This excerpt taken from the PNC DEF 14A filed Mar 19, 2009.
Change in Control Employment Agreements. We had previously entered into change in control severance agreements with each of our named executive officers and certain other executive officers. These agreements have been a valuable component of our executive compensation program for several years. We believe that these arrangements assist in ensuring the impartial and dedicated service of our executive officers, notwithstanding concerns that they might have regarding their continued employment following a change in control. Potential payments under these arrangements do not directly impact the yearly decisions made regarding other elements of our executive compensation.
In connection with our review of existing executive compensation arrangements in order to comply with Section 409A of the Internal Revenue Code of 1986, as amended (the Code), the Committee approved a form of change of control employment agreement in September 2008. Each of
our named executive officers (and certain other executive officers) entered into the revised agreement. The previous change in control severance agreements were terminated.
Similar to the prior agreements, the new change in control agreements provide for the following payments and benefits to our named executive officers upon a qualifying termination of employment following a change of control:
Like the prior agreements, these replacement agreements provide the executive with an additional payment for any excise tax and related taxes on change of control payments or benefits that are considered excess parachute payments under the Code. Unlike the prior agreements, the replacement agreements only provide for this additional payment if the parachute value of all such payments exceeds 105% of the maximum amount that the executive could receive without being subject to the excise tax, and if this threshold is not met, the executives payments are cut back so that no excise tax is imposed.
Like the prior agreements, each of the replacement agreements prohibits the executive from using or disclosing any of our confidential business or technical information or trade secrets. The executive may also not employ or solicit any of our officers during the one-year period following termination.
The replacement agreements differ from the prior agreements in the following material respects:
We have also entered into change in control employment agreements with certain other officers under which they will receive benefits similar to those described above. In some cases, however, these benefits have a lower level of payment and a shorter coverage period.
For a discussion of potential payments to our named executive officers upon a change in control or other events resulting in termination please see Potential Payments Upon Termination of Employment and Change in Control, beginning on page 83 and Potential Change in Control Payments below.
Change in Control Provisions in Other Grants. We also typically include provisions in our stock option, restricted stock, and incentive share and incentive performance unit grants providing certain protections to our officers. Upon a change in control of PNC, all of the outstanding unvested employee stock options, restricted stock, and restricted share unit grants will vest, whether or not the employee has a qualifying termination of employment. As described above, there is a provision in our incentive performance unit programs entitling the officer to receive a payment if a change in control occurs. In addition, if an officer is terminated by the surviving company without cause or by the employee for good reason after a change in control, the officer will have a period of three years to exercise his or her options but not extending past the original option termination date.
Our displaced employee assistance plans for employees generally provide for an increase in severance benefits following a change in control under certain circumstances. These plans do not apply to our executive officers, as they have change in control agreements as described above. If an employees employment is terminated by the surviving corporation within two years following consummation of a change in control, the employee will receive a lump sum payment equal to twice the benefits to which such employee otherwise would be entitled under the applicable plan. In addition to that lump sum payment, selected officers and employees will become eligible for an additional severance benefit under similar circumstances, based on their annual variable cash compensation