This excerpt taken from the PNC DEF 14A filed Mar 19, 2009.
The material terms of the Plan are described below. This summary is not intended to be a complete description of the Plan and is qualified in its entirety by the actual text of the Plan to which reference is made, a copy of which is attached to this proxy statement as Exhibit A.
Material Features of the Plan. Twice a year the Plan provides employees the opportunity to purchase shares of our common stock through payroll deductions at a price equal to 95% of the fair market value of the shares on the date of purchase. As proposed, 2,000,000 authorized but unissued shares of our common stock may be issued or sold under the Plan, subject to adjustment pursuant to anti-dilution provisions. This includes 1,239,371 shares of common stock previously available for issuance under the Prior Plan.
Term of Plan. The Plan is effective January 1, 2009 and will continue in effect through December 31, 2013. The Board and the Personnel and Compensation Committee of the Board have the right to extend the term of or terminate the Plan at any time. If the Plan is terminated, the balance of any participants account will be refunded to the participant or, if a refund is not possible, disposed of in accordance with procedures established by the Plan Committee (as defined below).
Administration. The Plan may be administered by a committee of our officers or designated subsidiaries appointed by our Board or our Personnel and Compensation Committee (Plan Committee). Subject to oversight by the Board and our Personnel and Compensation Committee, the Plan Committee is authorized to interpret the Plan and adopt rules and regulations that are not inconsistent with the Plan. The Plan Committee may appoint an employee as a Plan Manager and delegate to the Plan Manager such authority relating to the administration of the Plan that the Plan Committee, in its sole discretion, deems advisable. The Plan Committee members may participate in the Plan. The Plan Manager is currently James S. Gehlke.
Eligibility. Effective with the first offering period under the Plan, which began on January 1, 2009, (i) each full-time employee of PNC or a subsidiary of PNC designated by the Plan Committee to participate in the Plan (a Designated Subsidiary) with at least six months of continuous service and (ii) each part-time employee of PNC or a Designated Subsidiary (excluding peak-time employees who were not previously participating in the Prior Plan) with at least 12 months of continuous service may become participants in the Plan by submitting a notice to us before the offering period begins. Participants in the Prior Plan will continue to participate in the Plan pursuant to the same elections made under the Prior Plan (unless such elections are modified in accordance with the terms of the Plan). No employee who is deemed to own 5% or more of the total combined voting power or value of all classes of stock of PNC or any subsidiary may participate in the Plan. Employees may not transfer their rights under the Plan.
Offerings Under the Purchase Plan. Plan offerings are made on January 1 and July 1 each year. An offering gives each eligible employee the opportunity to buy shares of our common stock at a 5% discount from fair market value. Purchases under the Plan are made by means of payroll deductions over a six-month option period beginning on January 1 and July 1 and ending on June 30 and December 31 of the applicable year. The amount deducted must be a whole number percentage of a participating employees base salary from 1% to 10%, and is credited to a Plan account established in the employees name. A participant may not increase or decrease the percentage of the payroll deduction during an option period. However, a participant may change the percentage of the payroll deduction for a future option period by filing a notice with us before the applicable option period begins. For a participating employee, the amount in his or her account on the last day of the option period is applied, without interest, to purchase that number of whole shares of our common stock, at a price equal to 95% of the fair market value of a share of our common stock on the exercise date of the option period (which is June 30 or December 31) that such amount will purchase.
Plan participation will be automatically suspended if, during a Plan Year, a participant has reached any applicable limit imposed by law or has taken a hardship withdrawal from the Our Incentive Savings Plan or the PNC Global Investment Servicing Retirement Savings Plan. Participants who cease to participate in the Plan because they have reached the applicable limit will participate again, at the beginning of the next Plan year, at the same percentage. Participants who cease participating in the Plan because of a hardship withdrawal are eligible to enroll in the next offering period.
If an offering is oversubscribed, any balance in an employees Plan account not applied to the purchase of shares of our common stock will be carried over to the next offering period. No purchase of shares under the Plan will exceed any statutory limits imposed under section 423(b)(8) of the Code, which generally limits the accrual of the right of any employee to purchase shares under employee stock purchase plans to an annual rate of $25,000 in fair market value.
An employee may withdraw from an offering at any time before the last day of the option period and may request that all accumulated payroll deductions be refunded. No interest will be paid on the withdrawn amount. An employee may discontinue payroll deductions without the withdrawal of all payroll deductions previously made during that particular option period before the termination of his or her participation in that offering. The amount remaining in the employees Plan account will be used to purchase shares of our common stock on the exercise date of the option period, provided that he or she is an employee as of the exercise date. Amounts not used to purchase shares of our common stock will be refunded without interest upon the written request of the participant. A participant who elects to discontinue payroll deductions during an option period may again become a participant in a subsequent option period by filing a new notice with us.
Plan Benefits. The number of shares of Common Stock that would be purchased during our 2009 fiscal year is not determinable because purchase prices will not be set until the end of each option period and the level of participation may fluctuate during the year.
During the first option period, one named executive officer, Richard J. Johnson, is participating in the Plan. No other executive officer has purchased shares of our common stock under the Plan. A non-executive officer employee group of approximately 1,900 persons is participating in the Plan. Non-employee directors are not eligible to participate in the Plan.
Termination of Participation. A participant may withdraw from the Plan at any time and receive the entire amount in the participants account without interest. A participant who terminates employment with PNC or a Designated Subsidiary on or after attaining age 55 and completing five years of service, as determined under The PNC Financial Services Group, Inc. Pension Plan (retires) may elect to withdraw the participants entire account. If during an option period (i) a participant retires and does not withdraw his or her account or (ii) a participants employer ceases to be a Designated Subsidiary, the balance of the participants account will be used to purchase shares at the next exercise date. If a participant dies during an option period, the participants account will be distributed to the participants beneficiary (and if there is no beneficiary, to the participants personal representative). A participant who terminates employment for any other reason will receive the cash balance remaining in the participants account.
Certain Federal Income Tax Consequences. Under the Code, we are deemed to grant employees an option on the first day of each offering period and the employee is deemed to exercise the option on the exercise date. Under these provisions, a participant will not recognize income at the time of the grant of an option under the Plan (that is, on the offering date). In addition, a participant will not recognize income on the exercise of such an option (that is, on the exercise date), provided that at no time during the period beginning with the offering date and ending on the date three months before the exercise date, the participant ceased to be an employee of PNC or one of our subsidiaries (employment requirement). Under these circumstances, we will not be allowed to take a deduction in connection with either the grant of an option or the issuance of shares upon exercise of an option. If a participant disposes of shares acquired under the Plan more than two years after the purchase date (the
required holding period) or in the event of the participants death, the participant will recognize compensation income equal to the lesser of (a) the excess, if any, of the fair market value of the shares on the date of disposition or the participants death over the amount the participant paid for the shares, or (b) 5% of the fair market value of the shares as of the offering date. In addition, a participant will recognize a capital gain equal to the excess, if any, of the proceeds from the disposition over the sum of the purchase price paid by the participant for the shares and the amount of ordinary income the participant recognizes. If the proceeds from disposition of the shares are less than the purchase price paid by the participant, the participant will be entitled to a long-term capital loss. We will not be allowed to take a deduction if the participant dies or disposes of the shares after the required holding period. If shares acquired under the Plan are held less than the required holding period, the excess of the fair market value of the shares as of the exercise date over the price the participant paid for the shares will be treated as ordinary income to the participant at the time of disposition of the shares. In addition, the participant will recognize capital gain equal to the excess, if any, of the proceeds from sale over the fair market value of the shares as of the exercise date. If the proceeds from disposition of the shares are less than the fair market value of the shares as of the exercise date, the participant will recognize a capital loss equal to the amount of such difference. We will be entitled to a deduction for federal income tax purposes equal to the amount of ordinary income a participant recognizes upon disposition of the shares prior to expiration of the required holding period.
If a participant fails for any reason other than the participants death or certain temporary leaves to meet the employment requirement, then, upon the receipt of shares upon exercise, the participant generally will recognize ordinary income equal to the difference between the fair market value of the shares purchased as of the date of exercise and the purchase price paid. Under such circumstances, we will be entitled to a deduction equal to the amount of ordinary income recognized by the participant.
The rules governing employee stock purchase plans are highly technical, so that the above description of tax consequences is general in nature and does not purport to be complete. Moreover, statutory provisions are subject to change, as are their interpretations, and their application may vary in individual circumstances. Finally, the consequences under applicable state and local income tax laws may not be the same as under the federal income tax laws.
Shareholder Approval Required. Approval of the Plan requires the affirmative vote of a majority of the votes cast by the holders of the Corporations common stock and the voting preferred stock, voting together as a single class, in person or by proxy, at a meeting at which a quorum is present. The rules of the New York Stock Exchange also require that the total vote cast on this proposal represent over 50% in interest of the Corporations common stock and voting preferred stock, voting together as a single class. Please see What Vote is Required for a Proposal to Pass? on page 5 for more information.