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MELLON FINANCIAL CORP
DEF 14A, 2000-03-08
NATIONAL COMMERCIAL BANKS

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¨     Preliminary Proxy Statement   x    Definitive Proxy Statement   ¨    Definitive Additional Materials   ¨    Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12

¨     Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

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(1) Title of each class of securities to which transaction applies:

(2) Aggregate number of securities to which transaction applies:

(3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):

(4) Proposed maximum aggregate value of transaction:

(5) Total fee paid:

¨     Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

(1) Amount Previously Paid:

(2) Form, Schedule or Registration Statement No.:

(3) Filing Party:

(4) Date Filed:

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Mellon [LOGO OF MELLON FINANCIAL CORP.]

Mellon Financial Corporation One Mellon Center Pittsburgh, PA 15258-0001   March 8, 2000

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1.	The election of directors;

2.	A proposal to amend the Corporation’s Long-Term Profit Incentive Plan (1996);

3.	A proposal to adopt the Mellon Financial Corporation Employee Stock Purchase Plan;

4.	The ratification of the appointment of KPMG LLP as independent public accountants of the Corporation for the year 2000; and

5.	Such other business as may properly come before the meeting.

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NOMINEES FOR DIRECTOR—TERM EXPIRES 2003

Burton C. Borgelt		Director Since 1991		Age 67
Retired (1996) Chairman and Chief Executive Officer, Dentsply International, Inc. (manufacturer of dental products). Mr. Borgelt is also a director of Dentsply International, Inc. and DeVlieg-Bullard, Inc. He serves on the Corporation’s Community Responsibility Committee and Trust and Investment Committee.

     

Carol R. Brown		Director Since 1992		Age 66
President, The Pittsburgh Cultural Trust (cultural and economic growth organization). Mrs. Brown serves on the Corporation’s Community Responsibility Committee (Vice Chairman) and Human Resources Committee.

Christopher M. Condron		Director Since 1998		Age 52
President and Chief Operating Officer of the Corporation (1999) and of Mellon Bank, N.A. (“Mellon Bank”). From 1998 to 1999, Mr. Condron served as President and Chief Operating Officer of Mellon Bank and as Vice Chairman of the Corporation. From 1994 to 1998, Mr. Condron was Vice Chairman of the Corporation and of Mellon Bank. He serves on the Corporation’s Executive Committee.

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Seward Prosser Mellon		Director Since 1972		Age 56
President and Chief Executive Officer, Richard K. Mellon and Sons (investments) and Richard King Mellon Foundation (philanthropy).

     

Mark A. Nordenberg		Director Since 1998		Age 51
Chancellor, University of Pittsburgh (major public research university). Mr. Nordenberg served as the Interim Chancellor of the University of Pittsburgh from 1994 to 1996. He serves on the Corporation’s Community Responsibility Committee.

 

DIRECTORS —TERM EXPIRES 2001

Jared L. Cohon		Director Since 1998		Age 52
President, Carnegie Mellon University (private co-educational research university). From 1992 to 1997, Dr. Cohon served as Dean of the School of Forestry and Environmental Studies at Yale University. Dr. Cohon is also a director of American Standard Companies Inc. He serves on the Corporation’s Audit Committee.

     

Ira J. Gumberg		Director Since 1989		Age 46
President, Chief Executive Officer and director, J.J. Gumberg Co. (real estate investment and development). Mr. Gumberg is also a director of Jo- Ann Stores, Inc. He serves on the Corporation’s Executive Committee, Audit Committee and Trust and Investment Committee (Chairman).

     

Edward J. McAniff		Director Since 1994		Age 65
Of Counsel to O ’Melveny & Myers (full service law firm), where Mr. McAniff was a partner from 1970 through January 31, 1999. Mr. McAniff is also Visiting Professor of Law, University of Oregon Law School and Adjunct Professor of Law, UCLA Law School (major public university law schools). He serves on the Corporation’s Community Responsibility Committee and Trust and Investment Committee.

     

Martin G. McGuinn		Director Since 1998		Age 57
Chairman and Chief Executive Officer of the Corporation (1999) and of Mellon Bank. From 1998 to 1999, Mr. McGuinn served as Chairman and Chief Executive Officer of Mellon Bank and as Vice Chairman of the Corporation. From 1990 to 1998, Mr. McGuinn was Vice Chairman of the Corporation and of Mellon Bank. He serves as Chairman of the Corporation’s Executive Committee.

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David S. Shapira		Director Since 1986		Age 58
Chairman, Chief Executive Officer and director, Giant Eagle, Inc. (retail grocery store chain). Mr. Shapira is also a director of Equitable Resources, Inc. He serves on the Corporation’s Executive Committee, Audit Committee (Chairman), Technology Committee and Trust and Investment Committee.

     

Joab L. Thomas		Director Since 1993		Age 67
President Emeritus (1995), The Pennsylvania State University (major public research university). Dr. Thomas serves on the Corporation’s Human Resources Committee and Technology Committee.

 

DIRECTORS —TERM EXPIRES 2002

J. W. Connolly		Director Since 1989		Age 66
Retired Senior Vice President, H. J. Heinz Company (food manufacturer). Mr. Connolly serves on the Corporation’s Executive Committee, Audit Committee, Human Resources Committee and Nominating Committee (Chairman).

     

Charles A. Corry		Director Since 1991		Age 68
Retired (1995) Chairman and Chief Executive Officer, USX Corporation (energy and steel). Mr. Corry is also a director of USX Corporation and GenCorp. He serves on the Corporation’s Executive Committee, Audit Committee, Human Resources Committee (Chairman) and Nominating Committee (Vice Chairman).

     

Pemberton Hutchinson		Director Since 1989*		Age 68
Retired Chief Executive Officer, Westmoreland Coal Company (coal mining company). Mr. Hutchinson is also a director of Westmoreland Coal Company and Teleflex Incorporated. He serves on the Corporation’s Community Responsibility Committee, Nominating Committee and Trust and Investment Committee (Vice Chairman).

 

*	Served as a director of The Girard Company from 1977 until its merger with the Corporation in 1983.

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Rotan E. Lee, Esquire		Director Since 1993		Age 50
Chief Executive Officer of Total Health Care Plan, Inc. (a Medicaid managed health care organization). From 1998 to 1999, Mr. Lee was Vice President and General Counsel, Scheur Management Group (operations management and consulting to the health care industry). In 1999, Mr. Lee was also Of Counsel to Katz, Ettin, Levine, Kurzweil, Weber & Scialabbu, P.C. (full service law firm). From 1998 to 1999, Mr. Lee was Vice President, Hugh Wood, Inc. (insurance brokerage firm). From 1997 to 1998, Mr. Lee served as the Chairman of Talleyrand Atlantic, LLC (strategic planning company- information technology). From 1996 to 1997, Mr. Lee was a partner with Sherr, Joffe & Zuckerman, P.C. (full service law firm). From 1994 to 1996, Mr. Lee served as Chief Operating Officer of RMS Technologies, Inc. (information technology). He serves on the Corporation’s Community Responsibility Committee and Trust and Investment Committee.

     

Robert Mehrabian		Director Since 1994		Age 58
President, Chief Executive Officer and Director, Teledyne Technologies Incorporated (advanced industrial technologies). From 1997 to 1999, Dr. Mehrabian served as Executive Vice President and Segment Executive, Aerospace, Electronics and Industrial, of Allegheny Teledyne Incorporated (specialty metals and diversified businesses). Through mid-1997, Dr. Mehrabian served as President of Carnegie Mellon University (private co- educational research university). Dr. Mehrabian is also a director of Allegheny Teledyne Incorporated, BEI Technologies, Inc. and PPG Industries, Inc. He serves on the Corporation’s Executive Committee, Audit Committee (Vice Chairman) and Technology Committee (Chairman).

     

Wesley W. von Schack		Director Since 1989		Age 55
Chairman, President and Chief Executive Officer, Energy East Corporation (energy services company). Prior to 1996, Mr. von Schack served as Chairman, President and Chief Executive Officer of DQE (energy services company). Mr. von Schack is also a director of Energy East Corporation, New York State Electric & Gas Corporation and RTI International Metals, Inc. He serves on the Corporation’s Executive Committee, Community Responsibility Committee (Chairman), Human Resources Committee (Vice Chairman), Nominating Committee and Technology Committee.

 

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Andrew W. Mathieson                                                       Advisory Board Since 1999   Retired Executive Vice President, Richard K. Mellon and Sons (investments). Mr. Mathieson served on the Corporation’s Board from 1981 through 1999.

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Name		Common Stock  Owned Beneficially (1)(2)
Dwight L. Allison, Jr		35,760	(3)
Burton C. Borgelt		83,632
Carol R. Brown		48,464
Frank V. Cahouet		3,313,958	(4)
John T. Chesko		178,503
Jared L. Cohon		3,156
Christopher M. Condron		272,987	(5)
J.W. Connolly		98,864
Charles A. Corry		80,980
Steven G. Elliott		699,037
Ira J. Gumberg		212,536
Pemberton Hutchinson		16,900
George W. Johnstone		16,716
Rotan E. Lee		31,812
Jeffery L. Leininger		210,244
Edward J. McAniff		39,934
Martin G. McGuinn		775,109	(6)
Robert Mehrabian		44,636
Seward Prosser Mellon		482,056
Mark A. Nordenberg		2,756
Keith P. Russell		134,761
David S. Shapira		97,580
Joab L. Thomas		66,540
Wesley W. von Schack		123,580	(7)
Directors, Nominees and Executive Officers as a group (28 persons)		7,593,675

(1)

On February 11, 2000, none of the individuals named in the above table beneficially owned more than 1% of the Corporation’s outstanding shares of Common Stock. On that date, all the directors, nominees and executive officers as a group owned beneficially approximately 1.5% of the Corporation’s outstanding Common Stock.

(2)

The amounts shown include the following amounts of Common Stock which the indicated individuals and group have the right to acquire within 60 days of February 11, 2000, through the exercise of stock options granted pursuant to the Corporation ’s stock option plans: Mr. Allison, 18,760; Mr. Borgelt, 71,032; Ms. Brown, 20,012; Mr. Cahouet, 1,105,648; Mr. Chesko, 91,333; Dr. Cohon, 2,556; Mr. Condron, 8,081; Mr. Connolly, 84,980; Mr. Corry, 60,980; Mr. Elliott, 123,800; Mr. Gumberg, 60,980; Mr. Hutchinson, 3,000; Mr. Johnstone, 14,620; Mr. Lee, 31,212; Mr. Leininger 69,600; Mr. McAniff, 33,440; Mr. McGuinn, 143,141; Dr. Mehrabian, 38,636; Mr. Mellon, 72,980; Mr. Nordenberg, 2,556; Mr. Russell 12,400; Mr. Shapira, 84,980; Dr. Thomas, 28,112; Mr. von Schack, 72,980; and all directors, nominees and executive officers as a group, 2,325,398 shares.

(3)	Of these shares, 17,000 are held in a trust for Mr. Allison’s benefit. Mr. Allison’s son is the sole trustee for the trust, and Mr. Allison has no voting or investment control over such shares.

(4)	Of these shares, 1,100,000 are held in trust for Mr. Cahouet’s wife. Mellon Bank is the sole trustee for Mrs. Cahouet’s trust, and Mr. Cahouet has no voting or investment control over such shares. Mr. Cahouet disclaims beneficial ownership of all such shares.

(5)	Of these shares, 25,000 are held by Mr. Condron’s wife. Mr. Condron disclaims beneficial ownership of such shares.

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(6)	Of these shares, 28,000 are held by Mr. McGuinn’s wife. Mr. McGuinn disclaims beneficial ownership of such shares.

(7)	Of these shares, 1,156 are held by Mr. von Schack’s wife. Mr. von Schack disclaims beneficial ownership of such shares.

		December 31,
		1994		1995		1996		1997		1998		1999
Mellon Financial Corporation		100		184		253		443		514		519
S&P 500 Index		100		138		168		226		290		351
KBW 50 Index		100		161		228		334		361		345

*	Assumes that the value of the investment in the Corporation’s Common Stock and each index was $100 on December 31, 1994 and that all dividends were reinvested.

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											Long-Term  Compensation
		Annual  Compensation									Awards					Payouts
Name and Principal Position		Year		Salary($)		Bonus(1)($)			Other Annual Compensation ($)		Restricted Stock Awards ($)(1)(2)(3)(4)			Securities Underlying Options(5)		LTIP Payouts ($)(6)		All Other Compensation ($)(7)
MARTIN G. MC GUINN		1999		$729,167		$1,200,000			$9,600		$1,440,141			112,141		$1,578,929		$248,138
Chairman and Chief		1998		679,167		1,050,000			4,500		950,907			420,432		528,632		50,815
Executive Officer		1997		404,167		487,500			1,800		1,020,594			56,514		482,219		23,641
CHRISTOPHER M. CONDRON		1999		664,584		1,080,000			6,223		1,300,647			131,230		1,279,594		246,370
President and Chief		1998		637,500		975,000			3,500		919,238			375,984		619,510		24,542
Operating Officer		1997		500,000		487,500			5,400		1,020,594			52,000		486,203		17,104
STEVEN G. ELLIOTT		1999		508,334		—	(8)		3,311		2,160,770	(8)		61,800		1,184,185		168,189
Senior Vice Chairman		1998		445,833		675,000			3,400		537,031			341,850		504,157		36,275
and Chief Financial Officer		1997		400,000		450,000			2,100		1,004,938			1,624		482,219		23,269
KEITH P. RUSSELL		1999		400,000		412,500			-0-		173,379			-0-		434,313		11,242
Vice Chairman		1998		400,000		450,000			875		193,532			110,692		504,155		12,630
		1997		400,000		412,500			600		989,282			-0-		482,219		6,695
JOHN T. CHESKO		1999		322,917		375,000			3,641		157,472			-0-		262,071		14,694
Vice Chairman and		1998		300,000		309,375			3,042		133,713			74,400		110,667		13,102
Chief Risk Officer		1997		218,750		225,000			637		911,001			64,000		58,928		4,046
JEFFERY L. LEININGER		1999		322,917		375,000			3,197		157,472			-0-		401,177		38,548
Vice Chairman		1998		300,000		337,500			3,155		147,788			74,400		437,194		21,709
		1997		231,250		225,000			3,208		911,001			-0-		105,703		17,276

(1)

Bonus awards are generally payable 75% in cash and 25% in restricted shares of the Common Stock or deferred share awards equivalent to restricted shares. In calculating the number of restricted shares or, beginning in 1999, deferred share awards to be awarded as the non-cash portion of the bonus awards, the value of the non-cash portion of the award was divided by the per share fair market value of the Common Stock on the grant date with the result multiplied by 125% to take into account the financial impact of the restrictions placed on the stock or award. The restrictions generally prevent transfer or sale of the stock or award for a three year period and subject the shares or award to forfeiture in the event the executive terminates his employment with the Corporation during that three year period, other than through retirement. Deferred share awards represent the Corporation’s promise to pay the number of shares of Common Stock covered by the award to the executive at a later date elected by the executive. The executive may elect to take a greater portion of his bonus in restricted stock or deferred share awards, with the number of shares or awards covered by such awards determined as described above. The aggregate market value of such restricted stock or deferred share awards on the award date is disclosed as Long-Term Compensation under “Restricted Stock Awards ”.

(2)

In 1999 Messrs. McGuinn, Condron and Elliott received grants of performance accelerated restricted stock in the following respective share amounts: 26,500, 24,000, 19,500. The shares are restricted against transfer and will only be earned prior to the expiration of seven years from the date of grant if performance goals established by the Human Resources Committee of the Board of Directors are met. The performance goals require that for years after 1998 both earnings per share and return on common equity targets must be met. If the performance goals for a particular year are met, the restrictions against transfer will then lapse as to one-third of the amount granted to each executive. The executive has full voting rights with respect to the shares, and dividends are payable at the same rate and at the same time as paid to other holders of the Corporation’s Common Stock. In January of 2000, the Committee certified that the performance goals for 1999 were achieved and the restrictions against transfer lapsed for one-third of each executive’s award.

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(3)

Except for the 34,000 shares of transitional restricted stock granted to each of Mr. McGuinn, Mr. Condron, Mr. Elliott, Mr. Russell, Mr. Chesko and Mr. Leininger in 1997 and deferred share awards granted in 1999, dividends are paid on the awards disclosed in the table at the same rate and at the same time as dividends are paid on all other outstanding shares of the Corporation ’s Common Stock. Dividends on the transitional restricted stock, which are paid at the same rate as the dividend on all other outstanding shares of the Common Stock, are withheld by the Corporation during the period the restrictions are in effect and will be released and paid to the executive upon derestriction of the shares. Dividend equivalents are also paid on the deferred share awards at the same rate and at the same time as the dividends on the Common Stock, but are withheld by the Corporation until the payout date elected by the executive.

(4)

The number and value of the aggregate restricted stock of each of the named officers at the end of 1999 were as follows: Mr. McGuinn—85,700/$2,919,156; Mr. Condron —84,700/$2,885,094; Mr. Elliott—73,700/$2,510,406; Mr. Russell —51,200/$1,744,000; Mr. Chesko—43,000/$1,464,688; Mr. Leininger —44,800/$1,526,000. The restricted stock was valued using the Common Stock’s December 31, 1999 closing price of $34.0625 per share in the New York Stock Exchange Composite Transactions.

(5)	Numbers have been adjusted to reflect the Common Stock Split.

(6)

Long-Term Incentive Plan Payouts, in the form of deferred cash incentive awards, were also paid in January of 2000 in connection with the exercise of accelerated stock options, including payments to Messrs. McGuinn, Condron, Elliott, Russell, Chesko and Leininger of $1,365,188, $1,279,595, $950,636, $485,364, $519,769 and $638,675, respectively. To the extent applicable, these January, 2000 payments will be recorded as 2000 LTIP Payouts in the Summary Compensation Table included in next year’s Proxy Statement.

(7)

Includes for 1999 for Messrs. McGuinn, Condron, Elliott, Russell, Chesko and Leininger, respectively, the following compensation amounts: (i) the portion of interest accrued (but not currently paid or payable) on deferred compensation above 120% of the applicable federal long-term rate at the maximum rate payable under the Corporation’s Elective Deferred Compensation Plan for Senior Officers, $59,438, $42,419, $80,707, -0-, $2,678, $31,535; (ii) matching contributions under the Corporation’s Retirement Savings Plan, a 401(k) plan, $3,000, $3,000, $3,000, $3,000, $3,000, $3,000; (iii) the present value of the economic benefit to the executive from corporate premiums paid to purchase split dollar life insurance contracts under the Mellon Bank Senior Executive and Optional Life Insurance Plans, $183,000, $199,051, $83,182, $6,992, $8,266, $3,113; and (iv) cash paid to the executive equal to his imputed income under the Mellon Bank Senior Executive Life Insurance Plan, $2,700, $1,900, $1,300, $1,250, $750, $900.

(8)

Mr. Elliott was awarded a bonus of $1,175,000 which he elected to receive in the form of deferred share awards. These awards are reflected in the “Restricted Stock Awards” column. If he had not made this election, he would have received (i) $881,250 as the cash portion of his bonus and (ii) a restricted stock grant as the non-cash portion of his bonus calculated as set forth in footnote (1) above.

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		Individual  Grants
Name		Number of Securities Underlying Options Granted			Percent of Total Options Granted to Employees in 1999		Exercise Price (per share) ($)		Expiration Date		Grant Date Present Value ($)(5)
MARTIN G. MC GUINN		8,400	(1)		.2%		$33.25		1/20/09		$80,652
		58,000	(2)(4)		1.4%		35.4375		5/17/09		549,586
		14,369	(3)(4)		.3%		34.125		10/17/06		132,876
		31,172	(3)(4)		.7%		37.25		10/22/08		347,543
CHRISTOPHER M. CONDRON		6,300	(1)		.1%		33.25		1/20/09		60,489
		17,312	(3)(4)		.4%		33.1875		11/20/05		140,958
		52,000	(2)(4)		1.2%		35.4375		5/17/09		492,732
		26,249	(3)(4)		.6%		37.75		10/22/08		294,693
		6,635	(3)		.2%		37.25		2/23/03		47,700
		7,485	(3)(4)		.2%		37.25		10/17/06		75,555
		15,249	(3)		.4%		37.25		10/20/04		133,406
STEVEN G. ELLIOTT		18,400	(1)		.4%		33.25		1/20/09		176,666
		43,400	(2)(4)		1.0%		35.4375		5/17/09		411,242

(1)	Numbers have been adjusted pursuant to the terms of the Option Plan to reflect the Common Stock Split. Option becomes exercisable annually in thirds beginning on 1/21/01. Transferable to immediate family members and entities for their benefit.

(2)

Option may not be exercised before 5/18/00 and becomes exercisable as indicated when the closing price of the Common Stock on the New York Stock Exchange has achieved or exceeded the following prices for 20 consecutive trading days: 25% at $44.2969 per share; 50% at $53.1563; 75% at $62.0157; and 100% at $70.875. Option becomes exercisable in full on 5/18/06 if the stock prices have not been achieved by that date. Transferable to immediate family members and entities for their benefit.

(3)

These reload option grants become exercisable three years after their grant date; provided, however, that if the option holder sells any of the shares acquired on exercise of the underlying option before such date, the entire reload option will expire. Transferable to immediate family members and entities for their benefit. The reload option grants shown above would become exercisable as follows: Mr. McGuinn—10/25/2002, 10/28/2002; Mr. Condron —1/22/2002, 10/28/2002, 10/28/2002, 10/28/2002, 10/28/2002.

(4)

Reload option rights are attached, and reload options will be automatically granted on exercise when the exercise price is paid by delivering or withholding shares of Common Stock; provided the closing price of the Common Stock on the New York Stock Exchange on the date of exercise exceeds the exercise price by at least 25 percent. Reload options have an exercise price equal to the closing price of the Common Stock on their grant date and the same expiration date as the underlying option. Reload option rights are not transferable.

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(5)

Based on the Black-Scholes model adapted for use in valuing executive stock options. There is no assurance the value realized by an executive will be at or near the value estimated by the Black-Scholes model. The actual value, if any, an executive may realize will depend on the excess of the stock price over the exercise price on the date the option is exercised. In determining the Black-Scholes value, the following underlying assumptions were used: (i) stock price volatility represents the standard deviation of the Common Stock over the three-year period prior to grant of the option (i.e., from 26.72% to 26.79%); (ii) dividend yield represents the cumulative dividends per share for the 12-month period prior to grant of the option, divided by the average monthly price of the Common Stock over the same period (i.e., from 2.25% to 2.78%); (iii) the risk-free rate of return represents the average weekly yield on 10-year Treasury Notes over the 52-week period prior to grant of the option as derived from the Value Line Investment Report (i.e., from 5.13% to 5.40%); (iv) option term represents the period from the date of grant of each option to the expiration of the term of the option; (v) vesting restrictions are reflected by reducing the value of the option determined by the Black-Scholes model by 4% for each full year of vesting restrictions (8% to 22% for 1999 grants); (vi) reload options are valued assuming that the option holder does not sell any of the shares acquired on exercise of the underlying option before the vesting date of the reload option.

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		Shares Acquired on Exercise		Value Realized ($)(1)		Number of  Securities Underlying Unexercised Options at Year-End				Value of  Unexercised In-the-Money Options at Year-End ($)(2)
Name						Exercisable		Unexercisable		Exercisable		Unexercisable
MARTIN G. MC GUINN		138,501		$1,790,502		138,422		550,384		$3,367,769		$2,662,858
CHRISTOPHER M. CONDRON		159,606		2,359,941		4,177		533,721		62,054		2,706,648
STEVEN G. ELLIOTT		65,843		1,022,104		117,125		391,525		2,109,747		1,614,471
KEITH P. RUSSELL		80,334		1,658,548		35,066		132,292		475,388		919,250
JOHN T. CHESKO		16,332		272,803		91,333		107,584		1,673,187		912,709
JEFFERY L. LEININGER		105,670		2,210,247		69,600		113,800		1,163,600		1,326,800

(1)	The “Value Realized ” is equal to the difference between the option exercise price and the fair market value of the Common Stock on the New York Stock Exchange on the date of exercise.

(2)	The “Value of Unexercised In-the-Money Options at Year-End” is equal to the difference between the option exercise price and the Common Stock’s December 31, 1999 closing price of $34.0625 per share on the New York Stock Exchange.

Average Annual Base Salary		Estimated Annual  Pension for Representative Years of Credited  Service
		10		15		20		25		30		35
$   200,000		$  28,000		$  42,500		$  56,500		$  70,500		$  84,500		$  99,000
300,000		43,000		65,000		86,500		108,000		129,500		151,500
400,000		58,000		87,500		116,500		145,500		174,500		204,000
500,000		73,000		110,000		146,500		183,000		219,500		256,500
600,000		88,000		132,500		176,500		220,500		264,500		309,000
700,000		103,000		155,000		206,500		258,000		309,500		361,500
800,000		118,000		177,500		236,500		295,500		354,500		414,000
900,000		133,000		200,000		266,500		333,000		399,500		466,500
1,000,000		148,000		222,500		296,500		370,500		444,500		519,000

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Charles A. Corry, Chairman		Joab L. Thomas
Carol R. Brown		Wesley W. von Schack, Vice Chairman
J. W. Connolly

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1.	An increase of 14,000,000 in the total number of shares of Common Stock reserved for issuance pursuant to awards, including 6,500,000 additional shares for issuance as restricted stock;

2.	Deletion of the requirement that awards be granted under the Option Plan only to full-time employees;

3.	Inclusion of new Section 3.5 prohibiting the repricing of option awards; and

4.	Technical amendments to the language describing retirement and disability to reflect current corporate practices.

		Options With Deferred Cash Incentive Awards				Options With Reload Option Rights*
Name and Position		Number of Shares		Maximum Dollar Value		Number of Shares
MARTIN G. MC GUINN		53,668		$1,341,518		447,460
Chairman and Chief Executive Officer
CHRISTOPHER M. CONDRON		38,500		$1,012,718		399,676
President and Chief Operating Officer
STEVEN G. ELLIOTT		40,333		$     950,636		281,289
Senior Vice Chairman and Chief Financial Officer
KEITH P. RUSSELL		47,530		$1,138,435		88,602
Vice Chairman
JOHN T. CHESKO		50,220		$1,271,913		121,600
Vice Chairman and Chief Risk Officer
JEFFERY L. LEININGER		53,800		$1,183,887		94,400
Vice Chairman
EXECUTIVE OFFICER GROUP (10)		354,967		$8,917,333		1,612,684
NON -EXECUTIVE OFFICER GROUP		312,652		$8,501,951		9,071,623

*

Reload options will be automatically granted on exercise when the exercise price is paid by delivering or withholding shares of Common Stock; provided the closing price of the Common Stock in the New York Stock Exchange Composite Transactions on the date of exercise exceeds the exercise price by at least 25 percent. Reload options have an exercise price equal to the closing price of the Common Stock on their grant date and the same expiration date as the underlying option.

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(a)     The occurrence with respect to the Corporation of a “control transaction”, as such term is defined in Section 2542 of the Pennsylvania Business Corporation Law of 1988, as of August 15, 1989; or

(b)     Approval by the stockholders of the Corporation of (i) any consolidation or merger of the Corporation where either (x) the holders of voting stock of the Corporation immediately before the merger or consolidation will not own more than 50% of the voting shares of the continuing or surviving corporation immediately after such merger or consolidation or (y) the Incumbent Directors immediately before the merger or consolidation will not hold more than 50% (rounded to the next whole person) of the seats on the board of directors of the continuing or surviving corporation, or (ii) any sale, lease or exchange or other transfer (in one transaction or a series of related transactions) of all or substantially all the assets of the Corporation; or

(c)     A change of 25% (rounded to the next whole person) in the membership of the Board of Directors within a 12-month period, unless the election or nomination for election by stockholders of each new director within such period (i) was approved by the vote of 85% (rounded to the next whole person) of the directors then still in office who were in office at the beginning of the 12-month period and (ii) was not as a result of an actual or threatened election with respect to directors or any other actual or threatened solicitation of proxies by or on behalf of any person other than the Board of Directors. As used in this Section 2.4, the term “Incumbent Director” means as of any time a director of the Corporation (x) who has been a member of the Board of Directors continuously for at least 12 months or (y) whose election or nomination as a director within such period met the requirements of clauses (i) and (ii) of the preceding sentence.

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(a)     The Plan shall be administered by the Committee, each member of which shall at the time of any action under the Plan be (i) a “non-employee director” as then defined under Rule 16b-3 and (ii) an “outside director” as then defined under Section 162(m) of the Code.

(b)     The Committee shall have the authority in its sole discretion from time to time: (i) to designate the employees eligible to participate in the Plan; (ii) to grant Awards under the Plan; (iii) to prescribe such limitations, restrictions and conditions upon any such Award as the Committee shall deem appropriate; and (iv) to interpret the Plan, to adopt, amend and rescind rules and regulations relating to the Plan, and to make all other determinations and take all other action necessary or advisable for the implementation and administration of the Plan. A majority of the Committee shall constitute a quorum, and the action of a majority of members of the Committee present at any meeting at which a quorum is present, or acts unanimously adopted in writing without the holding of a meeting, shall be the acts of the Committee.

(c)     All actions of the Committee shall be final, conclusive and binding upon the Participant. No member of the Committee shall be liable for any action taken or decision made in good faith relating to the Plan or any Award thereunder.

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(a)     The aggregate number of shares of Common Stock reserved for issue under the Plan on and after April 18, 2000 [its effective date] shall not exceed 50,500,000* [58,400,000] shares, subject to adjustments pursuant to Section 9.7. No more than 8,000,000** [4,000,000] shares of Common Stock may be issued as Restricted Stock on and after April 18, 2000. Shares of Common Stock which may satisfy Awards granted under the Plan may be either authorized and unissued shares of Common Stock or authorized and issued shares of Common Stock held in the Corporation ’s treasury or issued and outstanding shares of Common Stock held by any employee stock benefit trust established by the Corporation.

(b)     For purposes of paragraph (a) of this Section 3.4, shares of Common Stock that are actually issued upon exercise of an Option shall be counted against the total number of shares reserved for issuance, except that when Options are exercised by the delivery of shares of Common Stock the charge against the shares reserved for issuance shall be limited to the net new shares of Common Stock issued. In addition to shares of Common Stock actually issued pursuant to the exercise of Options, there shall be deemed to have been issued under the Plan a number of shares of Common Stock equal to (i) the number of shares issued pursuant to SARs which shall have been exercised pursuant to the Plan, (ii) the number of Performance Units which shall have been paid in shares of Common Stock pursuant to the Plan and (iii) the number of shares of Restricted Stock which shall have been granted pursuant to the Plan. For purposes of paragraph (a) of this Section 3.4, the payment of a Deferred Cash Incentive Award shall not be deemed to result in the issuance of any shares of Common Stock in addition to those issued pursuant to the exercise of the related Option.

(c)     For purposes of paragraph (a) of this Section 3.4, any shares of Common Stock subject to an Option which for any reason either terminates unexercised, or expires except by reason of the exercise of a related SAR, and any shares of Restricted Stock granted under this Plan or any shares of Common Stock covered by a Deferred Share Award which are surrendered or forfeited to the Corporation (including shares of Restricted Stock or Deferred Share Awards outstanding as of April 18, 2000), shall again be available for issuance under the Plan.

(d)     The maximum number of shares of Common Stock available for grants of Options or SARs to any one Participant under the Plan during a calendar year shall not exceed 4,000,000 shares. The limitation in the preceding sentence shall be interpreted and applied in a manner consistent with Section 162(m) of the Code. To the extent consistent with Section 162(m) of the Code, a Reload Option (A) shall be deemed to have been granted at the same time as the original underlying Option grant and (B) shall not be deemed to increase the number of shares covered by the original underlying Option.

* The definitive number will be the sum of (i) 14,000,000 and (ii) the number of shares available for awards or subject to outstanding awards (approximately 36,500,000 as of February 11, 2000) as of the close of business on April 18, 2000.

**	The definitive number will be the sum of (i) 6,500,000 and (ii) the number of shares available for restricted stock awards (approximately 1,500,000 as of February 11, 2000) as of the close of business on April 18, 2000.

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(a)     If termination of employment of a Participant occurs on or [is due to retirement] after age 55 and the Participant is credited with at least five years of employment with [with the written consent of] the Corporation or an Affiliate, the Participant shall have the right to exercise his or her Options within the period of two years after such termination [retirement], to the extent such Options were exercisable at the time of such termination [retirement]; provided, however, that such post-termination[-retirement] exercise period may be extended by action of the Committee for up to the full term of such Options.

(b)     If a Participant shall die while employed by the Corporation or an Affiliate or within a period following termination of employment during which the Option remains exercisable under paragraphs (a), (c) or (d) of this Section 4.6, his or her Options may be exercised to the extent exercisable by the Participant at the time of his or her death within a period of two years from the date of death by the executor or administrator of the Participant’s estate or by the person or persons to whom the Participant shall have transferred such right by will or by the laws of descent and distribution.

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(c)    If termination of employment of a Participant is by reason of the [total and permanent] disability of the Participant covered by a long-term disability plan of the Corporation or an Affiliate then in effect, the Participant shall have the right to exercise his or her Options within the period of two years after the date of termination of employment, to the extent such Options were exercisable at the time of termination of employment.

(d)     In the event the employment of a Participant is terminated by the Corporation or an Affiliate without cause within two years after the occurrence of a Change in Control Event, the Participant shall have the right to exercise his or her Options within one year after the date such termination occurred, to the extent such Options were exercisable at the time of such termination of employment. For purposes of this paragraph, “without cause” shall mean any termination of employment where it cannot be shown that the employee has (i) willfully failed to perform his or her employment duties for the Corporation or an Affiliate, (ii) willfully engaged in conduct that is materially injurious to the Corporation or an Affiliate, monetarily or otherwise, or (iii) committed acts that constitute a felony under applicable federal or state law or constitute common law fraud. For purposes of this paragraph, no act or failure to act on the Participant’s part shall be considered “willful” unless done, or omitted to be done, by him or her not in good faith and without reasonable belief that his or her action or omission was in the best interest of the Corporation or Affiliate.

(e)     In the event all employment of a Participant with the Corporation or an Affiliate is terminated for any reason other than as stated in the preceding paragraphs (a) - (d), his or her Options shall terminate upon such termination of employment.

(f)     Notwithstanding the foregoing, in no event shall an Option granted hereunder be exercisable after the expiration of its term.

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(a)     If termination of employment of a Participant occurs on or [is due to retirement] after age 55 and the Participant is credited with at least five years of employment with [with the written consent of] the Corporation or an Affiliate, the Participant shall have the right to exercise his or her stand-alone SARs within the period of two years after such retirement, to the extent such SARs were exercisable at the time of retirement; provided, however, that such post-retirement exercise period may be extended by action of the Committee for up to the full term of such SARs.

(b)     If a Participant shall die while employed by the Corporation or an Affiliate thereof or within a period following termination of employment during which the SARs remain exercisable under paragraphs (a), (c) or (d) of this Section 5.5, his or her stand-alone SARs may be exercised to the extent exercisable by the Participant at the time of his or her death within a period of two years from the date of death by the executor or administrator of the Participant’s estate or by the person or persons to whom the Participant shall have transferred such right by will or by the laws of descent and distribution.

(c)     If termination of employment of a Participant is by reason of the [total and permanent] disability of the Participant covered by a long-term disability plan of the Corporation or an Affiliate then in effect, the Participant shall have the right to exercise his or her stand-alone SARs within the period of two years after the date of termination of employment, to the extent such SARs were exercisable at the time of termination of employment.

(d)     In the event all employment of a Participant with the Corporation or an Affiliate is terminated without cause within two years after the occurrence of a Change in Control Event, the Participant shall have the right to exercise his or her stand-alone SARs within one year after the date such termination occurred, to the extent such stand-alone SARs were exercisable at the time of such termination of employment. For purposes of this paragraph, “without cause” shall have the meaning provided in Section 4.6(d).

(e)     In the event all employment of a Participant with the Corporation or an Affiliate is terminated for any reason other than as stated in the preceding paragraphs (a) - (d), his or her stand-alone SARs shall terminate upon such termination of employment.

(f)     Notwithstanding the foregoing, in no event shall a stand-alone SAR granted hereunder be exercisable after the expiration of its term.

(a)     Except in the event of (i) death, (ii) [total and permanent] disability of the Participant covered by a long-term disability plan of the Corporation or an Affiliate then in effect or (iii) the occurrence of a Change in Control Event, any Deferred Cash Incentive Award shall only be earned and become payable if the Corporation achieves Performance Goals which are established for a calendar year or longer period by the Committee. After the completion of a performance period, performance during such period shall be measured against the Performance Goals set by the Committee. If the Performance Goals are met or exceeded, the Committee shall certify that fact in writing in the Committee minutes or elsewhere.

(b)     The amount payable to a Participant upon achieving the Performance Goals set by the Committee for the Deferred Cash Incentive Award shall be equal to the option price of the related Option, which shall be the Fair Market Value of the shares of Common Stock subject to the Option on the date the Option is granted. No individual may in any calendar year receive payment of Deferred Cash Incentive Awards with respect to Options for more than 3,000,000 shares of Common Stock.

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(a)     Unless expressly provided to the contrary in the applicable Restricted Stock Agreement, all restrictions placed upon Restricted Stock shall lapse immediately upon (i) termination of the Participant’s employment with the Corporation or an Affiliate if, and only if, such termination is by reason of the Participant’s death, [total and permanent] the disability of the Participant covered by a long-term disability plan of the Corporation or an Affiliate then in effect or (except where Performance Goals have been set for the Award) if such termination occurs on or [retirement] after age 55 and the Participant is credited with at least five years of employment with the [with the written consent of the] Corporation or an Affiliate or (ii) the occurrence of a Change in Control Event. In addition, the Committee may in its discretion (except where Performance Goals have been set for the Award) allow restrictions on Restricted Stock to lapse prior to the date specified in a Restricted Stock Agreement.

(b)     Except as otherwise provided in the Restricted Stock Agreement, upon the effective date of a termination for any reason not specified in paragraph (a) of this Section 8.5, all shares then subject to restrictions immediately shall be forfeited to the Corporation without consideration or further action being required of the Corporation. For purposes of this paragraph (b), the effective date of a Participant ’s termination shall be the date upon which such Participant ceases to perform services as an employee of the Corporation or any of its Affiliates, without regard to accrued vacation, severance or other benefits or the characterization thereof on the payroll records of the Corporation or Affiliate.

(a)     A Deferred Share Award shall entitle the Participant to receive from the Corporation a number of shares of Common Stock on a deferred payment date specified by the Participant. Participants shall be entitled to elect a Deferred Share Award as permitted by the Committee (a “Deferred Share Award Election ”).

(b)     Except as otherwise provided by the Committee, a Deferred Share Award Election (i) may be offered only with respect to a potential Restricted Stock Award or an outstanding Restricted Stock Award with at least one year to derestriction, (ii) shall have derestriction conditions identical as nearly as practicable to those of the Restricted Stock Award, (iii) shall specify a payment commencement date and form, which may occur no earlier than January 1 of the year following termination of employment on or after age 55 with five credited years of employment with the Corporation or an Affiliate and no later than January 1 of the year following age 70, in one lump sum payment or in equal annual payments over 5 or 10 years; provided, however, that payment following derestriction of the Award upon a termination of employment prior to age 55 or on or after age 55 with less than five years of credited employment with the Corporation or an Affiliate shall be made in a lump sum payment no later than March 1 of the year following such termination of employment.

(c)     Except as otherwise provided by the Committee, a Deferred Share Award shall entitle the Participant to receive dividend equivalents payable no earlier than the date payment is elected for the Deferred Share Award. Dividend equivalents shall be calculated on the number of shares covered by the Deferred Share Award as soon as practicable after the date dividends are payable on the Common Stock.

(d)     A Deferred Share Award shall be evidenced by a written Deferred Share Award Agreement executed by the Corporation and the Participant in such form as the Committee shall prescribe from time to time in accordance with the Plan.

(e)     Deferred Share Awards shall be subject to the same aggregate and individual limitations set under the Plan for Restricted Stock Awards and shall be subject to adjustment as provided in Section 9.7.

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(a)     An eligible Employee may authorize payroll deductions at the rate of any whole percentage of the Employee’s Eligible Compensation, not to exceed 15% or such greater percentage as specified by the Committee. The Committee may provide for a separate election (of a different percentage) for a specified item or items of Eligible Compensation, including specified bonus payments, if any. All payroll deductions may be used by the Company for any corporate purpose, and the Company shall not be obligated to segregate such payroll deductions unless required under local law. No interest shall be paid or credited to the Participant with respect to such payroll deductions except where required by local law as determined by the Committee. A separate bookkeeping account for each Participant shall be maintained by the Company under the Plan, and the amount of each Participant’s payroll deductions shall be credited to such account. A Participant may not make any additional payments into such account. Payroll deductions made with respect to employees paid in currencies other than U.S. dollars shall be converted to U.S. dollars as of each Purchase Date using the then applicable exchange rate, as determined by the Committee or its delegate; provided, however, that the Committee may determine, with respect to any Purchase Period, that payroll deductions shall be converted to U.S. dollars based on an average or median exchange rate applicable for the relevant Purchase Period.

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(b)    Subject to such limitations, if any, as prescribed by the Committee, a Participant may prospectively decrease his or her rate of payroll deductions at any time by filing a new payroll deduction authorization and Plan enrollment form or by following IVR, electronic or other procedures prescribed by the Committee. A Participant may not increase his or her rate of payroll deductions during a Purchase Period but may increase such rate only effective on the first payroll date following the next Purchase Date by filing a new payroll deduction authorization and Plan enrollment form or by following IVR, electronic or other procedures prescribed by the Committee. If a Participant has not followed such procedures to change the rate of payroll deductions, the rate of payroll deductions shall continue at the originally elected rate throughout the Purchase Period and future Purchase Periods unless reduced to reflect a change by the Committee in the maximum permissible rate.

(a)     Under procedures established by the Committee, a Participant may discontinue payroll deductions under the Plan at any time during a Purchase Period by completing and filing a new payroll deduction authorization and Plan enrollment form with the Company or by following IVR, electronic or other procedures prescribed by the Committee. If a Participant has not followed such procedures to discontinue the payroll deductions, the rate of payroll deductions shall continue at the originally elected rate throughout the Purchase Period and future Purchase Periods unless reduced to reflect a change by the Committee in the maximum permissible rate.

(b)     If a Participant discontinues participation during a Purchase Period, his or her accumulated payroll deductions will remain in the Plan for purchase of shares as specified in Section 6 on the following Purchase Date, but the Participant will not again participate until he or she re-enrolls in the Plan.

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(a)    The number of shares which may be purchased by any Participant on the first Purchase Date to occur in any calendar year may not exceed the number of shares determined by dividing $25,000 by the Fair Market Value of a share of Common Stock on the Offering Date for the Purchase Period ended on such Purchase Date; and

(b)     The number of shares which may be purchased by a Participant on any subsequent Purchase Date in the same calendar year shall not exceed the number of shares determined by performing the calculation below:

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Name

(Please Print)

Address

(Please Print)

Proxy Item 1 —
The election of  directors

FOR all nominees listed herein (except as withheld  in space provided)		WITHHOLD AUTHORITY to vote for all nominees listed herein

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(Signature of Shareholder)

(Signature of Shareholder)

Dated:		, 2000

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