PNC Bank 2000 Annual Report Download - page 81

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Compensation expense related to the portion of contribu-
tions matched with ESOP shares is determined based on the
number of ESOP shares allocated. Compensation expense
related to these plans was $30 million, $17 million and
$4 million for 2000, 1999 and 1998, respectively.
NO T E 2 0 ST O C K -B A S E D
CO M P E N S AT I O N PL A N S
The Corporation has a senior executive long-term incentive
award plan (“Incentive Plan”) that provides for the granting
of incentive stock options, nonqualified options, stock
appreciation rights, performance units and incentive shares.
In any given year, the number of shares of common stock
available for grant under the Incentive Plan may range from
1.5% to 3% of total issued shares of common stock deter-
mined at the end of the preceding calendar year.
ST O C K OP T I O N S
Options are granted at exercise prices not less than the mar-
ket value of common stock on the date of grant. Options
granted in 2000 and 1999 become exercisable in install-
ments after the grant date. Options granted prior to 1999
are mainly exercisable twelve months after the grant date.
Payment of the option price may be in cash or shares of
common stock at market value on the exercise date. A sum-
mary of stock option activity follows:
Per Option
Weighted-
Average
Shares in thousands Exercise Price Exercise Price Shares
January 1, 1998 . . . . . $11.38 - $43.75 $32.25 8,791
Granted . . . . . . . . . 43.66 - $66.00 55.17 3,449
Exercised . . . . . . . 11.38 - $43.75 31.26 (2,449)
Terminated . . . . . . 43.75 - $54.72 52.35 (225)
December 31, 1998 . . 11.38 - $66.00 40.30 9,566
Granted . . . . . . . . . 50.47 - $76.00 51.68 3,612
Exercised . . . . . . . 11.38 - $54.72 33.89 (1,856)
Terminated . . . . . . 21.75 - $59.31 51.68 (247)
December 31, 1999 . . 11.38 - $76.00 44.83 11,075
Granted . . . . . . . . . 42.19 - $66.22 44.20 4,171
Exercised . . . . . . . 11.38 - $59.31 37.77 (2,952)
Terminated . . . . . . 31.13 - $61.75 48.10 (464)
December 31, 2000 21.63 - 76.00 46.24 11,830
At December 31, 2000, the weighted-average remaining
contractual life of outstanding options was 7 years and
7 months and options for 5,834,898 shares of common stock
were exercisable at a weighted-average price of $45.96 per
share. The grant-date fair value of options granted in 2000
was $9.86 per option. Options for 82,000 shares of common
stock were granted in 1999 with an exercise price in excess
of the market value on the date of grant. There were no
options granted in excess of market value in 2000. Shares of
common stock available for the granting of options under
the Incentive Plan and the predecessor plans were
10,584,683 at December 31, 2000, 1999 and 1998.
IN C E N T I V E SH A R E AW A R D S
In 1998, incentive share awards potentially re p r e s e n t i n g
362,250 shares of common stock were granted to certain
senior executives pursuant to the Incentive Plan. Issuance of
restricted shares pursuant to these incentive awards is sub-
ject to the market price of PNC’s common stock equaling or
exceeding specified levels for defined periods. The re s t r i c t e d
period ends two years after the issue date. During the
restricted period, the recipient receives dividends and can
vote the shares. If the recipient leaves the Corporation before
the end of the restricted period, the shares will be forf e i t e d .
At December 31, 2000, the incentive share awards granted in
1998 had not met the specified levels re q u i red for issuance of
restricted stock. In 2000, incentive share awards potentially
re p resenting 606,000 shares of common stock were granted
to certain senior executives pursuant to the Incentive Plan.
Of this amount, the grant of 105,000 shares is subject to
s h a r eholder approval. One-half of any shares of re s t r i c t e d
stock issued pursuant to these awards will vest after 3 years
and one-half vest after year 4. Shares awarded, if any, under
this grant will be offset on a share - f o r- s h a re basis by any
s h a r es received by the executive from the 1998 grant. There
w e re 66,000 incentive shares forfeited in 2000, no forf e i t u r e s
in 1999 and 12,000 incentive shares forfeited in 1998. In
addition, 245,000 shares of restricted stock were granted to
senior executives with a 3-year vesting period of which the
grant of 60,000 shares is subject to shareholder appro v a l .
Compensation expense recognized for incentive share award s
was $8 million, $12 million and $15 million in 2000, 1999
and 1998, re s p e c t i v e l y.
EM P L O Y E E ST O C K PU R C H A S E PL A N
The Corporation’s employee stock purchase plan (“ESPP”)
has approximately 3.0 million shares available for issuance.
Persons who have been continuously employed for at least
one year are eligible to participate. Participants purchase
the Corporation’s common stock at 85% of the lesser of fair
market value on the first or last day of each offering period.
No charge to earnings is recorded with respect to the ESPP.
Shares issued pursuant to the ESPP were as follows:
Year ended December 31 Shares Price Per Share
2000 . . . . . . . . . . . . 504,988 $42.82 and $45.53
1999 . . . . . . . . . . . . 406,740 43.99 and 47.39
1998 . . . . . . . . . . . . 315,097 43.83 and 48.34