This excerpt taken from the PNC 8-K filed Sep 12, 2008.
Replacement Change of Control Employment Agreements
In connection with the Companys review of its executive compensation arrangements in order to comply with Section 409A of the Internal Revenue Code of 1986, as amended (the Code), on September 9, 2008, the Personnel and Compensation Committee of the Board of Directors of The PNC Financial Services Group, Inc. (the Company) approved a form of Change of Control Employment Agreements to be entered into with each of the Companys named executive officers (the Replacement Agreements).
In connection with entering into the Replacement Agreements, the Change in Control Severance Agreements described in the Companys proxy statement for its annual meeting of shareholders dated March 28, 2008 (the Prior Agreements) will be terminated.
The Replacement Agreements generally provide for similar termination protections and severance pay and benefits as the Prior Agreements. However, the Replacement Agreements differ from the Prior Agreements in the following material respects:
(1) the Replacement Agreements eliminate or reduce some of the payments and benefits provided under the Prior Agreements,
(2) the Replacement Agreements are written as employment agreements, the terms of which become operative upon a change of control, instead of severance agreements, to provide greater specificity regarding the parties rights and obligations following a change of control,
(3) the Replacement Agreements modify the manner in which certain types of benefits are provided in order to comply with Section 409A of the Code, and
(4) the Replacement Agreements provide that the severance pay multiple will be reduced to one and one-half (1.5) when an executive attains age 65 instead of providing that the three-times severance pay multiple will be reduced to the number of years from the date of termination until the date the executive attains age 65 (with the agreement expiring when the executive reaches age 65) under the Prior Agreement.
Similar to the Prior Agreements, the Replacement Agreements provide for the following payments and benefits upon a qualifying termination of employment following a change of control:
Like the Prior Agreements, the Replacement Agreements provide each 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.
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Based on the same assumptions and compensation information used for purposes of calculating the payments of severance and benefits under the Prior Agreements for purposes of the Companys proxy statement for its annual meeting of shareholders dated March 28, 2008, if the Replacement Agreements had been in place on December 31, 2007, the aggregate amount of the Total Benefits for the five named executive officers upon a qualifying termination following a change of control would have been decreased by $18.2 million as compared to the amounts shown under that heading in the table on page 71 of the annual meeting proxy statement, of which $11.0 million would represent a decrease in the aggregate amounts shown as Excise Tax Gross-Up.
Like the Prior Agreements, each of the Replacement Agreements prohibits the executive from using or disclosing any of the Companys confidential business or technical information or trade secrets. The executive may also not employ or solicit any of the Companys officers during the one-year period following termination.
The foregoing description of the Replacement Agreements does not purport to be complete and is qualified in its entirety by reference to the form of Replacement Agreements, which is filed as Exhibit 99.1 hereto, and is incorporated herein by reference.
(d) Exhibits. The exhibit listed on the Exhibit Index accompanying this Form 8-K is filed herewith.
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