
accomplish their intended purpose. Also, no modification or amendment shall make
it possible for any part of the corpus or income of the Trust Fund (other than
such part as is required to pay taxes and administration expenses) to be used
for, or diverted to, purposes other than for the exclusive benefit of
Participants or their Beneficiaries. No amendment which affects the rights,
duties, or responsibilities of the Trustee may be made without the Trustee's
written consent. No amendment to the Plan shall decrease a Participant's accrued
benefit.
14.2 Merger and Consolidation of Plan, Transfer of Plan Assets
In the event of any merger or consolidation with or transfer of assets and
liabilities to any other Plan, provision shall be made so that the benefit
payable to each Participant in the Plan as if the Plan were terminated
immediately after such action, would be equal to, or greater than, the benefit
that the Participant would have been entitled to receive if the Plan had been
terminated immediately prior to such action. In the event of a corporate
transaction which results in the merger of all or a portion of the Plan assets,
the Administrative Committee may, in its sole discretion, establish such rules
and procedures it deems necessary to effectuate such merger or transfer. This
may include but is not limited to giving the Participant the option of
liquidating into cash all or a portion of the Corporation Stock or BlackRock
Stock in the Participant's Account prior to such merger or transfer.
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14.3 Discontinuance of Contributions and Termination of Plan
Any Employer shall have the right at any time to discontinue its
contributions hereunder, and withdraw from further participation in the Plan.
The Corporation acting through the Board shall have the right at any time to
completely discontinue further contributions hereunder and to terminate the Plan
by delivering to the Trustee and the Administrative Committee written notice of
such discontinuance or termination. Any such suspension of contributions shall
not constitute a discontinuance of the Plan. If, however, the Internal Revenue
Service determines that any prolonged suspension has ripened into a
discontinuance of contributions, the discontinuance shall be effective no later
than the closing day of the fiscal year following the last year a substantial
contribution was made.
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ARTICLE XV
MISCELLANEOUS
15.1 Exclusive Benefit of Participants and Beneficiaries
(a) General Rule
All assets of the Trust shall be retained for the exclusive benefit of
Participants, former Participants, and their Beneficiaries, and shall be used
only to pay benefits to such persons or to pay the fees and expenses of the
Trust. The assets of the Trust shall not revert to the benefit of the Employer,
except as otherwise specifically provided in Section 15.1(b).
(b) Conditions on Contributions
To the extent permitted or required by ERISA and the Code, contributions to
the Trust under this Plan are subject to the following conditions:
(1) If a contribution or any part thereof is made to the Trust by the
Employer under a mistake of fact, such contribution or part thereof may be
returned to the Employer within one year after the date the contribution was
made.
(2) Contributions to the Trust are specifically conditioned on the
original and continuing qualification of the Plan under Section 401 of the Code,
and in the event the Plan is determined not to meet the qualification
requirements of Section 401 of the Code, contributions made in respect of any
period for which such requirements are not met shall be returned to the
Employer, provided the Employer requests the return within one year after the
Plan is determined not to meet such requirements.
(3) Contributions to the Trust are specifically conditioned on their
deductibility under Section 404 of the Code, and to the extent a deduction is
disallowed for any such contribution, the amount determined pursuant to the
following paragraph may be returned
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to the Employer, provided the Employer requests the return within one year after
the date of the disallowance of the deduction.
(4) The return of a contribution to an Employer pursuant to
subparagraphs (1) or (3) of Section 15.1(b) above must satisfy each of the
following conditions:
(A) The amount of such contribution which may be so returned
shall not be greater than the excess of the amount contributed over the amount
that would have been contributed had there been no mistake in determining the
deduction or had there been no mistake of fact, as the case may be.
(B) The amount of such contribution which may be so returned
shall not be increased by earnings attributable to the investment or
reinvestment of such contribution in the Trust, but shall be reduced by losses
attributable to the investment or reinvestment of such contribution in the
Trust.
(C) The return of such contribution shall not reduce the balance
in any Participant's Account to less than the balance which would have been in
that Account if the returned contribution had not been contributed.
15.2 Employment Rights
Neither the establishment of the Plan and the Trust hereby created nor any
modification thereof, nor the creation of any fund or account, nor the payment
of any benefits shall be construed as giving any Participant or Beneficiary any
legal or equitable right against any Employer or the Trustee except as expressly
herein provided, or as may be conferred upon the Participant or Beneficiary
expressly by statute; nor, similarly, shall such establishment be deemed to give
any Participant any right to inspect any of the books, Accounts, records or
balance sheets of any Employer or all of them. In no event shall the terms of
this Plan be interpreted as giving any Employee the right to be retained in the
service of the Employer, and
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all Employees shall remain subject to discharge to the same extent as if this
Plan had never been executed.
15.3 Spendthrift Clause
Except as otherwise provided in Article X regarding Plan loans, the
interests of Participants and their Beneficiaries under the Plan are not in any
way subject to their debts or other obligations and may not be voluntarily or
involuntarily sold, transferred, alienated or assigned, except to the extent
permitted by law.
Notwithstanding the preceding sentence, the Plan will recognize any
qualified domestic relations order as defined in Section 414(p) of the Code and
Section 206(d)(3)(B) of ERISA. The Administrative Committee will follow the
procedures set forth in those Sections for determining the qualified status of a
domestic relations order and will establish such other practices and procedures
as may be administratively necessary to comply with such order. The
Administrative Committee may authorize an immediate distribution to an alternate
payee under a qualified domestic relations order even if the Participant could
not have been entitled to such an immediate distribution.
15.4 Employer's Successor
In the event of the merger or consolidation of the Employer or other
circumstances whereby a successor entity shall continue to carry on all or a
substantial part of its business, and such successor shall elect to carry on the
provisions of the Plan as herein provided, such successor shall be substituted
upon the filing in writing of its election to do so with the Trustee and
approval of such election by the Board.
15.5 Legal Actions
In any action or proceeding involving any assets constituting part or all
of the Trust, or the administration thereof, the Corporation, the Administrative
Committee, and the Trustee shall
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be the only necessary parties and no Participants or Beneficiaries or any other
persons having or claiming to have an interest in the Trust Fund or under the
Plan shall be entitled to any notice of process.
15.6 Power to Interplead
In any action either at law or equity involving a Participant and the
Participant's interest under the Plan or its operation, but in which the Trustee
or the Employer are not directly a party litigant or necessary party, upon court
approval or order, the Employer may direct the Trustee to pay over to any court
or those persons designated by the court all sums or property subject to such
litigation. Upon such payment neither the Trustee nor the Employer shall be
liable or accountable for such payment.
15.7 Unclaimed Amounts
It shall be the sole duty and responsibility of a retired or terminated
Participant or a Beneficiary to keep the Trustee and the Employer apprised of
that person's whereabouts and current address. If any benefit to be paid under
this Plan cannot be distributed because of the Employer's and Trustee's
inability, after a reasonable search, to locate a particular Participant or
Beneficiary legally entitled to such benefit, it shall be held by the Trustee in
a special account which shall be invested in such Investment Fund as the
Administrative Committee or the Plan Manager may designate from time to time. If
such amount shall remain unclaimed at the time the Plan is finally terminated
and the Trust liquidated, the unclaimed amount shall then escheat to the
Commonwealth of Pennsylvania, or shall be subject to such other distribution as
may be required or permitted by law.
15.8 Construction of Plan
This Plan shall be construed and administered according to the laws of the
Commonwealth of Pennsylvania, to the extent not preempted by federal law.
Whenever any words are used herein in the masculine gender, they shall be
construed as though they were also
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used in the feminine gender in all cases where they would so apply, and whenever
any words are used herein in the singular form, they shall be construed as
though they were also used in the plural form in all cases where they would so
apply. Headings of Articles and Sections of this instrument are inserted for
convenience of reference. They constitute no part of the Plan and are not to be
considered in the construction hereof.
15.9 USERRA and Code Section 414(u) Compliance
Effective December 12, 1994, notwithstanding any provision of this Plan to
the contrary, contributions, benefits and service credit with respect to
qualified military service will be provided in accordance with Code Section
414(u). In addition, loan repayments will be suspended under this Plan as
permitted under Code Section 414(u).
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ARTICLE XVI
TOP HEAVY PROVISIONS
16.1 Definitions of Terms Used in This Article XVI
The following word or phrases as used herein shall have the following
meanings, unless a different meaning clearly is required by the context.
Otherwise, capitalized terms used in this Article XVI have the meanings assigned
them in Article I.
(a) "Aggregation Group" means the Mandatory Aggregation Group unless the
Permissive Aggregation Group is elected by the Corporation, in which case it
shall mean the Permissive Aggregation Group.
(b) "Determination Date" means the last day of the Plan Year.
(c) "Key Employee" means an employee who, at any time during the Plan Year
or any of the four preceding Plan Years is:
(1) an officer of the Corporation or a Related Entity having annual
compensation greater than 50 percent of the amount sin effect under Code Section
415(b)(1)(A) for such Plan Year. The number and identity of persons to be
considered officers in any Plan Year shall be determined by the Administrative
Committee pursuant to the provisions of Code Section 416(i) and the Treasury
Regulations thereunder;
(2) one of the ten employees having annual compensation of more than
the limitation in effect under Code Section 415(c)(1)(A) for such Plan Year and
owning (or considered as owning within the meaning of Code Section 318) the
largest interests in the Corporation and all Related Entities (aggregated);
(3) a five percent owner of the Corporation; or
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(4) a one percent owner of the Corporation having annual compensation
of more than $150,000.
(d) "Key Employee Ratio" means the ratio for any Plan Year calculated as of
the Determination Date with respect to such Plan Year, determined by dividing
the amount described in subparagraph (1) of this Section by the amount described
in subparagraph (2) of this Section.
(1) The amount described in this subparagraph (1) is the excess of the
sum of subparagraphs (A) through (C) over subparagraph (D).
(A) The aggregate of the present value of all accrued benefits of
Key Employees under all qualified defined benefit plans included in the
Aggregation Group.
(B) The aggregate of the balances in all of the accounts standing
to the credit of Key Employees under all qualified defined contribution plans
included in the Aggregation Group.
(C) The aggregate amount distributed from all qualified plans in
such Aggregation Group to or on behalf of any Key Employee during the period of
five Plan Years ending on the Determination Date.
(D) Any rollover contributions (or similar transfers) to the Plan
initiated by any Key Employee and made after December 31, 1983.
(2) The amount described in this subparagraph (2) is the excess of the
sum of subparagraphs (A) through (C) over subparagraph (D).
(A) The aggregate of the present value of all accrued benefits of
all Participants under all qualified defined benefit plans included in the
Aggregation Group.
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(B) The aggregate of the balances in all of the accounts standing
to the credit of all Participants under all qualified defined contribution plans
included in the Aggregation Group.
(C) The aggregate amount distributed from all plans in such
Aggregation Group to or on behalf of any Participant during the period of five
Plan Years ending on the Determination Date.
(D) All rollover contributions (or similar transfers) to a plan
initiated by any Participant and made after December 31, 1983, and any amount on
account of a person who is a Non-key Employee for a Plan Year but for a prior
Plan Year was a Key Employee of the Employer.
(e) "Mandatory Aggregation Group" means the group of qualified plans
sponsored by the Corporation or by a Related Entity formed by including in such
group (i) all such plans in which a Key Employee is a Participant and (ii) all
such plans which enable any plan described in clause (i) to meet the
requirements of Code Sections 401(a)(4) and 410.
(f) "Non-key Employee" means any person who is employed by the Corporation
or a Related Entity, but who is not a Key Employee as to that Plan Year.
(g) "Permissive Aggregation Group" means the group of qualified plans
sponsored by the Corporation or by a Related Entity formed by including in such
group (i) all plans in the Mandatory Aggregation Group and (ii) such other
qualified plans sponsored by the Corporation or a Related Entity as the
Corporation elects to include in such group, as long as the group, including
those plans electively included, continues to meet the requirements of Code
Sections 401(a)(4) and 410.
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16.2 Determination of Top Heavy and Super Top Heavy Status
This Plan shall be deemed "top heavy" as to any Plan Year if, as of the
last day of the preceding Plan Year, any of the following conditions are met:
(a) The Plan is not part of an Aggregation Group and the Key Employee Ratio
under the Plan exceeds 60 percent.
(b) The Plan is part of an Aggregation Group, there is no Permissive
Aggregation Group of which the Plan is a part, and the Key Employee Ratio of the
Mandatory Aggregation Group of which the Plan is a part exceeds 60 percent.
(c) The Plan is part of an Aggregation Group, there is a Permissive
Aggregation Group of which the Plan is a part, and the Key Employee Ratio of the
Permissive Aggregation Group of which the Plan is a part exceeds 60 percent.
This Plan shall be deemed "super top heavy" as to any Plan Year if, as of
the last day of the preceding Plan Year, any of the conditions above are met,
substituting "90 percent" for "60 percent" at each place where "60 percent"
appears.
16.3 Right to Participate in Allocation of Employer's Contributions
(a) General Rule
Notwithstanding any provision of this Plan to the contrary, any person who
was eligible to be a Participant at any time during a Plan Year in which this
Plan was top heavy shall share in the allocation provided for in Article III of
this Plan for such Plan Year if that person remained in the employ of the
Corporation or a Related Entity through the end of the Plan Year with respect to
which such allocation applies.
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(b) Exceptions to the General Rule
The provisions of Section 16.3(a) above shall not apply to any Participant
for a Plan Year if, with respect to that Plan Year:
(1) such Participant was an active participant in a qualified defined
benefit pension plan sponsored by the Corporation or by a Related Entity under
which plan the Participant's accrued benefit is not less than the minimum
accrued pension benefit that would be required under Section 416(c)(1) of the
Code, treating such defined benefit pension plan as a top heavy and treating all
such defined benefit pension plans as top heavy and treating all such defined
benefit pension plans as constitute an Aggregation Group as a single plan; or
(2) such Participant was an active participant in a qualified defined
contribution plan sponsored by the Corporation or by a Related Entity under
which plan the amount of the Employer's contribution allocable to the Account of
the Participant for the accrual computation period of such plan ending with or
within the Plan Year, exclusive of amounts by which the Participant's
compensation was reduced pursuant to a salary reduction agreement or similar
arrangement, is not less than the contribution allocation that would be required
under Code Section 416(c)(2) under this Plan.
16.4 Minimum Employer Contribution Allocation
The allocation made under Article III of this Plan to the Account of each
Participant who is a Non-key Employee for any Plan Year including a Plan Year in
which this Plan is top heavy Plan or a super top heavy Plan shall be not less
than the lesser of (i) three percent of the annual compensation of each such
Participant for such Plan Year or (ii) the percentage of annual compensation so
allocated under Article III (together with amounts so allocated as a result of a
cash or deferred election) to the Account of the Key Employee for whom such
percentage is the highest for such Plan Year.
If any person who is a Participant in the Plan is a participant under any
top heavy defined benefit pension plan qualified under Section 401(a) of the
Code sponsored by the Corporation or
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a Related Entity, there shall be substituted "five percent" for "three percent"
in this Section 16.4 of Article XVI.
For the purposes of determining whether or not the provisions of this
Section 16.4 have been satisfied, (i) contributions or benefits under Chapter 2
of the Code (relating to tax on self-employment income), Chapter 21 of the Code
(relating to Federal Insurance Contributions Act), Title II of the Social
Security Act, or any other federal or state law are disregarded, (ii) all
defined contribution plans in the Aggregation Group shall be treated as a single
plan and (iii) contributions allocable to the Account of the Participant under
any other qualified defined contribution plan that is part of the Aggregation
Group shall be deemed to be contributions made under this Plan, and, to the
extent thereof, no duplication of such contributions shall be required hereunder
solely by reason of this Section 16.4.
This Section 16.4 shall not apply in any Plan Year in which the Plan is
part of an Aggregation Group containing a defined benefit pension plan (or a
combination of such defined benefit pension plans) if the Plan enables a defined
benefit pension plan required to be included in such Aggregation Group to
satisfy the requirements of either Section 401(a)(4) or 410 of the Code.
For any Plan Year in which the Plan is top heavy, 1.0 shall be substituted
for 1.25 for purposes of determining the denominator of the separate defined
benefit and defined contribution plan fractions described in Section 7.3(c).
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<PAGE>
ARTICLE XVII
EMPLOYEE STOCK OWNERSHIP PLAN
17.1 Definitions of Terms Used in This Article XVII
The following word or phrases as used herein shall have the following
meanings, unless a different meaning clearly is required by the context.
Otherwise, capitalized terms used in this Article XVI have the meanings assigned
to them in Article I.
(a) "ESOP" shall mean the employee stock ownership plan through which
Matching Contributions in Corporation Stock shall be made to the Plan. Effective
January 1, 2002, ESOP shall mean and be designated as any part of the Plan
invested at any time in Corporation Stock.
(b) "Loan" shall mean any loan to the Trustee made or guaranteed by a
disqualified person (within the meaning of Section 4975(e)(2) of the Code) for
the purpose of permitting the Trustee to finance or refinance the purchase of
Corporation Stock, including, but not limited to, a direct loan or cash, a
purchase-money transaction, an assumption of an obligation of the Trustee, an
unsecured guarantee or the use of assets of a disqualified person (within the
meaning of Section 4975(e)(2) of the Code) as collateral for a loan.
(c) "Participating Employer Contribution" shall mean a contribution of
Corporation Stock or cash by a Participating Employer to the ESOP.
17.2 Effective Date of ESOP
Except to the extent provided otherwise in this Article XVII, the effective
date of the ESOP created by this Article XVII and all provisions in this
Article, shall be September 15, 1989.
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<PAGE>
17.3 Participating Employer Contributions
(a) Timing of Participating Employer Contributions
Each Participating Employer may make discretionary Participating Employer
Contributions to the ESOP in cash or Corporation Stock at such times and in such
amounts as the board of directors of each Participating Employer shall
determine.
In the event that a Loan is made to the Trustee, each Participating
Employer shall make Participating Employer Contributions to the ESOP in cash in
such amounts and at such times as will enable the Trustee to pay principal
and/or interest on any such Loans as they are due, but only to the extent the
principal and interest on any such Loan is not paid by means of a dividend on
Corporation Stock held as collateral for such Loan.
(b) Deductibility
All Participating Employer Contributions to the Trust are conditioned on
the deductibility of such contributions, and no Participating Employer
Contribution shall be made in excess of the maximum amount allowable as a
deduction for federal income tax purposes.
(c) Participating Employer Loan to ESOP
In the event that deductible Participating Employer Contributions are
insufficient to enable the Trustee to pay principal and interest on such Loan as
it is due and not paid by means of a dividend on Corporation Stock held as
collateral for such Loan, then upon the Trustee's request the Participating
Employer shall make a Loan to the ESOP, as described in Treasury Regulation
Section 54.4975-7(b)(4)(iii), in sufficient amounts to meet such principal and
interest payments. The new Loan shall also meet all requirements of an "exempt
loan" within the meaning of Treasury Regulation Section 54.4975-7(b)(1)(iii).
Corporation Stock released from the pledge of the prior Loan as a result of the
payment of principal and interest with the proceeds of a new Loan shall be
pledged as collateral to secure the new Loan. Such Corporation Stock
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will be released from this new pledge and allocated to the Accounts of the
Participants in accordance with applicable provisions of the ESOP.
17.4 Participant Contributions
No Participant shall be required or permitted to make contributions to the
ESOP.
17.5 Investment of ESOP Assets
Assets held under the ESOP will be invested in Corporation Stock, subject
to the special election for Participants attaining age 50 contained in Section
6.1(b) of the Plan. Participating Employer Contributions, and all other ESOP
assets, including cash dividends paid on Corporation Stock, may be used (i) to
acquire shares of Corporation Stock directly from Company shareholders
(including former Participants) or from the Corporation or (ii) to pay principal
and interest on a Loan.
17.6 Purchases of Corporation Stock
All purchases of Corporation Stock by the Trustee will be made at a price
that does not exceed the fair market value of such Corporation Stock. The
determination of fair market value of Corporation Stock for all purposes under
the Plan shall be made by the Trustee based upon the last public sale price on
the New York Stock Exchange on the date of purchase; except that for purchases
of Corporation Stock by the Trustee after September 14, 1989, the fair market
value of Corporation Stock shall be based upon (i) the public sale price on the
New York Stock Exchange at the time of purchase or (ii) if the purchase occurs
at a time when the New York Stock Exchange is closed, the closing price on the
New York Stock Exchange on the prior trading day.
17.7 Sales of Corporation Stock
The Trustee may sell or resell shares of Corporation Stock to any person,
including the Corporation, provided that such sales will be made at not less
than the fair market value as
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determined under Section 17.6, and no commission will be charged. Any such sale
shall be made in conformance with Section 408(e) of ERISA. All sales proceeds of
allocated Corporation Stock will be credited to the Matching Contribution
Accounts of the Participants on whose behalf such sales were made and shall be
distributed in accordance with this Plan.
17.8 Exempt Loans
(a) Terms of Loans
Any Loan obtained by the Trustee shall meet all requirements necessary to
constitute an "exempt loan" within the meaning of Treasury Regulation Section
54.4975-7(b)(7) and shall be used primarily for the benefit of the Participants
and their Beneficiaries. The proceeds of any Loan shall be used, within a
reasonable time after the Loan is obtained, only to purchase Corporation Stock,
repay the Loan and/or repay any prior Loan. The number of years to maturity
under the Loan must be definitely ascertainable at all times. Any Loan shall
provide for no more than a reasonable rate of interest, as determined under
Treasury Regulation Section 54.4975-7(b)(7). Any Loan must be without recourse
against the ESOP assets other than Corporation Stock acquired with the proceeds
of the Loan and shares of Corporation Stock that were used as collateral on a
prior Loan repaid with the proceeds of the current Loan.
(b) Release of Pledged Stock from Suspense Account
The Corporation Stock pledged under Section 17.8(a) above, shall be placed
in a suspense account. Any pledge of Corporation Stock must provide for the
release of shares so pledged at least as rapidly as under either the general
rule or special rule below.
Notwithstanding the foregoing, effective September 15, 1989, shares so
pledged may be released monthly in advance of actual payment on the Loan;
provided, however, that in no event will the release of shares for a Plan Year
be (i) less than the amount provided under the general rule or special rule
below, as the case may be, or (ii) in an amount in excess of the Participating
Employers' Matching Contributions.
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<PAGE>
Except as provided in subparagraph (3) of this Section 17.8(b), once the
Administrative Committee has selected either the general rule or special rule,
that rule shall be used exclusively for the release of pledged shares of
Corporation Stock acquired with the proceeds of that particular Loan.
(1) General Rule
For each Plan Year during the duration of the Loan, the Administrative
Committee shall withdraw from the suspense account a number of shares of
Corporation Stock equal to the total number of shares held in the suspense
account immediately prior to the withdrawal multiplied by a fraction (i) the
numerator of which is the amount of principal and interest paid for the Plan
Year and (ii) the denominator of which is the sum of the numerator plus the
principal and interest to be paid for all future years.
(2) Special Rule
(A) For each Plan Year, the Administrative Committee shall
withdraw from the suspense account a number of shares of Corporation Stock equal
to the total number of such shares held in the suspense account immediately
prior to the withdrawal multiplied by a fraction (i) the numerator of which is
the amount of principal paid for the Plan Year and (ii) the denominator of which
is the sum of the numerator plus the principal to be paid for all future Plan
Years.
(B) The Administrative Committee may select the special rule only
if (I) the Loan provides for annual payments of principal and interest at a
cumulative rate that is not less rapid at any time than level annual payments of
such amounts for ten years, (II) the interest included in any payment is
disregarded only to the extent that it would be determined to be interest under
standard loan amortization tables and (III) by reason of a renewal, extension or
refinancing, the sum of the expired duration of the original Loan, any renewal
period, any extension period and the duration of any new Loan does not exceed
ten years.
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<PAGE>
(3) In determining the number of shares to be released for any Plan
Year under either the general rule or special rule:
(A) the number of future years under the Loan must be definitely
ascertainable and must be determined without taking into account any possible
extensions or renewal periods;
(B) if the Loan provides for a variable interest rate, the
interest to be paid for all future Plan Years must be computed by using the
interest rate applicable as of the end of the Plan Year for which the
determination is being made; and
(C) if the Corporation Stock allocated to the suspense account
includes more than one class of shares, the number of shares of each class to be
withdrawn for a Plan Year from the suspense account must be determined by
applying the applicable fraction provided for above to each such class.
(b) Payments of Principal and Interest
Payments of principal and interest on any such Loan during a Plan Year
shall be made by the Trustee only from (i) any dividends attributable to
Corporation Stock given as collateral for a Loan, (ii) Participating Employer
Contributions and earnings from such Participating Employer Contributions made
to the ESOP to meet the Plan's obligation under a Loan and (iii) the proceeds of
a subsequent Loan made to repay a prior Loan. Such Participating Employer
Contributions and earnings must be accounted for separately by the Plan until
the Loan is repaid.
(c) Restriction on ESOP Shares
Notwithstanding any amendment to or termination of the ESOP which causes it
to cease to qualify as a leveraged employee stock ownership plan within the
meaning of Section 4975(e)(7) of the Code, no share of Corporation Stock
acquired with the proceeds of a Loan obtained by the Trust to purchase
Corporation Stock may be subject to a put, call, or other
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<PAGE>
option, or buy-sell or similar arrangement while such shares are held by and
when distributed from the ESOP.
17.9 Allocations to Participants' Accounts
(a) Corporation Stock
The Matching Contribution Account maintained for each Participant will be
credited with the Participant's allocated share as determined under Section
17.10 of Corporation Stock (including fractional shares) purchased and paid for
by the ESOP or contributed in kind to the ESOP and with any dividends on
Corporation Stock allocated to the Participant's Matching Contribution Account.
Corporation Stock acquired by the Trustee with the proceeds of a Loan shall be
allocated in accordance with Section 17.10 to the Matching Contribution Accounts
of Participants as the Corporation Stock is released from suspense accounts as
provided in Section 17.8(b); provided, however, that no portion of the ESOP
assets attributable to (or allocable in lieu of) Corporation Stock acquired in a
sale to which Code Sections 1042 or 2057 apply may be allocated to the Accounts
of any Participant who owns (after application of Code Section 318(a) without
regard to the employee trust exception contained in Code Section
318(a)(2)(B)(i)) more than 25 percent of the voting control or value of any
class of stock of any Related Entity at any time during the one-year period
ending on the date of such sale or on the date when the allocation of such
Corporation Stock otherwise would occur.
In addition, during the "nonallocation period," no portion of the ESOP
assets attributable to (or allocable in lieu of) Corporation Stock so acquired
may be allocated to the Accounts of (i) the selling shareholder or (ii) any
individual who is "related" (within the meaning of Code section 267(b)) to the
selling shareholder. The "nonallocation period" is the ten year period beginning
on the later of (a) the date of such sale or (b) the date of the allocation of
Corporation Stock so acquired attributable to the final payment of a Loan, the
proceeds of which were used to purchase such Corporation Stock.
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<PAGE>
(b) Dividends
If dividends paid on shares of Corporation Stock are used to make a Loan
payment, shares released from the suspense account as provided in Section
17.8(b) shall be allocated to Participants' Matching Contribution Accounts in
accordance with the provisions of Section 17.10(b). Dividends paid on shares of
Corporation Stock which are not used to make a Loan payment shall be allocated
to Participants' Matching Contribution Accounts in the same manner as
Participating Employer Contributions are allocated under provisions of Section
17.10(a).
17.10 Allocable Shares
(a) Corporation Stock
Participating Employer Contributions which are not used to pay principal
and interest on a Loan first shall be allocated to a Participant's Matching
Contribution Account to the extent necessary to fund the Matching Contribution
required pursuant to Section 3.3 of the Plan. To the extent that any additional
Participating Employer Contributions remain unallocated in excess of the amount
necessary to fund the Matching Contribution required pursuant to Section 3.3 of
the Plan, the Matching Contribution shall be increased in increments of .01 a
percentage point until the Participating Employer Contribution is completely
allocated among Participants' Matching Contribution Accounts.
Corporation Stock acquired with the proceeds of a Loan and released from
the suspense account as a result of a Participating Employer Contribution used
to pay principal or interest on such Loan shall be allocated to a Participant's
Matching Contribution Account based on the amount of Matching Contribution to be
made under Section 3.3 of the Plan.
(b) Dividends
For purposes of subsection 17.9(b), if dividends paid on shares of
Corporation Stock which have not been allocated to a Participant's Account are
used to make a Loan payment, shares released from the suspense account as
provided in Subsection 17.8(b) shall be allocated to
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<PAGE>
a Participant's Matching Contribution Account in the same manner as
Participating Employer Contributions as set forth in subsection 17.10(a) above.
For purposes of subsection 17.9(b), if dividends paid on shares of Corporation
Stock which have been allocated to a Participant's Account are used to make a
Loan payment, shares released from the suspense account as provided in
subsection 17.8(b) shall be treated as earnings on the Participant's Matching
Contributions and shall be allocated to a Participant's Matching Contribution
Account in the same manner as any other earnings on the Participant's Matching
Contributions.
Notwithstanding any provision to the contrary, the fair market value of the
Corporation Stock allocated to a Participant's Matching Contribution Account
with respect to dividends paid on Corporation Stock allocated to such Account
may not be less than the amount of dividends which otherwise would have been
allocated.
17.11 Accounting for Allocations
The Administrative Committee shall adopt accounting procedures for the
purpose of making the allocations, valuations, and adjustments to Participants'
Matching Contribution Accounts provided for in this Article. Except as provided
in Treasury Regulation Section 54.4975-11, Corporation Stock acquired by the
Plan shall be accounted for as provided under Treasury Regulation Section
1.402(a)-1(b)(2)(ii), allocations of Corporation Stock shall be made separately,
and the Administrative Committee shall maintain adequate records of the cost
basis of all shares of Corporation Stock allocated to each Participant's
Matching Contribution Account and furnish such information to the Trustee
regarding the same as may be necessary to allow the Trustee to perform its
duties under this Section 17.11 upon the written request of the Trustee. From
time to time, the Administrative Committee may modify the accounting procedures
for the purpose of achieving equitable and nondiscriminatory allocations among
the Matching Contribution Accounts of Participants in accordance with the
general concepts of the Plan and the provisions of this Section.
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17.12 Form of Distribution
The distribution in kind of a Participant's Matching Contribution Account
as provided in Section 8.4 is conditioned upon the availability of ESOP assets
that are sufficiently liquid to effectuate such distribution without
jeopardizing the financial position of the ESOP and taking into account debt
service requirements of any Loan then outstanding.
17.13 Voting Corporation Stock
The Trustees shall vote any full and partial shares of Corporation Stock
credited to a Participant's Account in accordance with the direction of such
Participant. Such direction must be made in the manner prescribed by the Plan
Manager or Administrative Committee. Any shares for which the Trustees do not
receive instruction (including unallocated shares) shall be voted by the
Trustees in the exercise of their sole discretion. When Participants or
Beneficiaries are entitled to direct the manner in which voting rights of
allocated Corporation Stock are to be exercised, the Corporation shall furnish
the Trustee and the Participant or Beneficiary with a notice or information
statement which complies with applicable law and the Corporation's charter and
by-laws as applicable to security holders in general.
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IN WITNESS WHEREOF, this amended and restated Plan is executed and adopted
by The PNC Financial Services Group, Inc., by its duly authorized officer, this
20th day of December, 2001.
/s/ William E. Rosner
-----------------------------------
William E. Rosner
Senior Vice President
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</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.17
<SEQUENCE>9
<FILENAME>j9925001exv10w17.txt
<DESCRIPTION>1ST AMENDMENT TO INCENTIVE SAVINGS PLAN
<TEXT>
<PAGE>
EXHIBIT 10.17
FIRST AMENDMENT TO
THE PNC FINANCIAL SERVICES GROUP, INC.
INCENTIVE SAVINGS PLAN
WHEREAS, The PNC Financial Services Group, Inc. (the "Corporation")
sponsors The PNC Financial Services Group, Inc. Incentive Savings Plan (the
"Plan"); and
WHEREAS, the Corporation desires to amend the Plan as requested by the
Internal Revenue Service in connection with the issuance of a favorable
determination letter for the qualification of the Plan as amended and restated
effective January 1, 2001.
NOW, THEREFORE, IT IS RESOLVED, that the Plan is hereby amended as follows:
1. The fourth paragraph of Section 1.8 of the Plan is amended to provide in
its entirety as follows:
A Participant's Compensation shall not exceed the Code Section
401(a)(17) limit, which is $150,000 (as adjusted by the Secretary of the
Treasury or by statute).
2. Section 1.17 of the Plan is amended to provide in its entirety as
follows:
1.17 "Eligible Employee" means any Employee who has satisfied the
requirement to become a Participant under Article II, other than execution
of an Elective Contribution Agreement. Eligible Employee does not include
any Employee who is a leased employee (which, in accordance with Code
Section 414(n) and effective January 1, 1997, means any person (other than
an employee of the recipient) who pursuant to an agreement between the
recipient and any other person has performed services for the recipient (or
for the recipient and related persons determined in accordance with Section
414(n)(6) of the Code) on a substantially full-time basis for a period of
at least one year, and such services are performed under primary direction
or control by the recipient) or a student intern.
3. Section 1.24 of the Plan is amended to provide in its entirety as
follows:
1.24 "Highly Compensated Employee" means, effective January 1, 1997, any
Employee who (i) performs service for the Employer during the Plan Year for
which the determination of who is highly compensated is being made (the
"determination year") or the 12-month period immediately preceding the Plan
Year (the "look-back year") and who was, or is, a five percent owner (as
defined in Code Section 416(i)(1)) or (ii) for the look-back year received
compensation (as defined in Plan Section 7.3(a)) in excess of $80,000 (as
adjusted by the Secretary of the Treasury or by statute) and for such year
was a member of the "top-paid group" (as defined below).
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<PAGE>
The "top-paid group" consists of the top 20 percent of Employees ranked on
the basis of compensation received during the look-back year. For purposes of
determining the number of Employees in the top-paid group, employees described
in Code Section 414(q)(5) and Q&A-9(b) of Treasury Regulation Section
1.414(q)-1T are excluded.
A Highly Compensated Employee includes any Employee who separated from
service (or was deemed to have separated) prior to the determination year,
performed no service for the employer during the determination year, and was a
highly compensated active Employee for either the separation year or any
determination year ending on or after the Employee's 55th birthday.
Employers aggregated under Code Sections 414(b), (c), (m) or (o) are
treated as a single employer for purposes of the determination of who is a
Highly Compensated Employee.
4. Section 7.3(a) of the Plan is amended to provide in its entirety as
follows:
(a) Amount of Limitation
Notwithstanding any other provision of this Plan, the total "annual
additions" (which, in accordance with Code Section 415(c), means the sum
for any year of Employer contributions, Employee contributions and
forfeitures) to the Account of any Participant under this Plan and any
other defined contribution plan or plans maintained by the Employer or any
Related Entity for any Plan Year shall not exceed the lesser of (i) 25
percent of the Participant's "compensation" (which, in accordance with
Section 415(c)(3) of the Code and Treasury Regulation Section 1.415-2(d),
is defined as compensation reported on Form W-2, and which for Plan Years
beginning on or after January 1, 1998 includes (A) any elective deferral
(as defined in Code Section 402(g)(3)) and (B) any amount that is
contributed or deferred by the Employer at the election of the Employee
that is not includible in the Employee's gross income by reason of Code
Sections 125, 132(f)(4) or 457) or (ii) $30,000, as adjusted by the
Secretary of the Treasury or by statute (or, effective for Plan Years
ending on or before December 31, 1994, if greater, one-quarter of the
defined benefit dollar limit in effect for such year under Section
415(b)(1)(A) of the Code).
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<PAGE>
5. The first paragraph of Section 7.3(c) of the Plan is amended to provide
in its entirety as follows:
For Plan Years ending on or before December 31, 1999, if an Employee
was a participant in one or more defined benefit plans and one or more
defined contribution plans maintained by the Employer, the sum of the
"defined benefit plan fraction" and the "defined contribution plan
fraction" for any year may not exceed 1.0.
6. Section 7.4(a) of the Plan shall be amended by adding the following
sentences to the end of the first paragraph of that section:
The Plan uses the prior year testing method. Therefore, the Actual Deferral
Percentage of Highly Compensated Employees is determined for the current
Plan Year and the Actual Deferral Percentage for Non-highly Compensated
Employees is determined for the prior Plan Year.
7. Section 7.4(c) is amended by adding the following paragraph at the end
of that section:
Failure to correct excess contributions by the close of the Plan Year
following the Plan Year for which they were made will cause the cash or
deferred arrangement to fail to satisfy the requirements of Code Section
401(k)(3) for the Plan Year for which the excess contributions were made
and for all subsequent years they remain in the trust. Also, the Employer
will be liable for a 10 percent excise tax on the amount of excess
contributions unless they are corrected within 2 1/2 months after the close
of the Plan Year for which they were made.
8. Section 7.4(c)(1) of the Plan is amended by adding the following
sentence after the first sentence of that section:
The income allocable to excess contributions includes income for the Plan
Year in which the excess contributions were made.
9. Section 7.4(c)(2) is amended by adding the following sentence to the end
of that section:
Recharacterized excess contributions will remain subject to the
nonforfeitability requirements and distributions limitations that apply to
Elective Contributions.
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<PAGE>
10. Section 7.5(a) of the Plan shall be amended by adding the following
sentences to the end of the first paragraph of that section:
The Plan uses the prior year testing method. Therefore, the Actual
Contribution Percentage of Highly Compensated Employees is determined for
the current Plan Year and the Actual Contribution Percentage for Non-highly
Compensated Employees is determined for the prior Plan Year.
11. Section 7.5(c) of the Plan is amended to provide in its entirety as
follows:
(c) Elimination of the Excess Aggregate Contributions
Effective for Plan Years beginning on and after January 1, 1997, if
the Actual Contribution Percentage for the group of Highly Compensated
Employees exceeds the maximum contribution percentage described above for a
particular Plan Year, the amount of such excess aggregate contributions
shall be eliminated in the same manner as described in Section 7.4(c)
above, but by distribution of Matching Contributions.
12. Section 7.6 of the Plan is amended by adding the following sentence to
the end of that section:
Multiple use will be corrected through reduction of the Actual Deferral
Percentage with respect to all Highly Compensated Employees.
13. Section 8.7(a)(3) is amended by adding the following sentence to the
end of that section:
Effective January 1, 1999, an Eligible Rollover Distribution described in
Code Section 402(c)(4), which a Participant can elect to roll over to
another Plan pursuant to Code Section 401(a)(31), excludes hardship
withdrawals as defined in Code Section 401(k)(2)(B)(i)(IV) which are
attributable to the Participant's elective contributions under Treasury
Regulation Section 1.401(k)-1(d)(2)(ii).
14. Sections 16.1(b) of the Plan is amended to provide in its entirety as
follows:
(b) "Determination Date" means the last day of the Plan Year. The
Determination Date also is the valuation date for purposes of this Article
XVI, as the last day of the Plan Year is the most recent valuation date
within a 12-month period ending on the Determination Date.
15. Section 16.1 of the Plan is amended to add the following new subsection
(h):
(h) "Compensation" as used in this Article XVI means an employee's W-2
compensation for the calendar year that ends within the applicable Plan
Year. However, for purposes of determining whether an employee is a Key
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<PAGE>
Employee, with respect to Plan Years beginning on or after January 1, 1989,
the compensation to be used is W-2 compensation but including Employer
contributions made pursuant to a salary reduction arrangement.
16. The last paragraph of Section 16.2 of the Plan is amended to provide in
its entirety as follows:
For any Plan Year ending on or before December 31, 1999, this Plan
shall be deemed "super top heavy" as to any Plan year if, as of the last
day of the preceding Plan Year, any of the conditions above are met,
substituting "90 percent" for "60 percent" at each place where "60 percent"
appears.
17. The last paragraph of Section 16.4 of the Plan is amended to provide in
its entirety as follows:
For any Plan Year ending on or before December 31, 1999 in which the
Plan is top heavy, 1.0 shall be substituted for 1.25 for purposes of
determining the denominator of the separate defined benefit and defined
contribution plan fractions described in Section 7.3(c).
Except as herein amended, the Plan shall remain in full force and effect.
-5-
<PAGE>
IN WITNESS WHEREOF, this First Amendment to The PNC Financial Services
Group, Inc. Incentive Savings Plan is executed and adopted by The PNC Financial
Services Group, Inc. by its duly authorized officer, this 7th day of May, 2002.
/s/ William E. Rosner
-------------------------------------------------------
William E. Rosner
Senior Vice President and Chief Human Resources Officer
-6-
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.18
<SEQUENCE>10
<FILENAME>j9925001exv10w18.txt
<DESCRIPTION>2ND AMENDMENT TO INCENTIVE SAVINGS PLAN
<TEXT>
<PAGE>
EXHIBIT 10.18
SECOND AMENDMENT TO
THE PNC FINANCIAL SERVICES GROUP, INC.
INCENTIVE SAVINGS PLAN
WHEREAS, The PNC Financial Services Group, Inc. (the "Corporation")
sponsors The PNC Financial Services Group, Inc. Incentive Savings Plan (the
"Plan"); and
WHEREAS, the Corporation has the authority under Article XIV to amend the
Plan, and the Corporation wishes to amend the Plan as set forth below.
NOW, THEREFORE, IT IS RESOLVED, that the Plan is hereby amended as follows:
PREAMBLE
1. Adoption and effective date of amendment. This amendment of The PNC
Financial Services Group, Inc. is adopted in order to (i) reflect certain
provisions of the Economic Growth and Tax Relief Reconciliation Act of 2001
("EGTRRA"), (ii) clarify the Plan's definition of total disability and
(iii) update the Plan's claims procedures. This amendment is intended as
good faith compliance with the requirements of EGTRRA and is to be
construed in accordance with EGTRRA and guidance issued thereunder. Except
as otherwise provided, this amendment shall be effective as of the first
day of the first plan year beginning after December 31, 2001.
2. Supersession of inconsistent provisions. This amendment shall supersede the
provisions of the plan to the extent those provisions are inconsistent with
the provisions of this amendment.
SECTION 1. LIMITATIONS ON CONTRIBUTIONS
1. Effective date. This section shall be effective for limitation years
beginning after December 31, 2001.
2. Maximum annual addition. Except to the extent permitted under Section 8 of
this amendment and section 414(v) of the Code, if applicable, the annual
addition that may be contributed or allocated to a Participant's account
under the Plan for any limitation year shall not exceed the lesser of:
(a) $40,000, as adjusted for increases in the cost-of-living under section
415(d) of the Code; or
(b) 100 percent of the Participant's compensation, within the meaning of
section 415(c)(3) of the Code, for the limitation year.
-1-
<PAGE>
The compensation limit referred to in (b) shall not apply to any
contribution for medical benefits after separation from service (within the
meaning of section 401(h) or section 419A(f)(2) of the Code) which is
otherwise treated as an annual addition.
SECTION 2. INCREASE IN COMPENSATION LIMIT
The annual compensation of each Participant taken into account in determining
allocations for any Plan Year beginning after December 31, 2001, shall not
exceed $200,000, as adjusted for cost-of-living increases in accordance with
section 401(a)(17)(B) of the Code. Annual compensation means compensation during
the Plan Year or such other consecutive 12-month period over which compensation
is otherwise determined under the Plan (the determination period). The
cost-of-living adjustment in effect for a calendar year applies to annual
compensation for the determination period that begins with or within such
calendar year.
SECTION 3. MODIFICATION OF TOP-HEAVY RULES
The top-heavy requirements of section 416 of the Code and Article XVI of the
Plan shall not apply in any year beginning after December 31, 2001, in which the
Plan consists solely of a cash or deferred arrangement which meets the
requirements of section 401(k)(12) of the Code and matching contributions with
respect to which the requirements of section 401(m)(11) of the Code are met.
SECTION 4. DIRECT ROLLOVERS OF PLAN DISTRIBUTIONS
1. Effective date. This section shall apply to distributions made after
December 31, 2001.
2. Modification of definition of Eligible Retirement Plan. For purposes of the
direct rollover provisions in Section 8.7 of the Plan, an Eligible
Retirement Plan shall also mean an annuity contract described in Section
403(b) of the Code and an eligible plan under Section 457(b) of the Code
which is maintained by a state, political subdivision of a state, or any
agency or instrumentality of a state or political subdivision of a state
and which agrees to separately account for amounts transferred into such
plan from this Plan. The definition of Eligible Retirement Plan shall also
apply in the case of a distribution to a surviving spouse, or to a spouse
or former spouse who is the alternate payee under a qualified domestic
relation order, as defined in Section 414(p) of the Code.
3. Modification of definition of Eligible Rollover Distribution to exclude
hardship distributions. For purposes of the direct rollover provisions in
Section 8.7 of the Plan, any amount that is distributed on account of
hardship shall not be an Eligible Rollover Distribution and the Distributee
may not elect to have any portion of such a distribution paid directly to
an Eligible Retirement Plan.
4. Modification of definition of Eligible Rollover Distribution to include
after-tax employee contributions. For purposes of the direct rollover
provisions in Section 8.7 of the Plan, a portion of a distribution shall
not fail to be an Eligible Rollover Distribution merely because the portion
consists of after-tax employee contributions that are not includible in
-2-
<PAGE>
gross income. However, such portion may be transferred only to an
individual retirement account or annuity described in Section 408(a) or (b)
of the Code, or to a qualified defined contribution plan described in
Section 401(a) or 403(a) of the Code that agrees to separately account for
amounts so transferred, including separately accounting for the portion of
such distribution which is includible in gross income and the portion of
such distribution which is not so includible.
SECTION 5. ROLLOVERS FROM OTHER PLANS
The Plan will accept participant rollover contributions and/or direct rollovers
of distributions made after December 31, 2001, from the following types of plans
effective January 1, 2002:
Direct Rollovers:
The plan will accept a direct rollover of an eligible rollover distribution from
a qualified plan described in section 401(a) or 403(a) of the Code, an annuity
contract described in section 403(b) of the Code and an eligible plan under
section 457(b) of the Code which is maintained by a state, political subdivision
of a state, or any agency or instrumentality of a state or political subdivision
of a state, and in all cases including after-tax employee contributions.
Participant Rollover Contributions from Other Plans:
The plan will accept a participant contribution of an eligible rollover
distribution from a qualified plan described in section 401(a) or 403(a) of the
Code, an annuity contract described in section 403(b) of the Code and an
eligible plan under section 457(b) of the Code which is maintained by a state,
political subdivision of a state, or any agency or instrumentality of a state or
political subdivision of a state, and in all cases including after-tax employee
contributions.
Participant Rollover Contributions from IRAs:
The plan will accept a participant rollover contribution of the portion of a
distribution from an individual retirement account or annuity described in
section 408(a) or 408(b) of the Code that is eligible to be rolled over and
would otherwise be includible in gross income, but only if the IRA qualifies as
a "conduit" IRA.
SECTION 6. REPEAL OF MULTIPLE USE TEST
The multiple use test described in Treasury Regulation section 1.401(m)-2 and
Section 7.6 of the Plan shall not apply for Plan Years beginning after December
31, 2001.
SECTION 7. ELECTIVE DEFERRALS -- CONTRIBUTION LIMITATION
No Participant shall be permitted to have elective deferrals made under this
Plan, or any other qualified plan maintained by the employer during any taxable
year, in excess of the dollar limitation contained in Section 402(g) of the Code
in effect for such taxable year, except to the
-3-
<PAGE>
extent permitted under Section 8 of this amendment and Section 414(v) of the
Code, if applicable.
SECTION 8. CATCH-UP CONTRIBUTIONS
Effective January 1, 2002, all Employees who are eligible to make elective
deferrals under this plan and who have attained age 50 before the close of the
Plan Year shall be eligible to make catch-up contributions in accordance with,
and subject to the limitations of, Section 414(v) of the Code. Such catch-up
contributions shall not be taken into account for purposes of the provisions of
the Plan implementing the required limitations of Sections 402(g) and 415 of the
Code. The Plan shall not be treated as failing to satisfy the provisions of the
Plan implementing the requirements of Section 401(k)(3), 401(k)(11), 401(k)(12),
410(b), or 416 of the Code, as applicable, by reason of the making of such
catch-up contributions. Matching Contributions will not be made on account of
amounts designated as catch-up contributions, unless required by applicable law.
SECTION 9. DISTRIBUTION UPON SEVERANCE FROM EMPLOYMENT
1. Effective date. This section shall apply for distributions after December
31, 2001, regardless of when the severance from employment occurred.
2. New distributable event. A Participant's Account Balance shall be
distributed on account of the Participant's severance from employment,
except as provided in Section 8.1(a) of the Plan. However, such a
distribution shall be subject to the other provisions of the Plan regarding
distributions, other than provisions that require a separation from service
before such amounts may be distributed.
SECTION 10. ESOP DIVIDEND REINVESTMENT
Effective January 1, 2002, in accordance with Section 622 of EGTRRA and IRS
Notice 2002-2, a Participant may make an annual election in accordance with Plan
procedures to either (i) receive in cash any dividends paid on Corporation Stock
held by the ESOP portion of the Plan or (ii) have those dividends reinvested in
shares of Corporation Stock to be held in the Participant's Account. A
Participant who does not make an affirmative election to receive dividends in
cash will be deemed to have chosen to have those dividends reinvested.
SECTION 11. ELIGIBLE EMPLOYEE
In order to clarify the employees eligible to participate in the Plan, Section
1.17 of the Plan is amended in its entirety as follows:
1.17 "Eligible Employee" means any Employee who has satisfied the requirement to
become a Participant under Article II, other than execution of an Elective
Contribution Agreement, but does not include: (i) leased employees (which,
in accordance with Code Section 414(n) and effective January 1, 1997, means
any person (other than an employee of the recipient) who pursuant to an
agreement between the recipient and any other person has
-4-
<PAGE>
performed services for the recipient (or for the recipient and related
persons determined in accordance with Section 414(n)(6) of the Code) on a
substantially full-time basis for a period of at least one year, and such
services are performed under primary direction or control by the
recipient), (ii) student interns and (iii) effective January 1, 2002,
temporary employees.
SECTION 12. DEFINITION OF DISABILITY
To clarify the Plan's definition of total disability, Section 1.43 of the Plan
is amended to provide in its entirety as follows:
1.43 "Total Disability" means medically determinable physical condition of such
severity and probable prolonged duration as to entitle a Participant to
receive disability payments under a long-term disability income plan
maintained by an Employer with respect to that Employee. For Employees not
covered by such a plan, Total Disability means a determination by the
Social Security Administration that the Participant has a disability. The
definition of Total Disability contained in this Plan shall have no impact
or effect on any determination regarding disability made under any other
employee benefit plan of the Employer.
SECTION 13. CLAIMS PROCEDURES
Section 12.12 of the Plan is amended to provide in its entirety follows:
12.12 Claims Procedure
(a) Claim for Benefits
A claim for benefits is a request for a Plan benefit or benefits submitted
by a claimant in writing to the Plan Manager.
(b) Timing of Notification of Benefit Determination
The Plan Manager shall notify the claimant of an adverse benefit
determination within a reasonable period of time, but not later than 90 days
after receipt of the claim by the Plan, unless the Plan Manager determines that
special circumstances require an extension of time for processing the claim. If
the Plan Manager determines that an extension of time for processing is
required, written notice of the extension shall be furnished to the claimant
within the initial 90-day period. In no event shall such extension exceed a
period of 90 days from the end of such initial period. The extension notice
shall indicate the special circumstances requiring an extension of time and the
date by which the Plan expects to render the benefit determination.
The period of time within which a benefit determination is required to be
made shall begin at the time a claim is filed in accordance with Plan
procedures, without regard to whether all the information necessary to make a
benefit determination accompanies the filing.
-5-
<PAGE>
(c) Manner and Content of Benefit Determinations
The Plan Manager shall provide a claimant with written or electronic
notification of any adverse benefit determination. The notification shall set
forth, in a manner calculated to be understood by the claimant: (i) the specific
reason or reasons for the adverse determination; (ii) reference to the specific
Plan provisions on which the determination is based; (iii) a description of any
additional material or information necessary for the claimant to perfect the
claim and an explanation of why such material or information is necessary; and
(iv) a description of the Plan's review procedures and the time limits
applicable to such procedures, including a statement of the claimant's right to
bring a civil action under section 502(a) of ERISA following an adverse benefit
determination on review.
(d) Appeal of Adverse Benefit Determination
A claimant may submit a request for review of an adverse benefit
determination to the Administrative Committee. In order to provide a claimant
with the opportunity for a full and fair review of a claim and adverse benefit
determination: (i) a claimant has at least 60 days following receipt of a
notification of an adverse benefit determination within which to appeal the
determination; (ii) a claimant may submit written comments, documents, records
and other information relating to the claim for benefits; (iii) a claimant shall
be provided, upon request and free of charge, reasonable access to, and copies
of, all documents, records and other information relevant to the claimant's
claim for benefits; and (iv) the review will take into account all comments,
documents, records and other information submitted by the claimant relating to
the claim, without regard to whether such information was submitted or
considered in the initial benefit determination.
(e) Timing of Notification of Benefit Determination on Review
The Administrative Committee shall notify a claimant of the Plan's benefit
determination on review within a reasonable period of time, but not later than
60 days after receipt of the claimant's request for review by the Plan, unless
the Committee determines that special circumstances (such as the need to hold a
hearing) require an extension of time for processing the claim. If the Committee
determines that an extension of time for processing is required, written notice
of the extension shall be furnished to the claimant prior to the termination of
the initial 60-day period. In no event shall such extension exceed a period of
60 days from the end of the initial period. The extension notice shall indicate
the special circumstances requiring an extension of time and the date by which
the Plan expects to render the determination on review.
The period of time within which a benefit determination on review is
required to be made shall begin at the time an appeal is filed in accordance
with the Plan procedures, without regard to whether all the information
necessary to make a benefit determination on review accompanies the filing.
-6-
<PAGE>
(f) Manner and Content of Notification of Benefit Determination on Review
The Administrative Committee shall provide a claimant with written or
electronic notification of a Plan's benefit determination on review. In the case
of an adverse benefit determination, the notification shall set forth, in a
manner calculated to be understood by the claimant: (i) the specific reason or
reasons for the adverse determination; (ii) reference to the specific Plan
provisions on which the benefit determination is based; (iii) a statement that
the claimant is entitled to receive, upon request and free of charge, reasonable
access to, and copies of, all documents, records, and other information relevant
to the claimant's claim for benefits; and (iv) a statement of the claimant's
right to bring an action under section 502(a) of ERISA.
In the case of an adverse benefit determination on review, the Plan
Administrator shall provide such access to, and copies of, documents, records,
and other information described above, as appropriate.
(g) Exhaustion of Remedies; Waiver
No legal action with respect to a claim for benefits under the Plan shall
be instituted unless the claimant shall have first exhausted the claims
procedure set forth in this Section 12.12, except as provided in Section
12.12(h) below. If a Participant or Beneficiary fails to file a claim or request
for review in the manner specified herein, such claim or request shall be
waiver, and the Participant or Beneficiary will be barred from reasserting the
claim.
(h) Failure of Plan to Follow Claims Procedures
In the case of the failure of the Plan to follow the claims procedures, the
claimant shall be deemed to have exhausted the administrative remedies under the
Plan and shall be entitled to pursue any available remedies under section 502(a)
of ERISA.
SECTION 14. COMPENSATION DEFINITION
In order to clarify the definition of compensation contained in the Plan, the
following sentence is added to the end of the second paragraph of Section 1.8 of
the Plan: "Notwithstanding the above and Annex I, effective January 1, 2002,
Compensation shall not include earnings paid as a gross up payment."
SECTION 15. ELIMINATION OF INSTALLMENT METHOD OF PAYMENT
In order to eliminate the installment method of payment formerly provided under
the Plan, subsections (a) and (b) of Section 8.4 are amended to provide in their
entirety as follows:
(a) Lump Sum
If a Participant's employment terminates for any reason and the
Participant's Account Balance exceeds the involuntary cashout limit described in
Section 8.1(b), the Participant's Account Balance shall be paid in a single lump
sum.
-7-
<PAGE>
(b) Elimination of Installment Method of Payment
Participants were permitted to elect to receive their Account Balance in
periodic installments. This installment method of payment is eliminated in
accordance with Internal Revenue Service guidance. However, the amendment
eliminating the installment method of payment shall not apply with respect to
any distribution with an annuity starting date that is earlier than 90 days from
the date a summary of material modification describing the amendment is
furnished to affected Participants.
-8-
<PAGE>
IN WITNESS WHEREOF, this Second Amendment to The PNC Financial Services
Group, Inc. Incentive Savings Plan is executed and adopted by The PNC Financial
Services Group, Inc. by its duly authorized officer, this 18th day of December,
2002.
/s/ William E. Rosner
-------------------------------------------------------
William E. Rosner
Senior Vice President and Chief Human Resources Officer
-9-
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-12.1
<SEQUENCE>11
<FILENAME>j9925001exv12w1.txt
<DESCRIPTION>COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
<TEXT>
<PAGE>
.
.
.
THE PNC FINANCIAL SERVICES GROUP, INC. AND SUBSIDIARIES Exhibit 12.1
Computation of Ratio of Earnings
to Fixed Charges
<TABLE>
<CAPTION>
Year ended December 31
-------------------------------------------------------------------------
Dollars in millions 2002 2001 2000 1999 1998
- ---------------------------------------------------------------- ------------- ------------- ----------- ------------
<S> <C> <C> <C> <C> <C>
EARNINGS
Income from continuing operations before taxes $ 1,821 $ 564 $ 1,848 $ 1,788 $ 1,651
Fixed charges excluding interest on deposits 433 763 1,033 980 1,159
---------------- ------------- ------------- ----------- ------------
Subtotal 2,254 1,327 2,881 2,768 2,810
Interest on deposits 659 1,229 1,653 1,369 1,471
---------------- ------------- ------------- ----------- ------------
Total $ 2,913 $ 2,556 $ 4,534 $ 4,137 $ 4,281
================ ============= ============= =========== ============
FIXED CHARGES
Interest on borrowed funds $ 316 $ 646 $ 915 $ 870 $ 1,065
Interest component of rentals 58 53 50 44 33
Amortization of notes and debentures 1 1 1 1 1
Distributions on Mandatorily Redeemable
Capital Securities of Subsidiary Trusts 58 63 67 65 60
---------------- ------------- ------------- ----------- ------------
Subtotal 433 763 1,033 980 1,159
Interest on deposits 659 1,229 1,653 1,369 1,471
---------------- ------------- ------------- ----------- ------------
Total $ 1,092 $ 1,992 $ 2,686 $ 2,349 $ 2,630
================ ============= ============= =========== ============
RATIO OF EARNINGS TO FIXED CHARGES
Excluding interest on deposits 5.21 x 1.74 x 2.79 x 2.82 x 2.42 x
Including interest on deposits 2.67 1.28 1.69 1.76 1.63
========================================================================================================================
</TABLE>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-12.2
<SEQUENCE>12
<FILENAME>j9925001exv12w2.txt
<DESCRIPTION>COMP. OF RATIO OF ERNGS TO FIXED CHGS. AND PREF. D
<TEXT>
<PAGE>
.
.
.
THE PNC FINANCIAL SERVICES GROUP, INC. AND SUBSIDIARIES Exhibit 12.2
Computation of Ratio of Earnings
to Fixed Charges and Preferred Stock Dividends
<TABLE>
<CAPTION>
Year ended December 31
-------------------------------------------------------------------------
Dollars in millions 2002 2001 2000 1999 1998
- ---------------------------------------------------------------- ------------- ------------- ----------- ------------
<S> <C> <C> <C> <C> <C>
EARNINGS
Income from continuing operations before taxes $ 1,821 $ 564 $ 1,848 $ 1,788 $ 1,651
Fixed charges and preferred stock dividends
excluding interest on deposits 434 783 1,063 1,010 1,188
---------------- ------------- ------------- ----------- ------------
Subtotal 2,255 1,347 2,911 2,798 2,839
Interest on deposits 659 1,229 1,653 1,369 1,471
---------------- ------------- ------------- ----------- ------------
Total $ 2,914 $ 2,576 $ 4,564 $ 4,167 $ 4,310
================ ============= ============= =========== ============
FIXED CHARGES
Interest on borrowed funds $ 316 $ 646 $ 915 $ 870 $ 1,065
Interest component of rentals 58 53 50 44 33
Amortization of notes and debentures 1 1 1 1 1
Distributions on Mandatorily Redeemable
Capital Securities of Subsidiary Trusts 58 63 67 65 60
Preferred stock dividend requirements 1 20 30 30 29
---------------- ------------- ------------- ----------- ------------
Subtotal 434 783 1,063 1,010 1,188
Interest on deposits 659 1,229 1,653 1,369 1,471
---------------- ------------- ------------- ----------- ------------
Total $ 1,093 $ 2,012 $ 2,716 $ 2,379 $ 2,659
================ ============= ============= =========== ============
RATIO OF EARNINGS TO FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS
Excluding interest on deposits 5.20 x 1.72 x 2.74 x 2.77 x 2.39 x
Including interest on deposits 2.67 1.28 1.68 1.75 1.62
========================================================================================================================
</TABLE>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-13
<SEQUENCE>13
<FILENAME>j9925001exv13.txt
<DESCRIPTION>EXCERPTS FROM THE ANNUAL REPORT TO SHAREHOLDERS
<TEXT>
<PAGE>
Exhibit 13
FINANCIALS
------------------------------------------------------------------
THE PNC FINANCIAL SERVICES GROUP, INC.
FINANCIAL REVIEW
26 Selected Consolidated Financial Data
28 Overview
30 Review Of Businesses
31 Regional Community Banking
Wholesale Banking
32 Corporate Banking
33 PNC Real Estate
Finance
34 PNC Business Credit
35 PNC Advisors
36 BlackRock
37 PFPC
38 Consolidated Statement Of Income Review
40 Consolidated Balance Sheet Review
48 Risk Factors
53 Risk Management
64 2001 Versus 2000
66 Forward-Looking Statements
REPORTS ON CONSOLIDATED FINANCIAL STATEMENTS
67 Management's Responsibility For Financial Reporting
67 Report Of Deloitte & Touche LLP, Independent Auditors
CONSOLIDATED FINANCIAL STATEMENTS
68 Consolidated Statement Of Income
69 Consolidated Balance Sheet
70 Consolidated Statement Of Shareholders' Equity
71 Consolidated Statement Of Cash Flows
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
72 NOTE 1 - Accounting Policies
81 NOTE 2 - NBOC Acquisition
82 NOTE 3 - Regulatory Matters
83 NOTE 4 - Discontinued Operations
83 NOTE 5 - Fourth Quarter 2001 Actions
84 NOTE 6 - Sale Of Subsidiary Stock
84 NOTE 7 - Cash Flows
84 NOTE 8 - Trading Activities
85 NOTE 9 - Securities
87 NOTE 10 - Loans And Commitments To Extend Credit
88 NOTE 11 - Nonperforming Assets
89 NOTE 12 - Allowances For Credit Losses And Unfunded Loan Commitments And
Letters Of Credit
89 NOTE 13 - Premises, Equipment And Leasehold Improvements
89 NOTE 14 - Goodwill And Other Intangible Assets
90 NOTE 15 - Securitizations
92 NOTE 16 - Deposits
92 NOTE 17 - Borrowed Funds
92 NOTE 18 - Capital Securities Of Subsidiary Trusts
92 NOTE 19 - Shareholders' Equity
93 NOTE 20 - Financial Derivatives
93 NOTE 21 - Employee Benefit Plans
96 NOTE 22 - Stock-Based Compensation Plans
98 NOTE 23 - Income Taxes
98 NOTE 24 - Legal Proceedings
99 NOTE 25 - Earnings Per Share
100 NOTE 26 - Segment Reporting
102 NOTE 27 - Comprehensive Income
103 NOTE 28 - Fair Value Of Financial Instruments
104 NOTE 29 - Commitments And Guarantees
106 NOTE 30 - Unused Line Of Credit
106 NOTE 31 - Parent Company
107 NOTE 32 - Subsequent Event
STATISTICAL INFORMATION
108 Selected Quarterly Financial Data
109 Analysis Of Year-To-Year Changes In Net Interest Income
110 Average Consolidated Balance Sheet And Net Interest Analysis
112 Summary Of Loan Loss Experience
112 Allocation Of Allowance For Credit Losses
113 Short-Term Borrowings
113 Loan Maturities And Interest Sensitivity
113 Time Deposits Of $100,000 Or More
113 Common Stock Prices/Dividends Declared
25
<PAGE>
FINANCIAL REVIEW
SELECTED CONSOLIDATED FINANCIAL DATA
THE PNC FINANCIAL SERVICES GROUP, INC.
<TABLE>
<CAPTION>
--------------------------------------------------------------------
Year ended December 31
--------------------------------------------------------------------
Dollars in millions, except per share data 2002 2001(a) 2000 1999 1998
========================================================= ============== ============ =========== =========== ============
<S> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS
Interest income $3,172 $4,137 $4,732 $4,583 $5,024
Interest expense 975 1,875 2,568 2,239 2,536
- --------------------------------------------------------- -------------- ------------ ----------- ----------- ------------
Net interest income 2,197 2,262 2,164 2,344 2,488
Provision for credit losses 309 903 136 163 225
Noninterest income before net securities gains 3,108 2,521 2,930 2,438 2,076
Net securities gains 89 131 20 22 16
Noninterest expense 3,227 3,414 3,103 2,838 2,698
- --------------------------------------------------------- -------------- ------------ ----------- ----------- ------------
Income from continuing operations before minority
interest and income taxes 1,858 597 1,875 1,803 1,657
Minority interest in income of consolidated entities 37 33 27 15 6
Income taxes 621 187 634 586 571
- --------------------------------------------------------- -------------- ------------ ----------- ----------- ------------
Income from continuing operations 1,200 377 1,214 1,202 1,080
Income (loss) from discontinued operations, net of
tax (16) 5 65 62 35
- --------------------------------------------------------- -------------- ------------ ----------- ----------- ------------
Income before cumulative effect of accounting
change 1,184 382 1,279 1,264 1,115
Cumulative effect of accounting change, net of tax (5)
- --------------------------------------------------------- -------------- ------------ ----------- ----------- ------------
Net income $1,184 $377 $1,279 $1,264 $1,115
========================================================= ============== ============ =========== =========== ============
PER COMMON SHARE
Basic earnings (loss)
Continuing operations $4.23 $1.27 $4.12 $3.98 $3.53
Discontinued operations (.05) .02 .23 .21 .11
- --------------------------------------------------------- -------------- ------------ ----------- ----------- ------------
Before cumulative effect of accounting change 4.18 1.29 4.35 4.19 3.64
Cumulative effect of accounting change (.02)
- --------------------------------------------------------- -------------- ------------ ----------- ----------- ------------
Net income $4.18 $1.27 $4.35 $4.19 $3.64
========================================================= ============== ============ =========== =========== ============
Diluted earnings (loss)
Continuing operations $4.20 $1.26 $4.09 $3.94 $3.49
Discontinued operations (.05) .02 .22 .21 .11
- --------------------------------------------------------- -------------- ------------ ----------- ----------- ------------
Before cumulative effect of accounting change 4.15 1.28 4.31 4.15 3.60
Cumulative effect of accounting change (.02)
- --------------------------------------------------------- -------------- ------------ ----------- ----------- ------------
Net income $4.15 $1.26 $4.31 $4.15 $3.60
========================================================= ============== ============ =========== =========== ============
Book value (At December 31) $24.03 $20.54 $21.88 $19.23 $18.86
Cash dividends declared $1.92 $1.92 $1.83 $1.68 $1.58
========================================================= ============= ============ =========== =========== ============
</TABLE>
This Financial Review should be read in conjunction with The PNC Financial
Services Group, Inc. and subsidiaries ("Corporation" or "PNC") Consolidated
Financial Statements and Statistical Information included herein. Certain
prior-period amounts have been reclassified to conform with the current year
presentation. For information regarding certain business risks, see the Risk
Factors, Risk Management, Credit Risk and Liquidity sections in this Financial
Review. Also, see the Forward-Looking Statements section in this Financial
Review for certain other factors that could cause actual results to differ
materially from forward-looking statements or historical performance.
26
<PAGE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------
At or Year ended December 31
-----------------------------------------------------------------------
Dollars in millions 2002 2001(a) 2000 1999 1998
========================================================= =============== ============ =========== ============= ============
<S> <C> <C> <C> <C> <C>
BALANCE SHEET HIGHLIGHTS
Assets $66,377 $69,638 $69,921 $69,360 $70,829
Earning assets 54,833 57,875 59,373 60,268 63,547
Loans, net of unearned income 35,450 37,974 50,601 49,673 57,633
Allowance for credit losses 673 560 598 600 678
Securities 13,763 13,908 5,902 5,960 4,472
Loans held for sale 1,607 4,189 1,655 3,477 467
Total deposits 44,982 47,304 47,664 45,802 46,150
Transaction deposits 32,349 32,590 29,922 26,538 26,798
Borrowed funds 9,116 12,090 11,718 14,229 15,939
Allowance for unfunded loan commitments and
letters of credit 84 70 77 74 75
Shareholders' equity 6,859 5,823 6,656 5,946 6,043
Common shareholders' equity 6,849 5,813 6,344 5,633 5,729
- --------------------------------------------------------- --------------- ------------ ----------- ------------- ------------
SELECTED RATIOS
FROM CONTINUING OPERATIONS
Return on
Average common shareholders' equity 19.08% 5.65% 20.52% 21.29% 20.14%
Average assets 1.80 .53 1.76 1.76 1.55
Net interest margin 3.99 3.84 3.64 3.86 3.99
Noninterest income to total revenue 59.1 53.8 57.5 51.0 45.4
Efficiency (b) 58.62 65.48 56.82 55.32 54.74
FROM NET INCOME
Return on
Average common shareholders' equity 18.83 5.65 21.63 22.41 20.81
Average assets 1.78 .53 1.68 1.69 1.49
Net interest margin 3.99 3.81 3.37 3.68 3.85
Noninterest income to total revenue 59.1 53.9 59.7 52.9 47.0
Efficiency (b) 59.08 65.36 55.16 54.63 54.69
Loans to deposits 79 80 106 108 125
Dividend payout 46.07 151.65 42.06 40.22 43.43
Leverage (c) 8.1 6.8 8.0 6.6 7.3
Common shareholders' equity to assets 10.32 8.35 9.07 8.12 8.09
Average common shareholders' equity to average
assets 9.44 9.14 8.44 8.12 7.56
========================================================= =============== ============ =========== ============= ============
</TABLE>
(a) See 2001 Strategic Repositioning in the Consolidated Balance Sheet Review
section of this Financial Review for further information regarding items
impacting the comparability of 2001 amounts with other periods presented.
(b) The efficiency ratio is noninterest expense divided by the sum of
taxable-equivalent net interest income and noninterest income. Amortization
of goodwill and other intangibles, distributions on capital securities and
mortgage banking risk management activities are excluded for purposes of
computing this ratio. Excluding the impact of charges in 2001 related to
strategic initiatives and additions to reserves related to insured residual
value exposures, the efficiency ratios from continuing operations and from
net income were 58.14% and 58.07%, respectively.
(c) The leverage ratio represents Tier 1 capital divided by adjusted average
total assets as defined by regulatory capital requirements for bank holding
companies. The ratio includes discontinued operations for the years 1998
and 1999.
27
<PAGE>
OVERVIEW
THE PNC FINANCIAL SERVICES GROUP, INC.
The Corporation is one of the largest diversified financial services companies
in the United States, operating businesses engaged in regional community
banking; wholesale banking, including corporate banking, real estate finance and
asset-based lending; wealth management; asset management and global fund
processing services. The Corporation provides certain products and services
nationally and others in PNC's primary geographic markets in Pennsylvania, New
Jersey, Delaware, Ohio and Kentucky. The Corporation also provides certain
banking, asset management and global fund processing services internationally.
PNC's strategies to enhance shareholder value include expanding its
deposit-driven banking franchise through internal growth and, as opportunities
arise, through targeted acquisitions. In addition, the Corporation plans to
leverage its customer base and leading technology to grow the asset management
and processing businesses in an efficient and effective manner. Efforts in
recent years to reduce risk, grow deposits and diversify the Corporation's
revenue mix have enabled PNC to improve liquidity and build a strong capital
position.
SUMMARY FINANCIAL RESULTS
Consolidated net income for 2002 was $1.184 billion or $4.15 per diluted share
compared with $377 million or $1.26 per diluted share for 2001. Results for 2002
reflected the adoption of Statement of Financial Accounting Standards ("SFAS")
No. 142, "Goodwill and Other Intangible Assets," under which goodwill is no
longer amortized to expense. Results for 2001 reflected the cost of actions
taken during the year to accelerate the repositioning of PNC's lending business
and other strategic initiatives. These charges totaled $1.2 billion pretax and
reduced 2001 net income by $768 million or $2.65 per diluted share. Excluding
the effects of the strategic repositioning charges and goodwill amortization
expense, net income for 2001 would have been $1.238 billion, or $4.23 per
diluted share.
Results for 2002 included a loss from discontinued operations of $16
million, or $.05 per diluted share, compared with income from discontinued
operations in 2001 of $5 million, or $.02 per diluted share. Results for 2001
also included an after-tax loss of $5 million, or $.02 per diluted share,
related to the cumulative effect of the accounting change for the adoption of
SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," as
amended.
Return on average common shareholders' equity was 18.83% and return on
average assets was 1.78% for 2002 compared with 5.65% and .53%, respectively,
for 2001.
The residential mortgage banking business, which was sold in January 2001,
is reflected in discontinued operations throughout the Corporation's
consolidated financial statements. The remainder of the presentation in this
Financial Review reflects continuing operations, unless otherwise noted. See
Note 4 Discontinued Operations in the Notes to Consolidated Financial Statements
for additional information.
The Corporation's results for 2002 reflected significant progress in a
number of key areas:
- - As part of the Corporation's overall risk repositioning efforts,
institutional loans held for sale were reduced $2.3 billion, or 88%, from
December 31, 2001, with net gains in excess of valuation adjustments
totaling $147 million in 2002.
- - Total shareholders' equity increased $1.0 billion during 2002 to $6.9
billion at December 31, 2002.
- - Capital flexibility was strengthened during 2002 as the ratio of common
shareholders' equity to total assets increased to 10.3% at December 31,
2002 compared with 8.3% at December 31, 2001.
- - Lower cost funding sources increased as average total transaction deposits
increased $1.1 billion, to $30.7 billion, compared with the prior year.
- - In January 2003, PNC and Washington Mutual Bank, FA, agreed to a settlement
of all issues in dispute between them in connection with the sale of the
Corporation's residential mortgage banking business.
Management expects that 2003 will continue to be a challenging operating
environment that will limit opportunities for revenue growth. The Corporation's
success in 2003 will depend on the economy, interest rates, financial market
conditions, the impact of international hostilities and its success in
implementing current strategies, as well as PNC's ability to address its key
operating challenges. These challenges include the stability of asset quality,
revenue growth and development of value-added customer relationships. Other
factors that will affect the Corporation's success include leveraging
technology, execution of a share repurchase program, managing the
revenue/expense relationship including additional pension and stock-based
compensation costs, and regulatory actions. See also the Risk Factors, Risk
Management and Forward-Looking Statements sections of this Financial Review.
28
<PAGE>
BALANCE SHEET HIGHLIGHTS
During 2002, the Corporation emphasized the growth and retention of value-added
transaction deposits while changing the mix of earning assets, including a
reduction of institutional loans held for sale. These actions have resulted in a
significant risk repositioning of the Corporation as reflected in the
Consolidated Balance Sheet and Consolidated Average Balance Sheet line items
discussed below.
Total assets were $66.4 billion at December 31, 2002 compared with $69.6
billion at December 31, 2001. Average interest earning assets were $55.3 billion
in 2002, down $4.0 billion from 2001 due primarily to a decrease in average
loans that was partially offset by increases in average securities and average
loans held for sale.
Average loans for 2002 were $37.1 billion compared with $44.8 billion in
2001, a decline of $7.7 billion or 17%. Loans represented 67% of average
interest-earning assets for 2002 compared with 76% for 2001. The decreases were
primarily due to a decline in residential mortgages and institutional lending
portfolios that more than offset an increase in PNC Business Credit loans
resulting from the acquisition in 2002 of a portion of National Bank of Canada's
("NBOC") U.S. asset-based lending business. The term "loans" in this report
excludes loans held for sale and securities that represent interests in pools of
loans.
Changes in loans held for sale are described in 2001 Strategic Repositioning
and in Loans Held for Sale in the Consolidated Balance Sheet Review section of
this Financial Review.
Average securities totaled $12.0 billion for 2002, an increase of $1.1
billion from 2001. Securities comprised 22% of average interest-earning assets
for 2002 compared with 18% for 2001. The increases were primarily due to net
securities purchases upon redeployment of funds resulting from loan downsizing
and interest rate risk management activities.
Funding cost is affected by the volume and composition of funding sources as
well as related rates paid thereon. Average deposits comprised 66% of total
sources of funds for 2002 compared with 64% for 2001, respectively, with the
remainder comprised primarily of wholesale funding obtained at prevailing market
rates.
Average interest-bearing demand and money market deposits totaled $22.1
billion for 2002 compared with $21.3 billion in 2001. The increase reflected
focused marketing efforts to grow and maintain more valuable transaction
accounts while higher cost, less valuable retail certificates of deposit were
not emphasized. Average borrowed funds for 2002 decreased $2.8 billion, to $10.7
billion, compared with 2001 commensurate with the decline in average earning
assets. See the Consolidated Average Balance Sheet and Net Interest Analysis for
additional information.
29
<PAGE>
REVIEW OF BUSINESSES
PNC operates seven major businesses engaged in regional community banking;
wholesale banking, including corporate banking, real estate finance and
asset-based lending; wealth management; asset management and global fund
processing services. Treasury management activities, which include cash and
investment management, receivables management, disbursement services and global
trade services; capital markets products, which include foreign exchange,
derivatives trading and loan syndications; and equipment leasing products are
offered through Corporate Banking and sold by several businesses across the
Corporation.
Results of individual businesses are presented based on PNC's management
accounting practices and the Corporation's management structure. There is no
comprehensive, authoritative body of guidance for management accounting
equivalent to generally accepted accounting principles; therefore, the financial
results of individual businesses are not necessarily comparable with similar
information for any other company. Financial results are presented, to the
extent practicable, as if each business operated on a stand-alone basis. Also,
certain amounts for 2001 have been reclassified to conform with the 2002
presentation.
The management accounting process uses various balance sheet and income
statement assignments and transfers to measure performance of the businesses.
Methodologies are refined from time to time as management accounting practices
are enhanced and businesses change. There were no significant methodology
changes made during 2002 other than the impact of refinements to the
Corporation's reserve methodology related to loans and unfunded credit
facilities. Securities or borrowings and related net interest income are
assigned based on the net asset or liability position of each business. Capital
is assigned based on management's assessment of inherent risks and equity levels
at independent companies providing similar products and services. The allowance
for credit losses is allocated based on management's assessment of risk inherent
in the loan portfolios. The costs incurred by support areas not directly aligned
with the businesses are allocated primarily based on the utilization of
services.
Total business financial results differ from consolidated results from
continuing operations. This is primarily due to differences between management
accounting practices and generally accepted accounting principles such as
economic capital assignments rather than legal entity shareholders' equity, unit
cost allocations rather than actual expense assignments, and policies that do
not fully allocate holding company expenses; minority interest in income of
consolidated entities; eliminations and other corporate items. The impact of
these differences is reflected in the "Other" category. Other also includes
equity management activities and residual asset and liability management
activities which do not meet the criteria for disclosure as a separate
reportable segment. Other reflected a net loss of $72 million in 2002 compared
with a net loss of $190 million in 2001. The net loss was smaller in 2002
primarily due to lower net losses from equity management activities and a
benefit from the assignment of unassigned allowance for credit losses to the
Wholesale Banking businesses in 2002. Details of inter-segment revenues are
included in Note 26 Segment Reporting. The operating results and financial
impact of the disposition of the residential mortgage banking business,
previously PNC Mortgage, are included in discontinued operations.
"Other Information" included in the individual business tables that follow
is presented as of period end, except for net charge-offs, net gains (losses) on
loans held for sale and average full-time equivalent employees (FTEs).
RESULTS OF BUSINESSES (a)
<TABLE>
<CAPTION>
--------------------- --------------------- -------------------- ----------------------
Return on
Operating Assigned
Earnings(Loss) Revenue (b) Capital(c) Average Assets
Year ended December 31 - dollars in --------------------- --------------------- -------------------- ----------------------
millions 2002 2001 2002 2001 2002 2001 2002 2001
======================================== ========== ========== ========== ========== ========= ========== =========== ==========
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Banking Businesses
Regional Community Banking $697 $596 $2,098 $2,145 27% 22% $38,976 $40,285
Wholesale Banking
Corporate Banking 150 (375) 631 764 14 (30) 13,807 16,685
PNC Real Estate Finance 90 38 226 213 23 10 5,018 5,290
PNC Business Credit 40 22 193 134 16 13 3,837 2,463
- ---------------------------------------- ---------- ---------- ---------- ---------- ----------- ----------
Total wholesale banking 280 (315) 1,050 1,111 17 (17) 22,662 24,438
PNC Advisors 97 143 654 735 19 26 2,929 3,330
- ---------------------------------------- ---------- ---------- ---------- ---------- ----------- ----------
Total banking businesses 1,074 424 3,802 3,991 22 8 64,567 68,053
- ---------------------------------------- ---------- ---------- ---------- ---------- ----------- ----------
Asset Management and Processing
businesses
BlackRock 133 107 577 533 24 25 864 684
PFPC 65 36 817 846 31 17 1,888 1,771
- ----------------------------------------- --------- ---------- ---------- ---------- ----------- ----------
Total asset management and
processing 198 143 1,394 1,379 26 22 2,752 2,455
- ---------------------------------------- ---------- ---------- ---------- ---------- ----------- ----------
Total business results 1,272 567 5,196 5,370 23 10 67,319 70,508
Other (72) (190) 211 (440) (730) (74)
- ---------------------------------------- ---------- ---------- ---------- ---------- ----------- ----------
Results from continuing operations 1,200 377 5,407 4,930 19 6 66,589 70,434
Discontinued operations (16) 5 51
- ---------------------------------------- ---------- ---------- ---------- ---------- ----------- ----------
Results before cumulative effect of
accounting change 1,184 382 5,407 4,930 19 6 66,589 70,485
Cumulative effect of accounting change (5)
- ---------------------------------------- ---------- ---------- ---------- ---------- --------- ---------- ----------- ----------
Total consolidated (b) $1,184 $377 $5,407 $4,930 19 6 $66,589 $70,485
======================================== ========== ========== ========== ========== ========= ========== =========== ==========
</TABLE>
(a) Amounts for 2002 reflect, where applicable, the adoption, effective January
1, 2002, of the new accounting standard under which goodwill is no longer
amortized to expense.
(b) Operating revenue is presented on a taxable-equivalent basis except for
BlackRock and PFPC. Total consolidated operating revenues included in the
table above exceeded total operating revenues on a book basis for 2002 and
2001 by $13 million and $16 million, respectively, due to
taxable-equivalent adjustments.
(c) Percentages for BlackRock reflect return on equity.
30
<PAGE>
REGIONAL COMMUNITY BANKING
Year ended December 31
Taxable-equivalent basis
Dollars in millions 2002 2001
===================================== =========== ============
INCOME STATEMENT
Net interest income $1,409 $1,466
Noninterest income 689 679
- ------------------------------------- ----------- ------------
Operating revenue 2,098 2,145
Provision for credit losses 52 50
Noninterest expense 1,061 1,063
Goodwill amortization 36
- ------------------------------------- ----------- ------------
Operating income 985 996
Net securities (gains) (84) (86)
Strategic repositioning:
Vehicle leasing costs 135
Asset impairment and severance costs 13
- ------------------------------------- ----------- ------------
Pretax earnings 1,069 934
Income taxes 372 338
- ------------------------------------- ----------- ------------
Earnings $697 $596
===================================== =========== ============
AVERAGE BALANCE SHEET
Loans
Consumer
Home equity $7,101 $6,351
Indirect 541 814
Other consumer 632 777
- ------------------------------------- ----------- ------------
Total consumer 8,274 7,942
Residential mortgage 4,110 7,912
Commercial 3,599 3,557
Vehicle leasing 1,678 1,901
Other 119 133
- ------------------------------------- ----------- ------------
Total loans 17,780 21,445
Securities 11,139 10,241
Education and other loans held for
sale 1,319 1,293
Assigned assets and other assets 8,738 7,306
- ------------------------------------- ----------- ------------
Total assets $38,976 $40,285
- ------------------------------------- ----------- ------------
Deposits
Noninterest-bearing demand $5,046 $4,571
Interest-bearing demand 6,057 5,713
Money market 12,279 12,162
- ------------------------------------- ----------- ------------
Total transaction deposits 23,382 22,446
Savings 1,962 1,870
Certificates 10,045 11,906
- ------------------------------------- ----------- ------------
Total deposits 35,389 36,222
Other liabilities 958 1,345
Assigned capital 2,629 2,718
- ------------------------------------- ----------- ------------
Total funds $38,976 $40,285
- ------------------------------------- ----------- ------------
PERFORMANCE RATIOS
Return on assigned capital 27% 22%
Noninterest income to operating revenue 33 32
Efficiency 49 54
Efficiency, excluding strategic
repositioning 51 50
- ----------------------------------------- ------- ------------
OTHER INFORMATION
Total nonperforming assets $82 $52
Vehicle leasing outstandings,
net of unearned income $1,386 $1,930
Net charge-offs $56 $50
Average FTEs 9,657 9,953
ATMs 3,550 3,250
Branches 714 712
Financial consultants 645 568
Business banking centers 193 140
Checking relationships 1,542,000 1,440,000
Online banking users 606,752 421,325
Deposit households using online
banking 36.6% 27.2%
======================================= ========== ===========
Regional Community Banking provides deposit, lending, cash management and
investment services to two million consumer and small business customers within
PNC's geographic footprint.
The strategic focus of the Regional Community Bank is to generate
sustainable revenue growth by consistently increasing its base of satisfied and
loyal customers. Revenue growth is driven by building a base of transaction
deposit relationships which provide fee revenue and a low-cost funding source
for loans and investments. Additional revenue growth is generated by deepening
relationships with these customers through cross-selling of other products and
services. The significant growth in online banking users is helping to improve
customer loyalty and retention.
During 2002, Regional Community Banking increased the number of checking
relationships by 8% causing increases in transaction deposits and fee revenues.
Customer growth was driven by simultaneous improvements in the rates of customer
acquisition and retention. Despite this trend and success in keeping deposit
funding costs low, this business was adversely impacted by a reduction in
average residential mortgages and vehicle leases and lower investment yields in
the relatively low interest rate environment in 2002.
Regional Community Banking earnings were $697 million in 2002 compared with
$596 million in 2001. Excluding goodwill amortization expense in 2001, operating
income declined 5% in the comparison as the benefit of growth in average
transaction deposits and fee income was more than offset by lower net interest
income.
Operating revenue was $2.1 billion for both 2002 and 2001. Revenue was flat
in the year-to-year comparison primarily due to lower net interest income in
2002 partially offset by higher noninterest income.
The provision for credit losses for 2002 increased to $52 million compared
with $50 million in the prior year due to higher net charge-offs on residential
mortgage loans partially offset by the impact of refinements to the
Corporations' reserve methodology related to impaired loans and pooled reserves.
Total loans decreased 17% on average in 2002 compared with the prior year.
Home equity loans, the lead consumer lending product, grew 12% in the
comparison. The overall decline in loans primarily resulted from residential
mortgage prepayments and a decline in vehicle leases and indirect loans. In
addition, management elected to invest in mortgage-backed securities rather than
purchase residential mortgages as part of overall balance sheet and interest
rate management.
Total deposits declined 2% in the year-to-year comparison as increases in
transaction and savings deposits were more than offset by a decline in
certificates of deposit. Demand and money market deposits increased due to
ongoing strategic marketing efforts to add new accounts and retain existing
customers while higher cost, less valuable certificates of deposit were not
emphasized.
As previously reported, the Corporation decided to discontinue its vehicle
leasing business in the fourth quarter of 2001. As a result, this portfolio has
declined 28% since December 31, 2001 and is performing overall as expected. See
2001 Strategic Repositioning in the Consolidated Balance Sheet Review section
and Risk Factors section of this Financial Review for additional information.
31
<PAGE>
WHOLESALE BANKING
CORPORATE BANKING
Year ended December 31
Taxable-equivalent basis
Dollars in millions 2002 2001
======================================= ========== ===========
INCOME STATEMENT
Net interest income $349 $508
Noninterest income 282 256
- --------------------------------------- ---------- -----------
Operating revenue 631 764
Provision for credit losses 203 57
Noninterest expense 359 378
Goodwill amortization 3
- --------------------------------------- ---------- -----------
Operating income 69 326
Strategic repositioning:
Institutional lending repositioning 891
Asset impairment and severance costs 16
Net (gains) on loans held for sale (155)
- --------------------------------------- ---------- -----------
Pretax earnings (loss) 224 (581)
Income tax expense (benefit) 74 (206)
- --------------------------------------- ---------- -----------
Earnings (loss) $150 $(375)
======================================= ========== ===========
AVERAGE BALANCE SHEET
Loans $9,477 $13,907
Loans held for sale 1,369 367
Other assets 2,961 2,411
- --------------------------------------- ---------- -----------
Total assets $13,807 $16,685
======================================= ========== ===========
Deposits $4,683 $4,729
Assigned funds and other liabilities 8,088 10,705
Assigned capital 1,036 1,251
- --------------------------------------- ---------- -----------
Total funds $13,807 $16,685
======================================= ========== ===========
PERFORMANCE RATIOS
Return on assigned capital 14% (30)%
Noninterest income to operating
revenue 45 34
Efficiency 46 71
Efficiency, excluding strategic
repositioning 57 49
- ----------------------------------------- -------- -----------
OTHER INFORMATION
Total nonperforming assets $187 $220
Net charge-offs $137 $209
Average FTEs 2,123 2,424
INSTITUTIONAL LENDING REPOSITIONING
Loans held for sale
Credit exposure $564 $4,594
Outstandings $245 $2,294
Exit portfolio
Credit exposure $413 $2,262
Outstandings $192
======================================= ========== ===========
Corporate Banking provides credit, equipment leasing, treasury management and
capital markets products and services to mid-sized corporations, government
entities and selectively to large corporations primarily within PNC's geographic
region. Additionally, PNC, through the Corporate Banking line of business,
administers Market Street Funding Corporation ("Market Street"), a multi-seller
asset-backed commercial paper conduit. The strategic focus for Corporate Banking
is to adapt its institutional expertise to the middle market with an emphasis on
higher-margin noncredit products and services, especially treasury management
and capital markets, and to improve the risk/return characteristics of the
lending business. Corporate Banking intends to continue its efforts to manage
credit risk, liquidate loans held for sale and sustain relationships with
traditional customers emphasizing noncredit products.
During 2002, Corporate Banking made significant progress in the
repositioning of its institutional lending business. The exit and held for sale
portfolios at December 31, 2002 had total credit exposure of $977 million
including outstandings of $245 million, a reduction in outstandings of
approximately 90% from December 31, 2001. The Corporation is continuing to
pursue liquidation of the remaining institutional held for sale portfolio. Gains
and losses may result from the liquidation of loans held for sale to the extent
actual performance differs from estimates inherent in the recorded amounts or if
valuations change. A total of $155 million of net gains on loans held for sale
was recognized in 2002. Gains realized in 2002 resulted from a more active
market than was anticipated at the time the loans were transferred to held for
sale, the negotiation of individual loan sales rather than bulk transactions,
and sales occurring faster than expected. Additionally, declines in credit
exposure resulting from payments, refinancings and reductions in credit
facilities also contributed to the gains in 2002. These gains were partially
offset by additional valuation adjustments required on certain credit facilities
remaining in the portfolio. See 2001 Strategic Repositioning in the Consolidated
Balance Sheet Review section and Critical Accounting Policies And Judgments in
the Risk Factors section of this Financial Review for additional information.
Corporate Banking earned $150 million in 2002 compared with a net lo