This excerpt taken from the PNC 8-K filed Feb 20, 2008.
Annual Incentive Award Eligibility for Fiscal 2008
We have a shareholder-approved compensation plan, the 1996 Executive Incentive Award Plan, which was amended and restated January 1, 2007. On February 13, 2008, our Boards Personnel and Compensation Committee approved the eligibility of certain officers to receive annual incentive awards (bonuses) under the 1996 plan. The committee designated James E. Rohr, our Chairman and Chief Executive Officer and our next four most highly compensated executive officers as the five eligible officers.
Under the plan, the maximum amount that each of the participants will be eligible to receive is 0.2% of Incentive Income for 2008. The plan defines Incentive Income as our consolidated net income, with certain adjustments. The net income is increased for income taxes and then adjusted for the impact of any item resulting from changes in the tax law, for the impact of any extraordinary items, discontinued operations, acquisition costs and merger integration costs. The net income will also be adjusted for the impact of our obligation to fund long-term incentive programs at BlackRock, Inc., including both charges or credits for marking the funding obligation to market and gains or losses on the transfer of shares in satisfaction of such obligation (the BlackRock LTIP Shares Obligation).
Once the year ends, the committee will decide whether to make a downward adjustment from the maximum bonus amount for each participant. In making a downward adjustment, the committee has determined that it will take into account the same types of performance factors used in deciding bonuses for the other executive officers who do not participate in the 1996 plan. The committee focuses on corporate performance metrics, such as diluted earnings per share (EPS) performance and return on average common shareholders equity (ROCE), but does not follow a particular formula. The committee looks at relative corporate performance, as measured against our peer group. The committee may also consider line of business performance and, in some cases, individual performance.
Any bonuses for fiscal 2008 will be paid in the first quarter of 2009. On February 13, the committee also determined that any bonuses would be denominated in dollars and would contain a non-cash portion, consisting of restricted stock, cash-payable restricted share units or stock-payable restricted share units, as well as a cash portion. The first portion of the 2008 bonus would equal 75% of the dollar-denominated award amount and would be paid in cash (or deferred, if the officer previously made an election to do so). The remaining 25% would consist of an award of restricted PNC common stock or share units, in either case subject to forfeiture if the executive officer does not remain with us during a three-year vesting period (with certain limited exceptions). This non-cash portion would be further increased by 25% to reflect a risk of forfeiture and the lack of liquidity during the vesting period. The committee approved these conditions for the 1996 plan participants as well as for most of our other executive officers.
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