This excerpt taken from the PNC 8-K filed Feb 20, 2008.
2006 Incentive Award Plan 2008 Performance Unit Grants
As previously reported, our Boards Personnel and Compensation Committee granted incentive performance unit award opportunities on January 15, 2008 to certain of our senior officers. The committee authorized these grants under our shareholder-approved 2006 Incentive Award Plan. The committee made similar grants under this plan in 2007 and under a predecessor plan in 2006.
Under the terms of these grants, the grantee has the opportunity to receive a payout in shares of PNC common stock, or a combination of stock and cash-equivalents, based on our performance relative to peers. Performance is measured with respect to corporate diluted earnings per share (EPS) growth and return on average common shareholders equity (ROCE) performance in each year over a three-year performance period starting on January 1st of the grant year. The amount of the grant is stated in terms of a target number of share units. The actual award may range from nothing up to two times target, as adjusted upward during the performance period for phantom dividends.
Each year, the committee approves the terms and conditions and peer group for that years grant, and for that year of the three-year performance period for all of the outstanding grants. On February 13, 2008, the committee approved the terms and conditions and peer group for the 2008 grants and for the 2008 performance year of the 2006 and 2007 grants.
As in the earlier grants, the potential payout amount for the 2008 grants at the end of the three-year performance period is performance-based. First, an annual percentage will be determined for our relative corporate EPS growth and ROCE performance for each year in the three-year performance period based on the potential payout calculation schedules established for that year by the committee, giving equal weight to EPS growth and ROCE performance. The basic annual payout calculation schedule, which generates a payout percentage for that year based on our relative position within the peer group that year with respect to EPS growth and ROCE performance, will remain the same for the 2008 performance year for all three years grants.
At the end of the three-year performance period, the three annual percentages resulting from these measurements are then averaged. Finally, this overall average percentage will then be applied to the number of dividend-adjusted target share units to arrive at the calculated award payout amount. This calculated amount is expressed as a number of share units. Final awards are determined by the committee.
The committee will review the calculated award payout amounts for the 2008 grants early in 2011 and will make its final award decisions at that time. The committee may reduce the calculated award payout amounts.
Corporate performance criteria for these grants continue to be based on our annual EPS growth and ROCE performance relative to our peers, with slightly different adjustments. As in prior years, the adjustments for the 2008 grants are intended to align, as closely as possible, performance as measured for these awards with the metrics we use as a corporation to measure corporate performance.
For the 2008 grants, EPS and ROCE performance results will be adjusted, on an after-tax basis, for the impact of any extraordinary items, items resulting from a change in tax law, discontinued operations, acquisition and merger integration costs, Visa-litigation-related expenses/charges or gains and other gains/losses on Visa shares as applicable, and, in our case, the net impact of PNCs BlackRock LTIP Shares Obligation. EPS will also be adjusted for any stock splits, and ROCE will also be adjusted for the impact of any goodwill. For the 2006 and 2007 grants, certain adjustments will be added on a going forward basis. Adjustments will be done, including with respect to PNC, on the basis of publicly disclosed financial information.
- 3 -
Generally, in order to receive an award payout, an executive must still be employed by us at that time. There are certain limited exceptions that may be approved by the committee. In most cases, there will be further limitations on the maximum size of any award payout that may be approved for a former employee. The grants also include a formula for calculating a final award in the event of a change in control. Awarded share units up to the initial target share unit number will be paid in shares of our common stock. For this purpose, the number of target share units is not adjusted for phantom dividends. Any remaining awarded share units will be paid in cash. The amount of cash will be equal to the market value of the number of shares represented by the remaining share units.
The committee also reviews the makeup of the peer group that will be used in making these comparative annual measurements to determine whether any changes are advisable (for example, due to mergers and acquisitions). The committee did not make any changes to the 2008 peer group from 2007. The peer group used for each year is the same for each outstanding grant. With respect to the three outstanding grants, the 2008 peer group represents the 2008 peer group for the performance unit grants made in 2006 (payable in 2009), 2007 (payable in 2010) and 2008 (payable in 2011).
This excerpt taken from the PNC 8-K filed Jan 22, 2008.
2006 Incentive Award Plan 2008 Performance Unit Grants
On January 15, 2008, the Personnel and Compensation Committee of our Board of Directors granted incentive performance unit award opportunities to certain senior PNC officers. The named executive officers from last years proxy statement all received grants.
The Committee authorized these grants under our shareholder-approved 2006 Incentive Award Plan. The Committee made similar grants under this plan in 2007.
The grants of performance units are denominated in shares, not dollars. Each grantee receives a target number of share units. Any final payout will be expressed as a percentage of target and may exceed target. A grantee will not receive a final payout unless PNC achieves corporate performance goals. The performance period for the grants begins on January 1, 2008 and ends on December 31, 2010. In early 2011, the Committee will determine whether any final payouts will occur. The Committee retains the ability to reduce payouts.
In the first quarter of 2008, the Committee will approve the corporate performance goals and a comparison peer group. The Committee will also approve additional terms and conditions for these grants, including how a change in control would impact these grants.
The target share units granted to each of the five executive officers named in last years proxy statement are:
James E. Rohr Principal Executive Officer (40,000)
Richard J. Johnson Principal Financial Officer (9,000)
Joseph C. Guyaux (16,000)
William S. Demchak (16,000)
Timothy G. Shack (13,000)
- 2 -