Exhibit 10.30
FORMS OF EMPLOYEE STOCK OPTION, RESTRICTED STOCK,
RESTRICTED DEFERRAL, AND INCENTIVE SHARE AGREEMENTS
FORM OF STANDARD EMPLOYEE STOCK OPTION AGREEMENT
THE
PNC FINANCIAL SERVICES GROUP, INC.
1997 LONG-TERM INCENTIVE AWARD PLAN
NONSTATUTORY STOCK OPTION AGREEMENT
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OPTIONEE:
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<Name>
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GRANT DATE:
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, 200
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OPTION PRICE:
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$
per share
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COVERED SHARES:
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«Shares»
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Terms defined in The PNC Financial
Services Group, Inc. 1997 Long-Term Incentive Award Plan as amended from time to time (“Plan”) are used in this Agreement (“Agreement”) as defined in the Plan unless otherwise defined in the Agreement or an Annex thereto. In the
Agreement, “PNC” means The PNC Financial Services Group, Inc. and “Corporation” means PNC and its Subsidiaries. For certain definitions, see Annex A attached hereto and incorporated herein by reference. Headings used in the
Agreement and in the Annexes hereto are for convenience only and are not part of the Agreement and Annexes.
1.
Grant of Option
. Pursuant to the Plan and subject to the terms of the Agreement, PNC hereby grants to Optionee an Option to purchase from PNC that number of shares of PNC common stock specified above as the
“Covered Shares,” exercisable at the Option Price.
2.
Terms of
the Option
.
2.1
Type of Option
. The Option is intended to be a
Nonstatutory Stock Option without Rights.
2.2
Option Period
. The Option
is exercisable in whole or in part as to any Covered Shares as to which it is outstanding and has become exercisable (“vested”) at any time and from time to time through the Expiration Date.
To the extent that the Option or relevant portion thereof is outstanding, the Option will
vest as to Covered Shares as set forth in this Section 2.2.
(a) Unless the
Option has become fully vested pursuant to Section 2.2(b), 2.2(c), 2.2(d) or 2.2(e), the Option will become exercisable (“vest”):
(i) as to one-third (1/3
rd
) of the
Covered Shares (rounded down to the nearest whole Share), commencing on the first (1
st
) anniversary date of the
Grant Date
provided
that
Optionee is still an employee of the Corporation on such vesting date or is a Retiree whose Retirement date occurred on or after the six (6) month anniversary date of the Grant Date;
(ii) as to one-half (1/2) of the remaining Covered Shares (rounded down to the nearest whole
Share), commencing on the second (2
nd
) anniversary date of the Grant Date
provided
that
Optionee is
still an employee of the Corporation on such vesting date or is a Retiree whose Retirement date occurred on or after the first (1
st
) anniversary date of the Grant Date; and
(iii) as to the remaining Covered Shares, commencing on the third (3
rd
) anniversary date of the Grant Date
provided
that
Optionee is still an employee of the Corporation on such vesting date or is a Retiree whose
Retirement date occurred on or after the first (1
st
) anniversary date of the Grant Date.
(b) If Optionee’s employment is terminated by the Corporation by reason of Total and
Permanent Disability and not for Cause, the Option will vest as to all outstanding Covered Shares as to which it has not otherwise vested commencing on Optionee’s Termination Date.
(c) If Optionee’s employment with the Corporation is terminated by reason of Optionee’s death, the Option will immediately vest as
to all outstanding Covered Shares as to which it has not otherwise vested, and the Option may be exercised by Optionee’s properly designated beneficiary, by the person or persons entitled to do so under Optionee’s will, or by the person or
persons entitled to do so under the applicable laws of descent and distribution.
(d) If Optionee’s employment with the Corporation is terminated during a Coverage Period by the Corporation without Cause or by Optionee with Good Reason, the Option will vest as to all outstanding Covered Shares as to which it has not
otherwise vested commencing on Optionee’s Termination Date.
(e)
Notwithstanding any other provision of this Section 2.2, to the extent that the Option is outstanding but not yet fully vested at the time a Change in Control occurs, the Option will vest as to all then outstanding Covered Shares as to which it has
not otherwise vested, effective as of the day immediately prior to the occurrence of the Change in Control,
provided that
, at the time the Change in Control occurs, Optionee is either (i) an employee of the Corporation or (ii) a former
employee of the Corporation whose unvested Option, or portion thereof, is then outstanding and continues to qualify for vesting pursuant to the terms of Section 2.2(a)(i), (ii) and/or (iii).
If Optionee is employed by a Subsidiary that ceases to be a Subsidiary of PNC and Optionee
does not continue to be employed by PNC or a Subsidiary, then for purposes of the Agreement, Optionee’s employment with the Corporation terminates effective at the time this occurs.
2.3
Nontransferability; Designation of Beneficiary
. The Option is not transferable or assignable by Optionee other than by transfer
to a properly designated beneficiary in the event of death, or by will or the laws of descent and distribution.
During Optionee’s lifetime, the Option may be exercised only by Optionee or, in the event of Optionee’s legal incapacity, by his or her legal representative.
During Optionee’s lifetime, Optionee may file with PNC, at such address
and in such manner as PNC may from time to time direct, on a form to be provided by PNC on request, a designation of a beneficiary or beneficiaries (a “properly designated beneficiary”) to hold and exercise Optionee’s stock options,
to the extent outstanding and exercisable, in accordance with their respective stock option agreements and the Plan in the event of Optionee’s death. In the absence of a properly designated beneficiary, the Option will be held and may be
exercised by the person or persons entitled to do so under Optionee’s will or under the applicable laws of descent and distribution.
3.
Capital Adjustments
. The number and class of Covered Shares as to which the Option is outstanding and has not yet been exercised and the Option Price will be
subject to such adjustment, if any, as the Committee in its sole discretion deems appropriate to reflect corporate transactions (including, without limitation, stock dividends, stock splits, spin-offs, split-offs, recapitalizations, mergers,
consolidations or reorganizations of or by PNC (each, a “Corporate Transaction”)), including without limitation cancellation of the Option immediately prior to the effective time of the Corporate Transaction and payment, in cash, in
consideration therefor, of an amount equal to the product of (a) the excess, if any, of the per share value of the consideration payable to a PNC common shareholder in connection with such Corporate Transaction over the Option Price and (b) the
total number of Covered Shares subject to the Option that were outstanding and unexercised immediately prior to the effective time of the Corporate Transaction.
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All determinations hereunder will be made by the Committee in its sole discretion and will be final, binding and
conclusive for all purposes on all parties, including without limitation the holder of the Option.
No fractional shares will be issued on exercise of the Option. PNC will determine the manner in which any fractional shares will be treated.
4.
Exercise of Option
.
4.1
Notice and Effective Date
. The Option may be exercised, in whole or in part, by delivering to PNC written notice of such exercise, in such form as PNC may from
time to time prescribe, accompanied by full payment of the aggregate Option Price with respect to that portion of the Option being exercised and satisfaction of any amounts required to be withheld pursuant to applicable tax laws in connection with
such exercise.
In addition, notwithstanding Sections 4.2 and 4.3, Optionee may
elect to complete his or her Option exercise through a brokerage service/margin account pursuant to the broker-assisted cashless option exercise procedure under Regulation T of the Board of Governors of the Federal Reserve System and in such manner
as may be permitted by PNC from time to time consistent with said Regulation T.
The effective date of such exercise will be the Exercise Date. Until PNC notifies Optionee to the contrary, the form attached to the Agreement as Annex B shall be used to exercise the Option and the form attached to the Agreement as Annex C
shall be used to make tax payment elections.
In the event that the Option is
exercised, pursuant to Section 2.3, by any person or persons other than Optionee, such notice of exercise must be accompanied by appropriate proof of the derivative right of such person or persons to exercise the Option.
4.2
Payment of Option Price
. Upon exercise of the Option, in whole or in part,
Optionee may pay the aggregate Option Price (a) in cash, (b) using whole shares of PNC common stock (either by physical delivery to PNC of certificates for the shares or through PNC’s attestation procedure) having an aggregate Fair Market Value
on the Exercise Date not exceeding that portion of the aggregate Option Price being paid using such shares, or (c) through a combination of cash and shares of PNC common stock;
provided
,
however
, that shares of PNC common stock used to
pay all or any portion of the aggregate Option Price may not be subject to any contractual restriction, pledge or other encumbrance and must be shares that have been owned by Optionee for at least six (6) months prior to the Exercise Date and, in
the case of restricted stock, for which it has been at least six (6) months since the restrictions lapsed, or, in either case, for such other period as may be specified or permitted by PNC.
4.3
Payment of Taxes
. Optionee may elect to satisfy any or all applicable federal,
state, or local tax liabilities incurred in connection with exercise of the Option (a) by payment of cash, (b) subject to such terms and conditions as PNC may from time to time establish, through the retention by PNC of sufficient whole shares of
PNC common stock otherwise issuable upon such exercise to satisfy the minimum amount of taxes required to be withheld in connection with such exercise, or (c) subject to such terms and conditions as PNC may from time to time establish, using whole
shares of PNC common stock (either by physical delivery to PNC of certificates for the shares or through PNC’s attestation procedure) that are not subject to any contractual restriction, pledge or other encumbrance and that have been owned by
Optionee for at least six (6) months prior to the Exercise Date and, in the case of restricted stock, for which it has been at least six (6) months since the restrictions lapsed, or, in either case, for such other period as may be specified or
permitted by PNC.
For purposes of this Section 4.3, shares of PNC common stock
that are used to satisfy applicable taxes will be valued at their Fair Market Value on the date the tax withholding obligation arises. In no event will the Fair Market Value of the shares of PNC common stock otherwise issuable upon exercise of the
Option but retained pursuant to Section 4.3(b) exceed the minimum amount of taxes required to be withheld in connection with the Option exercise.
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4.4
Effect
. The exercise, in whole or in part, of the Option will cause a reduction in the number of unexercised
Covered Shares as to which the Option is outstanding equal to the number of shares of PNC common stock with respect to which the Option is exercised.
5.
Restrictions on Exercise and on Shares Issued on Exercise
. Notwithstanding any other provision of the Agreement, the Option may not be exercised at any time
that PNC does not have in effect a registration statement under the Securities Act of 1933 as amended relating to the offer of shares of PNC common stock under the Plan unless PNC agrees to permit such exercise. Upon the issuance of any shares of
PNC common stock pursuant to exercise of the Option at a time when such a registration statement is not in effect, Optionee will, upon the request of PNC, agree in writing that Optionee is acquiring such shares for investment only and not with a
view to resale and that Optionee will not sell, pledge, or otherwise dispose of such shares unless and until (a) PNC is furnished with an opinion of counsel to the effect that registration of such shares pursuant to the Securities Act of 1933 as
amended is not required by that Act or by rules and regulations promulgated thereunder, (b) the staff of the SEC has issued a no-action letter with respect to such disposition, or (c) such registration or notification as is, in the opinion of
counsel for PNC, required for the lawful disposition of such shares has been filed and has become effective;
provided
,
however
, that PNC is not obligated hereby to file any such registration or notification. PNC may place a legend
embodying such restrictions on the certificate(s) evidencing such shares.
6.
Rights as Shareholder
. Optionee will have no rights as a shareholder with respect to any Covered Shares until the Exercise Date and then only with respect to those shares of PNC common stock issued upon such exercise of the Option and not
retained as provided in Section 4.3.
7.
Employment
. Neither the
granting of the Option evidenced by the Agreement nor any term or provision of the Agreement will constitute or be evidence of any understanding, expressed or implied, on the part of PNC or any Subsidiary to employ Optionee for any period.
8.
Subject to the Plan
. The Option evidenced by the Agreement and the
exercise thereof are subject to the terms and conditions of the Plan, which is incorporated by reference herein and made a part hereof, but the terms of the Plan will not be considered an enlargement of any benefits under the Agreement. In addition,
the Option is subject to any rules and regulations promulgated by or under the authority of the Committee.
9.
Optionee Covenants
.
9.1
General
. Optionee and PNC acknowledge and agree that Optionee has received adequate consideration with respect to enforcement of the provisions of Sections 9 and 10 hereof, that such provisions are reasonable and properly required for the
adequate protection of the business of the Corporation, and that enforcement of such provisions will not prevent Optionee from earning a living.
9.2
Non-Solicitation; No-Hire
. Optionee agrees to comply with the provisions of subsections (a) and (b) of this Section 9.2 while employed by the Corporation and
for a period of twelve (12) months after Optionee’s Termination Date regardless of the reason for such termination of employment.
(a)
Non-Solicitation
. Optionee shall not, directly or indirectly, either for Optionee’s own benefit or purpose or for the benefit or purpose of any Person
other than PNC or any Subsidiary, solicit, call on, do business with, or actively interfere with PNC’s or any Subsidiary’s relationship with, or attempt to divert or entice away, any Person that Optionee should reasonably know (i) is a
customer of PNC or any Subsidiary for which PNC or any Subsidiary provides any services as of the Termination Date, or (ii) was a customer of PNC or any Subsidiary for which PNC or any Subsidiary provided any services at any time during the twelve
(12) months preceding the Termination Date, or (iii) was, as of the Termination Date, considering retention of PNC or any Subsidiary to provide any services.
(b)
No-Hire
. Optionee shall not, directly or indirectly, either for Optionee’s own benefit or purpose or for the benefit or purpose of any Person other than
PNC or any Subsidiary, employ or offer to employ, call on,
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or actively interfere with PNC’s or any Subsidiary’s relationship with, or attempt to divert or entice away, any employee of the Corporation, nor
shall Optionee assist any other Person in such activities.
Notwithstanding the
above, if Optionee’s employment with the Corporation is terminated by the Corporation without Cause or by Optionee with Good Reason and such Termination Date occurs during a Coverage Period (either as Coverage Period is defined in Section A.10
of Annex A or, if Optionee was a party to a CIC Severance Agreement that was in effect at the time of such termination of employment, as Coverage Period is defined in such CIC Severance Agreement, if longer), then commencing immediately after such
Termination Date, the provisions of subsections (a) and (b) of this Section 9.2 shall no longer apply and shall be replaced with the following subsection (c):
(c)
No-Hire
. Optionee agrees that Optionee shall not, for a period of twelve (12) months after the Termination Date, employ or offer to employ, solicit,
actively interfere with PNC’s or any PNC affiliate’s relationship with, or attempt to divert or entice away, any officer of PNC or any PNC affiliate.
9.3
Confidentiality
. During Optionee’s employment with the Corporation, and thereafter regardless of the reason for termination of such employment,
Optionee will not disclose or use in any way any confidential business or technical information or trade secret acquired in the course of such employment, all of which is the exclusive and valuable property of the Corporation whether or not
conceived of or prepared by Optionee, other than (a) information generally known in the Corporation’s industry or acquired from public sources, (b) as required in the course of employment by the Corporation, (c) as required by any court,
supervisory authority, administrative agency or applicable law, or (d) with the prior written consent of PNC.
9.4
Ownership of Inventions
. Optionee shall promptly and fully disclose to PNC any and all inventions, discoveries, improvements, ideas or other works of inventorship or authorship, whether or not patentable,
that have been or will be conceived and/or reduced to practice by Optionee during the term of Optionee’s employment with the Corporation, whether alone or with others, and that are (a) related directly or indirectly to the business or
activities of PNC or any Subsidiary or (b) developed with the use of any time, material, facilities or other resources of PNC or any Subsidiary (“Developments”). Optionee agrees to assign and hereby does assign to PNC or its designee all
of Optionee’s right, title and interest, including copyrights and patent rights, in and to all Developments. Optionee shall perform all actions and execute all instruments that PNC or any Subsidiary shall deem necessary to protect or record
PNC’s or its designee’s interests in the Developments. The obligations of this Section 9.4 shall be performed by Optionee without further compensation and shall continue beyond the Termination Date.
10.
Enforcement Provisions
. Optionee understands and agrees to the following
provisions regarding enforcement of the Agreement.
10.1
Governing Law and
Jurisdiction
. The Agreement is governed by and construed under the laws of the Commonwealth of Pennsylvania, without regard to conflict of laws rules. Any dispute or claim arising out of or relating to the Agreement or claim of breach hereof
shall be brought exclusively in the federal court for the Western District of Pennsylvania or in the Court of Common Pleas of Allegheny County, Pennsylvania. By execution of the Agreement, Optionee and PNC hereby consent to the exclusive
jurisdiction of such courts, and waive any right to challenge jurisdiction or venue in such courts with regard to any suit, action, or proceeding under or in connection with the Agreement.
10.2
Equitable Remedies
. A breach of the provisions of any of Sections 9.2, 9.3 or 9.4
will cause the Corporation irreparable harm, and the Corporation will therefore be entitled to issuance of immediate, as well as permanent, injunctive relief restraining Optionee, and each and every person and entity acting in concert or
participating with Optionee, from initiation and/or continuation of such breach.
10.3
Tolling Period
. If it becomes necessary or desirable for the Corporation to seek compliance with the provisions of Section 9.2 by legal proceedings, the period during which Optionee shall comply with said provisions shall extend
for a period of twelve (12) months from the date of the legal order requiring such compliance.
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10.4
No Waiver
. Failure of PNC to demand strict compliance with any of the terms, covenants or conditions of the
Agreement shall not be deemed a waiver of such term, covenant or condition, nor shall any waiver or relinquishment of any such term, covenant or condition on any occasion or on multiple occasions be deemed a waiver or relinquishment of such term,
covenant or condition.
10.5
Severability
. The restrictions and
obligations imposed by Sections 9.2, 9.3 and 9.4 are separate and severable, and it is the intent of Optionee and PNC that if any restriction or obligation imposed by any of these provisions is deemed by a court of competent jurisdiction to be void
for any reason whatsoever, the remaining provisions, restrictions and obligations shall remain valid and binding upon Optionee.
10.6
Reform
. In the event any of Sections 9.2, 9.3 and 9.4 are determined by a court of competent jurisdiction to be unenforceable because unreasonable either as
to length of time or area to which said restriction applies, it is the intent of Optionee and PNC that said court reduce and reform the provisions thereof so as to apply the greatest limitations considered enforceable by the court.
10.7
Waiver of Jury Trial
. Each of Optionee and PNC hereby waives any right to trial
by jury with regard to any suit, action or proceeding under or in connection with any of Sections 9.2, 9.3 and 9.4.
10.8
Applicable Law
. Notwithstanding anything in the Agreement, PNC will not be required to comply with any term, covenant or condition of the Agreement if and to
the extent prohibited by law, including but not limited to federal banking and securities regulations, or as otherwise directed by one or more regulatory agencies having jurisdiction over PNC or any of its subsidiaries. Further, to the extent, if
any, applicable to Optionee, Optionee agrees to reimburse PNC for any amounts Optionee may be required to reimburse the Corporation pursuant to Section 304 of the Sarbanes-Oxley Act of 2002, and agrees that PNC need not comply with any term,
covenant or condition of the Agreement to the extent that doing so would require that Optionee reimburse PNC or its subsidiaries for such amounts pursuant to Section 304 of the Sarbanes-Oxley Act of 2002.
11.
Amendment of Pre-2004 Options and Reloads
. For purposes of all PNC stock options
held by Optionee that were granted prior to January 1, 2004 and outstanding on February 18, 2004 (or, in the case of reload stock options, that were outstanding on February 18, 2004 or will be granted after February 18, 2004 in connection with the
exercise of original stock options granted prior to January 1, 2004), the terms of each such option are amended to include, or shall include, as the case may be, the following provisions:
(a) Notwithstanding any other provision of such option relating to vesting, to the extent that the such option is outstanding but not yet
fully vested at the time a Change in Control occurs, the option will vest as to all then outstanding Covered Shares as to which it has not otherwise vested, effective as of the day immediately prior to the occurrence of the Change in Control,
provided that,
at the time the Change in Control occurs, the optionee either (i) is an employee of the Corporation or (ii) is a former employee of the Corporation whose unvested option, or portion thereof, is then outstanding and continues to
qualify for vesting under the terms of the relevant stock option agreement as amended;
(b) If there is a Change in Control, then notwithstanding any other provisions of such option relating to the date of expiration or expiration date of the option, to the extent that such option is outstanding and vested or vests at the time
the Change in Control occurs, such option will not expire at the earliest before the close of business on the ninetieth (90
th
) day after the occurrence of the Change in Control (or the tenth (10
th
) anniversary of the Grant
Date if earlier),
provided that
, either (i) the optionee is an employee of the Corporation at the time the Change in Control occurs and the optionee’s employment with the Corporation is not terminated for Cause or (ii) the optionee is a
former employee of the Corporation whose option, or portion thereof, is outstanding at the time the Change in Control occurs because it qualified and continues to qualify pursuant to the terms of the relevant stock option agreement as amended for an
exception to the general rule that stock options expire at the time the optionee ceases to be an employee of the Corporation;
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(c) If, under the relevant stock option agreement as amended, more than one exception to the general rule that stock
options expire on termination of the optionee’s employment with the Corporation is applicable to such option or a portion thereof, then the option, or such portion of the option, will expire in accordance with the provision or provisions of
said agreement that specify the latest expiration date;
(d) If the terms of
the relevant stock option agreement as amended provide for the early expiration of such stock option in certain circumstances where the optionee has engaged in competitive conduct or activity or in other conduct or activity that is inimical,
contrary, harmful or detrimental to the Corporation’s interests (a “detrimental conduct” provision), no determination that the optionee has engaged in such detrimental conduct may be made on or after the occurrence of a Change in
Control; and
(e) If the termination of the optionee’s employment with the
Corporation meets the definition of Retirement, then with respect to any portion of the option that is outstanding and vested on optionee’s retirement date or that qualifies for post-employment vesting under the terms of the relevant stock
option agreement and vests thereafter, such option will qualify for an exception to the general rule that options expire at the time the optionee ceases to be an employee and will expire on the tenth (10
th
) anniversary date of the Grant Date, subject to the operation of any detrimental conduct provision that may be applicable.
The terms of PNC employee stock options granted after January 1, 2004 (including reload
options granted after February 18, 2004) shall also include the capital adjustment provisions set forth in Section 3, unless and until the Committee determines otherwise.
12.
Effective Date
. If Optionee does not accept the grant of the Option by executing and delivering a copy of the Agreement to PNC,
without altering or changing the terms of the Agreement in any way, within sixty (60) days of receipt by Optionee of a copy of the Agreement, PNC may, in its sole discretion, withdraw its offer and cancel the Option and the Agreement at any time
prior to Optionee’s delivery to PNC of a copy of the Agreement executed by Optionee.
Otherwise, upon execution and delivery of the Agreement by both PNC and Optionee and, in the event that Optionee is subject to the reporting requirements of Section 16(a) of the Exchange Act with respect to PNC
securities, the filing with and acceptance by the SEC of a Form 4 reporting the Grant, the Option and the Agreement are effective as of the Grant Date.
I
N
W
ITNESS
W
HEREOF
, PNC has caused the Agreement to be signed on its behalf effective as of the Grant Date.
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THE PNC FINANCIAL SERVICES GROUP, INC.
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By:
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Chairman and Chief Executive Officer
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ATTEST:
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By:
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Corporate Secretary
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Accepted and agreed to as of the Grant Date.
Annex A - Certain Definitions
Annex B - Notice of Exercise
Annex C - Tax Payment Election
Form
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ANNEX A
THE PNC FINANCIAL SERVICES GROUP, INC.
1997
LONG-TERM INCENTIVE AWARD PLAN
NONSTATUTORY STOCK OPTION AGREEMENT
CERTAIN DEFINITIONS
Except where the context otherwise indicates, the following definitions apply to the Nonstatutory Stock Option Agreement (“Agreement”) to which this Annex A is attached.
A.1 “Board” means the Board of Directors of PNC.
A.2 “Cause.”
(a)
“Cause” during a Coverage Period
. If the termination of Optionee’s employment with the Corporation occurs during a
Coverage Period, then, for purposes of the Agreement, “Cause” means:
(i) the willful and continued failure of Optionee to substantially perform Optionee’s duties with the Corporation (other than any such failure resulting from incapacity due to physical or mental illness), after a written demand for
substantial performance is delivered to Optionee by the Board or the CEO that specifically identifies the manner in which the Board or the CEO believes that Optionee has not substantially performed Optionee’s duties; or
(ii) the willful engaging by Optionee in illegal conduct or gross misconduct that is
materially and demonstrably injurious to PNC or any Subsidiary.
For purposes
of the preceding clauses (i) and (ii), no act or failure to act, on the part of Optionee, shall be considered willful unless it is done, or omitted to be done, by Optionee in bad faith and without reasonable belief that Optionee’s action or
omission was in the best interests of the Corporation. Any act, or failure to act, based upon the instructions or prior approval of the Board, the CEO or Optionee’s superior or based upon the advice of counsel for the Corporation, shall be
conclusively presumed to be done, or omitted to be done, by Optionee in good faith and in the best interests of the Corporation.
The cessation of employment of Optionee will be deemed to be a termination of Optionee’s employment with the Corporation for Cause for purposes of the Agreement only
if and when there shall have been delivered to Optionee, as part of the notice of Optionee’s termination, a copy of a resolution duly adopted by the affirmative vote of not less than a majority of the entire membership of the Board, at a Board
meeting called and held for the purpose of considering such termination, finding on the basis of clear and convincing evidence that, in the good faith opinion of the Board, Optionee is guilty of conduct described in clause (i) or (ii) above and, in
either case, specifying the particulars thereof in detail. Such resolution shall be adopted only after (1) reasonable notice of such Board meeting is provided to Optionee, together with written notice that PNC believes that Optionee is guilty of
conduct described in clause (i) or (ii) above and, in either case, specifying the particulars thereof in detail, and (2) Optionee is given an opportunity, together with counsel, to be heard before the Board.
(b)
“Cause” other than during a Coverage Period
. If the termination of
Optionee’s employment with the Corporation occurs other than during a Coverage Period, then, for purposes of the Agreement, “Cause” means:
(i) the willful and continued failure of Optionee to substantially perform Optionee’s duties with the Corporation (other than any such failure resulting from
incapacity due to physical or mental illness), after a written demand for substantial performance is delivered to Optionee by PNC that
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specifically identifies the manner in which it is believed that Optionee has not substantially performed Optionee’s duties;
(ii) a material breach by Optionee of (1) any code of conduct of PNC or a Subsidiary or (2)
other written policy of PNC or a Subsidiary, in either case required by law or established to maintain compliance with applicable law;
(iii) any act of fraud, misappropriation, material dishonesty, or embezzlement by Optionee against PNC or a Subsidiary or any client or customer of PNC or a Subsidiary;
(iv) any conviction (including a plea of guilty or of
nolo contendere
)
of Optionee for, or entry by Optionee into a pre-trial disposition with respect to, the commission of a felony; or
(v) entry of any order against Optionee, by any governmental body having regulatory authority with respect to the business of PNC or any Subsidiary, that relates to or
arises out of Optionee’s employment or other service relationship with the Corporation.
The cessation of employment of Optionee will be deemed to have been a termination of Optionee’s employment with the Corporation for Cause for purposes of the Agreement only if and when the CEO or his or her
designee (or, if Optionee is the CEO, the Board) determines that Optionee is guilty of conduct described in clause (i), (ii) or (iii) above or that an event described in clause (iv) or (v) above has occurred with respect to Optionee and, if so,
determines that the termination of Optionee’s employment with the Corporation will be deemed to have been for Cause.
A.3 “CEO” means the chief executive officer of PNC.
A.4 “Change in Control” means a change of control of PNC of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of
Regulation 14A (or in response to any similar item on any similar schedule or form) promulgated under the Exchange Act, whether or not PNC is then subject to such reporting requirement;
provided
,
however
, that without limitation, a
Change in Control shall be deemed to have occurred if:
(a) any Person,
excluding employee benefit plans of the Corporation, is or becomes the beneficial owner (as defined in Rules 13d-3 and 13d-5 under the Exchange Act or any successor provisions thereto), directly or indirectly, of securities of PNC representing
twenty percent (20%) or more of the combined voting power of PNC’s then outstanding securities;
provided
,
however
, that such an acquisition of beneficial ownership representing between twenty percent (20%) and forty percent (40%),
inclusive, of such voting power shall not be considered a Change in Control if the Board approves such acquisition either prior to or immediately after its occurrence;
(b) PNC consummates a merger, consolidation, share exchange, division or other reorganization or transaction of PNC (a “Fundamental
Transaction”) with any other corporation, other than a Fundamental Transaction that results in the voting securities of PNC outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity) at least sixty percent (60%) of the combined voting power immediately after such Fundamental Transaction of (i) PNC’s outstanding securities, (ii) the surviving entity’s outstanding
securities, or (iii) in the case of a division, the outstanding securities of each entity resulting from the division;
(c) the shareholders of PNC approve a plan of complete liquidation or winding-up of PNC or an agreement for the sale or disposition (in one transaction or a series of
transactions) of all or substantially all of PNC’s assets;
-10-
(d) as a result of a proxy contest, individuals who prior to the conclusion thereof constituted the Board (including for
this purpose any new director whose election or nomination for election by PNC’s shareholders in connection with such proxy contest was approved by a vote of at least two-thirds (2/3rds) of the directors then still in office who were directors
prior to such proxy contest) cease to constitute at least a majority of the Board (excluding any Board seat that is vacant or otherwise unoccupied);
(e) during any period of twenty-four (24) consecutive months, individuals who at the beginning of such period constituted the Board (including for this purpose any new
director whose election or nomination for election by PNC’s shareholders was approved by a vote of at least two-thirds (2/3rds) of the directors then still in office who were directors at the beginning of such period) cease for any reason to
constitute at least a majority of the Board (excluding any Board seat that is vacant or otherwise unoccupied); or
(f) the Board determines that a Change in Control has occurred.
Notwithstanding anything to the contrary herein, a divestiture or spin-off of a subsidiary or division of PNC or any of its Subsidiaries shall not by itself constitute a
Change in Control.
A.5 “CIC Failure” means the following:
(a) with respect to a CIC Triggering Event described in Section A.7(a),
PNC’s shareholders vote against the transaction approved by the Board or the agreement to consummate the transaction is terminated; or
(b) with respect to a CIC Triggering Event described in Section A.7(b), the proxy contest fails to replace or remove a majority of the members of the Board.
A.6 “CIC Severance Agreement” means the written agreement, if any, between
Optionee and PNC providing, among other things, for certain change in control severance benefits.
A.7 “CIC Triggering Event” means the occurrence of either of the following:
(a) the Board or PNC’s shareholders approve a transaction described in Subsection (b) of the definition of Change in Control contained in Section A.4; or
(b) the commencement of a proxy contest in which any Person seeks to replace or remove a
majority of the members of the Board.
A.8 “Competitive Activity”
means, for purposes of the Agreement and for purposes of determining whether Optionee will be deemed to have violated the detrimental conduct clause of Prior Options, any participation in, employment by, ownership of any equity interest exceeding
one percent (1%) in, or promotion or organization of, any Person other than PNC or any Subsidiary (1) engaged in business activities similar to some or all of the business activities of PNC or any Subsidiary as of Optionee’s Termination Date or
(2) engaged in business activities that Optionee knows PNC or any Subsidiary intends to enter within the first twelve (12) months after Optionee’s Termination Date, in either case whether Optionee is acting as agent, consultant, independent
contractor, employee, officer, director, investor, partner, shareholder, proprietor or in any other individual or representative capacity therein.
A.9 “Corporation” means PNC and its Subsidiaries.
A.10 “Coverage Period” means a period (a) commencing on the earlier to occur of (i) the date of a CIC Triggering Event and (ii) the date of a Change in Control
and (b) ending on the date that is two (2) years after the date of the Change in Control;
provided
,
however
, that in the event that a Coverage Period commences on the date of a CIC Triggering Event, such Coverage Period
-11-
will terminate upon the earlier to occur of (x) the date of a CIC Failure and (y) the date that is two (2) years after the date of the Change in Control
triggered by the CIC Triggering Event. After the termination of any Coverage Period, another Coverage Period will commence upon the earlier to occur of clauses (a)(i) and (a)(ii) in the preceding sentence.
A.11 “Detrimental Conduct.” For purposes of the Agreement and for purposes of
determining whether Optionee will be deemed to have violated the detrimental conduct clause of Prior Options, “Detrimental Conduct” means:
(i) Optionee has engaged, without the prior written consent of PNC (at PNC’s sole discretion), in any Competitive Activity in the continental United States at any
time during the period commencing on Optionee’s Termination Date through the first (1
st
) anniversary of
Optionee’s Termination Date;
(ii) a material breach by Optionee of (1)
any code of conduct of PNC or a Subsidiary or (2) other written policy of PNC or a Subsidiary, in either case required by law or established to maintain compliance with applicable law;
(iii) any act of fraud, misappropriation, material dishonesty, or embezzlement by Optionee against PNC or a Subsidiary or any client or
customer of PNC or a Subsidiary;
(iv) any conviction (including a plea of
guilty or of
nolo contendere
) of Optionee for, or entry by Optionee into a pre-trial disposition with respect to, the commission of a felony that relates to or arises out of Optionee’s employment or other service relationship with the
Corporation; or
(v) entry of any order against Optionee, by any governmental
body having regulatory authority with respect to the business of PNC or any Subsidiary, that relates to or arises out of Optionee’s employment or other service relationship with the Corporation.
Optionee will be deemed to have engaged in Detrimental Conduct, for purposes of the Agreement
and for purposes of determining whether Optionee will be deemed to have violated the detrimental conduct clause of Prior Options, only if and when the CEO or his or her designee (or, if Optionee is the CEO, the Board) determines that Optionee has
engaged in conduct described in clause (i) above, that Optionee is guilty of conduct described in clause (ii) or (iii) above, or that an event described in clause (iv) or (v) above has occurred with respect to Optionee and, if so, determines that
Optionee will be deemed to have engaged in Detrimental Conduct.
A.12
“Exchange Act” means the Securities Exchange Act of 1934 as amended and the rules and regulations promulgated thereunder.
A.13 “Exercise Date” means the date on which PNC receives written notice, in such form as PNC may from time to time prescribe, of the exercise, in whole or in
part, of the Option pursuant to the terms of the Agreement, subject to full payment of the aggregate Option Price and satisfaction of all taxes required to be withheld in connection with such exercise as provided in Sections 4.1, 4.2 and 4.3 of the
Agreement.
A.14 “Expiration Date.”
(a)
Expiration Date
. Expiration Date means the date on which the Option expires, which
will be the tenth (10
th
) anniversary of the Grant Date unless the Option expires earlier pursuant to any of the
provisions set forth in Sections A.14(b) through A.14(d);
provided,
however,
if there is a Change in Control, then notwithstanding Sections A.14(c) and A.14(d), to the extent that the Option is outstanding and vested or vests at the time the Change in Control occurs, the Option will not expire at the earliest
before the close of business on the
-12-
ninetieth (90
th
) day
after the occurrence of the Change in Control (or the tenth (10
th
) anniversary of the Grant Date if earlier),
provided that
either (1) Optionee is an employee of the Corporation at the time the Change in Control occurs and Optionee’s employment with the Corporation is not terminated for Cause or (2) Optionee is a former employee of the
Corporation whose Option, or portion thereof, is outstanding at the time the Change in Control occurs by virtue of the application of one or more of the exceptions set forth in Section A.14(c) and at least one of such exceptions is still applicable
at the time the Change in Control occurs.
In no event will the Option remain
outstanding beyond the tenth (10
th
) anniversary of the Grant Date.
(b)
Termination for Cause
. Upon a termination of Optionee’s employment with the
Corporation for Cause, unless the Committee determines otherwise, the Option will expire at the close of business on Optionee’s Termination Date with respect to all Covered Shares, whether or not vested and whether or not Optionee is eligible
to Retire or Optionee’s employment also terminates for another reason.
(c)
Ceasing to be an Employee other than by Termination for Cause
. If Optionee ceases to be an employee of the Corporation other than by termination of Optionee’s employment for Cause, then unless the Committee determines
otherwise, the Option will expire at the close of business on Optionee’s Termination Date with respect to all Covered Shares, whether or not vested, except to the extent that the provisions set forth in subsection (1), (2), (3), (4) or (5) of
this Section A.14(c) apply to Optionee’s circumstances and such applicable subsection specifies a later expiration date for all or a portion of the Option. If more than one of such exceptions is applicable to the Option or a portion thereof,
then the Option or such portion of the Option will expire in accordance with the provisions of the subsection that specifies the latest expiration date.
(1)
Retirement
.
If the termination of Optionee’s employment with the Corporation meets the definition of Retirement, then the Option will expire on the
tenth (10
th
) anniversary of the Grant Date with respect to any Covered Shares as to which the Option is vested on
the Retirement date or thereafter vests pursuant to Section 2.2 of the Agreement.
(2)
Death
.
If Optionee’s employment with the Corporation is terminated by reason of Optionee’s death, then the Option will expire on the tenth (10
th
) anniversary of the Grant Date.
(3)
Termination during a Coverage Period without Cause or with Good Reason
.
If Optionee’s employment with the Corporation is terminated (other than by
reason of Optionee’s death) during a Coverage Period by the Corporation without Cause or by Optionee with Good Reason, then the Option will expire on the third (3
rd
) anniversary of such Termination Date (but in no event later than on the tenth (10
th
) anniversary of the Grant Date).
(4)
Total and Permanent Disability
.
If Optionee’s employment is terminated by the Corporation by reason of Total and Permanent Disability, then the
Option will expire on the third (3
rd
) anniversary of such Termination Date (but in no event later than on the tenth
(10
th
) anniversary of the Grant Date).
(5)
DEAP or Agreement or Arrangement in lieu of or in addition to DEAP
.
In the event that (a) Optionee’s employment with
the Corporation is terminated by the Corporation, and Optionee is offered and has entered into the standard Waiver and Release Agreement with PNC or a Subsidiary under an applicable PNC or Subsidiary Displaced Employee Assistance Plan, or any
successor plan by whatever name known (“DEAP”), or Optionee is offered and has entered into a similar waiver and release agreement between PNC or a Subsidiary and Optionee pursuant to the terms of an agreement or arrangement entered into
by PNC or a Subsidiary and Optionee in
-13-
lieu of or in addition to the DEAP, and (b) Optionee has not revoked such waiver and release agreement, and (c) the time for revocation of such waiver and
release agreement by Optionee has lapsed, then the Option will expire at the close of business on the ninetieth (90
th
) day after Optionee’s Termination Date (but in no event later than on the tenth (10
th
)
anniversary of the Grant Date) with respect to any Covered Shares as to which the Option has already become vested;
provided
,
however
, that if Optionee returns to employment with the Corporation no later than said ninetieth
(90
th
) day, then for purposes of the Agreement, the entire Option, whether vested or unvested, will be treated as if
the termination of Optionee’s employment with the Corporation had not occurred.
If the vested portion of the Option (or the entire Option if fully vested) will expire on Optionee’s Termination Date unless the conditions set forth in this Section A.14(c)(5) are met, then such vested Option or portion thereof will
not terminate on the Termination Date, but Optionee will not be able to exercise the Option after such Termination Date unless and until all of the conditions set forth in this Section A.14(c)(5) have been met and the Option will terminate on the
ninetieth (90
th
) day after Optionee’s Termination Date (but in no event later than on the tenth (10
th
) anniversary of the Grant Date).
(d)
Detrimental Conduct
. If the Option would otherwise remain outstanding after Optionee’s Termination Date with respect to any of the Covered Shares pursuant
to one or more of the exceptions set forth in the subsections of Section A.14(c), then notwithstanding the provisions of such exception or exceptions, the Option will expire on the date that PNC determines that Optionee has engaged in Detrimental
Conduct, if earlier than the date on which the Option would otherwise expire;
provided
,
however
, that:
(1) no determination that Optionee has engaged in Detrimental Conduct may be made on or after the date of Optionee’s death, and Detrimental Conduct will not apply to
conduct by or activities of beneficiaries or other successors to the Option in the event of Optionee’s death;
(2) in the event that Optionee’s employment with the Corporation is terminated (other than by reason of Optionee’s death) during a Coverage Period by the
Corporation without Cause or by Optionee with Good Reason, whether or not another exception is applicable, no determination that Optionee has engaged in Detrimental Conduct may be made, for purposes of the Agreement and for purposes of determining
whether Optionee will be deemed to have violated the detrimental conduct clause of Prior Options, on or after such Termination Date; and
(3) no determination that Optionee has engaged in Detrimental Conduct may be made after the occurrence of a Change in Control.
For purposes of Prior Options that contain a clause in the definition of expiration date or
date of expiration providing for the early termination of the stock option in certain circumstances where the optionee has engaged in competitive conduct or activity or in other conduct or activity that is inimical, contrary, or harmful to the
Corporation’s interests (the “detrimental conduct clause”), the detrimental conduct clause of the Prior Options will be deemed to have the same meaning and application as this Section A.14(d), and the standard of conduct, standard of
proof, and procedures to be followed when determining whether such detrimental conduct clause will apply and the impact on expiration of the stock option of making such determination will be the same as that provided for in this Section A.14(d).
A.15 “Good Reason” means:
(a) the assignment to Optionee of any duties inconsistent in any respect with Optionee’s
position (including status, offices, titles and reporting requirements), authority, duties or responsibilities immediately prior to either the CIC Triggering Event or the Change in Control,
-14-
or any other action by the Corporation that results in a diminution in any respect in such position, authority, duties or responsibilities, excluding for
this purpose an isolated, insubstantial and inadvertent action not taken in bad faith that is remedied by the Corporation promptly after receipt of notice thereof given by Optionee;
(b) a reduction by the Corporation in Optionee’s annual base salary as in effect on the Grant Date, as the same may be increased from
time to time;
(c) the Corporation’s requiring Optionee to be based at any
office or location that is more than fifty (50) miles from Optionee’s office or location immediately prior to either the CIC Triggering Event or the Change in Control;
(d) the failure by the Corporation (i) to continue in effect any bonus, stock option or other cash or equity-based incentive plan in which
Optionee participates immediately prior to either the CIC Triggering Event or the Change in Control that is material to Optionee’s total compensation, unless a substantially equivalent arrangement (embodied in an ongoing substitute or
alternative plan) has been made with respect to such plan, or (ii) to continue Optionee’s participation in such plan (or in such substitute or alternative plan) on a basis at least as favorable, both in terms of the amount of benefits provided
and the level of Optionee’s participation relative to other participants, as existed immediately prior to the CIC Triggering Event or the Change in Control; or
(e) the failure by the Corporation to continue to provide Optionee with benefits substantially similar to those received by Optionee under
any of the Corporation’s pension (including, but not limited to, tax-qualified plans), life insurance, health, accident, disability or other welfare plans in which Optionee was participating, at costs substantially similar to those paid by
Optionee, immediately prior to the CIC Triggering Event or the Change in Control.
A.16 “Grant Date” means the date set forth as the Grant Date on page 1 of the Agreement.
A.17 “Option” means the Nonstatutory Stock Option granted to Optionee in Section 1 of the Agreement pursuant to which Optionee may purchase shares of PNC common stock as provided in the Agreement.
A.18 “Option Price” means the dollar amount per share of PNC common
stock set forth as the Option Price on page 1 of the Agreement.
A.19
“Optionee” means the person identified as Optionee on page 1 of the Agreement.
A.20 “Person” has the meaning given in Section 3(a)(9) of the Exchange Act and also includes any syndicate or group deemed to be a person under Section 13(d)(3) of the Exchange Act.
A.21 “PNC” means The PNC Financial Services Group, Inc.
A.22 “Prior Options” means PNC stock options granted prior to January 1, 2001 or,
in the case of reload stock options, that were or will be granted in connection with the exercise of original stock options issued prior to that date.
A.23 “Retiree” means an Optionee who has Retired.
A.24 “Retire” or “Retirement” means termination of Optionee’s employment with the Corporation (a) at any time on or after the first day of the
first month coincident with or next following the date on which Optionee attains age fifty-five (55) and completes five (5) years of service (as determined in the same manner as the determination of five years of Vesting Service under the provisions
of The PNC Financial Services Group, Inc. Pension Plan) with the Corporation and (b) for a reason other than termination by reason of Optionee’s death or by the
-15-
Corporation for Cause or, unless the Committee determines otherwise, termination in connection with a divestiture of assets or of one or more Subsidiaries.
A.25 “Right(s)” means stock appreciation right(s) in accordance with
the terms of Article 7 of the Plan.
A.26 “SEC” means the Securities
and Exchange Commission.
A.27 “Termination Date” means
Optionee’s last date of employment with the Corporation. If Optionee is employed by a Subsidiary that ceases to be a Subsidiary of PNC and Optionee does not continue to be employed by PNC or a Subsidiary, then for purposes of the Agreement,
Optionee’s employment with the Corporation terminates effective at the time this occurs.
A.28 “Total and Permanent Disability” means, unless the Committee determines otherwise, Optionee’s disability as determined to be total and permanent by the Corporation for purposes of the Agreement.
-16-
FORM OF ADDENDUM TO STOCK OPTION AGREEMENT
FOR GRANTS WITH RELOAD FEATURE
THE PNC FINANCIAL SERVICES GROUP, INC.
1997 LONG-TERM INCENTIVE AWARD PLAN
ADDENDUM
TO
NONSTATUTORY STOCK OPTION AGREEMENT (“AGREEMENT”)
DATED
,
200
|
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OPTIONEE:
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<EMPLOYEE>
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|
ORIGINAL OPTION GRANT DATE:
|
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, 200
|
|
ORIGINAL OPTION PRICE:
|
|
$
per share
|
|
ORIGINAL OPTION COVERED SHARES:
|
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<SHARES>
|
T
HIS
A
DDENDUM
to the Agreement with respect to the original nonstatutory stock option referenced above (“Original Option”) is made and entered into by and between The PNC Financial Services Group, Inc. (“PNC”) and the
optionee identified above (“Optionee”) in order to provide for the grant of a certain additional stock option or options (“Reload Option”) upon the terms and conditions set forth in this Addendum and the Reload Nonstatutory Stock
Option Agreement for each such grant subsequently delivered to Optionee by PNC and signed by the parties.
1.
Definitions
. Terms defined in The PNC Financial Services Group, Inc. 1997 Long-Term Incentive Award Plan as amended from time to time (“Plan”), or in the Agreement or an Annex thereto, are used in
this Addendum as defined in the Plan, or in the Agreement or an Annex thereto, unless otherwise defined in this Addendum.
2.
Grant of Reload Option
. Provided that Optionee exercises all or a portion of the Original Option while employed by PNC or one of its Subsidiaries and in the
manner specified in Section 3 of this Addendum, Optionee will be granted a Reload Option, as set forth in Section 4 of this Addendum, in connection with each such exercise. Such Reload Option will be granted upon the terms and conditions set forth
in a Reload Nonstatutory Stock Option Agreement provided to Optionee for such grant by PNC following the exercise of the Original Option, subject to Optionee’s timely acceptance of such grant in the manner specified in such Reload Nonstatutory
Stock Option Agreement.
3.
Required Manner of Original Option Exercise
.
To receive a Reload Option, Optionee must exercise all or a portion of the Original Option while employed by PNC or one of its Subsidiaries, and must pay all or a portion of the aggregate Option Price for such exercise or satisfy all or a portion of
the minimum, exercise-related withholding tax requirements incurred in connection with such exercise, or both, in the following manner:
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•
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Exercise Price
: Pay all or a portion of the aggregate Option Price, in accordance with and subject to the limitations of Section 4.2 of the Agreement, for exercise of the
Original Option or portion thereof using eligible previously-acquired shares of PNC common stock, either by physically delivering certificates for the shares to PNC or through PNC’s attestation procedure, where Optionee delivers an executed
affidavit of share ownership form to PNC in which Optionee attests to ownership of a specified number of eligible previously-acquired shares of PNC common stock (which may be in certificated or non-certificated form).
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•
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Exercise-Related Withholding Taxes
: Satisfy all or a portion of the minimum, exercise-related withholding tax requirements incurred in connection with
exercise of the Original Option or portion thereof, in accordance with and subject to the limitations of Section 4.3 of the Agreement, either (i) using eligible previously-acquired shares of PNC common stock (either by physical
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-1-
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delivery of the share certificates to PNC or through PNC’s attestation procedure) or (ii) by having PNC retain shares otherwise issuable to Optionee on
exercise of the Original Option or portion thereof and attesting to PNC that Optionee owns a number of eligible previously-acquired shares of PNC common stock at least equal to the number of shares retained.
|
Eligible Shares
. In order for shares to be eligible previously-acquired shares of PNC
common stock for purposes of this Section 3 of the Addendum (“Eligible Shares”), Optionee must have owned those shares for at least six (6) months prior to the Original Option Exercise Date and, in the case of restricted stock, at least
six (6) months must have passed since the restrictions lapsed, or, in either case, such other period as may be specified or permitted by PNC. In addition, to be Eligible Shares, those shares cannot be subject to any contractual restriction, pledge
or other encumbrance.
4.
Nature of Reload Option
.
(a) A Reload Option will be an Option to purchase, at Fair Market Value as of the Original
Option Exercise Date, a number of shares of PNC common stock equal to the aggregate number of whole Eligible Shares that Optionee, in the manner set forth in Section 3 of this Addendum, either used or attested to the ownership of in connection with
the exercise of all or a portion of the Original Option, in order to pay all or a portion of the aggregate Option Price for such exercise, to satisfy all or a portion of the minimum, exercise-related withholding tax requirements incurred in
connection with such exercise, or both.
Any additional Eligible Shares that
Optionee may decide to use for exercise-related tax withholding in excess of the minimum required withholding amount are
not
counted in determining the number of shares of PNC common stock underlying a Reload Option.
(b) Subject generally to the lapse of a one-year vesting period beginning upon the Reload
Option’s Grant Date, a Reload Option will be exercisable only between its Grant Date and the Original Option Expiration Date, and only in accordance with the terms and conditions of the governing Reload Nonstatutory Stock Option Agreement.
5.
No Additional Reload Option
. No Reload Option will entitle Optionee
to receive another Reload Option upon its exercise.
6.
Applicable Law
.
Notwithstanding anything in this Addendum, PNC will not be required to comply with any term, covenant or condition of this Addendum if and to the extent prohibited by law, including but not limited to federal banking and securities regulations, or
as otherwise directed by one or more regulatory agencies having jurisdiction over PNC or any of its subsidiaries. Further, to the extent, if any, applicable to Optionee, Optionee agrees to reimburse PNC for any amounts Optionee may be required to
reimburse the Corporation pursuant to Section 304 of the Sarbanes-Oxley Act of 2002, and agrees that PNC need not comply with any term, covenant or condition of this Addendum to the extent that doing so would require that Optionee reimburse PNC or
its subsidiaries for such amounts pursuant to Section 304 of the Sarbanes-Oxley Act of 2002.
7.
Effective Date
. This Addendum will not be effective unless and until the Original Option Agreement is effective in accordance with its terms. Upon effectiveness of the Original Option Agreement and upon
execution and delivery of this Addendum by both PNC and Optionee, this Addendum is effective as of the Original Option Grant Date.
-2-
I
N
W
ITNESS
W
HEREOF
, PNC has caused this Addendum to be signed on its behalf,
effective as of the Original Option Grant Date.
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THE PNC FINANCIAL SERVICES GROUP, INC.
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By:
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Chairman and Chief Executive Officer
|
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ATTEST:
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|
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By:
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Corporate Secretary
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Accepted and Agreed to as of the Original Option Grant Date:
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Optionee
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-3-
FORM OF STOCK OPTION
AGREEMENT FOR
EXECUTIVE WITH 1-YEAR VESTING
THE PNC FINANCIAL SERVICES GROUP, INC.
1997
LONG-TERM INCENTIVE AWARD PLAN
NONSTATUTORY STOCK OPTION AGREEMENT
|
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OPTIONEE:
|
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<Name>
|
|
|
|
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GRANT DATE:
|
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, 200
|
|
|
|
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OPTION PRICE:
|
|
$
per share
|
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|
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COVERED SHARES:
|
|
«Shares»
|
Terms defined in The PNC Financial
Services Group, Inc. 1997 Long-Term Incentive Award Plan as amended from time to time (“Plan”) are used in this Agreement (“Agreement”) as defined in the Plan unless otherwise defined in the Agreement or an Annex thereto. In the
Agreement, “PNC” means The PNC Financial Services Group, Inc. and “Corporation” means PNC and its Subsidiaries. For certain definitions, see Annex A attached hereto and incorporated herein by reference. Headings used in the
Agreement and in the Annexes hereto are for convenience only and are not part of the Agreement and Annexes.
1.
Grant of Option
. Pursuant to the Plan and subject to the terms of the Agreement, PNC hereby grants to Optionee an Option to purchase from PNC that number of shares of PNC common stock specified above as the
“Covered Shares,” exercisable at the Option Price.
2.
Terms of
the Option
.
2.1
Type of Option
. The Option is intended to be a
Nonstatutory Stock Option without Rights.
2.2
Option Period
. The Option
is exercisable in whole or in part as to any Covered Shares as to which it is outstanding and has become exercisable (“vested”) at any time and from time to time through the Expiration Date.
To the extent that the Option is otherwise outstanding, the Option will vest as to Covered
Shares as set forth in this Section 2.2.
(a) Unless the Option has become
vested pursuant to Section 2.2(b), 2.2(c), 2.2(d) or 2.2(e), the Option will become exercisable (“vest”) as to all outstanding Covered Shares commencing on the first (1
st
) anniversary date of the Grant Date
provided
that
Optionee is still an employee of the Corporation on such vesting date.
(b) If Optionee’s employment is terminated by the Corporation by reason of Total and
Permanent Disability and not for Cause, the Option will vest as to all outstanding Covered Shares as to which it has not otherwise vested commencing on Optionee’s Termination Date.
(c) If Optionee’s employment with the Corporation is terminated by reason of Optionee’s death, the Option will immediately vest as
to all outstanding Covered Shares as to which it has not otherwise vested, and the Option may be exercised by Optionee’s properly designated beneficiary, by the person or persons entitled to do so under Optionee’s will, or by the person or
persons entitled to do so under the applicable laws of descent and distribution.
(d) If Optionee’s employment with the Corporation is terminated during a Coverage Period by the Corporation without Cause or by Optionee with Good Reason, the Option will vest as to all outstanding Covered Shares as to which it has not
otherwise vested commencing on Optionee’s Termination Date.
(e) Notwithstanding any other provision of this Section 2.2, to the extent that the Option is outstanding but not yet
vested at the time a Change in Control occurs, the Option will vest as to all then outstanding Covered Shares, effective as of the day immediately prior to the occurrence of the Change in Control,
provided that
, at the time the Change in
Control occurs, Optionee is an employee of the Corporation.
If Optionee is
employed by a Subsidiary that ceases to be a Subsidiary of PNC and Optionee does not continue to be employed by PNC or a Subsidiary, then for purposes of the Agreement, Optionee’s employment with the Corporation terminates effective at the time
this occurs.
2.3
Nontransferability; Designation of Beneficiary
. The
Option is not transferable or assignable by Optionee other than by transfer to a properly designated beneficiary in the event of death, or by will or the laws of descent and distribution.
During Optionee’s lifetime, the Option may be exercised only by Optionee or, in the event of Optionee’s legal incapacity, by his
or her legal representative.
During Optionee’s lifetime, Optionee may
file with PNC, at such address and in such manner as PNC may from time to time direct, on a form to be provided by PNC on request, a designation of a beneficiary or beneficiaries (a “properly designated beneficiary”) to hold and exercise
Optionee’s stock options, to the extent outstanding and exercisable, in accordance with their respective stock option agreements and the Plan in the event of Optionee’s death. In the absence of a properly designated beneficiary, the Option
will be held and may be exercised by the person or persons entitled to do so under Optionee’s will or under the applicable laws of descent and distribution.
3.
Capital Adjustments
. The number and class of Covered Shares as to which the Option is outstanding and has not yet been exercised
and the Option Price will be subject to such adjustment, if any, as the Committee in its sole discretion deems appropriate to reflect corporate transactions (including, without limitation, stock dividends, stock splits, spin-offs, split-offs,
recapitalizations, mergers, consolidations or reorganizations of or by PNC (each, a “Corporate Transaction”)), including without limitation cancellation of the Option immediately prior to the effective time of the Corporate Transaction and
payment, in cash, in consideration therefor, of an amount equal to the product of (a) the excess, if any, of the per share value of the consideration payable to a PNC common shareholder in connection with such Corporate Transaction over the Option
Price and (b) the total number of Covered Shares subject to the Option that were outstanding and unexercised immediately prior to the effective time of the Corporate Transaction.
All determinations hereunder will be made by the Committee in its sole discretion and will be final, binding and conclusive for all purposes
on all parties, including without limitation the holder of the Option.
No
fractional shares will be issued on exercise of the Option. PNC will determine the manner in which any fractional shares will be treated.
4.
Exercise of Option
.
4.1
Notice and Effective Date
. The Option may be exercised, in whole or in part, by delivering to PNC written notice of such exercise, in such form as PNC may from time to time prescribe, accompanied by full
payment of the aggregate Option Price with respect to that portion of the Option being exercised and satisfaction of any amounts required to be withheld pursuant to applicable tax laws in connection with such exercise.
In addition, notwithstanding Sections 4.2 and 4.3, Optionee may elect to complete his or her
Option exercise through a brokerage service/margin account pursuant to the broker-assisted cashless option exercise procedure under Regulation T of the Board of Governors of the Federal Reserve System and in such manner as may be permitted by PNC
from time to time consistent with said Regulation T.
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The effective date of such exercise will be the Exercise Date. Until PNC notifies Optionee to the contrary, the form
attached to the Agreement as Annex B shall be used to exercise the Option and the form attached to the Agreement as Annex C shall be used to make tax payment elections.
In the event that the Option is exercised, pursuant to Section 2.3, by any person or persons other than Optionee, such notice of exercise
must be accompanied by appropriate proof of the derivative right of such person or persons to exercise the Option.
4.2
Payment of Option Price
. Upon exercise of the Option, in whole or in part, Optionee may pay the aggregate Option Price (a) in cash, (b) using whole shares of
PNC common stock (either by physical delivery to PNC of certificates for the shares or through PNC’s attestation procedure) having an aggregate Fair Market Value on the Exercise Date not exceeding that portion of the aggregate Option Price
being paid using such shares, or (c) through a combination of cash and shares of PNC common stock;
provided
,
however
, that shares of PNC common stock used to pay all or any portion of the aggregate Option Price may not be subject to
any contractual restriction, pledge or other encumbrance and must be shares that have been owned by Optionee for at least six (6) months prior to the Exercise Date and, in the case of restricted stock, for which it has been at least six (6) months
since the restrictions lapsed, or, in either case, for such other period as may be specified or permitted by PNC.
4.3
Payment of Taxes
. Optionee may elect to satisfy any or all applicable federal, state, or local tax liabilities incurred in connection with exercise of the
Option (a) by payment of cash, (b) subject to such terms and conditions as PNC may from time to time establish, through the retention by PNC of sufficient whole shares of PNC common stock otherwise issuable upon such exercise to satisfy the minimum
amount of taxes required to be withheld in connection with such exercise, or (c) subject to such terms and conditions as PNC may from time to time establish, using whole shares of PNC common stock (either by physical delivery to PNC of certificates
for the shares or through PNC’s attestation procedure) that are not subject to any contractual restriction, pledge or other encumbrance and that have been owned by Optionee for at least six (6) months prior to the Exercise Date and, in the case
of restricted stock, for which it has been at least six (6) months since the restrictions lapsed, or, in either case, for such other period as may be specified or permitted by PNC.
For purposes of this Section 4.3, shares of PNC common stock that are used to satisfy applicable taxes will be valued at their Fair Market
Value on the date the tax withholding obligation arises. In no event will the Fair Market Value of the shares of PNC common stock otherwise issuable upon exercise of the Option but retained pursuant to Section 4.3(b) exceed the minimum amount of
taxes required to be withheld in connection with the Option exercise.
4.4
Effect
. The exercise, in whole or in part, of the Option will cause a reduction in the number of unexercised Covered Shares as to which the Option is outstanding equal to the number of shares of PNC common stock with respect to which the
Option is exercised.
5.
Restrictions on Exercise and on Shares Issued on
Exercise
. Notwithstanding any other provision of the Agreement, the Option may not be exercised at any time that PNC does not have in effect a registration statement under the Securities Act of 1933 as amended relating to the offer of shares of
PNC common stock under the Plan unless PNC agrees to permit such exercise. Upon the issuance of any shares of PNC common stock pursuant to exercise of the Option at a time when such a registration statement is not in effect, Optionee will, upon the
request of PNC, agree in writing that Optionee is acquiring such shares for investment only and not with a view to resale and that Optionee will not sell, pledge, or otherwise dispose of such shares unless and until (a) PNC is furnished with an
opinion of counsel to the effect that registration of such shares pursuant to the Securities Act of 1933 as amended is not required by that Act or by rules and regulations promulgated thereunder, (b) the staff of the SEC has issued a no-action
letter with respect to such disposition, or (c) such registration or notification as is, in the opinion of counsel for PNC, required for the lawful disposition of such shares has been filed and has become effective;
provided
,
however
,
that PNC is not obligated hereby to file any such registration or notification. PNC may place a legend embodying such restrictions on the certificate(s) evidencing such shares.
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6.
Rights as Shareholder
. Optionee will have no rights as a shareholder with respect to any Covered Shares until
the Exercise Date and then only with respect to those shares of PNC common stock issued upon such exercise of the Option and not retained as provided in Section 4.3.
7.
Employment
. Neither the granting of the Option evidenced by the Agreement nor any term or provision of the Agreement will
constitute or be evidence of any understanding, expressed or implied, on the part of PNC or any Subsidiary to employ Optionee for any period.
8.
Subject to the Plan
. The Option evidenced by the Agreement and the exercise thereof are subject to the terms and conditions of the Plan, which is incorporated
by reference herein and made a part hereof, but the terms of the Plan will not be considered an enlargement of any benefits under the Agreement. In addition, the Option is subject to any rules and regulations promulgated by or under the authority of
the Committee.
9.
Optionee Covenants
.
9.1
General
. Optionee and PNC acknowledge and agree that Optionee has received
adequate consideration with respect to enforcement of the provisions of Sections 9 and 10 hereof, that such provisions are reasonable and properly required for the adequate protection of the business of the Corporation, and that enforcement of such
provisions will not prevent Optionee from earning a living.
9.2
Non-Solicitation; No-Hire
. Optionee agrees to comply with the provisions of subsections (a) and (b) of this Section 9.2 while employed by the Corporation and for a period of twelve (12) months after Optionee’s Termination Date regardless
of the reason for such termination of employment.
(a)
Non-Solicitation
.
Optionee shall not, directly or indirectly, either for Optionee’s own benefit or purpose or for the benefit or purpose of any Person other than PNC or any Subsidiary, solicit, call on, do business with, or actively interfere with PNC’s or
any Subsidiary’s relationship with, or attempt to divert or entice away, any Person that Optionee should reasonably know (i) is a customer of PNC or any Subsidiary for which PNC or any Subsidiary provides any services as of the Termination
Date, or (ii) was a customer of PNC or any Subsidiary for which PNC or any Subsidiary provided any services at any time during the twelve (12) months preceding the Termination Date, or (iii) was, as of the Termination Date, considering retention of
PNC or any Subsidiary to provide any services.
(b)
No-Hire
. Optionee
shall not, directly or indirectly, either for Optionee’s own benefit or purpose or for the benefit or purpose of any Person other than PNC or any Subsidiary, employ or offer to employ, call on, or actively interfere with PNC’s or any
Subsidiary’s relationship with, or attempt to divert or entice away, any employee of the Corporation, nor shall Optionee assist any other Person in such activities.
Notwithstanding the above, if Optionee’s employment with the Corporation is terminated by the Corporation without Cause or by Optionee
with Good Reason and such Termination Date occurs during a Coverage Period (either as Coverage Period is defined in Section A.10 of Annex A or, if Optionee was a party to a CIC Severance Agreement that was in effect at the time of such termination
of employment, as Coverage Period is defined in such CIC Severance Agreement, if longer), then commencing immediately after such Termination Date, the provisions of subsections (a) and (b) of this Section 9.2 shall no longer apply and shall be
replaced with the following subsection (c):
(c)
No-Hire
. Optionee
agrees that Optionee shall not, for a period of twelve (12) months after the Termination Date, employ or offer to employ, solicit, actively interfere with PNC’s or any PNC affiliate’s relationship with, or attempt to divert or entice away,
any officer of PNC or any PNC affiliate.
9.3
Confidentiality
. During
Optionee’s employment with the Corporation, and thereafter regardless of the reason for termination of such employment, Optionee will not disclose or use in any way any confidential business or technical information or trade secret acquired in
the course of such employment, all of which is the exclusive and valuable property of the Corporation whether or not conceived of or prepared by Optionee, other than (a) information generally known in the Corporation’s industry or acquired from
public
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sources, (b) as required in the course of employment by the Corporation, (c) as required by any court, supervisory authority, administrative agency or
applicable law, or (d) with the prior written consent of PNC.
9.4
Ownership
of Inventions
. Optionee shall promptly and fully disclose to PNC any and all inventions, discoveries, improvements, ideas or other works of inventorship or authorship, whether or not patentable, that have been or will be conceived and/or reduced
to practice by Optionee during the term of Optionee’s employment with the Corporation, whether alone or with others, and that are (a) related directly or indirectly to the business or activities of PNC or any Subsidiary or (b) developed with
the use of any time, material, facilities or other resources of PNC or any Subsidiary (“Developments”). Optionee agrees to assign and hereby does assign to PNC or its designee all of Optionee’s right, title and interest, including
copyrights and patent rights, in and to all Developments. Optionee shall perform all actions and execute all instruments that PNC or any Subsidiary shall deem necessary to protect or record PNC’s or its designee’s interests in the
Developments. The obligations of this Section 9.4 shall be performed by Optionee without further compensation and shall continue beyond the Termination Date.
10.
Enforcement Provisions
. Optionee understands and agrees to the following provisions regarding enforcement of the Agreement.
10.1
Governing Law and Jurisdiction
. The Agreement is governed by and construed under
the laws of the Commonwealth of Pennsylvania, without regard to conflict of laws rules. Any dispute or claim arising out of or relating to the Agreement or claim of breach hereof shall be brought exclusively in the federal court for the Western
District of Pennsylvania or in the Court of Common Pleas of Allegheny County, Pennsylvania. By execution of the Agreement, Optionee and PNC hereby consent to the exclusive jurisdiction of such courts, and waive any right to challenge jurisdiction or
venue in such courts with regard to any suit, action, or proceeding under or in connection with the Agreement.
10.2
Equitable Remedies
. A breach of the provisions of any of Sections 9.2, 9.3 or 9.4 will cause the Corporation irreparable harm, and the Corporation will therefore be entitled to issuance of immediate, as
well as permanent, injunctive relief restraining Optionee, and each and every person and entity acting in concert or participating with Optionee, from initiation and/or continuation of such breach.
10.3
Tolling Period
. If it becomes necessary or desirable for the Corporation to seek
compliance with the provisions of Section 9.2 by legal proceedings, the period during which Optionee shall comply with said provisions shall extend for a period of twelve (12) months from the date of the legal order requiring such compliance.
10.4
No Waiver
. Failure of PNC to demand strict compliance with any of
the terms, covenants or conditions of the Agreement shall not be deemed a waiver of such term, covenant or condition, nor shall any waiver or relinquishment of any such term, covenant or condition on any occasion or on multiple occasions be deemed a
waiver or relinquishment of such term, covenant or condition.
10.5
Severability
. The restrictions and obligations imposed by Sections 9.2, 9.3 and 9.4 are separate and severable, and it is the intent of Optionee and PNC that if any restriction or obligation imposed by any of these provisions is deemed by a
court of competent jurisdiction to be void for any reason whatsoever, the remaining provisions, restrictions and obligations shall remain valid and binding upon Optionee.
10.6
Reform
. In the event any of Sections 9.2, 9.3 and 9.4 are determined by a court of competent jurisdiction to be unenforceable
because unreasonable either as to length of time or area to which said restriction applies, it is the intent of Optionee and PNC that said court reduce and reform the provisions thereof so as to apply the greatest limitations considered enforceable
by the court.
10.7
Waiver of Jury Trial
. Each of Optionee and PNC
hereby waives any right to trial by jury with regard to any suit, action or proceeding under or in connection with any of Sections 9.2, 9.3 and 9.4.
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10.8
Applicable Law
. Notwithstanding anything in the Agreement, PNC will not be required to comply with any term,
covenant or condition of the Agreement if and to the extent prohibited by law, including but not limited to federal banking and securities regulations, or as otherwise directed by one or more regulatory agencies having jurisdiction over PNC or any
of its subsidiaries. Further, to the extent, if any, applicable to Optionee, Optionee agrees to reimburse PNC for any amounts Optionee may be required to reimburse the Corporation pursuant to Section 304 of the Sarbanes-Oxley Act of 2002, and agrees
that PNC need not comply with any term, covenant or condition of the Agreement to the extent that doing so would require that Optionee reimburse PNC or its subsidiaries for such amounts pursuant to Section 304 of the Sarbanes-Oxley Act of 2002.
11.
Amendment of Pre-2004 Options
. For purposes of all PNC stock
options held by Optionee that were granted prior to January 1, 2004 and outstanding on February 18, 2004, the terms of each such option are amended to include, or shall include, as the case may be, the following provisions:
(a) Notwithstanding any other provision of such option relating to vesting, to the extent
that the such option is outstanding but not yet fully vested at the time a Change in Control occurs, the option will vest as to all then outstanding Covered Shares as to which it has not otherwise vested, effective as of the day immediately prior to
the occurrence of the Change in Control,
provided that,
at the time the Change in Control occurs, the optionee is an employee of the Corporation;
(b) If there is a Change in Control, then notwithstanding any other provisions of such option relating to the date of expiration or expiration date of the option, to the
extent that such option is outstanding and vested or vests at the time the Change in Control occurs, such option will not expire at the earliest before the close of business on the ninetieth (90
th
) day after the occurrence of the Change in Control (or the tenth (10
th
) anniversary of the Grant Date if earlier),
provided that
, either (i) the optionee is an employee of the Corporation at the time the Change in Control occurs and the optionee’s employment
with the Corporation is not terminated for Cause or (ii) the optionee is a former employee of the Corporation whose option, or portion thereof, is outstanding at the time the Change in Control occurs because it qualified and continues to qualify
pursuant to the terms of the relevant stock option agreement as amended for an exception to the general rule that stock options expire at the time the optionee ceases to be an employee of the Corporation;
(c) If, under the relevant stock option agreement as amended, more than one exception to the
general rule that stock options expire on termination of the optionee’s employment with the Corporation is applicable to such option or a portion thereof, then the option, or such portion of the option, will expire in accordance with the
provision or provisions of said agreement that specify the latest expiration date;
(d) If the terms of the relevant stock option agreement as amended provide for the early expiration of such stock option in certain circumstances where the optionee has engaged in competitive conduct or activity or in other conduct or
activity that is inimical, contrary, harmful or detrimental to the Corporation’s interests (a “detrimental conduct” provision), no determination that the optionee has engaged in such detrimental conduct may be made on or after the
occurrence of a Change in Control; and
(e) If the termination of the
optionee’s employment with the Corporation meets the definition of Retirement, then with respect to any portion of the option that is outstanding and vested on optionee’s retirement date or that qualifies for post-employment vesting under
the terms of the relevant stock option agreement and vests thereafter, such option will qualify for an exception to the general rule that options expire at the time the optionee ceases to be an employee and will expire on the tenth (10
th
) anniversary date of the Grant Date, subject to the operation of any detrimental conduct provision that may be applicable.
The terms of PNC employee stock options granted after January 1, 2004 shall
also include the capital adjustment provisions set forth in Section 3, unless and until the Committee determines otherwise.
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12.
Effective Date
. If Optionee does not accept the grant of the Option by executing and delivering a copy of the
Agreement to PNC, without altering or changing the terms of the Agreement in any way, within sixty (60) days of receipt by Optionee of a copy of the Agreement, PNC may, in its sole discretion, withdraw its offer and cancel the Option and the
Agreement at any time prior to Optionee’s delivery to PNC of a copy of the Agreement executed by Optionee.
Otherwise, upon execution and delivery of the Agreement by both PNC and Optionee and the filing with and acceptance by the SEC of a Form 4 reporting the Grant, the Option
and the Agreement are effective as of the Grant Date.
I
N
W
ITNESS
W
HEREOF
, PNC has caused the Agreement to be signed on its behalf effective as of the Grant Date.
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THE PNC FINANCIAL SERVICES GROUP, INC.
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By:
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Chairman and Chief Executive Officer
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ATTEST:
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By:
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Corporate Secretary
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Accepted and agreed to as of the Grant Date.
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Optionee
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Annex A - Certain Definitions
Annex B - Notice of Exercise
Annex C - Tax Payment Election
Form
-7-
ANNEX A
THE PNC FINANCIAL SERVICES GROUP, INC.
1997 LONG-TERM INCENTIVE AWARD PLAN
NONSTATUTORY STOCK OPTION AGREEMENT
CERTAIN DEFINITIONS
Except where the context otherwise indicates, the following definitions apply to the Nonstatutory Stock Option Agreement
(“Agreement”) to which this Annex A is attached.
A.1
“Board” means the Board of Directors of PNC.
A.2 “Cause.”
(a)
“Cause” during a Coverage Period
. If the termination of
Optionee’s employment with the Corporation occurs during a Coverage Period, then, for purposes of the Agreement, “Cause” means:
(i) the willful and continued failure of Optionee to substantially perform Optionee’s duties with the Corporation (other than any such failure resulting from
incapacity due to physical or mental illness), after a written demand for substantial performance is delivered to Optionee by the Board or the CEO that specifically identifies the manner in which the Board or the CEO believes that Optionee has not
substantially performed Optionee’s duties; or
(ii) the willful engaging
by Optionee in illegal conduct or gross misconduct that is materially and demonstrably injurious to PNC or any Subsidiary.
For purposes of the preceding clauses (i) and (ii), no act or failure to act, on the part of Optionee, shall be considered willful unless it is done, or omitted to be
done, by Optionee in bad faith and without reasonable belief that Optionee’s action or omission was in the best interests of the Corporation. Any act, or failure to act, based upon the instructions or prior approval of the Board, the CEO or
Optionee’s superior or based upon the advice of counsel for the Corporation, shall be conclusively presumed to be done, or omitted to be done, by Optionee in good faith and in the best interests of the Corporation.
The cessation of employment of Optionee will be deemed to be a termination of Optionee’s
employment with the Corporation for Cause for purposes of the Agreement only if and when there shall have been delivered to Optionee, as part of the notice of Optionee’s termination, a copy of a resolution duly adopted by the affirmative vote
of not less than a majority of the entire membership of the Board, at a Board meeting called and held for the purpose of considering such termination, finding on the basis of clear and convincing evidence that, in the good faith opinion of the
Board, Optionee is guilty of conduct described in clause (i) or (ii) above and, in either case, specifying the particulars thereof in detail. Such resolution shall be adopted only after (1) reasonable notice of such Board meeting is provided to
Optionee, together with written notice that PNC believes that Optionee is guilty of conduct described in clause (i) or (ii) above and, in either case, specifying the particulars thereof in detail, and (2) Optionee is given an opportunity, together
with counsel, to be heard before the Board.
(b)
“Cause” other
than during a Coverage Period
. If the termination of Optionee’s employment with the Corporation occurs other than during a Coverage Period, then, for purposes of the Agreement, “Cause” means:
(i) the willful and continued failure of Optionee to substantially perform Optionee’s
duties with the Corporation (other than any such failure resulting from incapacity due to physical or mental
-8-
illness), after a written demand for substantial performance is delivered to Optionee by PNC that specifically identifies the manner in which it is believed
that Optionee has not substantially performed Optionee’s duties;
(ii) a
material breach by Optionee of (1) any code of conduct of PNC or a Subsidiary or (2) other written policy of PNC or a Subsidiary, in either case required by law or established to maintain compliance with applicable law;
(iii) any act of fraud, misappropriation, material dishonesty, or embezzlement by Optionee
against PNC or a Subsidiary or any client or customer of PNC or a Subsidiary;
(iv) any conviction (including a plea of guilty or of
nolo contendere
) of Optionee for, or entry by Optionee into a pre-trial disposition with respect to, the commission of a felony; or
(v) entry of any order against Optionee, by any governmental body having regulatory authority
with respect to the business of PNC or any Subsidiary, that relates to or arises out of Optionee’s employment or other service relationship with the Corporation.
The cessation of employment of Optionee will be deemed to have been a termination of Optionee’s employment with the Corporation for
Cause for purposes of the Agreement only if and when the CEO or his or her designee (or, if Optionee is the CEO, the Board) determines that Optionee is guilty of conduct described in clause (i), (ii) or (iii) above or that an event described in
clause (iv) or (v) above has occurred with respect to Optionee and, if so, determines that the termination of Optionee’s employment with the Corporation will be deemed to have been for Cause.
A.3 “CEO” means the chief executive officer of PNC.
A.4 “Change in Control” means a change of control of PNC of a nature that would be
required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A (or in response to any similar item on any similar schedule or form) promulgated under the Exchange Act, whether or not PNC is then subject to such reporting
requirement;
provided
,
however
, that without limitation, a Change in Control shall be deemed to have occurred if:
(a) any Person, excluding employee benefit plans of the Corporation, is or becomes the beneficial owner (as defined in Rules 13d-3 and 13d-5 under the Exchange Act or any
successor provisions thereto), directly or indirectly, of securities of PNC representing twenty percent (20%) or more of the combined voting power of PNC’s then outstanding securities;
provided
,
however
, that such an acquisition
of beneficial ownership representing between twenty percent (20%) and forty percent (40%), inclusive, of such voting power shall not be considered a Change in Control if the Board approves such acquisition either prior to or immediately after its
occurrence;
(b) PNC consummates a merger, consolidation, share exchange,
division or other reorganization or transaction of PNC (a “Fundamental Transaction”) with any other corporation, other than a Fundamental Transaction that results in the voting securities of PNC outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least sixty percent (60%) of the combined voting power immediately after such Fundamental Transaction of (i) PNC’s
outstanding securities, (ii) the surviving entity’s outstanding securities, or (iii) in the case of a division, the outstanding securities of each entity resulting from the division;
(c) the shareholders of PNC approve a plan of complete liquidation or winding-up of PNC or an agreement for the sale or disposition (in one
transaction or a series of transactions) of all or substantially all of PNC’s assets;
-9-
(d) as a result of a proxy contest, individuals who prior to the conclusion thereof constituted the Board (including for
this purpose any new director whose election or nomination for election by PNC’s shareholders in connection with such proxy contest was approved by a vote of at least two-thirds (2/3rds) of the directors then still in office who were directors
prior to such proxy contest) cease to constitute at least a majority of the Board (excluding any Board seat that is vacant or otherwise unoccupied);
(e) during any period of twenty-four (24) consecutive months, individuals who at the beginning of such period constituted the Board (including for this purpose any new
director whose election or nomination for election by PNC’s shareholders was approved by a vote of at least two-thirds (2/3rds) of the directors then still in office who were directors at the beginning of such period) cease for any reason to
constitute at least a majority of the Board (excluding any Board seat that is vacant or otherwise unoccupied); or
(f) the Board determines that a Change in Control has occurred.
Notwithstanding anything to the contrary herein, a divestiture or spin-off of a subsidiary or division of PNC or any of its Subsidiaries shall not by itself constitute a
Change in Control.
A.5 “CIC Failure” means the following:
(a) with respect to a CIC Triggering Event described in Section A.7(a),
PNC’s shareholders vote against the transaction approved by the Board or the agreement to consummate the transaction is terminated; or
(b) with respect to a CIC Triggering Event described in Section A.7(b), the proxy contest fails to replace or remove a majority of the members of the Board.
A.6 “CIC Severance Agreement” means the written agreement, if any, between
Optionee and PNC providing, among other things, for certain change in control severance benefits.
A.7 “CIC Triggering Event” means the occurrence of either of the following:
(a) the Board or PNC’s shareholders approve a transaction described in Subsection (b) of the definition of Change in Control contained in Section A.4; or
(b) the commencement of a proxy contest in which any Person seeks to replace or remove a
majority of the members of the Board.
A.8 “Competitive Activity”
means, for purposes of the Agreement, any participation in, employment by, ownership of any equity interest exceeding one percent (1%) in, or promotion or organization of, any Person other than PNC or any Subsidiary (1) engaged in business
activities similar to some or all of the business activities of PNC or any Subsidiary as of Optionee’s Termination Date or (2) engaged in business activities that Optionee knows PNC or any Subsidiary intends to enter within the first twelve
(12) months after Optionee’s Termination Date, in either case whether Optionee is acting as agent, consultant, independent contractor, employee, officer, director, investor, partner, shareholder, proprietor or in any other individual or
representative capacity therein.
A.9 “Corporation” means PNC and its
Subsidiaries.
A.10 “Coverage Period” means a period (a) commencing
on the earlier to occur of (i) the date of a CIC Triggering Event and (ii) the date of a Change in Control and (b) ending on the date that is two (2) years after the date of the Change in Control;
provided
,
however
, that in the event
that a Coverage Period commences on the date of a CIC Triggering Event, such Coverage Period will terminate upon the earlier to occur of (x) the date of a CIC Failure and (y) the date that is
-10-
two (2) years after the date of the Change in Control triggered by the CIC Triggering Event. After the termination of any Coverage Period, another Coverage
Period will commence upon the earlier to occur of clauses (a)(i) and (a)(ii) in the preceding sentence.
A.11 “Detrimental Conduct” means, for purposes of the Agreement:
(i) Optionee has engaged, without the prior written consent of PNC (at PNC’s sole discretion), in any Competitive Activity in the continental United States at any time during the period commencing on
Optionee’s Termination Date through the first (1
st
) anniversary of Optionee’s Termination Date;
(ii) a material breach by Optionee of (1) any code of conduct of PNC or a
Subsidiary or (2) other written policy of PNC or a Subsidiary, in either case required by law or established to maintain compliance with applicable law;
(iii) any act of fraud, misappropriation, material dishonesty, or embezzlement by Optionee against PNC or a Subsidiary or any client or customer of PNC or a Subsidiary;
(iv) any conviction (including a plea of guilty or of
nolo contendere
)
of Optionee for, or entry by Optionee into a pre-trial disposition with respect to, the commission of a felony that relates to or arises out of Optionee’s employment or other service relationship with the Corporation; or
(v) entry of any order against Optionee, by any governmental body having regulatory authority
with respect to the business of PNC or any Subsidiary, that relates to or arises out of Optionee’s employment or other service relationship with the Corporation.
Optionee will be deemed to have engaged in Detrimental Conduct for purposes of the Agreement only if and when the CEO or his or her designee
(or, if Optionee is the CEO, the Board) determines that Optionee has engaged in conduct described in clause (i) above, that Optionee is guilty of conduct described in clause (ii) or (iii) above, or that an event described in clause (iv) or (v) above
has occurred with respect to Optionee and, if so, determines that Optionee will be deemed to have engaged in Detrimental Conduct.
A.12 “Exchange Act” means the Securities Exchange Act of 1934 as amended and the rules and regulations promulgated thereunder.
A.13 “Exercise Date” means the date on which PNC receives written notice, in such
form as PNC may from time to time prescribe, of the exercise, in whole or in part, of the Option pursuant to the terms of the Agreement, subject to full payment of the aggregate Option Price and satisfaction of all taxes required to be withheld in
connection with such exercise as provided in Sections 4.1, 4.2 and 4.3 of the Agreement.
A.14 “Expiration Date.”
(a)
Expiration Date
. Expiration Date means the date on which the Option expires, which will be the tenth (10
th
)
anniversary of the Grant Date unless the Option expires earlier pursuant to any of the provisions set forth in Sections A.14(b) through A.14(d);
provided, however,
if there is a Change in Control, then notwithstanding Sections A.14(c) and A.14(d), to the extent that the Option is outstanding and vested or
vests at the time the Change in Control occurs, the Option will not expire at the earliest before the close of business on the ninetieth (90
th
) day after the occurrence of the Change in Control (or the tenth (10
th
) anniversary of the
Grant Date if earlier),
provided that
either (1) Optionee is an employee of the Corporation at the time the Change in Control occurs and Optionee’s employment with the Corporation is not terminated for Cause or (2) Optionee is a former
employee of the Corporation whose Option, or portion thereof, is outstanding at the time the Change in Control occurs by virtue of the
-11-
application of one or more of the exceptions set forth in Section A.14(c) and at least one of such exceptions is still applicable at the time the Change in
Control occurs.
In no event will the Option remain outstanding beyond the
tenth (10
th
) anniversary of the Grant Date.
(b)
Termination for Cause
. Upon a termination of Optionee’s employment with the Corporation for Cause, unless the Committee
determines otherwise, the Option will expire at the close of business on Optionee’s Termination Date with respect to all Covered Shares, whether or not vested and whether or not Optionee is eligible to Retire or Optionee’s employment also
terminates for another reason.
(c)
Ceasing to be an Employee other than by
Termination for Cause
. If Optionee ceases to be an employee of the Corporation other than by termination of Optionee’s employment for Cause, then unless the Committee determines otherwise, the Option will expire at the close of business on
Optionee’s Termination Date with respect to all Covered Shares, whether or not vested, except to the extent that the provisions set forth in subsection (1), (2), (3), (4) or (5) of this Section A.14(c) apply to Optionee’s circumstances and
such applicable subsection specifies a later expiration date for all or a portion of the Option. If more than one of such exceptions is applicable to the Option or a portion thereof, then the Option or such portion of the Option will expire in
accordance with the provisions of the subsection that specifies the latest expiration date.
(1)
Retirement
.
If the termination of Optionee’s employment with the Corporation meets the definition of Retirement, then the Option will expire on the tenth (10
th
) anniversary of the Grant Date with respect to any Covered Shares as to which the Option is vested on the Retirement date.
(2)
Death
.
If Optionee’s employment with the Corporation is terminated by
reason of Optionee’s death, then the Option will expire on the tenth (10
th
) anniversary of the Grant Date.
(3)
Termination during a Coverage Period without Cause or with Good
Reason
.
If Optionee’s employment with the Corporation is terminated (other than by reason of Optionee’s death) during a Coverage Period by the Corporation without Cause or by Optionee with Good Reason, then the Option will expire
on the third (3
rd
) anniversary of such Termination Date (but in no event later than on the tenth (10
th
) anniversary of the Grant Date).
(4)
Total and Permanent Disability
.
If Optionee’s employment is terminated by the Corporation by reason of Total and Permanent Disability, then the
Option will expire on the third (3
rd
) anniversary of such Termination Date (but in no event later than on the tenth
(10
th
) anniversary of the Grant Date).
(5)
DEAP or Agreement or Arrangement in lieu of or in addition to DEAP
.
In the event that (a) Optionee’s employment with
the Corporation is terminated by the Corporation, and Optionee is offered and has entered into the standard Waiver and Release Agreement with PNC or a Subsidiary under an applicable PNC or Subsidiary Displaced Employee Assistance Plan, or any
successor plan by whatever name known (“DEAP”), or Optionee is offered and has entered into a similar waiver and release agreement between PNC or a Subsidiary and Optionee pursuant to the terms of an agreement or arrangement entered into
by PNC or a Subsidiary and Optionee in lieu of or in addition to the DEAP, and (b) Optionee has not revoked such waiver and release agreement, and (c) the time for revocation of such waiver and release agreement by Optionee has lapsed, then the
Option will expire at the close of business on the ninetieth (90
th
) day after Optionee’s Termination Date (but
in no event later than on the tenth (10
th
) anniversary of the Grant Date) with respect to any Covered Shares as to
which the Option has already become vested;
provided
,
however
, that if Optionee returns to employment with the Corporation no later
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than said ninetieth (90
th
) day, then for purposes of the Agreement, the entire Option, whether vested or unvested, will be treated as if the termination of Optionee’s employment with the Corporation had not occurred.
If the Option is vested and will expire on Optionee’s Termination Date unless the
conditions set forth in this Section A.14(c)(5) are met, then such vested Option will not terminate on the Termination Date, but Optionee will not be able to exercise the Option after such Termination Date unless and until all of the conditions set
forth in this Section A.14(c)(5) have been met and the Option will terminate on the ninetieth (90
th
) day after
Optionee’s Termination Date (but in no event later than on the tenth (10
th
) anniversary of the Grant Date).
(d)
Detrimental Conduct
. If the Option would otherwise remain
outstanding after Optionee’s Termination Date with respect to any of the Covered Shares pursuant to one or more of the exceptions set forth in the subsections of Section A.14(c), then notwithstanding the provisions of such exception or
exceptions, the Option will expire on the date that PNC determines that Optionee has engaged in Detrimental Conduct, if earlier than the date on which the Option would otherwise expire;
provided
,
however
, that:
(1) no determination that Optionee has engaged in Detrimental Conduct may be made on or after
the date of Optionee’s death, and Detrimental Conduct will not apply to conduct by or activities of beneficiaries or other successors to the Option in the event of Optionee’s death;
(2) in the event that Optionee’s employment with the Corporation is terminated (other
than by reason of Optionee’s death) during a Coverage Period by the Corporation without Cause or by Optionee with Good Reason, whether or not another exception is applicable, no determination that Optionee has engaged in Detrimental Conduct may
be made for purposes of the Agreement on or after such Termination Date; and
(3) no determination that Optionee has engaged in Detrimental Conduct may be made after the occurrence of a Change in Control.
A.15 “Good Reason” means:
(a) the assignment to Optionee of any duties inconsistent in any respect with Optionee’s position (including status, offices, titles and reporting requirements),
authority, duties or responsibilities immediately prior to either the CIC Triggering Event or the Change in Control, or any other action by the Corporation that results in a diminution in any respect in such position, authority, duties or
responsibilities, excluding for this purpose an isolated, insubstantial and inadvertent action not taken in bad faith that is remedied by the Corporation promptly after receipt of notice thereof given by Optionee;
(b) a reduction by the Corporation in Optionee’s annual base salary as in effect on the
Grant Date, as the same may be increased from time to time;
(c) the
Corporation’s requiring Optionee to be based at any office or location that is more than fifty (50) miles from Optionee’s office or location immediately prior to either the CIC Triggering Event or the Change in Control;
(d) the failure by the Corporation (i) to continue in effect any bonus, stock option or other
cash or equity-based incentive plan in which Optionee participates immediately prior to either the CIC Triggering Event or the Change in Control that is material to Optionee’s total compensation, unless a substantially equivalent arrangement
(embodied in an ongoing substitute or alternative plan) has been made with respect to such plan, or (ii) to continue Optionee’s participation in such plan (or in such substitute or alternative plan) on a basis at least as
-13-
favorable, both in terms of the amount of benefits provided and the level of Optionee’s participation relative to other participants, as existed
immediately prior to the CIC Triggering Event or the Change in Control; or
(e)
the failure by the Corporation to continue to provide Optionee with benefits substantially similar to those received by Optionee under any of the Corporation’s pension (including, but not limited to, tax-qualified plans), life insurance,
health, accident, disability or other welfare plans in which Optionee was participating, at costs substantially similar to those paid by Optionee, immediately prior to the CIC Triggering Event or the Change in Control.
A.16 “Grant Date” means the date set forth as the Grant Date on page 1 of the
Agreement.
A.17 “Option” means the Nonstatutory Stock Option granted
to Optionee in Section 1 of the Agreement pursuant to which Optionee may purchase shares of PNC common stock as provided in the Agreement.
A.18 “Option Price” means the dollar amount per share of PNC common stock set forth as the Option Price on page 1 of the Agreement.
A.19 “Optionee” means the person identified as Optionee on page 1 of the Agreement.
A.20 “Person” has the meaning given in Section 3(a)(9) of the
Exchange Act and also includes any syndicate or group deemed to be a person under Section 13(d)(3) of the Exchange Act.
A.21 “PNC” means The PNC Financial Services Group, Inc.
A.22 “Retiree” means an Optionee who has Retired.
A.23 “Retire” or “Retirement” means termination of Optionee’s employment with the Corporation (a) at any time on or after the first day of the
first month coincident with or next following the date on which Optionee attains age fifty-five (55) and completes five (5) years of service (as determined in the same manner as the determination of five years of Vesting Service under the provisions
of The PNC Financial Services Group, Inc. Pension Plan) with the Corporation and (b) for a reason other than termination by reason of Optionee’s death or by the Corporation for Cause or, unless the Committee determines otherwise, termination in
connection with a divestiture of assets or of one or more Subsidiaries.
A.24
“Right(s)” means stock appreciation right(s) in accordance with the terms of Article 7 of the Plan.
A.25 “SEC” means the Securities and Exchange Commission.
A.26 “Termination Date” means Optionee’s last date of employment with the Corporation. If Optionee is employed by a Subsidiary that ceases to be a Subsidiary of PNC and Optionee does not continue to be
employed by PNC or a Subsidiary, then for purposes of the Agreement, Optionee’s employment with the Corporation terminates effective at the time this occurs.
A.27 “Total and Permanent Disability” means, unless the Committee determines otherwise, Optionee’s disability as determined
to be total and permanent by the Corporation for purposes of the Agreement.
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FORM OF NON-CEG ANNUAL LTI PROGRAM
RESTRICTED STOCK GRANT AGREEMENT
200_ Long-Term Incentive Award Program Grant
Continued Employment Performance Goal
Restricted Period: Three Years (100%)
THE PNC FINANCIAL SERVICES GROUP, INC.
1997 LONG-TERM INCENTIVE AWARD PLAN
* * *
200
LONG-TERM INCENTIVE AWARD PROGRAM
* * *
RESTRICTED STOCK AGREEMENT
* * *
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GRANTEE:
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< name >
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GRANT DATE:
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, 200
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SHARES:
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< number of whole shares>
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1.
Grant of
Restricted Shares
. Pursuant to Article 12 of The PNC Financial Services Group, Inc. 1997 Long-Term Incentive Award Plan as amended from time to time (“Plan”), and subject to the terms and conditions of this Restricted Stock Agreement
(“Agreement”), The PNC Financial Services Group, Inc. (“PNC”) hereby grants to the Grantee named above (“Grantee”) an Incentive Share Award (as defined in the Plan) of the number of shares of PNC common stock set forth
above, and, upon acceptance of the Grant by Grantee in accordance with Section 17, will cause the issuance of said shares to Grantee subject to the terms and conditions of the Agreement and the Plan. The shares granted and issued to Grantee hereby
as an Incentive Share Award subject to the terms and conditions of the Agreement and the Plan are hereafter referred to as the “Restricted Shares.”
2.
Definitions
. Terms defined in the Plan are used in the Agreement as defined in the Plan unless otherwise defined in Annex A (attached hereto and
incorporated herein by reference) or elsewhere in the Agreement.
3.
Terms of Grant
. The Grant will be subject to the following terms and conditions:
Restricted Shares will be subject to a Restricted Period as provided in Section A.24 of Annex A. Restricted Shares will be deposited with PNC or its
designee,
-1-
or credited to a book-entry account, during the term of the Restricted Period unless and until forfeited pursuant to the terms of the Agreement.
Any certificate or certificates representing such Restricted Shares will
contain the following legend:
“This certificate and the
shares of stock represented hereby are subject to the terms and conditions (including forfeiture and restrictions against transfer) contained in The PNC Financial Services Group, Inc. 1997 Long-Term Incentive Award Plan as amended and an Agreement
entered into between the registered owner and The PNC Financial Services Group, Inc. Release from such terms and conditions will be made only in accordance with the provisions of such Plan and such Agreement, a copy of each of which is on file in
the office of the Corporate Secretary of The PNC Financial Services Group, Inc.”
Where a book-entry system is used with respect to Restricted Shares, appropriate notation of such forfeiture possibility and transfer restrictions will be made on the system with respect to the account or accounts to
which the Restricted Shares are credited.
Restricted Shares
deposited with PNC or its designee during the term of the Restricted Period that become Awarded Shares will be released and issued or reissued to, or at the proper direction of, Grantee or Grantee’s legal representative pursuant to Section 9 as
soon as administratively practicable following the end of the Restricted Period.
4.
Rights as Shareholder
. Except as provided in Section 6 and subject to Section 7.6(c), if applicable, and to Section 17, Grantee will have all the rights and privileges of a shareholder with respect to the
Restricted Shares including, but not limited to, the right to vote the Restricted Shares and the right to receive dividends thereon if and when declared by the Board;
provided, however,
that all such rights and privileges will cease
immediately upon any forfeiture of such shares.
5.
Capital
Adjustments
. Restricted Shares awarded hereunder will, as issued and outstanding shares of PNC common stock, be subject to such adjustment as may be necessary to reflect corporate transactions, including, without limitation, stock dividends,
stock splits, spin-offs, split-offs, recapitalizations, mergers, consolidations or reorganizations of or by PNC;
provided
,
however
, that any shares received as distributions on or in exchange for Unvested Shares will be subject to the
terms and conditions of the Agreement as if they were Restricted Shares.
6.
Prohibitions Against Sale, Assignment, etc.
Unvested Shares may not be sold, assigned, transferred, exchanged, pledged, hypothecated or otherwise encumbered, other than by will or the laws of descent and
distribution or as may be required pursuant to Section 10.2, unless and until the Restricted Period terminates and the Awarded Shares are released and issued or reissued by PNC pursuant to Section 9.
-2-
7.
Forfeiture; Death; Qualifying Disability or Retirement Termination; Termination in Anticipation of
Change in Control
.
7.1
Forfeiture on Termination of
Employment
. Except as otherwise provided in and subject to the conditions of Section 7.3, Section 7.4(a), Section 7.5(a), Section 7.5(c), Section 7.6(a), Section 7.6(b), or Section 8, if applicable, or unless the Committee determines otherwise,
in the event that Grantee’s employment with the Corporation terminates prior to the third (3
rd
) anniversary of
the Grant Date, all Restricted Shares that are Unvested Shares on Grantee’s Termination Date will be forfeited by Grantee to PNC without payment of any consideration by PNC.
Upon forfeiture of Unvested Shares pursuant to the provisions of this Section 7.1 or the provisions of Section 7.2, Section
7.4(b), Section 7.5(b), Section 7.5(c) or Section 7.6(d), neither Grantee nor any successors, heirs, assigns or legal representatives of Grantee will thereafter have any further rights or interest in such Unvested Shares or any certificate or
certificates representing such Unvested Shares.
7.2
Forfeiture for Detrimental Conduct
. Unvested Shares that would otherwise remain outstanding after Grantee’s Termination Date, if any, will be forfeited by Grantee to PNC without payment of any consideration by PNC in the event that, at
any time prior to the date such shares become Awarded Shares, PNC determines that Grantee has engaged in Detrimental Conduct;
provided, however,
that: (a) this Section 7.2 will not apply to Restricted Shares that remain outstanding after
Grantee’s Termination Date pursuant to Section 7.3 or Section 7.6, if any; (b) no determination that Grantee has engaged in Detrimental Conduct may be made on or after the date of Grantee’s death; (c) Detrimental Conduct will not apply to
conduct by or activities of successors to the Restricted Shares by will or the laws of descent and distribution in the event of Grantee’s death; and (d) Detrimental Conduct will cease to apply to any Restricted Shares upon a Change in Control.
7.3
Death
. In the event of Grantee’s death while
an employee of the Corporation and prior to the third (3
rd
) anniversary of the Grant Date, the Three-Year Continued
Employment Performance Goal will be
deemed
to have been achieved, and the Restricted Period with respect to the then outstanding Unvested Shares will terminate on the date of Grantee’s death.
The Restricted Shares which thereby become Awarded Shares will be released
and issued or reissued by PNC to, or at the proper direction of, Grantee’s legal representative pursuant to Section 9 as soon as administratively practicable following such date.
7.4
Disability Termination
.
(a) In the event Grantee’s employment with the Corporation is terminated prior to the third (3
rd
) anniversary of the Grant Date by the Corporation by reason of Grantee’s Total and Permanent Disability, Unvested Shares will not be forfeited on
-3-
Grantee’s Termination Date. Instead, Unvested Shares will, subject to the forfeiture provisions of Section 7.2, remain outstanding pending approval of
the vesting of the Restricted Shares pursuant to this Section 7.4(a) by the Designated Person specified in Section A.13 of Annex A.
If such Unvested Shares are still outstanding but the Designated Person has not made an affirmative determination to either approve or disapprove the
vesting of the Unvested Shares by the day immediately preceding the third (3
rd
) anniversary of the Grant Date, then
the Restricted Period will be automatically extended through the first to occur of: (1) the day the Designated Person makes an affirmative determination regarding such vesting; and (2) either (i) the ninetieth (90
th
) day following the third (3
rd
) anniversary of the Grant Date, if the Designated Person is the Chief Human Resources Officer of PNC, or (ii) the 180
th
day following such anniversary date if the Designated Person is the Committee, whichever is applicable.
If the vesting of the then outstanding Unvested Shares is affirmatively approved by the Designated Person on or prior to the last day of the Restricted
Period, including any extension of the Restricted Period, if applicable, then the Three-Year Continued Employment Performance Goal will be
deemed
to have been achieved, and the Restricted Period with respect to any then outstanding Unvested
Shares will terminate as of the end of the day on the date of such approval or the day immediately preceding the third (3
rd
) anniversary of the Grant Date, whichever is later. The Restricted Shares outstanding at the termination of the Restricted Period will become Awarded Shares and will be released and issued or reissued by PNC pursuant to Section 9.
(b) If the Designated Person disapproves the vesting of the
Unvested Shares that had remained outstanding after Grantee’s Termination Date pending approval of vesting, then all such Unvested Shares that are still outstanding will be forfeited by Grantee to PNC on such disapproval date without payment of
any consideration by PNC.
If by the end of the Restricted
Period, including any extension of the Restricted Period pursuant to the second paragraph of Section 7.4(a), if applicable, the Designated Person has neither affirmatively approved nor disapproved the vesting of the Unvested Shares that had remained
outstanding after Grantee’s Termination Date pending approval of vesting, then all such Unvested Shares that are still outstanding will be forfeited by Grantee to PNC at the close of business on the last day of the Restricted Period without
payment of any consideration by PNC.
7.5
Retirement
.
(a) In the event that Grantee Retires on or after the first
(1
st
) anniversary of the Grant Date but prior to the third (3
rd
) anniversary of the Grant Date, Unvested Shares will not be forfeited on Grantee’s Termination Date. Instead, Unvested Shares will, subject to the
forfeiture provisions of Section 7.2, remain outstanding pending approval of the vesting of the Restricted Shares pursuant to this Section 7.5(a) by the Designated Person specified in Section A.13 of Annex A.
-4-
If such Unvested Shares are still outstanding but the Designated Person has not made an affirmative
determination to either approve or disapprove the vesting of the Unvested Shares by the day immediately preceding the third (3
rd
) anniversary of the Grant Date, then the Restricted Period will be automatically extended through the first to occur of: (1) the day the Designated Person makes an affirmative determination regarding such vesting; and (2) either (i)
the ninetieth (90
th
) day following the third (3
rd
) anniversary of the Grant Date, if the Designated Person is the Chief Human Resources Officer of PNC, or (ii) the 180
th
day following such anniversary date if the Designated Person is the Committee, whichever is applicable.
If the vesting of the then outstanding Unvested Shares is affirmatively
approved by the Designated Person on or prior to the last day of the Restricted Period, including any extension of the Restricted Period, if applicable, then the Three-Year Continued Employment Performance Goal will be
deemed
to have been
achieved, and the Restricted Period with respect to any then outstanding Unvested Shares will terminate as of the end of the day on the date of such approval or the day immediately preceding the third (3
rd
) anniversary of the Grant Date, whichever is later. The Restricted Shares outstanding at the termination of the Restricted Period will become Awarded Shares
and will be released and issued or reissued by PNC pursuant to Section 9.
(b) If the Designated Person disapproves the vesting of the Unvested Shares that had remained outstanding after Grantee’s Termination Date pending approval of vesting, then all such Unvested Shares that are still
outstanding will be forfeited by Grantee to PNC on such disapproval date without payment of any consideration by PNC.
If by the end of the Restricted Period, including any extension of the Restricted Period pursuant to the second paragraph of Section 7.5(a), if
applicable, the Designated Person has neither affirmatively approved nor disapproved the vesting of the Unvested Shares that had remained outstanding after Grantee’s Termination Date pending approval of vesting, then all such Unvested Shares
that are still outstanding will be forfeited by Grantee to PNC at the close of business on the last day of the Restricted Period without payment of any consideration by PNC.
(c) In the event that Grantee Retires prior to the first (1
st
) anniversary of the Grant Date, all Restricted Shares that are Unvested Shares on Grantee’s Termination Date will be forfeited by Grantee to PNC on such
date without payment of any consideration by PNC;
provided, however,
that the Committee may, in its sole discretion with respect to some or all of the Unvested Shares, treat such shares as if Grantee had retired on or after the first
(1
st
) anniversary of the Grant Date.
7.6
Termination in Anticipation of a Change in Control
.
(a) Notwithstanding anything in the Agreement to the contrary, if, after the
occurrence of a CIC Triggering Event but prior to a CIC Failure and prior to the third (3
rd
) anniversary of the
Grant Date, Grantee’s employment is terminated (other than by reason of Grantee’s death) by the Corporation without Cause or by Grantee for Good
-5-
Reason, or if Grantee’s employment is
deemed
to have been so terminated pursuant to Section 7.6(b), then: (i) the Three-Year Continued Employment
Performance Goal will be
deemed
to have been achieved and the Restricted Period with respect to any then outstanding Unvested Shares will terminate as of the end of the day on the day immediately preceding Grantee’s Termination Date (or,
in the case of a qualifying termination pursuant to Section 7.6(b), the date all of the conditions set forth in clauses (i), (ii) and (iii) of the first or second paragraph, as the case may be, of Section 7.6(b) are met); and (ii) all Restricted
Shares that thereby become Awarded Shares will be released and issued or reissued by PNC pursuant to Section 9 as soon as administratively practicable following such date.
(b) Grantee’s employment will also be
deemed
to have been terminated by the Corporation without Cause after the
occurrence of a CIC Triggering Event but prior to a CIC Failure for purposes of Section 7.6(a) if: (i) Grantee’s employment is terminated by the Corporation without Cause; (ii) such termination of employment (a) was at the request of a third
party that has taken steps reasonably calculated to effect a Change in Control or (b) otherwise arose in anticipation of a Change in Control; and (iii) a CIC Triggering Event or a Change in Control occurs within three (3) months of such termination
of employment.
Grantee’s employment will also be
deemed
to have been terminated by Grantee for Good Reason after the occurrence of a CIC Triggering Event but prior to a CIC Failure for purposes of Section 7.6(a) if: (i) Grantee terminates Grantee’s employment with Good Reason; (ii) the
circumstance or event that constitutes Good Reason (a) occurs at the request of a third party that has taken steps reasonably calculated to effect a Change in Control or (b) otherwise arose in anticipation of a Change in Control; and (iii) a CIC
Triggering Event or a Change in Control occurs within three (3) months of such termination of employment.
For purposes of this Section 7.6(b) only, Grantee will have the burden of proving that the requirements of clause (ii) of the first or second paragraph of
this Section 7.6(b), as the case may be, have been met and the standard of proof to be met by Grantee will be clear and convincing evidence.
For purposes of this Section 7.6(b) only, the definition of Change in Control in Section A.6 of Annex A will exclude the
proviso
in Section A.6(a).
(c) If the Unvested Shares will be forfeited by Grantee to PNC
by reason of Grantee’s termination of employment with the Corporation pursuant to Section 7.1 unless all of the conditions set forth in clauses (i), (ii) and (iii) of the first or second paragraph, as the case may be, of Section 7.6(b) are met,
then in the event that the record date for any dividend payable with respect to the Unvested Shares occurs on or after Grantee’s Termination Date but prior to the time all of the conditions set forth in clauses (i), (ii) and (iii) of the first
or second paragraph, as the case may be, of Section 7.6(b) have been met, such dividend will be held, without interest, pending satisfaction of all of such conditions. In the event that one or more of the conditions of Section 7.6(b) are
not
met, any dividend
-6-
being held pending satisfaction of such conditions will be forfeited by Grantee to PNC without payment of any consideration by PNC.
(d) If the Unvested Shares will be forfeited by Grantee to PNC by reason of
Grantee’s termination of employment with the Corporation pursuant to Section 7.1 unless all of the conditions set forth in clauses (i), (ii) and (iii) of the first or second paragraph, as the case may be, of Section 7.6(b) are met, then the
Restricted Shares will remain outstanding pending satisfaction of all of those conditions. Upon the failure of any required condition, all such Unvested Shares will be forfeited by Grantee to PNC on the date such failure occurs without payment of
any consideration by PNC.
8.
Change in Control
.
Notwithstanding anything in the Agreement to the contrary, upon the occurrence of a Change in Control: (i) if Grantee is an employee of the Corporation as of the day immediately preceding the Change in Control, the Three-Year Continued Employment
Performance Goal will be
deemed
to have been achieved and the Restricted Period will terminate with respect to all then outstanding Unvested Shares as of the day immediately preceding the Change in Control; (ii) if Grantee’s employment
with the Corporation terminated prior to the occurrence of the Change in Control but the Unvested Shares remained outstanding after such termination of employment pursuant to Section 7.4 or Section 7.5 and are still outstanding pending approval of
the vesting of such shares by the Designated Person specified in Section A.13 of Annex A, then with respect to all Unvested Shares outstanding as of the day immediately preceding the Change in Control, such vesting approval will be
deemed
to
have been given, the Three-Year Continued Employment Performance Goal will be
deemed
to have been achieved, and the Restricted Period will terminate, all as of the day immediately preceding the Change in Control; and (iii) all Restricted
Shares that thereby become Awarded Shares will be released and issued or reissued by PNC pursuant to Section 9 as soon as administratively practicable following such date.
9.
Termination of Prohibitions
. Following termination of the Restricted Period, PNC will release and issue or reissue
the certificate or certificates representing the then outstanding whole Restricted Shares that have become Awarded Shares without the legend referred to in Section 3.
Upon release and issuance or reissuance of shares that have become Awarded Shares, PNC or its designee will deliver the
certificate or certificates for such whole shares to, or at the proper direction of, Grantee or Grantee’s legal representative.
10.
Payment of Taxes
.
10.1
Internal Revenue Code Section 83(b) Election
. In the event that Grantee makes an Internal Revenue Code Section 83(b) election with respect to
the Restricted Shares, Grantee shall satisfy all applicable federal, state or local withholding tax obligations arising from that election either: (a) by payment of cash; (b) by physical delivery to PNC of certificates for whole shares of PNC common
stock that are not subject to any contractual restriction, pledge or other encumbrance and that have been
-7-
owned by Grantee for at least six (6) months and, in the case of restricted stock, for which it has been at least six (6) months since the restrictions
lapsed; or (c) by a combination of cash and such stock. Any such tax election shall be made pursuant to a form to be provided to Grantee by PNC on request. For purposes of this Section 10.1, shares of PNC common stock that are used to satisfy
applicable withholding tax obligations will be valued at their Fair Market Value on the date the tax withholding obligation arises. Grantee will provide to PNC a copy of any Internal Revenue Code Section 83(b) election filed by Grantee with respect
to the Restricted Shares not later than ten (10) days after the filing of such election.
10.2
Other Tax Liabilities
. Where Grantee has not previously satisfied all applicable withholding tax obligations, PNC will, at the time the tax withholding obligation arises, retain sufficient whole shares of
PNC common stock from the shares granted pursuant to the Agreement to satisfy the minimum amount of taxes required to be withheld by the Corporation in connection with the Restricted Shares. For purposes of this Section 10.2, shares of PNC common
stock retained to satisfy applicable withholding tax requirements will be valued at their Fair Market Value on the date the tax withholding obligation arises.
PNC will
not
retain more than the number of shares sufficient to satisfy the minimum amount of taxes required to be withheld in connection with
the Restricted Shares. If Grantee desires to have an additional amount, up to Grantee’s W-4 obligation, withheld above the required minimum and if PNC so permits, Grantee may elect to satisfy this additional withholding either: (a) by payment
of cash; or (b) using whole shares of PNC common stock (either by physical delivery to PNC of certificates for the shares or through PNC’s attestation procedure) that are not subject to any contractual restriction, pledge or other encumbrance
and that have been owned by Grantee for at least six (6) months and, in the case of restricted stock, for which it has been at least six (6) months since the restrictions lapsed. Any such tax election shall be made pursuant to a form provided by
PNC. Shares of PNC common stock that are used for this purpose will be valued at their Fair Market Value on the date the tax withholding obligation arises.
11.
Employment
. Neither the granting and issuance of the Restricted Shares nor any term or provision of the Agreement shall constitute or be
evidence of any understanding, expressed or implied, on the part of PNC or any Subsidiary to employ Grantee for any period or in any way alter Grantee’s status as an employee at will.
12.
Subject to the Plan and the Committee
. In all respects the Grant
and the Agreement are subject to the terms and conditions of the Plan, which has been made available to Grantee and is incorporated herein by reference;
provided, however,
the terms of the Plan shall not be considered an enlargement of any
benefits under the Agreement. Further, the Grant and the Agreement are subject to any interpretation of, and any rules and regulations issued by, the Committee or under the authority of the Committee, whether made or issued before or after the Grant
Date.
-8-
13.
Headings; Entire Agreement
. Headings used in the Agreement are provided for reference and
convenience only, shall not be considered part of the Agreement, and shall not be employed in the construction of the Agreement. The Agreement constitutes the entire agreement between Grantee and PNC and supersedes all other discussions,
negotiations, correspondence, representations, understandings and agreements between the parties with respect to the subject matter hereof.
14.
Grantee Covenants
.
14.1
General
. Grantee and PNC acknowledge and agree that Grantee has received adequate consideration with respect to enforcement of the provisions
of Sections 14 and 15, that such provisions are reasonable and properly required for the adequate protection of the business of the Corporation, and that enforcement of such provisions will not prevent Grantee from earning a living.
14.2
Non-Solicitation; No-Hire
. Grantee agrees to comply with the
provisions of subsections (a) and (b) of this Section 14.2 while employed by the Corporation and for a period of twelve (12) months after Grantee’s Termination Date regardless of the reason for such termination of employment.
(a)
Non-Solicitation
. Grantee shall not, directly or indirectly,
either for Grantee’s own benefit or purpose or for the benefit or purpose of any Person other than PNC or any Subsidiary, solicit, call on, do business with, or actively interfere with PNC’s or any Subsidiary’s relationship with, or
attempt to divert or entice away, any Person that Grantee should reasonably know (i) is a customer of PNC or any Subsidiary for which PNC or any Subsidiary provides any services as of the Termination Date, or (ii) was a customer of PNC or any
Subsidiary for which PNC or any Subsidiary provided any services at any time during the twelve (12) months preceding the Termination Date, or (iii) was, as of the Termination Date, considering retention of PNC or any Subsidiary to provide any
services.
(b)
No-Hire
. Grantee shall not, directly or
indirectly, either for Grantee’s own benefit or purpose or for the benefit or purpose of any Person other than PNC or any Subsidiary, employ or offer to employ, call on, or actively interfere with PNC’s or any Subsidiary’s
relationship with, or attempt to divert or entice away, any employee of the Corporation, nor shall Grantee assist any other Person in such activities.
Notwithstanding the above, if Grantee’s employment with the Corporation is terminated by the Corporation without Cause or by Grantee with Good Reason
and such Termination Date occurs during a Coverage Period (either as Coverage Period is defined in Section A.12 of Annex A or, if Grantee was a party to a written agreement between Grantee and PNC providing, among other things, for certain change in
control severance benefits (a “CIC Severance Agreement”) that was in effect at the time of such termination of employment, as Coverage Period is defined in such CIC Severance Agreement, if longer), then commencing immediately after such
Termination Date, the provisions of
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subsections (a) and (b) of this Section 14.2 will no longer apply and will be replaced with the following subsection (c):
(c)
No-Hire
. Grantee agrees that Grantee shall not, for a period of
twelve (12) months after the Termination Date, employ or offer to employ, solicit, actively interfere with PNC’s or any PNC affiliate’s relationship with, or attempt to divert or entice away, any officer of PNC or any PNC affiliate.
14.3
Confidentiality
. During Grantee’s employment
with the Corporation, and thereafter regardless of the reason for termination of such employment, Grantee will not disclose or use in any way any confidential business or technical information or trade secret acquired in the course of such
employment, all of which is the exclusive and valuable property of the Corporation whether or not conceived of or prepared by Grantee, other than (a) information generally known in the Corporation’s industry or acquired from public sources, (b)
as required in the course of employment by the Corporation, (c) as required by any court, supervisory authority, administrative agency or applicable law, or (d) with the prior written consent of PNC.
14.4
Ownership of Inventions
. Grantee shall promptly and fully
disclose to PNC any and all inventions, discoveries, improvements, ideas or other works of inventorship or authorship, whether or not patentable, that have been or will be conceived and/or reduced to practice by Grantee during the term of
Grantee’s employment with the Corporation, whether alone or with others, and that are (a) related directly or indirectly to the business or activities of PNC or any Subsidiary or (b) developed with the use of any time, material, facilities or
other resources of PNC or any Subsidiary (“Developments”). Grantee agrees to assign and hereby does assign to PNC or its designee all of Grantee’s right, title and interest, including copyrights and patent rights, in and to all
Developments. Grantee shall perform all actions and execute all instruments that PNC or any Subsidiary shall deem necessary to protect or record PNC’s or its designee’s interests in the Developments. The obligations of this Section 14.4
shall be performed by Grantee without further compensation and will continue beyond the Termination Date.
15.
Enforcement Provisions
. Grantee understands and agrees to the following provisions regarding enforcement of the Agreement.
15.1
Governing Law and Jurisdiction
. The Agreement is governed by and
construed under the laws of the Commonwealth of Pennsylvania, without regard to conflict of laws rules. Any dispute or claim arising out of or relating to the Agreement or claim of breach hereof shall be brought exclusively in the federal court for
the Western District of Pennsylvania or in the Court of Common Pleas of Allegheny County, Pennsylvania. By execution of the Agreement, Grantee and PNC hereby consent to the exclusive jurisdiction of such courts, and waive any right to challenge
jurisdiction or venue in such courts with regard to any suit, action, or proceeding under or in connection with the Agreement.
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15.2
Equitable Remedies
. A breach of the provisions of any of Sections 14.2, 14.3 or 14.4 will
cause the Corporation irreparable harm, and the Corporation will therefore be entitled to issuance of immediate, as well as permanent, injunctive relief restraining Grantee, and each and every person and entity acting in concert or participating
with Grantee, from initiation and/or continuation of such breach.
15.3
Tolling Period
. If it becomes necessary or desirable for the Corporation to seek compliance with the provisions of Section 14.2 by legal proceedings, the period during which Grantee shall comply with said provisions will extend
for a period of twelve (12) months from the date of the legal order requiring such compliance.
15.4
No Waiver
. Failure of PNC to demand strict compliance with any of the terms, covenants or conditions of the Agreement will not be deemed a waiver of such term, covenant or condition, nor will any waiver or
relinquishment of any such term, covenant or condition on any occasion or on multiple occasions be deemed a waiver or relinquishment of such term, covenant or condition.
15.5
Severability
. The restrictions and obligations imposed by Sections 14.2, 14.3 and 14.4 are separate and
severable, and it is the intent of Grantee and PNC that if any restriction or obligation imposed by any of these provisions is deemed by a court of competent jurisdiction to be void for any reason whatsoever, the remaining provisions, restrictions
and obligations will remain valid and binding upon Grantee.
15.6
Reform
. In the event any of Sections 14.2, 14.3 and 14.4 are determined by a court of competent jurisdiction to be unenforceable because unreasonable either as to length of time or area to which said restriction applies, it is
the intent of Grantee and PNC that said court reduce and reform the provisions thereof so as to apply the greatest limitations considered enforceable by the court.
15.7
Waiver of Jury Trial
. Each of Grantee and PNC hereby waives any right to trial by jury with regard to any suit,
action or proceeding under or in connection with any of Sections 14.2, 14.3 and 14.4.
15.8
Applicable Law
. Notwithstanding anything in the Agreement, PNC will not be required to comply with any term, covenant or condition of the Agreement if and to the extent prohibited by law, including but not
limited to federal banking and securities regulations, or as otherwise directed by one or more regulatory agencies having jurisdiction over PNC or any of its subsidiaries. Further, to the extent, if any, applicable to Grantee, Grantee agrees to
reimburse PNC for any amounts Grantee may be required to reimburse PNC or its subsidiaries pursuant to Section 304 of the Sarbanes-Oxley Act of 2002, and agrees that PNC need not comply with any term, covenant or condition of the Agreement to the
extent that doing so would require that Grantee reimburse PNC or its subsidiaries for such amounts pursuant to Section 304 of the Sarbanes-Oxley Act of 2002.
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16.
Amendment of Pre-2004 Stock Options, Restricted Stock and Restricted Stock Deferrals
. All
nonstatutory stock options granted to employees under the Plan outstanding on February 18, 2004, all restricted stock grants to employees under the Plan or PNC’s 1996 Executive Incentive Award Plan outstanding but not yet vested on February 18,
2004, and all participant restricted stock deferral accounts under the PNC and Affiliates Deferred Compensation Plan that were in place but not yet vested on February 18, 2004, are subject to the amendments approved by the Committee on that date.
These amendments are generally described in the Plan prospectus dated
, 200
under the heading
“Recent Amendments” of the section titled “The Plan.” A copy of this Plan prospectus accompanied or preceded delivery of the Agreement to Grantee.
To the extent that Grantee is the holder of any such stock options or is the grantee of any such restricted stock or is a
participant in the PNC and Affiliates Deferred Compensation Plan with such stock deferral account or accounts in place but not yet vested, Grantee hereby acknowledges and consents to such amendments.
17.
Acceptance of Grant; PNC Right to Cancel
. If Grantee does not
accept the Grant by executing and delivering a copy of the Agreement to PNC, without altering or changing the terms thereof in any way, within sixty (60) days of receipt by Grantee of a copy of the Agreement, PNC may, in its sole discretion,
withdraw its offer and cancel the Grant at any time prior to Grantee’s delivery to PNC of a copy of the Agreement executed by Grantee. Otherwise, upon execution and delivery of the Agreement by both PNC and Grantee and, in the event that
Grantee is subject to the reporting requirements of Section 16(a) of the Exchange Act with respect to PNC securities, the filing with and acceptance by the SEC of a Form 4 reporting the Grant, the Agreement is effective.
Grantee will not have any of the rights of a shareholder with respect to the
Restricted Shares as set forth in Section 4, and will not have the right to vote or to receive dividends on such shares, until the date the Agreement is effective and the Restricted Shares are issued in accordance with this Section 17.
In the event that one or more record dates for dividends on PNC common
stock occur after the Grant Date but before the date the Agreement is effective in accordance with this Section 17 and the Restricted Shares are issued, then upon the effectiveness of the Agreement, the Corporation will make a cash payment to
Grantee equivalent to the amount of the dividends Grantee would have received had the Agreement been effective and the Restricted Shares had been issued on the Grant Date.
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I
N
W
ITNESS
W
HEREOF
, PNC has caused the Agreement to be
signed on its behalf as of the Grant Date.
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THE PNC FINANCIAL SERVICES GROUP, INC.
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By:
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Chairman and Chief Executive Officer
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ATTEST:
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By:
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Corporate Secretary
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A
CCEPTED
AND
A
GREED
TO
by G
RANTEE
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Grantee
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200_ Long-Term Incentive Award Program Grant
Continued Employment Performance Goal
Restricted Period: Three Years (100%)
ANNEX A
TO
THE PNC FINANCIAL SERVICES GROUP, INC.
1997 LONG-TERM INCENTIVE AWARD PLAN
200_
LONG-TERM INCENTIVE AWARD PROGRAM
RESTRICTED STOCK AGREEMENT
* * *
CERTAIN DEFINITIONS
Except where the context otherwise indicates, the following definitions apply for purposes of the Restricted Stock Agreement (“Agreement”) to
which this Annex A is attached:
A.1 “
Awarded
Shares
.” Provided that the Restricted Shares are then outstanding, Restricted Shares become “Awarded Shares” when both of the following have occurred: (a) the Three-Year Continued Employment Performance Goal has been achieved or
is
deemed
to have been achieved pursuant to the terms of the Agreement; and (b) the Restricted Period has terminated.
A.2 “
Board
” means the Board of Directors of PNC.
A.3 “
Business Day
” means any day when the New York Stock Exchange is open for business.
A.4 “
Cause
” means:
(a) the willful and continued failure of Grantee to substantially perform
Grantee’s duties with the Corporation (other than any such failure resulting from incapacity due to physical or mental illness), after a written demand for substantial performance is delivered to Grantee by the Board or the CEO which
specifically identifies the manner in which the Board or the CEO believes that Grantee has not substantially performed Grantee’s duties; or
(b) the willful engaging by Grantee in illegal conduct or gross misconduct that is materially and demonstrably injurious to PNC or any Subsidiary.
For purposes of the preceding clauses (a) and (b), no act or
failure to act, on the part of Grantee, shall be considered willful unless it is done, or omitted to be done, by
-14-
Grantee in bad faith and without reasonable belief that Grantee’s action or omission was in the best interests of the Corporation. Any act, or failure
to act, based upon the instructions or prior approval of the Board, the CEO or Grantee’s superior or based upon the advice of counsel for the Corporation, shall be conclusively presumed to be done, or omitted to be done, by Grantee in good
faith and in the best interests of the Corporation.
The
cessation of employment of Grantee will be
deemed
to be a termination of Grantee’s employment with the Corporation for Cause for purposes of the Agreement only if and when there shall have been delivered to Grantee, as part of the notice
of Grantee’s termination, a copy of a resolution duly adopted by the affirmative vote of not less than a majority of the entire membership of the Board, at a Board meeting called and held for the purpose of considering such termination, finding
on the basis of clear and convincing evidence that, in the good faith opinion of the Board, Grantee is guilty of conduct described in clause (a) or clause (b) above and, in either case, specifying the particulars thereof in detail. Such resolution
shall be adopted only after (i) reasonable notice of such Board meeting is provided to Grantee, together with written notice that PNC believes that Grantee is guilty of conduct described in clause (a) or clause (b) above and, in either case,
specifying the particulars thereof in detail, and (ii) Grantee is given an opportunity, together with counsel, to be heard before the Board.
A.5 “
CEO
” means the chief executive officer of PNC.
A.6 “
Change in Control
” means a change of control of PNC of a nature that would be required to be reported
in response to Item 6(e) of Schedule 14A of Regulation 14A (or in response to any similar item on any similar schedule or form) promulgated under the Exchange Act, whether or not PNC is then subject to such reporting requirement;
provided
,
however
, that without limitation, a Change in Control will be
deemed
to have occurred if:
(a) any Person, excluding employee benefits plans of the Corporation, is or becomes the beneficial owner (as defined in Rules 13d-3 and 13d-5 under the
Exchange Act or any successor provisions thereto), directly or indirectly, of securities of PNC representing twenty percent (20%) or more of the combined voting power of PNC’s then outstanding securities;
provided
,
however
, that
such an acquisition of beneficial ownership representing between twenty percent (20%) and forty percent (40%), inclusive, of such voting power will not be considered a Change in Control if the Board approves such acquisition either prior to or
immediately after its occurrence;
(b) PNC consummates a
merger, consolidation, share exchange, division or other reorganization or transaction of PNC (a “Fundamental Transaction”) with any other corporation, other than a Fundamental Transaction that results in the voting securities of PNC
outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least sixty percent (60%) of the combined voting power immediately after such
Fundamental Transaction of (i) PNC’s outstanding securities, (ii) the surviving entity’s outstanding
-15-
securities, or (iii) in the case of a division, the outstanding securities of each entity resulting from the division;
(c) the shareholders of PNC approve a plan of complete liquidation or
winding-up of PNC or an agreement for the sale or disposition (in one transaction or a series of transactions) of all or substantially all of PNC’s assets;
(d) as a result of a proxy contest, individuals who prior to the conclusion thereof constituted the Board (including for this purpose any new director
whose election or nomination for election by PNC’s shareholders in connection with such proxy contest was approved by a vote of at least two-thirds (2/3rds) of the directors then still in office who were directors prior to such proxy contest)
cease to constitute at least a majority of the Board (excluding any Board seat that is vacant or otherwise unoccupied);
(e) during any period of twenty-four (24) consecutive months, individuals who at the beginning of such period constituted the Board (including for this
purpose any new director whose election or nomination for election by PNC’s shareholders was approved by a vote of at least two-thirds (2/3rds) of the directors then still in office who were directors at the beginning of such period) cease for
any reason to constitute at least a majority of the Board (excluding any Board seat that is vacant or otherwise unoccupied); or
(f) the Board determines that a Change in Control has occurred.
Notwithstanding anything to the contrary herein, a divestiture or spin-off of a subsidiary or division of PNC will not by itself constitute a Change in
Control.
A.7 “
CIC Failure
” means the
following:
(a) with respect to a CIC Triggering Event
described in Section A.8(a), PNC’s shareholders vote against the transaction approved by the Board or the agreement to consummate the transaction is terminated; or
(b) with respect to a CIC Triggering Event described in Section A.8(b), the proxy contest fails to replace or remove a
majority of the members of the Board.
A.8 “
CIC
Triggering Event
” means the occurrence of either of the following:
(a) the Board or PNC’s shareholders approve a transaction described in Subsection (b) of the definition of Change in Control contained in Section A.6; or
(b) the commencement of a proxy contest in which any Person seeks to replace
or remove a majority of the members of the Board.
A.9
“
Committee
” means the Personnel and Compensation Committee of the Board.
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A.10 “
Competitive Activity
” means, for purposes of the Agreement, any participation in,
employment by, ownership of any equity interest exceeding one percent (1%) in, or promotion or organization of, any Person other than PNC or any Subsidiary (a) engaged in business activities similar to some or all of the business activities of PNC
or any Subsidiary as of Grantee’s Termination Date or (b) engaged in business activities which Grantee knows PNC or any Subsidiary intends to enter within the first twelve (12) months after Grantee’s Termination Date, in either case
whether Grantee is acting as agent, consultant, independent contractor, employee, officer, director, investor, partner, shareholder, proprietor or in any other individual or representative capacity therein.
A.11 “
Corporation
” means PNC and its Subsidiaries.
A.12 “
Coverage Period
” means a period (a)
commencing on the earlier to occur of (i) the date of a CIC Triggering Event and (ii) the date of a Change in Control and (b) ending on the date that is three (3) years after the date of the Change in Control;
provided
,
however
, that
in the event that a Coverage Period commences on the date of a CIC Triggering Event, such Coverage Period will terminate upon the earlier to occur of (x) the date of a CIC Failure and (y) the date that is three (3) years after the date of the Change
in Control triggered by the CIC Triggering Event. After the termination of any Coverage Period, another Coverage Period will commence upon the earlier to occur of clause (a)(i) and clause (a)(ii) in the preceding sentence.
A.13 “
Designated Person
” will be either: (a) the Committee,
if Grantee is a member of the Corporate Executive Group (or equivalent successor classification) or is subject to the reporting requirements of Section 16(a) of the Exchange Act with respect to PNC securities; or (a) the Chief Human Resources
Officer of PNC, if Grantee is not within one of the groups specified in Section A.13(a).
A.14 “
Detrimental Conduct
” means:
(a) Grantee has engaged, without the prior written consent of PNC (at PNC’s sole discretion), in any Competitive Activity in the continental United States at any time during the period commencing on
Grantee’s Termination Date through the first (1
st
) anniversary of Grantee’s Termination Date;
(b) a material breach by Grantee of (i) any code of conduct of PNC or a
Subsidiary or (ii) other written policy of PNC or a Subsidiary, in either case required by law or established to maintain compliance with applicable law;
(c) any act of fraud, misappropriation, material dishonesty, or embezzlement by Grantee against PNC or a Subsidiary or any client or customer of PNC or a
Subsidiary;
(d) any conviction (including a plea of guilty or
of
nolo contendere
) of Grantee for, or entry by Grantee into a pre-trial disposition with respect to, the
-17-
commission of a felony which relates to or arises out of Grantee’s employment or other service relationship with the Corporation; or
(e) entry of any order against Grantee by any governmental body having
regulatory authority with respect to the business of PNC or any Subsidiary, which order relates to or arises out of Grantee’s employment or other service relationship with the Corporation.
Grantee will be
deemed
to have engaged in Detrimental Conduct for
purposes of the Agreement only if and when the Committee determines that Grantee has engaged in conduct described in clause (a) above, that Grantee is guilty of conduct described in clause (b) or clause (c) above, or that an event described in
clause (d) or clause (e) above has occurred with respect to Grantee and, if so, determines that Grantee will be
deemed
to have engaged in Detrimental Conduct.
A.15 “
Exchange Act
” means the Securities Exchange Act of 1934 as amended, and the rules and regulations
promulgated thereunder.
A.16 “
Fair Market
Value
” as it relates to PNC common stock means the average of the high and low sale prices of the PNC common stock as reported on the New York Stock Exchange (or such successor reporting system as PNC may select) on the relevant date or, if
no sale of the PNC common stock has been reported for that day, the average of such prices on the next preceding day and the next following day for which there were reported sales.
A.17 “
Good Reason
” means:
(a) the assignment to Grantee of any duties inconsistent in any respect with Grantee’s position (including status,
offices, titles and reporting requirements), authority, duties or responsibilities immediately prior to either the CIC Triggering Event or the Change in Control, or any other action by the Corporation which results in a diminution in any respect in
such position, authority, duties or responsibilities, excluding for this purpose an isolated, insubstantial and inadvertent action not taken in bad faith that is remedied by the Corporation promptly after receipt of notice thereof given by Grantee;
(b) a reduction by the Corporation in Grantee’s annual
base salary as in effect on the Grant Date, as the same may be increased from time to time;
(c) the Corporation’s requiring Grantee to be based at any office or location that is more than fifty (50) miles from Grantee’s office or location immediately prior to either the CIC Triggering Event or the
Change in Control;
(d) the failure by the Corporation (i) to
continue in effect any bonus, stock option or other cash or equity-based incentive plan or program in which Grantee participates immediately prior to either the CIC Triggering Event or the Change in Control that is material to Grantee’s total
compensation, unless a substantially equivalent
-18-
arrangement (embodied in an ongoing substitute or alternative plan or program) has been made with respect to such plan or program, or (ii) to continue
Grantee’s participation in such plan or program (or in such substitute or alternative plan or program) on a basis at least as favorable, both in terms of the amount of benefits provided and the level of Grantee’s participation relative to
other participants, as existed immediately prior to the CIC Triggering Event or the Change in Control; or
(e) the failure by the Corporation to continue to provide Grantee with benefits substantially similar to those received by Grantee under any of the
Corporation’s pension (including, but not limited to, tax-qualified plans), life insurance, health, accident, disability or other welfare plans or programs in which Grantee was participating, at costs substantially similar to those paid by
Grantee, immediately prior to the CIC Triggering Event or the Change in Control.
A.18 “
Grant
” means the Restricted Shares granted and issued to Grantee pursuant to Section 1 of the Agreement.
A.19 “
Grant Date
” means the Grant Date set forth on page 1 of the Agreement.
A.20 “
Grantee
” means the person identified as Grantee on
page 1 of the Agreement.
A.21 “
Internal Revenue
Code
” means the Internal Revenue Code of 1986 as amended, and the rules and regulations promulgated thereunder.
A.22 “
Person
” has the meaning given in Section 3(a)(9) of the Exchange Act and also includes any syndicate or group
deemed
to be a
person under Section 13(d)(3) of the Exchange Act.
A.23
“
PNC
” means The PNC Financial Services Group, Inc.
A.24 “
Restricted Period
” means, subject to early termination if so determined by the Committee or pursuant to Section 7.6 of the Agreement, if applicable, the period from the Grant Date through (and including) the earlier
of: (a) the date of Grantee’s death; (b) the day immediately preceding the day a Change in Control is
deemed
to have occurred; and (c) the day immediately preceding the third (3
rd
) anniversary of the Grant Date or, if later, the last day of any extension of the Restricted Period pursuant to Section 7.4(a) or Section 7.5(a) of the
Agreement, if applicable.
A.25 “
Retiree
”
means a Grantee who has Retired.
A.26 “
Retire” or
“Retirement
” means termination of Grantee’s employment with the Corporation at any time and for any reason (other than termination by reason of Grantee’s death or by the Corporation for Cause or, unless the Committee
determines otherwise, termination in connection with a divestiture of assets or of one or more Subsidiaries) if such termination of employment occurs on or after the first (1
st
) day of
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the first (1
st
) month
coincident with or next following the date on which Grantee attains age fifty-five (55) and completes five (5) years of service (as determined in the same manner as the determination of five years of Vesting Service under the provisions of The PNC
Financial Services Group, Inc. Pension Plan) with the Corporation.
A.27 “
SEC
” means the United States Securities and Exchange Commission.
A.28 “
Termination Date
” means Grantee’s last date of employment with the Corporation. If Grantee is employed by a Subsidiary that
ceases to be a Subsidiary of PNC and Grantee does not continue to be employed by PNC or a Subsidiary, then for purposes of the Agreement, Grantee’s employment with the Corporation terminates effective at the time this occurs.
A.29 “
Three-Year Continued Employment Performance Goal
”
means, subject to early achievement if so determined by the Committee or to
deemed
achievement pursuant to Section 7.3, Section 7.4, Section 7.5, Section 7.6, or Section 8 of the Agreement, if applicable, that Grantee has been continuously
employed by the Corporation for the period from the Grant Date through (and including) the day immediately preceding the first of the following to occur: (a) the third (3
rd
) anniversary of the Grant Date; (b) the date of Grantee’s death; and (c) the day a Change in Control is
deemed
to have occurred.
A.30 “
Total and Permanent Disability
” means, unless the
Committee determines otherwise, Grantee’s disability as determined to be total and permanent by the Corporation for purposes of the Agreement.
A.31 “
Unvested Shares
” means any Restricted Shares that are not Awarded Shares.
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FORM OF CEG LTI PROGRAM
RESTRICTED STOCK GRANT AGREEMENT
CEG LTI
Program Restricted Stock Grant
Continued Employment Performance Goal
Restricted Period: Through November
, 200
(100%) [restricted period usually ends in November and can be between two and four years]
THE PNC FINANCIAL SERVICES GROUP, INC.
1997 LONG-TERM INCENTIVE AWARD PLAN
* * *
RESTRICTED STOCK AGREEMENT
* *
*
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GRANTEE:
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< name >
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GRANT DATE:
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, 200_
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SHARES:
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< number of whole shares>
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1.
Grant of
Restricted Shares
. Pursuant to Article 12 of The PNC Financial Services Group, Inc. 1997 Long-Term Incentive Award Plan as amended from time to time (“Plan”), and subject to the terms and conditions of this Restricted Stock Agreement
(“Agreement”), The PNC Financial Services Group, Inc. (“PNC”) hereby grants to the Grantee named above (“Grantee”) an Incentive Share Award (as defined in the Plan) of the number of shares of PNC common stock set forth
above, and, upon acceptance of the Grant by Grantee in accordance with Section 17, will cause the issuance of said shares to Grantee subject to the terms and conditions of the Agreement and the Plan. The shares granted and issued to Grantee hereby
as an Incentive Share Award subject to the terms and conditions of the Agreement and the Plan are hereafter referred to as the “Restricted Shares.”
2.
Definitions
. Terms defined in the Plan are used in the Agreement as defined in the Plan unless otherwise defined in Annex A (attached hereto and
incorporated herein by reference) or elsewhere in the Agreement.
3.
Terms of Grant
. The Grant will be subject to the following terms and conditions:
Restricted Shares will be subject to a Restricted Period as provided in Section A.25 of Annex A. Restricted Shares will be deposited with PNC or its
designee,
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or credited to a book-entry account, during the term of the Restricted Period unless and until forfeited pursuant to the terms of the Agreement.
Any certificate or certificates representing such Restricted Shares will
contain the following legend:
“This certificate and the
shares of stock represented hereby are subject to the terms and conditions (including forfeiture and restrictions against transfer) contained in The PNC Financial Services Group, Inc. 1997 Long-Term Incentive Award Plan as amended and an Agreement
entered into between the registered owner and The PNC Financial Services Group, Inc. Release from such terms and conditions will be made only in accordance with the provisions of such Plan and such Agreement, a copy of each of which is on file in
the office of the Corporate Secretary of The PNC Financial Services Group, Inc.”
Where a book-entry system is used with respect to Restricted Shares, appropriate notation of such forfeiture possibility and transfer restrictions will be made on the system with respect to the account or accounts to
which the Restricted Shares are credited.
Restricted Shares
deposited with PNC or its designee during the term of the Restricted Period that become Awarded Shares will be released and issued or reissued to, or at the proper direction of, Grantee or Grantee’s legal representative pursuant to Section 9 as
soon as administratively practicable following the end of the Restricted Period.
4.
Rights as Shareholder
. Except as provided in Section 6 and subject to Section 7.5(c), if applicable, and to Section 17, Grantee will have all the rights and privileges of a shareholder with respect to the
Restricted Shares including, but not limited to, the right to vote the Restricted Shares and the right to receive dividends thereon if and when declared by the Board;
provided, however,
that all such rights and privileges will cease
immediately upon any forfeiture of such shares.
5.
Capital
Adjustments
. Restricted Shares awarded hereunder will, as issued and outstanding shares of PNC common stock, be subject to such adjustment as may be necessary to reflect corporate transactions, including, without limitation, stock dividends,
stock splits, spin-offs, split-offs, recapitalizations, mergers, consolidations or reorganizations of or by PNC;
provided
,
however
, that any shares received as distributions on or in exchange for Unvested Shares will be subject to the
terms and conditions of the Agreement as if they were Restricted Shares.
6.
Prohibitions Against Sale, Assignment, etc.
Unvested Shares may not be sold, assigned, transferred, exchanged, pledged, hypothecated or otherwise encumbered, other than by will or the laws of descent and
distribution or as may be required pursuant to Section 10.2, unless and until the Restricted Period terminates and the Awarded Shares are released and issued or reissued by PNC pursuant to Section 9.
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7.
Forfeiture; Death; Qualifying Disability or Other Termination; Termination in Anticipation of
Change in Control
.
7.1
Forfeiture on Termination of
Employment
. Except as otherwise provided in and subject to the conditions of Section 7.3, Section 7.4(a), Section 7.4(c), Section 7.5(a), Section 7.5(b), or Section 8, if applicable, or unless the Committee determines otherwise, in the event
that Grantee’s employment with the Corporation terminates prior to November
, 200
, all Restricted Shares that are Unvested Shares on Grantee’s Termination Date will be forfeited by Grantee
to PNC without payment of any consideration by PNC.
Upon
forfeiture of Unvested Shares pursuant to the provisions of this Section 7.1 or the provisions of Section 7.2, Section 7.4(b), Section 7.4(c) or Section 7.5(d), neither Grantee nor any successors, heirs, assigns or legal representatives of Grantee
will thereafter have any further rights or interest in such Unvested Shares or any certificate or certificates representing such Unvested Shares.
7.2
Forfeiture for Detrimental Conduct
. Unvested Shares that would otherwise remain outstanding after Grantee’s Termination Date, if any, will
be forfeited by Grantee to PNC without payment of any consideration by PNC in the event that, at any time prior to the date such shares become Awarded Shares, PNC determines that Grantee has engaged in Detrimental Conduct;
provided, however,
that: (a) this Section 7.2 will not apply to Restricted Shares that remain outstanding after Grantee’s Termination Date pursuant to Section 7.3 or Section 7.5, if any; (b) no determination that Grantee has engaged in Detrimental Conduct may be
made on or after the date of Grantee’s death; (c) Detrimental Conduct will not apply to conduct by or activities of successors to the Restricted Shares by will or the laws of descent and distribution in the event of Grantee’s death; and
(d) Detrimental Conduct will cease to apply to any Restricted Shares upon a Change in Control.
7.3
Death
. In the event of Grantee’s death while an employee of the Corporation and prior to November
, 200
, the Continued Employment Performance Goal will
be
deemed
to have been achieved, and the Restricted Period with respect to the then outstanding Unvested Shares will terminate on the date of Grantee’s death.
The Restricted Shares which thereby become Awarded Shares will be released and issued or reissued by PNC to, or at the
proper direction of, Grantee’s legal representative pursuant to Section 9 as soon as administratively practicable following such date.
7.4
Disability or Other Termination
.
(a) In the event Grantee’s employment with the Corporation is terminated prior to November
, 200
by
the Corporation by reason of Grantee’s Total and Permanent Disability, Unvested Shares will not be forfeited on Grantee’s Termination Date. Instead, Unvested Shares will, subject to the forfeiture provisions of Section 7.2,
-3-
remain outstanding pending approval of the vesting of the Restricted Shares pursuant to this Section 7.4(a) by the Designated Person specified in Section
A.14 of Annex A.
If such Unvested Shares are still outstanding
but the Designated Person has not made an affirmative determination to either approve or disapprove the vesting of the Unvested Shares by November
, 200
, then the Restricted Period will be
automatically extended through the first to occur of: (1) the day the Designated Person makes an affirmative determination regarding such vesting; and (2) either (i) the ninetieth (90
th
) day following November
, 200
, if the Designated Person is the Chief Human Resources Officer of PNC, or (ii)
the 180
th
day following November
, 200
if the Designated Person is
the Committee, whichever is applicable.
If the vesting of the
then outstanding Unvested Shares is affirmatively approved by the Designated Person on or prior to the last day of the Restricted Period, including any extension of the Restricted Period, if applicable, then the Continued Employment Performance Goal
will be
deemed
to have been achieved, and the Restricted Period with respect to any then outstanding Unvested Shares will terminate as of the end of the day on the date of such approval or November
,
200
, whichever is later. The Restricted Shares outstanding at the termination of the Restricted Period will become Awarded Shares and will be released and issued or reissued by PNC pursuant to Section 9.
(b) If the Designated Person disapproves the vesting of the Unvested Shares
that had remained outstanding after Grantee’s Termination Date pending approval of vesting, then all such Unvested Shares that are still outstanding will be forfeited by Grantee to PNC on such disapproval date without payment of any
consideration by PNC.
If by the end of the Restricted Period,
including any extension of the Restricted Period pursuant to the second paragraph of Section 7.4(a), if applicable, the Designated Person has neither affirmatively approved nor disapproved the vesting of the Unvested Shares that had remained
outstanding after Grantee’s Termination Date pending approval of vesting, then all such Unvested Shares that are still outstanding will be forfeited by Grantee to PNC at the close of business on the last day of the Restricted Period without
payment of any consideration by PNC.
(c) In the event that
Grantee’s employment with the Corporation is terminated prior to November
, 200
other than by reason of death, by the Corporation by reason of Grantee’s Total and Permanent Disability, or
in circumstances that qualify for vesting pursuant to Section 7.5(a) or Section 7.5(b), all Restricted Shares that are Unvested Shares on Grantee’s Termination Date will be forfeited by Grantee to PNC on such date without payment of any
consideration by PNC unless the Committee determines otherwise. The Committee may, in its sole discretion with respect to some or all of the Unvested Shares, treat such shares in the same manner that such shares would be treated pursuant to Section
7.4 if Grantee’s employment had been terminated by the Corporation by reason of Total and Permanent Disability.
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7.5
Termination in Anticipation of a Change in Control
.
(a) Notwithstanding anything in the Agreement to the contrary, if, after the
occurrence of a CIC Triggering Event but prior to a CIC Failure and prior to November
, 200
, Grantee’s employment is terminated (other than by reason of Grantee’s death) by the Corporation
without Cause or by Grantee for Good Reason, or if Grantee’s employment is
deemed
to have been so terminated pursuant to Section 7.5(b), then: (i) the Continued Employment Performance Goal will be
deemed
to have been achieved and
the Restricted Period with respect to any then outstanding Unvested Shares will terminate as of the end of the day on the day immediately preceding Grantee’s Termination Date (or, in the case of a qualifying termination pursuant to Section
7.5(b), the date all of the conditions set forth in clauses (i), (ii) and (iii) of the first or second paragraph, as the case may be, of Section 7.5(b) are met); and (ii) all Restricted Shares that thereby become Awarded Shares will be released and
issued or reissued by PNC pursuant to Section 9 as soon as administratively practicable following such date.
(b) Grantee’s employment will also be
deemed
to have been terminated by the Corporation without Cause after the occurrence of a CIC Triggering
Event but prior to a CIC Failure for purposes of Section 7.5(a) if: (i) Grantee’s employment is terminated by the Corporation without Cause; (ii) such termination of employment (a) was at the request of a third party that has taken steps
reasonably calculated to effect a Change in Control or (b) otherwise arose in anticipation of a Change in Control; and (iii) a CIC Triggering Event or a Change in Control occurs within three (3) months of such termination of employment.
Grantee’s employment will also be
deemed
to have been
terminated by Grantee for Good Reason after the occurrence of a CIC Triggering Event but prior to a CIC Failure for purposes of Section 7.5(a) if: (i) Grantee terminates Grantee’s employment with Good Reason; (ii) the circumstance or event that
constitutes Good Reason (a) occurs at the request of a third party that has taken steps reasonably calculated to effect a Change in Control or (b) otherwise arose in anticipation of a Change in Control; and (iii) a CIC Triggering Event or a Change
in Control occurs within three (3) months of such termination of employment.
For purposes of this Section 7.5(b) only, Grantee will have the burden of proving that the requirements of clause (ii) of the first or second paragraph of this Section 7.5(b), as the case may be, have been met and the
standard of proof to be met by Grantee will be clear and convincing evidence.
For purposes of this Section 7.5(b) only, the definition of Change in Control in Section A.6 of Annex A will exclude the
proviso
in Section A.6(a).
(c) If the Unvested Shares will be forfeited by Grantee to PNC by reason of Grantee’s termination of employment with
the Corporation pursuant to Section 7.1 unless all of the conditions set forth in clauses (i), (ii) and (iii) of the first or second paragraph, as the case may be, of Section 7.5(b) are met, then in the event that the record date for any dividend
payable with respect to the Unvested Shares occurs on or after Grantee’s
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Termination Date but prior to the time all of the conditions set forth in clauses (i), (ii) and (iii) of the first or second paragraph, as the case may be,
of Section 7.5(b) have been met, such dividend will be held, without interest, pending satisfaction of all of such conditions. In the event that one or more of the conditions of Section 7.5(b) are
not
met, any dividend being held pending
satisfaction of such conditions will be forfeited by Grantee to PNC without payment of any consideration by PNC.
(d) If the Unvested Shares will be forfeited by Grantee to PNC by reason of Grantee’s termination of employment with the Corporation pursuant to
Section 7.1 unless all of the conditions set forth in clauses (i), (ii) and (iii) of the first or second paragraph, as the case may be, of Section 7.5(b) are met, then the Restricted Shares will remain outstanding pending satisfaction of all of
those conditions. Upon the failure of any required condition, all such Unvested Shares will be forfeited by Grantee to PNC on the date such failure occurs without payment of any consideration by PNC.
8.
Change in Control
. Notwithstanding anything in the Agreement to the
contrary, upon the occurrence of a Change in Control: (i) if Grantee is an employee of the Corporation as of the day immediately preceding the Change in Control, the Continued Employment Performance Goal will be
deemed
to have been achieved
and the Restricted Period will terminate with respect to all then outstanding Unvested Shares as of the day immediately preceding the Change in Control; (ii) if Grantee’s employment with the Corporation terminated prior to the occurrence of the
Change in Control but the Unvested Shares remained outstanding after such termination of employment pursuant to Section 7.4 and are still outstanding pending approval of the vesting of such shares by the Designated Person specified in Section A.14
of Annex A, then with respect to all Unvested Shares outstanding as of the day immediately preceding the Change in Control, such vesting approval will be
deemed
to have been given, the Continued Employment Performance Goal will be
deemed
to have been achieved, and the Restricted Period will terminate, all as of the day immediately preceding the Change in Control; and (iii) all Restricted Shares that thereby become Awarded Shares will be released and issued or reissued
by PNC pursuant to Section 9 as soon as administratively practicable following such date.
9.
Termination of Prohibitions
. Following termination of the Restricted Period, PNC will release and issue or reissue the certificate or certificates representing the then outstanding whole Restricted Shares
that have become Awarded Shares without the legend referred to in Section 3.
Upon release and issuance or reissuance of shares that have become Awarded Shares, PNC or its designee will deliver the certificate or certificates for such whole shares to, or at the proper direction of, Grantee or
Grantee’s legal representative.
10.
Payment of
Taxes
.
10.1
Internal Revenue Code Section 83(b)
Election
. In the event that Grantee makes an Internal Revenue Code Section 83(b) election with respect to the Restricted
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Shares, Grantee shall satisfy all applicable federal, state or local withholding tax obligations arising from that election either: (a) by payment of cash;
(b) by physical delivery to PNC of certificates for whole shares of PNC common stock that are not subject to any contractual restriction, pledge or other encumbrance and that have been owned by Grantee for at least six (6) months and, in the case of
restricted stock, for which it has been at least six (6) months since the restrictions lapsed; or (c) by a combination of cash and such stock. Any such tax election shall be made pursuant to a form to be provided to Grantee by PNC on request. For
purposes of this Section 10.1, shares of PNC common stock that are used to satisfy applicable withholding tax obligations will be valued at their Fair Market Value on the date the tax withholding obligation arises. Grantee will provide to PNC a copy
of any Internal Revenue Code Section 83(b) election filed by Grantee with respect to the Restricted Shares not later than ten (10) days after the filing of such election.
10.2
Other Tax Liabilities
. Where Grantee has not previously satisfied all applicable withholding tax obligations,
PNC will, at the time the tax withholding obligation arises, retain sufficient whole shares of PNC common stock from the shares granted pursuant to the Agreement to satisfy the minimum amount of taxes required to be withheld by the Corporation in
connection with the Restricted Shares. For purposes of this Section 10.2, shares of PNC common stock retained to satisfy applicable withholding tax requirements will be valued at their Fair Market Value on the date the tax withholding obligation
arises.
PNC will
not
retain more than the number of
shares sufficient to satisfy the minimum amount of taxes required to be withheld in connection with the Restricted Shares. If Grantee desires to have an additional amount, up to Grantee’s W-4 obligation, withheld above the required minimum and
if PNC so permits, Grantee may elect to satisfy this additional withholding either: (a) by payment of cash; or (b) using whole shares of PNC common stock (either by physical delivery to PNC of certificates for the shares or through PNC’s
attestation procedure) that are not subject to any contractual restriction, pledge or other encumbrance and that have been owned by Grantee for at least six (6) months and, in the case of restricted stock, for which it has been at least six (6)
months since the restrictions lapsed. Any such tax election shall be made pursuant to a form provided by PNC. Shares of PNC common stock that are used for this purpose will be valued at their Fair Market Value on the date the tax withholding
obligation arises.
11.
Employment
. Neither the granting
and issuance of the Restricted Shares nor any term or provision of the Agreement shall constitute or be evidence of any understanding, expressed or implied, on the part of PNC or any Subsidiary to employ Grantee for any period or in any way alter
Grantee’s status as an employee at will.
12.
Subject
to the Plan and the Committee
. In all respects the Grant and the Agreement are subject to the terms and conditions of the Plan, which has been made available to Grantee and is incorporated herein by reference;
provided, however,
the terms
of the Plan shall not be considered an enlargement of any benefits under the Agreement. Further, the Grant and the Agreement are subject to any interpretation of,
-7-
and any rules and regulations issued by, the Committee or under the authority of the Committee, whether made or issued before or after the Grant Date.
13.
Headings; Entire Agreement
. Headings used in the
Agreement are provided for reference and convenience only, shall not be considered part of the Agreement, and shall not be employed in the construction of the Agreement. The Agreement constitutes the entire agreement between Grantee and PNC and
supersedes all other discussions, negotiations, correspondence, representations, understandings and agreements between the parties with respect to the subject matter hereof.
14.
Grantee Covenants
.
14.1
General
. Grantee and PNC acknowledge and agree that Grantee has received adequate consideration with respect to enforcement of the provisions
of Sections 14 and 15, that such provisions are reasonable and properly required for the adequate protection of the business of the Corporation, and that enforcement of such provisions will not prevent Grantee from earning a living.
14.2
Non-Solicitation; No-Hire
. Grantee agrees to comply with the
provisions of subsections (a) and (b) of this Section 14.2 while employed by the Corporation and for a period of twelve (12) months after Grantee’s Termination Date regardless of the reason for such termination of employment.
(a)
Non-Solicitation
. Grantee shall not, directly or indirectly,
either for Grantee’s own benefit or purpose or for the benefit or purpose of any Person other than PNC or any Subsidiary, solicit, call on, do business with, or actively interfere with PNC’s or any Subsidiary’s relationship with, or
attempt to divert or entice away, any Person that Grantee should reasonably know (i) is a customer of PNC or any Subsidiary for which PNC or any Subsidiary provides any services as of the Termination Date, or (ii) was a customer of PNC or any
Subsidiary for which PNC or any Subsidiary provided any services at any time during the twelve (12) months preceding the Termination Date, or (iii) was, as of the Termination Date, considering retention of PNC or any Subsidiary to provide any
services.
(b)
No-Hire
. Grantee shall not, directly or
indirectly, either for Grantee’s own benefit or purpose or for the benefit or purpose of any Person other than PNC or any Subsidiary, employ or offer to employ, call on, or actively interfere with PNC’s or any Subsidiary’s
relationship with, or attempt to divert or entice away, any employee of the Corporation, nor shall Grantee assist any other Person in such activities.
Notwithstanding the above, if Grantee’s employment with the Corporation is terminated by the Corporation without Cause or by Grantee with Good Reason
and such Termination Date occurs during a Coverage Period (either as Coverage Period is defined in Section A.13 of Annex A or, if Grantee was a party to a written agreement between Grantee and PNC providing, among other things, for certain change in
control severance benefits (a “CIC Severance Agreement”) that was in effect at the time of such termination
-8-
of employment, as Coverage Period is defined in such CIC Severance Agreement, if longer), then commencing immediately after such Termination Date, the
provisions of subsections (a) and (b) of this Section 14.2 will no longer apply and will be replaced with the following subsection (c):
(c)
No-Hire
. Grantee agrees that Grantee shall not, for a period of twelve (12) months after the Termination Date, employ or offer to employ,
solicit, actively interfere with PNC’s or any PNC affiliate’s relationship with, or attempt to divert or entice away, any officer of PNC or any PNC affiliate.
14.3
Confidentiality
. During Grantee’s employment with the Corporation, and thereafter regardless of the reason
for termination of such employment, Grantee will not disclose or use in any way any confidential business or technical information or trade secret acquired in the course of such employment, all of which is the exclusive and valuable property of the
Corporation whether or not conceived of or prepared by Grantee, other than (a) information generally known in the Corporation’s industry or acquired from public sources, (b) as required in the course of employment by the Corporation, (c) as
required by any court, supervisory authority, administrative agency or applicable law, or (d) with the prior written consent of PNC.
14.4
Ownership of Inventions
. Grantee shall promptly and fully disclose to PNC any and all inventions, discoveries, improvements, ideas or other
works of inventorship or authorship, whether or not patentable, that have been or will be conceived and/or reduced to practice by Grantee during the term of Grantee’s employment with the Corporation, whether alone or with others, and that are
(a) related directly or indirectly to the business or activities of PNC or any Subsidiary or (b) developed with the use of any time, material, facilities or other resources of PNC or any Subsidiary (“Developments”). Grantee agrees to
assign and hereby does assign to PNC or its designee all of Grantee’s right, title and interest, including copyrights and patent rights, in and to all Developments. Grantee shall perform all actions and execute all instruments that PNC or any
Subsidiary shall deem necessary to protect or record PNC’s or its designee’s interests in the Developments. The obligations of this Section 14.4 shall be performed by Grantee without further compensation and will continue beyond the
Termination Date.
15.
Enforcement Provisions
. Grantee
understands and agrees to the following provisions regarding enforcement of the Agreement.
15.1
Governing Law and Jurisdiction
. The Agreement is governed by and construed under the laws of the Commonwealth of Pennsylvania, without regard to conflict of laws rules. Any dispute or claim arising out of
or relating to the Agreement or claim of breach hereof shall be brought exclusively in the federal court for the Western District of Pennsylvania or in the Court of Common Pleas of Allegheny County, Pennsylvania. By execution of the Agreement,
Grantee and PNC hereby consent to the exclusive jurisdiction of such courts, and waive any right to challenge jurisdiction or venue in such courts with regard to any suit, action, or proceeding under or in connection with the Agreement.
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15.2
Equitable Remedies
. A breach of the provisions of any of Sections 14.2, 14.3 or 14.4 will
cause the Corporation irreparable harm, and the Corporation will therefore be entitled to issuance of immediate, as well as permanent, injunctive relief restraining Grantee, and each and every person and entity acting in concert or participating
with Grantee, from initiation and/or continuation of such breach.
15.3
Tolling Period
. If it becomes necessary or desirable for the Corporation to seek compliance with the provisions of Section 14.2 by legal proceedings, the period during which Grantee shall comply with said provisions will extend
for a period of twelve (12) months from the date of the legal order requiring such compliance.
15.4
No Waiver
. Failure of PNC to demand strict compliance with any of the terms, covenants or conditions of the Agreement will not be deemed a waiver of such term, covenant or condition, nor will any waiver or
relinquishment of any such term, covenant or condition on any occasion or on multiple occasions be deemed a waiver or relinquishment of such term, covenant or condition.
15.5
Severability
. The restrictions and obligations imposed by Sections 14.2, 14.3 and 14.4 are separate and
severable, and it is the intent of Grantee and PNC that if any restriction or obligation imposed by any of these provisions is deemed by a court of competent jurisdiction to be void for any reason whatsoever, the remaining provisions, restrictions
and obligations will remain valid and binding upon Grantee.
15.6
Reform
. In the event any of Sections 14.2, 14.3 and 14.4 are determined by a court of competent jurisdiction to be unenforceable because unreasonable either as to length of time or area to which said restriction applies, it is
the intent of Grantee and PNC that said court reduce and reform the provisions thereof so as to apply the greatest limitations considered enforceable by the court.
15.7
Waiver of Jury Trial
. Each of Grantee and PNC hereby waives any right to trial by jury with regard to any suit,
action or proceeding under or in connection with any of Sections 14.2, 14.3 and 14.4.
15.8
Applicable Law
. Notwithstanding anything in the Agreement, PNC will not be required to comply with any term, covenant or condition of the Agreement if and to the extent prohibited by law, including but not
limited to federal banking and securities regulations, or as otherwise directed by one or more regulatory agencies having jurisdiction over PNC or any of its subsidiaries. Further, to the extent, if any, applicable to Grantee, Grantee agrees to
reimburse PNC for any amounts Grantee may be required to reimburse PNC or its subsidiaries pursuant to Section 304 of the Sarbanes-Oxley Act of 2002, and agrees that PNC need not comply with any term, covenant or condition of the Agreement to the
extent that doing so would require that Grantee reimburse PNC or its subsidiaries for such amounts pursuant to Section 304 of the Sarbanes-Oxley Act of 2002.
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16.
Amendment of Pre-2004 Stock Options, Restricted Stock and Restricted Stock Deferrals
. All
nonstatutory stock options granted to employees under the Plan outstanding on February 18, 2004, all restricted stock grants to employees under the Plan or PNC’s 1996 Executive Incentive Award Plan outstanding but not yet vested on February 18,
2004, and all participant restricted stock deferral accounts under the PNC and Affiliates Deferred Compensation Plan that were in place but not yet vested on February 18, 2004, are subject to the amendments approved by the Committee on that date.
These amendments are generally described in the Plan prospectus dated
, 200
under the heading “Recent Amendments” of
the section titled “The Plan.” A copy of this Plan prospectus accompanied or preceded delivery of the Agreement to Grantee.
To the extent that Grantee is the holder of any such stock options or is the grantee of any such restricted stock or is a participant in the PNC and
Affiliates Deferred Compensation Plan with such stock deferral account or accounts in place but not yet vested, Grantee hereby acknowledges and consents to such amendments.
17.
Acceptance of Grant; PNC Right to Cancel
. If Grantee does not accept the Grant by executing and delivering a copy
of the Agreement to PNC, without altering or changing the terms thereof in any way, within sixty (60) days of receipt by Grantee of a copy of the Agreement, PNC may, in its sole discretion, withdraw its offer and cancel the Grant at any time prior
to Grantee’s delivery to PNC of a copy of the Agreement executed by Grantee. Otherwise, upon execution and delivery of the Agreement by both PNC and Grantee and, in the event that Grantee is subject to the reporting requirements of Section
16(a) of the Exchange Act with respect to PNC securities, the filing with and acceptance by the SEC of a Form 4 reporting the Grant, the Agreement is effective.
Grantee will not have any of the rights of a shareholder with respect to the Restricted Shares as set forth in Section 4, and will not have the right
to vote or to receive dividends on such shares, until the date the Agreement is effective and the Restricted Shares are issued in accordance with this Section 17.
In the event that one or more record dates for dividends on PNC common stock occur after the Grant Date but before the date
the Agreement is effective in accordance with this Section 17 and the Restricted Shares are issued, then upon the effectiveness of the Agreement, the Corporation will make a cash payment to Grantee equivalent to the amount of the dividends Grantee
would have received had the Agreement been effective and the Restricted Shares had been issued on the Grant Date.
-11-
I
N
W
ITNESS
W
HEREOF
, PNC has caused the Agreement to be
signed on its behalf as of the Grant Date.
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THE PNC FINANCIAL SERVICES GROUP, INC.
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By:
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Chairman and Chief Executive Officer
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ATTEST:
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By:
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Corporate Secretary
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A
CCEPTED
A
ND
A
GREED
TO
by G
RANTEE
.
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Grantee
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-12-
CEG LTI Program Restricted Stock Grant
Continued Employment Performance Goal
Restricted Period: Through November
,
200
(100%) [restricted period usually ends in November and can be between two and four years]
ANNEX A
TO
THE PNC FINANCIAL SERVICES GROUP, INC.
1997 LONG-TERM INCENTIVE AWARD PLAN
RESTRICTED STOCK AGREEMENT
* * *
CERTAIN DEFINITIONS
Except where the context otherwise indicates, the following definitions apply for purposes of the Restricted Stock Agreement (“Agreement”) to which this Annex A is attached:
A.1 “
Awarded Shares
.” Provided that the Restricted Shares
are then outstanding, Restricted Shares become “Awarded Shares” when both of the following have occurred: (a) the Continued Employment Performance Goal has been achieved or is
deemed
to have been achieved pursuant to the terms of
the Agreement; and (b) the Restricted Period has terminated.
A.2 “
Board
” means the Board of Directors of PNC.
A.3 “
Business Day
” means any day when the New York Stock Exchange is open for business.
A.4 “
Cause
” means:
(a) the willful and continued failure of Grantee to substantially perform Grantee’s duties with the Corporation (other than any such failure
resulting from incapacity due to physical or mental illness), after a written demand for substantial performance is delivered to Grantee by the Board or the CEO which specifically identifies the manner in which the Board or the CEO believes that
Grantee has not substantially performed Grantee’s duties; or
(b) the willful engaging by Grantee in illegal conduct or gross misconduct that is materially and demonstrably injurious to PNC or any Subsidiary.
-13-
For purposes of the preceding clauses (a) and (b), no act or failure to act, on the part of Grantee,
shall be considered willful unless it is done, or omitted to be done, by Grantee in bad faith and without reasonable belief that Grantee’s action or omission was in the best interests of the Corporation. Any act, or failure to act, based upon
the instructions or prior approval of the Board, the CEO or Grantee’s superior or based upon the advice of counsel for the Corporation, shall be conclusively presumed to be done, or omitted to be done, by Grantee in good faith and in the best
interests of the Corporation.
The cessation of employment of
Grantee will be
deemed
to be a termination of Grantee’s employment with the Corporation for Cause for purposes of the Agreement only if and when there shall have been delivered to Grantee, as part of the notice of Grantee’s
termination, a copy of a resolution duly adopted by the affirmative vote of not less than a majority of the entire membership of the Board, at a Board meeting called and held for the purpose of considering such termination, finding on the basis of
clear and convincing evidence that, in the good faith opinion of the Board, Grantee is guilty of conduct described in clause (a) or clause (b) above and, in either case, specifying the particulars thereof in detail. Such resolution shall be adopted
only after (i) reasonable notice of such Board meeting is provided to Grantee, together with written notice that PNC believes that Grantee is guilty of conduct described in clause (a) or clause (b) above and, in either case, specifying the
particulars thereof in detail, and (ii) Grantee is given an opportunity, together with counsel, to be heard before the Board.
A.5 “
CEO
” means the chief executive officer of PNC.
A.6 “
Change in Control
” means a change of control of PNC of a nature that would be required to be reported
in response to Item 6(e) of Schedule 14A of Regulation 14A (or in response to any similar item on any similar schedule or form) promulgated under the Exchange Act, whether or not PNC is then subject to such reporting requirement;
provided
,
however
, that without limitation, a Change in Control will be
deemed
to have occurred if:
(a) any Person, excluding employee benefits plans of the Corporation, is or becomes the beneficial owner (as defined in Rules 13d-3 and 13d-5 under the
Exchange Act or any successor provisions thereto), directly or indirectly, of securities of PNC representing twenty percent (20%) or more of the combined voting power of PNC’s then outstanding securities;
provided
,
however
, that
such an acquisition of beneficial ownership representing between twenty percent (20%) and forty percent (40%), inclusive, of such voting power will not be considered a Change in Control if the Board approves such acquisition either prior to or
immediately after its occurrence;
(b) PNC consummates a
merger, consolidation, share exchange, division or other reorganization or transaction of PNC (a “Fundamental Transaction”) with any other corporation, other than a Fundamental Transaction that results in the voting securities of PNC
outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least sixty percent (60%) of the combined voting power immediately after such
Fundamental
-14-
Transaction of (i) PNC’s outstanding securities, (ii) the surviving entity’s outstanding securities, or (iii) in the case of a division, the
outstanding securities of each entity resulting from the division;
(c) the shareholders of PNC approve a plan of complete liquidation or winding-up of PNC or an agreement for the sale or disposition (in one transaction or a series of transactions) of all or substantially all of PNC’s assets;
(d) as a result of a proxy contest, individuals who prior to
the conclusion thereof constituted the Board (including for this purpose any new director whose election or nomination for election by PNC’s shareholders in connection with such proxy contest was approved by a vote of at least two-thirds
(2/3rds) of the directors then still in office who were directors prior to such proxy contest) cease to constitute at least a majority of the Board (excluding any Board seat that is vacant or otherwise unoccupied);
(e) during any period of twenty-four (24) consecutive months, individuals who
at the beginning of such period constituted the Board (including for this purpose any new director whose election or nomination for election by PNC’s shareholders was approved by a vote of at least two-thirds (2/3rds) of the directors then
still in office who were directors at the beginning of such period) cease for any reason to constitute at least a majority of the Board (excluding any Board seat that is vacant or otherwise unoccupied); or
(f) the Board determines that a Change in Control has occurred.
Notwithstanding anything to the contrary herein, a divestiture or spin-off
of a subsidiary or division of PNC will not by itself constitute a Change in Control.
A.7 “
CIC Failure
” means the following:
(a) with respect to a CIC Triggering Event described in Section A.8(a), PNC’s shareholders vote against the transaction approved by the Board or the agreement to consummate the transaction is terminated; or
(b) with respect to a CIC Triggering Event described in
Section A.8(b), the proxy contest fails to replace or remove a majority of the members of the Board.
A.8 “
CIC Triggering Event
” means the occurrence of either of the following:
(a) the Board or PNC’s shareholders approve a transaction described in Subsection (b) of the definition of Change in
Control contained in Section A.6; or
(b) the commencement of a
proxy contest in which any Person seeks to replace or remove a majority of the members of the Board.
-15-
A.9 “
Committee
” means the Personnel and Compensation Committee of the Board.
A.10 “
Competitive Activity
” means, for purposes of the
Agreement, any participation in, employment by, ownership of any equity interest exceeding one percent (1%) in, or promotion or organization of, any Person other than PNC or any Subsidiary (a) engaged in business activities similar to some or all of
the business activities of PNC or any Subsidiary as of Grantee’s Termination Date or (b) engaged in business activities which Grantee knows PNC or any Subsidiary intends to enter within the first twelve (12) months after Grantee’s
Termination Date, in either case whether Grantee is acting as agent, consultant, independent contractor, employee, officer, director, investor, partner, shareholder, proprietor or in any other individual or representative capacity therein.
A.11 “
Continued Employment Performance Goal
”
means, subject to early achievement if so determined by the Committee or to
deemed
achievement pursuant to Section 7.3, Section 7.4, Section 7.5, or Section 8 of the Agreement, if applicable, that Grantee has been continuously employed by the
Corporation for the period from the Grant Date through (and including) the first of the following to occur: (a) November
, 200
; (b) the day immediately preceding the date of Grantee’s death; and
(c) the day immediately preceding the day a Change in Control is
deemed
to have occurred.
A.12 “
Corporation
” means PNC and its Subsidiaries.
A.13 “
Coverage Period
” means a period (a) commencing on the earlier to occur of (i) the date of a CIC
Triggering Event and (ii) the date of a Change in Control and (b) ending on the date that is three (3) years after the date of the Change in Control;
provided
,
however
, that in the event that a Coverage Period commences on the date of
a CIC Triggering Event, such Coverage Period will terminate upon the earlier to occur of (x) the date of a CIC Failure and (y) the date that is three (3) years after the date of the Change in Control triggered by the CIC Triggering Event. After the
termination of any Coverage Period, another Coverage Period will commence upon the earlier to occur of clause (a)(i) and clause (a)(ii) in the preceding sentence.
A.14 “
Designated Person
” will be either: (a) the Committee, if Grantee is a member of the Corporate
Executive Group (or equivalent successor classification) or is subject to the reporting requirements of Section 16(a) of the Exchange Act with respect to PNC securities; or (a) the Chief Human Resources Officer of PNC, if Grantee is not within one
of the groups specified in Section A.14(a).
A.15
“
Detrimental Conduct
” means:
(a) Grantee has
engaged, without the prior written consent of PNC (at PNC’s sole discretion), in any Competitive Activity in the continental United States at any time during the period commencing on Grantee’s Termination Date through the first
(1
st
) anniversary of Grantee’s Termination Date;
-16-
(b) a material breach by Grantee of (i) any code of conduct of PNC or a Subsidiary or (ii) other written
policy of PNC or a Subsidiary, in either case required by law or established to maintain compliance with applicable law;
(c) any act of fraud, misappropriation, material dishonesty, or embezzlement by Grantee against PNC or a Subsidiary or any client or customer of PNC or a
Subsidiary;
(d) any conviction (including a plea of guilty or
of
nolo contendere
) of Grantee for, or entry by Grantee into a pre-trial disposition with respect to, the commission of a felony which relates to or arises out of Grantee’s employment or other service relationship with the Corporation;
or
(e) entry of any order against Grantee by any governmental
body having regulatory authority with respect to the business of PNC or any Subsidiary, which order relates to or arises out of Grantee’s employment or other service relationship with the Corporation.
Grantee will be
deemed
to have engaged in Detrimental Conduct for
purposes of the Agreement only if and when the Committee determines that Grantee has engaged in conduct described in clause (a) above, that Grantee is guilty of conduct described in clause (b) or clause (c) above, or that an event described in
clause (d) or clause (e) above has occurred with respect to Grantee and, if so, determines that Grantee will be
deemed
to have engaged in Detrimental Conduct.
A.16 “
Exchange Act
” means the Securities Exchange Act of 1934 as amended, and the rules and regulations
promulgated thereunder.
A.17 “
Fair Market
Value
” as it relates to PNC common stock means the average of the high and low sale prices of the PNC common stock as reported on the New York Stock Exchange (or such successor reporting system as PNC may select) on the relevant date or, if
no sale of the PNC common stock has been reported for that day, the average of such prices on the next preceding day and the next following day for which there were reported sales.
A.18 “
Good Reason
” means:
(a) the assignment to Grantee of any duties inconsistent in any respect with Grantee’s position (including status,
offices, titles and reporting requirements), authority, duties or responsibilities immediately prior to either the CIC Triggering Event or the Change in Control, or any other action by the Corporation which results in a diminution in any respect in
such position, authority, duties or responsibilities, excluding for this purpose an isolated, insubstantial and inadvertent action not taken in bad faith that is remedied by the Corporation promptly after receipt of notice thereof given by Grantee;
-17-
(b) a reduction by the Corporation in Grantee’s annual base salary as in effect on the Grant Date,
as the same may be increased from time to time;
(c) the
Corporation’s requiring Grantee to be based at any office or location that is more than fifty (50) miles from Grantee’s office or location immediately prior to either the CIC Triggering Event or the Change in Control;
(d) the failure by the Corporation (i) to continue in effect any bonus, stock
option or other cash or equity-based incentive plan or program in which Grantee participates immediately prior to either the CIC Triggering Event or the Change in Control that is material to Grantee’s total compensation, unless a substantially
equivalent arrangement (embodied in an ongoing substitute or alternative plan or program) has been made with respect to such plan or program, or (ii) to continue Grantee’s participation in such plan or program (or in such substitute or
alternative plan or program) on a basis at least as favorable, both in terms of the amount of benefits provided and the level of Grantee’s participation relative to other participants, as existed immediately prior to the CIC Triggering Event or
the Change in Control; or
(e) the failure by the Corporation
to continue to provide Grantee with benefits substantially similar to those received by Grantee under any of the Corporation’s pension (including, but not limited to, tax-qualified plans), life insurance, health, accident, disability or other
welfare plans or programs in which Grantee was participating, at costs substantially similar to those paid by Grantee, immediately prior to the CIC Triggering Event or the Change in Control.
A.19 “
Grant
” means the Restricted Shares granted and issued
to Grantee pursuant to Section 1 of the Agreement.
A.20
“
Grant Date
” means the Grant Date set forth on page 1 of the Agreement.
A.21 “
Grantee
” means the person identified as Grantee on page 1 of the Agreement.
A.22 “
Internal Revenue Code
” means the Internal Revenue Code of 1986 as amended, and the rules and regulations promulgated thereunder.
A.23 “
Person
” has the meaning given in
Section 3(a)(9) of the Exchange Act and also includes any syndicate or group
deemed
to be a person under Section 13(d)(3) of the Exchange Act.
A.24 “
PNC
” means The PNC Financial Services Group, Inc.
A.25 “
Restricted Period
” means, subject to early termination if so determined by the Committee or pursuant
to Section 7.5 of the Agreement, if applicable, the period from the Grant Date through (and including) the earlier of: (a) the date of Grantee’s death; (b) the day immediately preceding the day a Change in Control is
deemed
to have
-18-
occurred; and (c) November
, 200
or, if later, the last day of any extension of the Restricted Period
pursuant to Section 7.4(a) of the Agreement, if applicable.
A.26 “
SEC
” means the United States Securities and Exchange Commission.
A.27 “
Termination Date
” means Grantee’s last date of employment with the Corporation. If Grantee is employed by a Subsidiary that
ceases to be a Subsidiary of PNC and Grantee does not continue to be employed by PNC or a Subsidiary, then for purposes of the Agreement, Grantee’s employment with the Corporation terminates effective at the time this occurs.
A.28 “
Total and Permanent Disability
” means, unless the
Committee determines otherwise, Grantee’s disability as determined to be total and permanent by the Corporation for purposes of the Agreement.
A.29 “
Unvested Shares
” means any Restricted Shares that are not Awarded Shares.
-19-
FORM OF 5-YEAR RESTRICTED STOCK GRANT AGREEMENT
Restricted Stock Grant
Continued Employment Performance Goals
Restricted Periods: Three Years (25%); Four Years (25%); Five Years (50%)
THE PNC FINANCIAL SERVICES GROUP, INC.
1997 LONG-TERM INCENTIVE AWARD PLAN
* * *
RESTRICTED STOCK AGREEMENT
* *
*
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GRANTEE:
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< name >
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GRANT DATE:
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, 200
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SHARES:
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< number of whole shares>
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1.
Grant of
Restricted Shares
. Pursuant to Article 12 of The PNC Financial Services Group, Inc. 1997 Long-Term Incentive Award Plan as amended from time to time (“Plan”), and subject to the terms and conditions of this Restricted Stock Agreement
(“Agreement”), The PNC Financial Services Group, Inc. (“PNC”) hereby grants to the Grantee named above (“Grantee”) an Incentive Share Award (as defined in the Plan) of the number of shares of PNC common stock set forth
above, and, upon acceptance of the Grant by Grantee in accordance with Section 17, will cause the issuance of said shares to Grantee subject to the terms and conditions of the Agreement and the Plan.
The shares granted and issued to Grantee hereby as an Incentive Share Award
subject to the terms and conditions of the Agreement and the Plan are hereafter referred to as the “Restricted Shares.”
For purposes of determining the Restricted Period and Continued Employment Performance Goal applicable to each portion of the Restricted Shares under the
Agreement, the Restricted Shares are divided into three “Tranches” as follows:
(a) twenty-five percent (25%) of these shares (rounded down to the nearest whole share) are in the First Tranche of Restricted Shares;
(b) another twenty-five percent (25%) of these shares (rounded down to the nearest whole share) are in the Second Tranche of
Restricted Shares; and
-1-
(c) the remaining fifty percent (50%) of these shares are in the Third Tranche of Restricted Shares.
2.
Definitions
. Terms defined in the Plan are used in
the Agreement as defined in the Plan unless otherwise defined in Annex A (attached hereto and incorporated herein by reference) or elsewhere in the Agreement.
3.
Terms of Grant
. The Grant is subject to the following terms and conditions:
Restricted Shares are subject to the Restricted Period applicable to such shares as provided in Section A.27 of Annex A.
Restricted Shares will be deposited with PNC or its designee, or credited to a book-entry account, during the term of the applicable Restricted Period unless and until forfeited pursuant to the terms of the Agreement.
Any certificate or certificates representing Restricted Shares will contain
the following legend:
“This certificate and the shares
of stock represented hereby are subject to the terms and conditions (including forfeiture and restrictions against transfer) contained in The PNC Financial Services Group, Inc. 1997 Long-Term Incentive Award Plan as amended and an Agreement entered
into between the registered owner and The PNC Financial Services Group, Inc. Release from such terms and conditions will be made only in accordance with the provisions of such Plan and such Agreement, a copy of each of which is on file in the office
of the Corporate Secretary of The PNC Financial Services Group, Inc.”
Where a book-entry system is used with respect to Restricted Shares, appropriate notation of such forfeiture possibility and transfer restrictions will be made on the system with respect to the account or accounts to
which the Restricted Shares are credited.
Restricted Shares
deposited with PNC or its designee during the term of the applicable Restricted Period that become Awarded Shares as provided in Section A.1 of Annex A will be released and issued or reissued to, or at the proper direction of, Grantee or
Grantee’s legal representative pursuant to Section 9 as soon as administratively practicable following the end of the Restricted Period applicable to such shares.
4.
Rights as Shareholder
. Except as provided in Section 6 and subject to Section 7.6(c), if applicable, and to
Section 17, Grantee will have all the rights and privileges of a shareholder with respect to the Restricted Shares including, but not limited to, the right to vote the Restricted Shares and the right to receive dividends thereon if and when declared
by the Board;
provided, however,
that all such rights and privileges will cease immediately upon any forfeiture of such shares.
5.
Capital Adjustments
. Restricted Shares awarded hereunder will, as issued and outstanding shares of PNC common stock, be subject to such
adjustment as may be
-2-
necessary to reflect corporate transactions, including, without limitation, stock dividends, stock splits, spin-offs, split-offs, recapitalizations, mergers,
consolidations or reorganizations of or by PNC;
provided
,
however
, that any shares received as distributions on or in exchange for Unvested Shares will be subject to the terms and conditions of the Agreement as if they were Restricted
Shares, and will have the same Restricted Period and Performance Goal that are applicable to the Restricted Shares that such shares were a distribution on or for which such shares were exchanged.
6.
Prohibitions Against Sale, Assignment, etc.
Unvested Shares may not
be sold, assigned, transferred, exchanged, pledged, hypothecated or otherwise encumbered, other than by will or the laws of descent and distribution or as may be required pursuant to Section 10.2, unless and until the applicable Restricted Period
terminates and the Awarded Shares are released and issued or reissued by PNC pursuant to Section 9.
7.
Forfeiture; Death; Disability Termination; Retirement; Termination in Anticipation of Change in Control
.
7.1
Forfeiture on Termination of Employment
. Except as otherwise
provided in and subject to the conditions of Section 7.3, Section 7.4(a), Section 7.5, Section 7.6(a), Section 7.6(b), or Section 8, if applicable, in the event that Grantee’s employment with the Corporation terminates prior to the fifth
(5
th
) anniversary of the Grant Date, all Restricted Shares that are Unvested Shares on Grantee’s Termination
Date will be forfeited by Grantee to PNC without payment of any consideration by PNC.
Upon forfeiture of Unvested Shares pursuant to the provisions of this Section 7.1 or the provisions of Section 7.2, Section 7.4(b), Section 7.5, or Section 7.6(d), neither Grantee nor any successors, heirs, assigns or
legal representatives of Grantee will thereafter have any further rights or interest in such Unvested Shares or any certificate or certificates representing such Unvested Shares.
7.2
Forfeiture for Detrimental Conduct
. Unvested Shares that would otherwise remain outstanding after Grantee’s
Termination Date, if any, will be forfeited by Grantee to PNC without payment of any consideration by PNC in the event that, at any time prior to the date such shares become Awarded Shares, PNC determines that Grantee has engaged in Detrimental
Conduct;
provided, however,
that: (a) this Section 7.2 will not apply to Restricted Shares that remain outstanding after Grantee’s Termination Date pursuant to Section 7.3 or Section 7.6, if any; (b) no determination that Grantee has
engaged in Detrimental Conduct may be made on or after the date of Grantee’s death; (c) Detrimental Conduct will not apply to conduct by or activities of successors to the Restricted Shares by will or the laws of descent and distribution in the
event of Grantee’s death; and (d) Detrimental Conduct will cease to apply to any Restricted Shares upon a Change in Control.
7.3
Death
. In the event of Grantee’s death while an employee of the Corporation and prior to the fifth (5
th
) anniversary of the Grant Date, all remaining applicable Continued Employment Performance Goals will be
deemed
to have been
-3-
achieved, and the Restricted Period or Periods with respect to all then outstanding Unvested Shares, if any, will terminate on the date of Grantee’s
death.
The Restricted Shares which thereby become Awarded
Shares will be released and issued or reissued by PNC to, or at the proper direction of, Grantee’s legal representative pursuant to Section 9 as soon as administratively practicable following such date.
7.4
Disability Termination
.
(a) In the event Grantee’s employment with the Corporation is terminated
prior to the fifth (5
th
) anniversary of the Grant Date by the Corporation by reason of Grantee’s Total and
Permanent Disability, Unvested Shares will not be forfeited on Grantee’s Termination Date. Instead, Unvested Shares will, subject to the forfeiture provisions of Section 7.2, remain outstanding pending approval of the vesting of the Restricted
Shares pursuant to this Section 7.4(a) by the Designated Person specified in Section A.14 of Annex A.
If such Unvested Shares are still outstanding but the Designated Person has not made an affirmative determination to either approve or disapprove the
vesting of the Unvested Shares or relevant portion thereof by the day immediately preceding the third (3
rd
)
anniversary of the Grant Date in the case of First Tranche shares, or the fourth (4
th
) or fifth (5
th
) anniversary of the Grant Date in the case of Second or Third Tranche shares, respectively, then the Restricted Period
applicable to such shares will be automatically extended through the first to occur of: (1) the day the Designated Person makes an affirmative determination regarding such vesting; and (2) either (i) the ninetieth (90
th
) day following the third (3
rd
) anniversary of the Grant Date in the case of First Tranche shares, or the fourth (4
th
) or fifth (5
th
) anniversary of the Grant Date in the case of Second or Third Tranche
shares, respectively, if the Designated Person is the Chief Human Resources Officer of PNC, or (ii) the 180
th
day
following such anniversary date if the Designated Person is the Committee, whichever is applicable.
If the vesting of the then outstanding Unvested Shares or relevant portion thereof is affirmatively approved by the Designated Person on or prior to the
last day of the applicable Restricted Period, including any extension of such Restricted Period, if applicable, then the applicable Continued Employment Performance Goal will be
deemed
to have been achieved, and the Restricted Period with
respect to any such Unvested Shares then outstanding will terminate as of the end of the day on the later of (i) the date of such approval and (ii) the day immediately preceding the third (3
rd
) anniversary of the Grant Date in the case of First Tranche shares, or the fourth (4
th
) or fifth (5
th
)
anniversary of the Grant Date in the case of Second or Third Tranche shares, respectively. The Restricted Shares outstanding at the termination of such applicable Restricted Period will become Awarded Shares and will be released and issued or
reissued by PNC pursuant to Section 9.
-4-
(b) If the Designated Person disapproves the vesting of Unvested Shares that had remained outstanding
after Grantee’s Termination Date pending approval of vesting, then all such Unvested Shares that are still outstanding will be forfeited by Grantee to PNC on such disapproval date without payment of any consideration by PNC.
If by the end of the applicable Restricted Period, including any extension of
such Restricted Period pursuant to the second paragraph of Section 7.4(a), if applicable, the Designated Person has neither affirmatively approved nor disapproved the vesting of Unvested Shares that had remained outstanding after Grantee’s
Termination Date pending approval of vesting, then all such Unvested Shares that are still outstanding will be forfeited by Grantee to PNC at the close of business on the last day of the applicable Restricted Period without payment of any
consideration by PNC.
7.5
Retirement
. In the event that
Grantee Retires prior to the fifth (5
th
) anniversary of the Grant Date, all Restricted Shares that are Unvested
Shares on Grantee’s Termination Date will be forfeited by Grantee to PNC on such date without payment of any consideration by PNC unless the Committee determines otherwise. The Committee may, in its sole discretion with respect to some or all
of the Unvested Shares, treat such shares in the same manner that such shares would be treated pursuant to Section 7.4 if Grantee’s employment had been terminated by the Corporation by reason of Total and Permanent Disability.
7.6
Termination in Anticipation of a Change in Control
.
(a) Notwithstanding anything in the Agreement to the contrary, if, after the
occurrence of a CIC Triggering Event but prior to a CIC Failure and prior to the fifth (5
th
) anniversary of the
Grant Date, Grantee’s employment is terminated (other than by reason of Grantee’s death) by the Corporation without Cause or by Grantee for Good Reason, or if Grantee’s employment is
deemed
to have been so terminated pursuant
to Section 7.6(b), then: (i) all remaining applicable Continued Employment Performance Goals will be
deemed
to have been achieved and the Restricted Period or Periods with respect to all then outstanding Unvested Shares, if any, will
terminate as of the end of the day on the day immediately preceding Grantee’s Termination Date (or, in the case of a qualifying termination pursuant to Section 7.6(b), the date all of the conditions set forth in clauses (i), (ii) and (iii) of
the first or second paragraph, as the case may be, of Section 7.6(b) are met); and (ii) all Restricted Shares that thereby become Awarded Shares will be released and issued or reissued by PNC pursuant to Section 9 as soon as administratively
practicable following such date.
(b) Grantee’s employment
will also be
deemed
to have been terminated by the Corporation without Cause after the occurrence of a CIC Triggering Event but prior to a CIC Failure for purposes of Section 7.6(a) if: (i) Grantee’s employment is terminated by the
Corporation without Cause; (ii) such termination of employment (a) was at the request of a third party that has taken steps reasonably calculated to effect a Change in Control or (b) otherwise arose in anticipation of a Change in Control; and (iii)
a CIC Triggering Event or a Change in Control occurs within three (3) months of such termination of employment.
-5-
Grantee’s employment will also be
deemed
to have been terminated by Grantee for Good Reason
after the occurrence of a CIC Triggering Event but prior to a CIC Failure for purposes of Section 7.6(a) if: (i) Grantee terminates Grantee’s employment with Good Reason; (ii) the circumstance or event that constitutes Good Reason (a) occurs at
the request of a third party that has taken steps reasonably calculated to effect a Change in Control or (b) otherwise arose in anticipation of a Change in Control; and (iii) a CIC Triggering Event or a Change in Control occurs within three (3)
months of such termination of employment.
For purposes of this
Section 7.6(b) only, Grantee will have the burden of proving that the requirements of clause (ii) of the first or second paragraph of this Section 7.6(b), as the case may be, have been met and the standard of proof to be met by Grantee will be clear
and convincing evidence.
For purposes of this Section 7.6(b)
only, the definition of Change in Control in Section A.6 of Annex A will exclude the
proviso
in Section A.6(a).
(c) If Unvested Shares will be forfeited by Grantee to PNC by reason of Grantee’s termination of employment with the Corporation pursuant to Section
7.1 unless all of the conditions set forth in clauses (i), (ii) and (iii) of the first or second paragraph, as the case may be, of Section 7.6(b) are met, then in the event that the record date for any dividend payable with respect to such Unvested
Shares occurs on or after Grantee’s Termination Date but prior to the time all of the conditions set forth in clauses (i), (ii) and (iii) of the first or second paragraph, as the case may be, of Section 7.6(b) have been met, such dividend will
be held, without interest, pending satisfaction of all of such conditions. In the event that one or more of the conditions of Section 7.6(b) are
not
met, any dividend being held pending satisfaction of such conditions will be forfeited by
Grantee to PNC without payment of any consideration by PNC.
(d) If Unvested Shares will be forfeited by Grantee to PNC by reason of Grantee’s termination of employment with the Corporation pursuant to Section 7.1 unless all of the conditions set forth in clauses (i), (ii) and (iii) of the first
or second paragraph, as the case may be, of Section 7.6(b) are met, then such Restricted Shares will remain outstanding pending satisfaction of all of those conditions. Upon the failure of any required condition, all such Unvested Shares will be
forfeited by Grantee to PNC on the date such failure occurs without payment of any consideration by PNC.
8.
Change in Control
. Notwithstanding anything in the Agreement to the contrary, upon the occurrence of a Change in Control: (i) if Grantee is an
employee of the Corporation as of the day immediately preceding the Change in Control, all remaining applicable Continued Employment Performance Goals will be
deemed
to have been achieved and the Restricted Period or Periods with respect to
all then outstanding Unvested Shares will terminate as of the day immediately preceding the Change in Control; (ii) if Grantee’s employment with the Corporation terminated prior to the occurrence of the Change in Control but Unvested Shares
remained outstanding after
-6-
such termination of employment pursuant to Section 7.4 or Section 7.5 and are still outstanding pending approval of the vesting of such shares by the
Designated Person specified in Section A.14 of Annex A, then with respect to all such Unvested Shares outstanding as of the day immediately preceding the Change in Control, such vesting approval will be
deemed
to have been given, the
applicable Continued Employment Performance Goal or Goals will be
deemed
to have been achieved, and the applicable Restricted Period or Periods will terminate, all as of the day immediately preceding the Change in Control; and (iii) all
Restricted Shares that thereby become Awarded Shares will be released and issued or reissued by PNC pursuant to Section 9 as soon as administratively practicable following such date.
9.
Termination of Prohibitions
. Following termination of the Restricted Period applicable to such shares, PNC will
release and issue or reissue the certificate or certificates representing the then outstanding whole Restricted Shares that have become Awarded Shares without the legend referred to in Section 3.
Upon release and issuance or reissuance of shares that have become Awarded
Shares, PNC or its designee will deliver the certificate or certificates for such whole shares to, or at the proper direction of, Grantee or Grantee’s legal representative.
10.
Payment of Taxes
.
10.1
Internal Revenue Code Section 83(b) Election
. In the event that Grantee makes an Internal Revenue Code Section 83(b) election with respect to
the Restricted Shares, Grantee shall satisfy all applicable federal, state or local withholding tax obligations arising from that election either: (a) by payment of cash; (b) by physical delivery to PNC of certificates for whole shares of PNC common
stock that are not subject to any contractual restriction, pledge or other encumbrance and that have been owned by Grantee for at least six (6) months and, in the case of restricted stock, for which it has been at least six (6) months since the
restrictions lapsed; or (c) by a combination of cash and such stock. Any such tax election shall be made pursuant to a form to be provided to Grantee by PNC on request. For purposes of this Section 10.1, shares of PNC common stock that are used to
satisfy applicable withholding tax obligations will be valued at their Fair Market Value on the date the tax withholding obligation arises. Grantee will provide to PNC a copy of any Internal Revenue Code Section 83(b) election filed by Grantee with
respect to the Restricted Shares not later than ten (10) days after the filing of such election.
10.2
Other Tax Liabilities
. Where Grantee has not previously satisfied all applicable withholding tax obligations, PNC will, at the time the tax
withholding obligation arises with respect to any Restricted Shares, retain sufficient whole shares of PNC common stock from the shares granted pursuant to the Agreement to satisfy the minimum amount of taxes required to be withheld by the
Corporation in connection with such shares. For purposes of this Section 10.2, shares of PNC common stock retained to satisfy applicable withholding tax requirements will be valued at their Fair Market Value on the date the tax withholding
obligation arises.
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PNC will
not
retain more than the number of shares sufficient to satisfy the minimum amount of
taxes required to be withheld in connection with the Restricted Shares. If Grantee desires to have an additional amount, up to Grantee’s W-4 obligation, withheld above the required minimum and if PNC so permits, Grantee may elect to satisfy
this additional withholding either: (a) by payment of cash; or (b) using whole shares of PNC common stock (either by physical delivery to PNC of certificates for the shares or through PNC’s attestation procedure) that are not subject to any
contractual restriction, pledge or other encumbrance and that have been owned by Grantee for at least six (6) months and, in the case of restricted stock, for which it has been at least six (6) months since the restrictions lapsed. Any such tax
election shall be made pursuant to a form provided by PNC. Shares of PNC common stock that are used for this purpose will be valued at their Fair Market Value on the date the tax withholding obligation arises.
11.
Employment
. Neither the granting and issuance of the Restricted
Shares nor any term or provision of the Agreement shall constitute or be evidence of any understanding, expressed or implied, on the part of PNC or any Subsidiary to employ Grantee for any period or in any way alter Grantee’s status as an
employee at will.
12.
Subject to the Plan and the
Committee
. In all respects the Grant and the Agreement are subject to the terms and conditions of the Plan, which has been made available to Grantee and is incorporated herein by reference;
provided, however,
the terms of the Plan shall
not be considered an enlargement of any benefits under the Agreement. Further, the Grant and the Agreement are subject to any interpretation of, and any rules and regulations issued by, the Committee or under the authority of the Committee, whether
made or issued before or after the Grant Date.
13.
Headings; Entire Agreement
. Headings used in the Agreement are provided for reference and convenience only, shall not be considered part of the Agreement, and shall not be employed in the construction of the Agreement. The Agreement
constitutes the entire agreement between Grantee and PNC and supersedes all other discussions, negotiations, correspondence, representations, understandings and agreements between the parties with respect to the subject matter hereof.
14.
Grantee Covenants
.
14.1
General
. Grantee and PNC acknowledge and agree that Grantee has
received adequate consideration with respect to enforcement of the provisions of Sections 14 and 15, that such provisions are reasonable and properly required for the adequate protection of the business of the Corporation, and that enforcement of
such provisions will not prevent Grantee from earning a living.
14.2
Non-Solicitation; No-Hire
. Grantee agrees to comply with the provisions of subsections (a) and (b) of this Section 14.2 while employed by the Corporation and for a period of twelve (12) months after Grantee’s Termination
Date regardless of the reason for such termination of employment.
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(a)
Non-Solicitation
. Grantee shall not, directly or indirectly, either for Grantee’s own
benefit or purpose or for the benefit or purpose of any Person other than PNC or any Subsidiary, solicit, call on, do business with, or actively interfere with PNC’s or any Subsidiary’s relationship with, or attempt to divert or entice
away, any Person that Grantee should reasonably know (i) is a customer of PNC or any Subsidiary for which PNC or any Subsidiary provides any services as of the Termination Date, or (ii) was a customer of PNC or any Subsidiary for which PNC or any
Subsidiary provided any services at any time during the twelve (12) months preceding the Termination Date, or (iii) was, as of the Termination Date, considering retention of PNC or any Subsidiary to provide any services.
(b)
No-Hire
. Grantee shall not, directly or indirectly, either for
Grantee’s own benefit or purpose or for the benefit or purpose of any Person other than PNC or any Subsidiary, employ or offer to employ, call on, or actively interfere with PNC’s or any Subsidiary’s relationship with, or attempt to
divert or entice away, any employee of the Corporation, nor shall Grantee assist any other Person in such activities.
Notwithstanding the above, if Grantee’s employment with the Corporation is terminated by the Corporation without Cause or by Grantee with Good Reason
and such Termination Date occurs during a Coverage Period (either as Coverage Period is defined in Section A.13 of Annex A or, if Grantee was a party to a written agreement between Grantee and PNC providing, among other things, for certain change in
control severance benefits (a “CIC Severance Agreement”) that was in effect at the time of such termination of employment, as Coverage Period is defined in such CIC Severance Agreement, if longer), then commencing immediately after such
Termination Date, the provisions of subsections (a) and (b) of this Section 14.2 will no longer apply and will be replaced with the following subsection (c):
(c)
No-Hire
. Grantee agrees that Grantee shall not, for a period of twelve (12) months after the Termination Date, employ or offer to employ,
solicit, actively interfere with PNC’s or any PNC affiliate’s relationship with, or attempt to divert or entice away, any officer of PNC or any PNC affiliate.
14.3
Confidentiality
. During Grantee’s employment with the Corporation, and thereafter regardless of the reason
for termination of such employment, Grantee will not disclose or use in any way any confidential business or technical information or trade secret acquired in the course of such employment, all of which is the exclusive and valuable property of the
Corporation whether or not conceived of or prepared by Grantee, other than (a) information generally known in the Corporation’s industry or acquired from public sources, (b) as required in the course of employment by the Corporation, (c) as
required by any court, supervisory authority, administrative agency or applicable law, or (d) with the prior written consent of PNC.
14.4
Ownership of Inventions
. Grantee shall promptly and fully disclose to PNC any and all inventions, discoveries, improvements, ideas or other
works of
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inventorship or authorship, whether or not patentable, that have been or will be conceived and/or reduced to practice by Grantee during the term of
Grantee’s employment with the Corporation, whether alone or with others, and that are (a) related directly or indirectly to the business or activities of PNC or any Subsidiary or (b) developed with the use of any time, material, facilities or
other resources of PNC or any Subsidiary (“Developments”). Grantee agrees to assign and hereby does assign to PNC or its designee all of Grantee’s right, title and interest, including copyrights and patent rights, in and to all
Developments. Grantee shall perform all actions and execute all instruments that PNC or any Subsidiary shall deem necessary to protect or record PNC’s or its designee’s interests in the Developments. The obligations of this Section 14.4
shall be performed by Grantee without further compensation and will continue beyond the Termination Date.
15.
Enforcement Provisions
. Grantee understands and agrees to the following provisions regarding enforcement of the Agreement.
15.1
Governing Law and Jurisdiction
. The Agreement is governed by and
construed under the laws of the Commonwealth of Pennsylvania, without regard to conflict of laws rules. Any dispute or claim arising out of or relating to the Agreement or claim of breach hereof shall be brought exclusively in the federal court for
the Western District of Pennsylvania or in the Court of Common Pleas of Allegheny County, Pennsylvania. By execution of the Agreement, Grantee and PNC hereby consent to the exclusive jurisdiction of such courts, and waive any right to challenge
jurisdiction or venue in such courts with regard to any suit, action, or proceeding under or in connection with the Agreement.
15.2
Equitable Remedies
. A breach of the provisions of any of Sections 14.2, 14.3 or 14.4 will cause the Corporation irreparable harm, and the
Corporation will therefore be entitled to issuance of immediate, as well as permanent, injunctive relief restraining Grantee, and each and every person and entity acting in concert or participating with Grantee, from initiation and/or continuation
of such breach.
15.3
Tolling Period
. If it becomes
necessary or desirable for the Corporation to seek compliance with the provisions of Section 14.2 by legal proceedings, the period during which Grantee shall comply with said provisions will extend for a period of twelve (12) months from the date of
the legal order requiring such compliance.
15.4
No
Waiver
. Failure of PNC to demand strict compliance with any of the terms, covenants or conditions of the Agreement will not be deemed a waiver of such term, covenant or condition, nor will any waiver or relinquishment of any such term, covenant
or condition on any occasion or on multiple occasions be deemed a waiver or relinquishment of such term, covenant or condition.
15.5
Severability
. The restrictions and obligations imposed by Sections 14.2, 14.3 and 14.4 are separate and severable, and it is the intent of
Grantee and PNC that if any restriction or obligation imposed by any of these provisions is deemed by a court of
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competent jurisdiction to be void for any reason whatsoever, the remaining provisions, restrictions and obligations will remain valid and binding upon
Grantee.
15.6
Reform
. In the event any of Sections
14.2, 14.3 and 14.4 are determined by a court of competent jurisdiction to be unenforceable because unreasonable either as to length of time or area to which said restriction applies, it is the intent of Grantee and PNC that said court reduce and
reform the provisions thereof so as to apply the greatest limitations considered enforceable by the court.
15.7
Waiver of Jury Trial
. Each of Grantee and PNC hereby waives any right to trial by jury with regard to any suit, action or proceeding under or
in connection with any of Sections 14.2, 14.3 and 14.4.
15.8
Applicable Law
. Notwithstanding anything in the Agreement, PNC will not be required to comply with any term, covenant or condition of the Agreement if and to the extent prohibited by law, including but not limited to federal banking and
securities regulations, or as otherwise directed by one or more regulatory agencies having jurisdiction over PNC or any of its subsidiaries. Further, to the extent, if any, applicable to Grantee, Grantee agrees to reimburse PNC for any amounts
Grantee may be required to reimburse PNC or its subsidiaries pursuant to Section 304 of the Sarbanes-Oxley Act of 2002, and agrees that PNC need not comply with any term, covenant or condition of the Agreement to the extent that doing so would
require that Grantee reimburse PNC or its subsidiaries for such amounts pursuant to Section 304 of the Sarbanes-Oxley Act of 2002.
16.
Amendment of Pre-2004 Stock Options, Restricted Stock and Restricted Stock Deferrals
. All nonstatutory stock options granted to employees under
the Plan outstanding on February 18, 2004, all restricted stock grants to employees under the Plan or PNC’s 1996 Executive Incentive Award Plan outstanding but not yet vested on February 18, 2004, and all participant restricted stock deferral
accounts under the PNC and Affiliates Deferred Compensation Plan that were in place but not yet vested on February 18, 2004, are subject to the amendments approved by the Committee on that date. These amendments are generally described in the Plan
prospectus dated
, 200
under the heading “Recent Amendments” of the section titled “The
Plan.” A copy of this Plan prospectus accompanied or preceded delivery of the Agreement to Grantee.
To the extent that Grantee is the holder of any such stock options or is the grantee of any such restricted stock or is a participant in the PNC and
Affiliates Deferred Compensation Plan with such stock deferral account or accounts in place but not yet vested, Grantee hereby acknowledges and consents to such amendments.
17.
Acceptance of Grant; PNC Right to Cancel
. If Grantee does not accept the Grant by executing and delivering a copy
of the Agreement to PNC, without altering or changing the terms thereof in any way, within sixty (60) days of receipt by Grantee of a copy of the Agreement, PNC may, in its sole discretion, withdraw its offer and cancel the Grant at any time prior
to Grantee’s delivery to PNC of a copy of the Agreement
-11-
executed by Grantee. Otherwise, upon execution and delivery of the Agreement by both PNC and Grantee and, in the event that Grantee is subject to the
reporting requirements of Section 16(a) of the Exchange Act with respect to PNC securities, the filing with and acceptance by the SEC of a Form 4 reporting the Grant, the Agreement is effective.
Grantee will not have any of the rights of a shareholder with respect to the
Restricted Shares as set forth in Section 4, and will not have the right to vote or to receive dividends on such shares, until the date the Agreement is effective and the Restricted Shares are issued in accordance with this Section 17.
In the event that one or more record dates for dividends on PNC common
stock occur after the Grant Date but before the date the Agreement is effective in accordance with this Section 17 and the Restricted Shares are issued, then upon the effectiveness of the Agreement, the Corporation will make a cash payment to
Grantee equivalent to the amount of the dividends Grantee would have received had the Agreement been effective and the Restricted Shares had been issued on the Grant Date.
I
N
W
ITNESS
W
HEREOF
, PNC has caused the Agreement to be signed on its behalf as
of the Grant Date.
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THE PNC FINANCIAL SERVICES GROUP, INC.
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By:
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Chairman and Chief Executive Officer
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ATTEST:
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By:
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Corporate Secretary
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A
CCEPTED
AND
A
GREED
TO
by G
RANTEE
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Grantee
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Restricted Stock Grant
Continued Employment Performance Goals
Restricted Periods: Three Years
(25%); Four Years (25%); Five Years (50%);
ANNEX A
TO
THE PNC FINANCIAL SERVICES GROUP, INC.
1997 LONG-TERM INCENTIVE AWARD PLAN
RESTRICTED STOCK AGREEMENT
* * *
CERTAIN DEFINITIONS
Except where the context otherwise indicates, the following definitions apply
for purposes of the Restricted Stock Agreement (“Agreement”) to which this Annex A is attached:
A.1 “
Awarded Shares
.” Provided that the Restricted Shares are then outstanding, Restricted Shares become “Awarded Shares” when
both of the following have occurred: (a) the Continued Employment Performance Goal applicable to such Restricted Shares has been achieved or is
deemed
to have been achieved pursuant to the terms of the Agreement; and (b) the Restricted Period
applicable to such Restricted Shares has terminated.
A.2
“
Board
” means the Board of Directors of PNC.
A.3 “
Business Day
” means any day when the New York Stock Exchange is open for business.
A.4 “
Cause
” means:
(a) the willful and continued failure of Grantee to substantially perform Grantee’s duties with the Corporation (other than any such failure
resulting from incapacity due to physical or mental illness), after a written demand for substantial performance is delivered to Grantee by the Board or the CEO which specifically identifies the manner in which the Board or the CEO believes that
Grantee has not substantially performed Grantee’s duties; or
(b) the willful engaging by Grantee in illegal conduct or gross misconduct that is materially and demonstrably injurious to PNC or any Subsidiary.
-13-
For purposes of the preceding clauses (a) and (b), no act or failure to act, on the part of Grantee,
shall be considered willful unless it is done, or omitted to be done, by Grantee in bad faith and without reasonable belief that Grantee’s action or omission was in the best interests of the Corporation. Any act, or failure to act, based upon
the instructions or prior approval of the Board, the CEO or Grantee’s superior or based upon the advice of counsel for the Corporation, shall be conclusively presumed to be done, or omitted to be done, by Grantee in good faith and in the best
interests of the Corporation.
The cessation of employment of
Grantee will be
deemed
to be a termination of Grantee’s employment with the Corporation for Cause for purposes of the Agreement only if and when there shall have been delivered to Grantee, as part of the notice of Grantee’s
termination, a copy of a resolution duly adopted by the affirmative vote of not less than a majority of the entire membership of the Board, at a Board meeting called and held for the purpose of considering such termination, finding on the basis of
clear and convincing evidence that, in the good faith opinion of the Board, Grantee is guilty of conduct described in clause (a) or clause (b) above and, in either case, specifying the particulars thereof in detail. Such resolution shall be adopted
only after (i) reasonable notice of such Board meeting is provided to Grantee, together with written notice that PNC believes that Grantee is guilty of conduct described in clause (a) or clause (b) above and, in either case, specifying the
particulars thereof in detail, and (ii) Grantee is given an opportunity, together with counsel, to be heard before the Board.
A.5 “
CEO
” means the chief executive officer of PNC.
A.6 “
Change in Control
” means a change of control of PNC of a nature that would be required to be reported
in response to Item 6(e) of Schedule 14A of Regulation 14A (or in response to any similar item on any similar schedule or form) promulgated under the Exchange Act, whether or not PNC is then subject to such reporting requirement;
provided
,
however
, that without limitation, a Change in Control will be
deemed
to have occurred if:
(a) any Person, excluding employee benefits plans of the Corporation, is or becomes the beneficial owner (as defined in Rules 13d-3 and 13d-5 under the
Exchange Act or any successor provisions thereto), directly or indirectly, of securities of PNC representing twenty percent (20%) or more of the combined voting power of PNC’s then outstanding securities;
provided
,
however
, that
such an acquisition of beneficial ownership representing between twenty percent (20%) and forty percent (40%), inclusive, of such voting power will not be considered a Change in Control if the Board approves such acquisition either prior to or
immediately after its occurrence;
(b) PNC consummates a
merger, consolidation, share exchange, division or other reorganization or transaction of PNC (a “Fundamental Transaction”) with any other corporation, other than a Fundamental Transaction that results in the voting securities of PNC
outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least sixty percent (60%) of the combined voting power immediately after such
Fundamental
-14-
Transaction of (i) PNC’s outstanding securities, (ii) the surviving entity’s outstanding securities, or (iii) in the case of a division, the
outstanding securities of each entity resulting from the division;
(c) the shareholders of PNC approve a plan of complete liquidation or winding-up of PNC or an agreement for the sale or disposition (in one transaction or a series of transactions) of all or substantially all of PNC’s assets;
(d) as a result of a proxy contest, individuals who prior to
the conclusion thereof constituted the Board (including for this purpose any new director whose election or nomination for election by PNC’s shareholders in connection with such proxy contest was approved by a vote of at least two-thirds
(2/3rds) of the directors then still in office who were directors prior to such proxy contest) cease to constitute at least a majority of the Board (excluding any Board seat that is vacant or otherwise unoccupied);
(e) during any period of twenty-four (24) consecutive months, individuals who
at the beginning of such period constituted the Board (including for this purpose any new director whose election or nomination for election by PNC’s shareholders was approved by a vote of at least two-thirds (2/3rds) of the directors then
still in office who were directors at the beginning of such period) cease for any reason to constitute at least a majority of the Board (excluding any Board seat that is vacant or otherwise unoccupied); or
(f) the Board determines that a Change in Control has occurred.
Notwithstanding anything to the contrary herein, a divestiture or spin-off
of a subsidiary or division of PNC will not by itself constitute a Change in Control.
A.7 “
CIC Failure
” means the following:
(a) with respect to a CIC Triggering Event described in Section A.8(a), PNC’s shareholders vote against the transaction approved by the Board or the agreement to consummate the transaction is terminated; or
(b) with respect to a CIC Triggering Event described in
Section A.8(b), the proxy contest fails to replace or remove a majority of the members of the Board.
A.8 “
CIC Triggering Event
” means the occurrence of either of the following:
(a) the Board or PNC’s shareholders approve a transaction described in Subsection (b) of the definition of Change in
Control contained in Section A.6; or
(b) the commencement of
a proxy contest in which any Person seeks to replace or remove a majority of the members of the Board.
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A.9 “
Committee
” means the Personnel and Compensation Committee of the Board.
A.10 “
Competitive Activity
” means, for purposes of the
Agreement, any participation in, employment by, ownership of any equity interest exceeding one percent (1%) in, or promotion or organization of, any Person other than PNC or any Subsidiary (a) engaged in business activities similar to some or all of
the business activities of PNC or any Subsidiary as of Grantee’s Termination Date or (b) engaged in business activities which Grantee knows PNC or any Subsidiary intends to enter within the first twelve (12) months after Grantee’s
Termination Date, in either case whether Grantee is acting as agent, consultant, independent contractor, employee, officer, director, investor, partner, shareholder, proprietor or in any other individual or representative capacity therein.
A.11 “
Continued Employment Performance Goal
”
means: (a) with respect to shares in the First Tranche of Restricted Shares, the Three-Year Continued Employment Performance Goal; (b) with respect to shares in the Second Tranche of Restricted Shares, the Four-Year Continued Employment Performance
Goal; and (c) with respect to shares in the Third Tranche of Restricted Shares, the Five-Year Continued Employment Performance Goal, as applicable.
A.12 “
Corporation
” means PNC and its Subsidiaries.
A.13 “
Coverage Period
” means a period (a) commencing on the earlier to occur of (i) the date of a CIC
Triggering Event and (ii) the date of a Change in Control and (b) ending on the date that is three (3) years after the date of the Change in Control;
provided
,
however
, that in the event that a Coverage Period commences on the date of
a CIC Triggering Event, such Coverage Period will terminate upon the earlier to occur of (x) the date of a CIC Failure and (y) the date that is three (3) years after the date of the Change in Control triggered by the CIC Triggering Event. After the
termination of any Coverage Period, another Coverage Period will commence upon the earlier to occur of clause (a)(i) and clause (a)(ii) in the preceding sentence.
A.14 “
Designated Person
” will be either: (a) the Committee, if Grantee is a member of the Corporate
Executive Group (or equivalent successor classification) or is subject to the reporting requirements of Section 16(a) of the Exchange Act with respect to PNC securities; or (a) the Chief Human Resources Officer of PNC, if Grantee is not within one
of the groups specified in Section A.14(a).
A.15
“
Detrimental Conduct
” means:
(a) Grantee has
engaged, without the prior written consent of PNC (at PNC’s sole discretion), in any Competitive Activity in the continental United States at any time during the period commencing on Grantee’s Termination Date through the first
(1
st
) anniversary of Grantee’s Termination Date;
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(b) a material breach by Grantee of (i) any code of conduct of PNC or a Subsidiary or (ii) other written
policy of PNC or a Subsidiary, in either case required by law or established to maintain compliance with applicable law;
(c) any act of fraud, misappropriation, material dishonesty, or embezzlement by Grantee against PNC or a Subsidiary or any client or customer of PNC or a
Subsidiary;
(d) any conviction (including a plea of guilty or
of
nolo contendere
) of Grantee for, or entry by Grantee into a pre-trial disposition with respect to, the commission of a felony which relates to or arises out of Grantee’s employment or other service relationship with the Corporation;
or
(e) entry of any order against Grantee by any governmental
body having regulatory authority with respect to the business of PNC or any Subsidiary, which order relates to or arises out of Grantee’s employment or other service relationship with the Corporation.
Grantee will be
deemed
to have engaged in Detrimental Conduct for
purposes of the Agreement only if and when the Committee determines that Grantee has engaged in conduct described in clause (a) above, that Grantee is guilty of conduct described in clause (b) or clause (c) above, or that an event described in
clause (d) or clause (e) above has occurred with respect to Grantee and, if so, determines that Grantee will be
deemed
to have engaged in Detrimental Conduct.
A.16 “
Exchange Act
” means the Securities Exchange Act of 1934 as amended, and the rules and regulations
promulgated thereunder.
A.17 “
Fair Market
Value
” as it relates to PNC common stock means the average of the high and low sale prices of the PNC common stock as reported on the New York Stock Exchange (or such successor reporting system as PNC may select) on the relevant date or, if
no sale of the PNC common stock has been reported for that day, the average of such prices on the next preceding day and the next following day for which there were reported sales.
A.18 “
Five-Year Continued Employment Performance Goal
” means, subject to early achievement if so determined
by the Committee or to
deemed
achievement pursuant to Section 7.3, Section 7.4, Section 7.5, Section 7.6, or Section 8 of the Agreement, if applicable, that Grantee has been continuously employed by the Corporation for the period from the
Grant Date through (and including) the day immediately preceding the first of the following to occur: (a) the fifth (5
th
) anniversary of the Grant Date; (b) the date of Grantee’s death; and (c) the day a Change in Control is
deemed
to have occurred.
A.19 “
Four-Year Continued Employment Performance Goal
” means, subject to early achievement if so determined by the Committee or to
deemed
achievement pursuant to Section 7.3, Section 7.4, Section 7.5, Section 7.6, or Section 8 of the Agreement, if
-17-
applicable, that Grantee has been continuously employed by the Corporation for the period from the Grant Date through (and including) the day immediately
preceding the first of the following to occur: (a) the fourth (4
th
) anniversary of the Grant Date; (b) the date of
Grantee’s death; and (c) the day a Change in Control is
deemed
to have occurred.
A.20 “
Good Reason
” means:
(a) the assignment to Grantee of any duties inconsistent in any respect with Grantee’s position (including status, offices, titles and reporting requirements), authority, duties or responsibilities immediately
prior to either the CIC Triggering Event or the Change in Control, or any other action by the Corporation which results in a diminution in any respect in such position, authority, duties or responsibilities, excluding for this purpose an isolated,
insubstantial and inadvertent action not taken in bad faith that is remedied by the Corporation promptly after receipt of notice thereof given by Grantee;
(b) a reduction by the Corporation in Grantee’s annual base salary as in effect on the Grant Date, as the same may be increased from time to time;
(c) the Corporation’s requiring Grantee to be based at
any office or location that is more than fifty (50) miles from Grantee’s office or location immediately prior to either the CIC Triggering Event or the Change in Control;
(d) the failure by the Corporation (i) to continue in effect any bonus, stock option or other cash or equity-based incentive
plan or program in which Grantee participates immediately prior to either the CIC Triggering Event or the Change in Control that is material to Grantee’s total compensation, unless a substantially equivalent arrangement (embodied in an ongoing
substitute or alternative plan or program) has been made with respect to such plan or program, or (ii) to continue Grantee’s participation in such plan or program (or in such substitute or alternative plan or program) on a basis at least as
favorable, both in terms of the amount of benefits provided and the level of Grantee’s participation relative to other participants, as existed immediately prior to the CIC Triggering Event or the Change in Control; or
(e) the failure by the Corporation to continue to provide Grantee with
benefits substantially similar to those received by Grantee under any of the Corporation’s pension (including, but not limited to, tax-qualified plans), life insurance, health, accident, disability or other welfare plans or programs in which
Grantee was participating, at costs substantially similar to those paid by Grantee, immediately prior to the CIC Triggering Event or the Change in Control.
A.21 “
Grant
” means the Restricted Shares granted and issued to Grantee pursuant to Section 1 of the Agreement.
A.22 “
Grant Date
” means the Grant Date set forth on page 1
of the Agreement.
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A.23 “
Grantee
” means the person identified as Grantee on page 1 of the Agreement.
A.24 “
Internal Revenue Code
” means the
Internal Revenue Code of 1986 as amended, and the rules and regulations promulgated thereunder.
A.25 “
Person
” has the meaning given in Section 3(a)(9) of the Exchange Act and also includes any syndicate or group
deemed
to be a
person under Section 13(d)(3) of the Exchange Act.
A.26
“
PNC
” means The PNC Financial Services Group, Inc.
A.27 “
Restricted Period
.” The applicable Restricted Period for Restricted Shares means, subject to early termination if so determined by the Committee or pursuant to Section 7.6 of the Agreement, if applicable, the period
set forth in the applicable subsection below:
(a)
For First
Tranche Shares
: with respect to shares in the First Tranche of Restricted Shares, the period from the Grant Date through (and including) the earlier of: (i) the date of Grantee’s death; (ii) the day immediately preceding the day a Change in
Control is
deemed
to have occurred; and (iii) the day immediately preceding the third (3
rd
) anniversary of
the Grant Date or, if later, the last day of any extension of the Restricted Period pursuant to Section 7.4(a) or Section 7.5 of the Agreement, if applicable;
(b)
For Second Tranche Shares
: with respect to shares in the Second Tranche of Restricted Shares, the period from the Grant Date through (and
including) the earlier of: (i) the date of Grantee’s death; (ii) the day immediately preceding the day a Change in Control is
deemed
to have occurred; and (iii) the day immediately preceding the fourth (4
th
) anniversary of the Grant Date or, if later, the last day of any extension of the Restricted Period pursuant to Section 7.4(a)
or Section 7.5 of the Agreement, if applicable; and
(c)
For
Third Tranche Shares
: with respect to shares in the Third Tranche of Restricted Shares, the period from the Grant Date through (and including) the earlier of: (i) the date of Grantee’s death; (ii) the day immediately preceding the day a
Change in Control is
deemed
to have occurred; and (iii) the day immediately preceding the fifth (5
th
)
anniversary of the Grant Date or, if later, the last day of any extension of the Restricted Period pursuant to Section 7.4(a) or Section 7.5 of the Agreement, if applicable.
A.28 “
Retiree
” means a Grantee who has Retired.
A.29 “
Retire” or “Retirement
” means termination of
Grantee’s employment with the Corporation at any time and for any reason (other than termination by reason of Grantee’s death or by the Corporation for Cause or, unless the Committee determines
-19-
otherwise, termination in connection with a divestiture of assets or of one or more Subsidiaries) if such termination of employment occurs on or after the
first (1
st
) day of the first (1
st
) month coincident with or next following the date on which Grantee attains age fifty-five (55) and completes five (5) years of service (as determined in the
same manner as the determination of five years of Vesting Service under the provisions of The PNC Financial Services Group, Inc. Pension Plan) with the Corporation.
A.30 “
SEC
” means the United States Securities and Exchange Commission.
A.31 “
Termination Date
” means Grantee’s last date of
employment with the Corporation. If Grantee is employed by a Subsidiary that ceases to be a Subsidiary of PNC and Grantee does not continue to be employed by PNC or a Subsidiary, then for purposes of the Agreement, Grantee’s employment with the
Corporation terminates effective at the time this occurs.
A.32
“
Three-Year Continued Employment Performance Goal
” means, subject to early achievement if so determined by the Committee or to
deemed
achievement pursuant to Section 7.3, Section 7.4, Section 7.5, Section 7.6, or Section 8 of
the Agreement, if applicable, that Grantee has been continuously employed by the Corporation for the period from the Grant Date through (and including) the day immediately preceding the first of the following to occur: (a) the third (3
rd
) anniversary of the Grant Date; (b) the date of Grantee’s death; and (c) the day a Change in Control is
deemed
to
have occurred.
A.33 “
Total and Permanent
Disability
” means, unless the Committee determines otherwise, Grantee’s disability as determined to be total and permanent by the Corporation for purposes of the Agreement.
A.34 “
Tranche(s)” or “First, Second or Third Tranche
” has the meaning set forth in Section 1 of
the Agreement.
A.35 “
Unvested Shares
” means
any Restricted Shares that are not Awarded Shares.
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FORM OF NON-NEO ANNUAL 25/25
PROGRAM
RESTRICTED STOCK GRANT AGREEMENT
Annual 25/25 Program - 200_ Restricted Stock Grant
Continued Employment
Performance Goal
Restricted Period: Three Years (100%)
THE PNC FINANCIAL SERVICES GROUP, INC.
1997
LONG-TERM INCENTIVE AWARD PLAN
* * *
ANNUAL 25/25 PROGRAM
200_ RESTRICTED STOCK GRANT
* * *
RESTRICTED STOCK AGREEMENT
* * *
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GRANTEE:
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< name >
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GRANT DATE:
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February
, 200
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SHARES:
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< number of whole shares>
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1.
Grant of
Restricted Shares
. Pursuant to Article 12 of The PNC Financial Services Group, Inc. 1997 Long-Term Incentive Award Plan as amended from time to time (“Plan”), and subject to the terms and conditions of this Restricted Stock Agreement
(“Agreement”), The PNC Financial Services Group, Inc. (“PNC”) hereby grants to the Grantee named above (“Grantee”) an Incentive Share Award (as defined in the Plan) of the number of shares of PNC common stock set forth
above, and, upon acceptance of the Grant by Grantee in accordance with Section 17, will cause the issuance of said shares to Grantee subject to the terms and conditions of the Agreement and the Plan. The shares granted and issued to Grantee hereby
as an Incentive Share Award subject to the terms and conditions of the Agreement and the Plan are hereafter referred to as the “Restricted Shares.”
2.
Definitions
. Terms defined in the Plan are used in the Agreement as defined in the Plan unless otherwise defined in Annex A (attached hereto and
incorporated herein by reference) or elsewhere in the Agreement.
-1-
3.
Terms of Grant
. The Grant will be subject to the following terms and conditions:
Restricted Shares will be subject to a Restricted Period as provided in
Section A.24 of Annex A. Restricted Shares will be deposited with PNC or its designee, or credited to a book-entry account, during the term of the Restricted Period unless and until forfeited pursuant to the terms of the Agreement.
Any certificate or certificates representing such Restricted Shares will
contain the following legend:
“This certificate and the
shares of stock represented hereby are subject to the terms and conditions (including forfeiture and restrictions against transfer) contained in The PNC Financial Services Group, Inc. 1997 Long-Term Incentive Award Plan as amended and an Agreement
entered into between the registered owner and The PNC Financial Services Group, Inc. Release from such terms and conditions will be made only in accordance with the provisions of such Plan and such Agreement, a copy of each of which is on file in
the office of the Corporate Secretary of The PNC Financial Services Group, Inc.”
Where a book-entry system is used with respect to Restricted Shares, appropriate notation of such forfeiture possibility and transfer restrictions will be made on the system with respect to the account or accounts to
which the Restricted Shares are credited.
Restricted Shares
deposited with PNC or its designee during the term of the Restricted Period that become Awarded Shares will be released and issued or reissued to, or at the proper direction of, Grantee or Grantee’s legal representative pursuant to Section 9 as
soon as administratively practicable following the end of the Restricted Period.
4.
Rights as Shareholder
. Except as provided in Section 6 and subject to Section 7.6(b) or Section 7.7(c), if applicable, and to Section 17, Grantee will have all the rights and privileges of a shareholder with
respect to the Restricted Shares including, but not limited to, the right to vote the Restricted Shares and the right to receive dividends thereon if and when declared by the Board;
provided, however,
that all such rights and privileges will
cease immediately upon any forfeiture of such shares.
5.
Capital Adjustments
. Restricted Shares awarded hereunder will, as issued and outstanding shares of PNC common stock, be subject to such adjustment as may be necessary to reflect corporate transactions, including, without limitation, stock
dividends, stock splits, spin-offs, split-offs, recapitalizations, mergers, consolidations or reorganizations of or by PNC;
provided
,
however
, that any shares received as distributions on or in exchange for Unvested Shares will be
subject to the terms and conditions of the Agreement as if they were Restricted Shares.
6.
Prohibitions Against Sale, Assignment, etc.
Unvested Shares may not be sold, assigned, transferred, exchanged, pledged, hypothecated or otherwise encumbered, other than by will or the laws of descent and
distribution or as may be required pursuant
-2-
to Section 10.2, unless and until the Restricted Period terminates and the Awarded Shares are released and issued or reissued by PNC pursuant to Section 9.
7.
Forfeiture; Death; Qualifying Disability, Retirement or
DEAP
Termination; Termination in Anticipation of CIC
.
7.1
Forfeiture on Termination of Employment
. Except as otherwise provided in and subject to the conditions of Section 7.3, Section 7.4(a), Section 7.5(a), Section 7.6(a), Section 7.7(a), Section 7.7(b), or Section 8, if applicable,
or unless the Committee determines otherwise, in the event that Grantee’s employment with the Corporation terminates prior to the third (3
rd
) anniversary of the Grant Date, all Restricted Shares that are Unvested Shares on Grantee’s Termination Date will be forfeited by Grantee to PNC without payment of any consideration by PNC.
Upon forfeiture of Unvested Shares pursuant to the provisions
of this Section 7.1 or the provisions of Section 7.2, Section 7.4(b), Section 7.5(b), Section 7.6(c) or Section 7.7(d), neither Grantee nor any successors, heirs, assigns or legal representatives of Grantee will thereafter have any further rights or
interest in such Unvested Shares or any certificate or certificates representing such Unvested Shares.
7.2
Forfeiture for Detrimental Conduct
. Unvested Shares that would otherwise remain outstanding after Grantee’s Termination Date, if any, will
be forfeited by Grantee to PNC without payment of any consideration by PNC in the event that, at any time prior to the date such shares become Awarded Shares, PNC determines that Grantee has engaged in Detrimental Conduct;
provided, however,
that: (a) this Section 7.2 will not apply to Restricted Shares that remain outstanding after Grantee’s Termination Date pursuant to Section 7.3 or Section 7.7, if any; (b) no determination that Grantee has engaged in Detrimental Conduct may be
made on or after the date of Grantee’s death; (c) Detrimental Conduct will not apply to conduct by or activities of successors to the Restricted Shares by will or the laws of descent and distribution in the event of Grantee’s death; and
(d) Detrimental Conduct will cease to apply to any Restricted Shares upon a Change in Control.
7.3
Death
. In the event of Grantee’s death while an employee of the Corporation and prior to the third (3
rd
) anniversary of the Grant Date, the Three-Year Continued Employment Performance Goal will be
deemed
to have been achieved, and the Restricted Period with respect to the then outstanding
Unvested Shares will terminate on the date of Grantee’s death.
The Restricted Shares which thereby become Awarded Shares will be released and issued or reissued by PNC to, or at the proper direction of, Grantee’s legal representative pursuant to Section 9 as soon as administratively practicable
following such date.
-3-
7.4
Disability Termination
.
(a) In the event Grantee’s employment with the Corporation is terminated prior to the third (3
rd
) anniversary of the Grant Date by the Corporation by reason of Grantee’s Total and Permanent Disability, Unvested Shares
will not be forfeited on Grantee’s Termination Date. Instead, Unvested Shares will, subject to the forfeiture provisions of Section 7.2, remain outstanding pending approval of the vesting of the Restricted Shares pursuant to this Section 7.4(a)
by the Designated Person specified in Section A.13 of Annex A.
If such Unvested Shares are still outstanding but the Designated Person has not made an affirmative determination to either approve or disapprove the vesting of the Unvested Shares by the day immediately preceding the third (3
rd
) anniversary of the Grant Date, then the Restricted Period will be automatically extended through the first to occur of: (1)
the day the Designated Person makes an affirmative determination regarding such vesting; and (2) either (i) the ninetieth (90
th
) day following the third (3
rd
) anniversary of the Grant Date, if the Designated Person is the Chief
Human Resources Officer of PNC, or (ii) the 180
th
day following such anniversary date if the Designated Person is
the Committee, whichever is applicable.
If the vesting of the
then outstanding Unvested Shares is affirmatively approved by the Designated Person on or prior to the last day of the Restricted Period, including any extension of the Restricted Period, if applicable, then the Three-Year Continued Employment
Performance Goal will be
deemed
to have been achieved, and the Restricted Period with respect to any then outstanding Unvested Shares will terminate as of the end of the day on the date of such approval or the day immediately preceding the
third (3
rd
) anniversary of the Grant Date, whichever is later. The Restricted Shares outstanding at the termination
of the Restricted Period will become Awarded Shares and will be released and issued or reissued by PNC pursuant to Section 9.
(b) If the Designated Person disapproves the vesting of the Unvested Shares that had remained outstanding after Grantee’s Termination Date pending
approval of vesting, then all such Unvested Shares that are still outstanding will be forfeited by Grantee to PNC on such disapproval date without payment of any consideration by PNC.
If by the end of the Restricted Period, including any extension of the Restricted Period pursuant to the second paragraph of
Section 7.4(a), if applicable, the Designated Person has neither affirmatively approved nor disapproved the vesting of the Unvested Shares that had remained outstanding after Grantee’s Termination Date pending approval of vesting, then all such
Unvested Shares that are still outstanding will be forfeited by Grantee to PNC at the close of business on the last day of the Restricted Period without payment of any consideration by PNC.
-4-
7.5
Retirement
.
(a) In the event that Grantee Retires prior to the third (3
rd
) anniversary of the Grant Date, Unvested Shares will not be forfeited on Grantee’s Termination Date. Instead, Unvested Shares will, subject to the
forfeiture provisions of Section 7.2, remain outstanding pending approval of the vesting of the Restricted Shares pursuant to this Section 7.5(a) by the Designated Person specified in Section A.13 of Annex A.
If such Unvested Shares are still outstanding but the Designated Person has
not made an affirmative determination to either approve or disapprove the vesting of the Unvested Shares by the day immediately preceding the third (3
rd
) anniversary of the Grant Date, then the Restricted Period will be automatically extended through the first to occur of: (1) the day the Designated Person makes an affirmative determination regarding
such vesting; and (2) either (i) the ninetieth (90
th
) day following the third (3
rd
) anniversary of the Grant Date, if the Designated Person is the Chief Human Resources Officer of PNC, or (ii) the 180
th
day following such anniversary date if the Designated Person is the Committee, whichever is applicable.
If the vesting of the then outstanding Unvested Shares is affirmatively
approved by the Designated Person on or prior to the last day of the Restricted Period, including any extension of the Restricted Period, if applicable, then the Three-Year Continued Employment Performance Goal will be
deemed
to have been
achieved, and the Restricted Period with respect to any then outstanding Unvested Shares will terminate as of the end of the day on the date of such approval or the day immediately preceding the third (3
rd
) anniversary of the Grant Date, whichever is later. The Restricted Shares outstanding at the termination of the Restricted Period will become Awarded Shares
and will be released and issued or reissued by PNC pursuant to Section 9.
(b) If the Designated Person disapproves the vesting of the Unvested Shares that had remained outstanding after Grantee’s Termination Date pending approval of vesting, then all such Unvested Shares that are still
outstanding will be forfeited by Grantee to PNC on such disapproval date without payment of any consideration by PNC.
If by the end of the Restricted Period, including any extension of the Restricted Period pursuant to the second paragraph of Section 7.5(a), if
applicable, the Designated Person has neither affirmatively approved nor disapproved the vesting of the Unvested Shares that had remained outstanding after Grantee’s Termination Date pending approval of vesting, then all such Unvested Shares
that are still outstanding will be forfeited by Grantee to PNC at the close of business on the last day of the Restricted Period without payment of any consideration by PNC.
7.6
DEAP Termination
.
(a) In the event that Grantee’s employment with the Corporation is terminated prior to the third (3
rd
) anniversary of the Grant Date by the Corporation and Grantee is
-5-
offered and has entered into the standard Waiver and Release Agreement with PNC or a Subsidiary under an applicable PNC or Subsidiary Displaced Employee
Assistance Plan, or any successor plan by whatever name known (“DEAP”), or Grantee is offered and has entered into a similar waiver and release agreement between PNC or a Subsidiary and Grantee pursuant to the terms of an agreement or
arrangement entered into by PNC or a Subsidiary and Grantee in lieu of or in addition to the DEAP, then Unvested Shares will not be forfeited on Grantee’s Termination Date. Instead, Unvested Shares will, subject to the forfeiture provisions of
Section 7.2, remain outstanding pending approval of the vesting of the Restricted Shares pursuant to this Section 7.6(a) by the Designated Person specified in Section A.13 of Annex A,
provided that
Grantee does not revoke such waiver and
release agreement within the time for revocation of such waiver and release agreement by Grantee.
If such Unvested Shares are still outstanding but the Designated Person has not made an affirmative determination to either approve or disapprove the
vesting of the Unvested Shares by the day immediately preceding the third (3
rd
) anniversary of the Grant Date, then
the Restricted Period will be automatically extended through the first to occur of: (1) the day the Designated Person makes an affirmative determination regarding such vesting; and (2) either (i) the ninetieth (90
th
) day following the third (3
rd
) anniversary of the Grant Date, if the Designated Person is the Chief Human Resources Officer of PNC, or (ii) the 180
th
day following such anniversary date if the Designated Person is the Committee, whichever is applicable.
If the vesting of the then outstanding Unvested Shares is affirmatively approved by the Designated Person on or prior to the last day of the Restricted
Period, including any extension of the Restricted Period, if applicable, then the Three-Year Continued Employment Performance Goal will be
deemed
to have been achieved, and the Restricted Period with respect to any then outstanding Unvested
Shares will terminate as of the end of the day on the date of such approval or the day immediately preceding the third (3
rd
) anniversary of the Grant Date, whichever is later. The Restricted Shares outstanding at the termination of the Restricted Period will become Awarded Shares and will be released and issued or reissued by PNC pursuant to Section 9.
(b) In the event that the record date for any dividend payable
with respect to the Unvested Shares occurs on or after Grantee’s Termination Date but prior to the lapse of the time for revocation by Grantee of the waiver and release agreement specified in the first paragraph of Section 7.6(a), then such
dividend will be held, without interest, pending satisfaction of the condition of Section 7.6(a) that Grantee enter into the offered waiver and release agreement and not revoke such waiver and release agreement within the time for revocation of such
agreement by Grantee. In the event that this condition is
not
met, any dividend being held pending satisfaction of such condition will be forfeited by Grantee to PNC without payment of any consideration by PNC.
(c) If (i) Grantee does not enter into, or enters into but revokes, the
waiver and release agreement specified in the first paragraph of Section 7.6(a) or (ii) the Designated Person disapproves the vesting of the Unvested Shares that had remained outstanding
-6-
after Grantee’s Termination Date pending the non-revocation of, and the lapse of the time within which Grantee may revoke, such waiver and release
agreement and pending approval of the vesting of such shares, then all such Unvested Shares that are still outstanding will be forfeited by Grantee to PNC on the date such failure to satisfy the conditions of Section 7.6(a) occurs without payment of
any consideration by PNC.
If, by the end of the Restricted
Period, including any extension of the Restricted Period pursuant to the second paragraph of Section 7.6(a), if applicable, such Unvested Shares are still outstanding but the Designated Person has neither affirmatively approved nor disapproved the
vesting of such shares, then all such Unvested Shares will be forfeited by Grantee to PNC at the close of business on the last day of the Restricted Period without payment of any consideration by PNC.
7.7
Termination in Anticipation of a Change in Control
.
(a) Notwithstanding anything in the Agreement to the contrary, if, after the
occurrence of a CIC Triggering Event but prior to a CIC Failure and prior to the third (3
rd
) anniversary of the
Grant Date, Grantee’s employment is terminated (other than by reason of Grantee’s death) by the Corporation without Cause or by Grantee for Good Reason, or if Grantee’s employment is
deemed
to have been so terminated pursuant
to Section 7.7(b), then: (i) the Three-Year Continued Employment Performance Goal will be
deemed
to have been achieved and the Restricted Period with respect to any then outstanding Unvested Shares will terminate as of the end of the day on
the day immediately preceding Grantee’s Termination Date (or, in the case of a qualifying termination pursuant to Section 7.7(b), the date all of the conditions set forth in clauses (i), (ii) and (iii) of the first or second paragraph, as the
case may be, of Section 7.7(b) are met); and (ii) all Restricted Shares that thereby become Awarded Shares will be released and issued or reissued by PNC pursuant to Section 9 as soon as administratively practicable following such date.
(b) Grantee’s employment will also be
deemed
to have been
terminated by the Corporation without Cause after the occurrence of a CIC Triggering Event but prior to a CIC Failure for purposes of Section 7.7(a) if: (i) Grantee’s employment is terminated by the Corporation without Cause; (ii) such
termination of employment (a) was at the request of a third party that has taken steps reasonably calculated to effect a Change in Control or (b) otherwise arose in anticipation of a Change in Control; and (iii) a CIC Triggering Event or a Change in
Control occurs within three (3) months of such termination of employment.
Grantee’s employment will also be
deemed
to have been terminated by Grantee for Good Reason after the occurrence of a CIC Triggering Event but prior to a CIC Failure for purposes of Section 7.7(a) if: (i)
Grantee terminates Grantee’s employment with Good Reason; (ii) the circumstance or event that constitutes Good Reason (a) occurs at the request of a third party that has taken steps reasonably calculated to effect a Change in Control or (b)
otherwise arose in anticipation of a Change in Control; and (iii) a CIC Triggering Event or a Change in Control occurs within three (3) months of such termination of employment.
-7-
For purposes of this Section 7.7(b) only, Grantee will have the burden of proving that the requirements
of clause (ii) of the first or second paragraph of this Section 7.7(b), as the case may be, have been met and the standard of proof to be met by Grantee will be clear and convincing evidence.
For purposes of this Section 7.7(b) only, the definition of Change in Control
in Section A.6 of Annex A will exclude the
proviso
in Section A.6(a).
(c) If the Unvested Shares will be forfeited by Grantee to PNC by reason of Grantee’s termination of employment with the Corporation pursuant to Section 7.1 unless all of the conditions set forth in clauses (i),
(ii) and (iii) of the first or second paragraph, as the case may be, of Section 7.7(b) are met, then in the event that the record date for any dividend payable with respect to the Unvested Shares occurs on or after Grantee’s Termination Date
but prior to the time all of the conditions set forth in clauses (i), (ii) and (iii) of the first or second paragraph, as the case may be, of Section 7.7(b) have been met, such dividend will be held, without interest, pending satisfaction of all of
such conditions. In the event that one or more of the conditions of Section 7.7(b) are
not
met, any dividend being held pending satisfaction of such conditions will be forfeited by Grantee to PNC without payment of any consideration by PNC.
(d) If the Unvested Shares will be forfeited by Grantee to PNC
by reason of Grantee’s termination of employment with the Corporation pursuant to Section 7.1 unless all of the conditions set forth in clauses (i), (ii) and (iii) of the first or second paragraph, as the case may be, of Section 7.7(b) are met,
then the Restricted Shares will remain outstanding pending satisfaction of all of those conditions. Upon the failure of any required condition, all such Unvested Shares will be forfeited by Grantee to PNC on the date such failure occurs without
payment of any consideration by PNC.
8.
Change in
Control
. Notwithstanding anything in the Agreement to the contrary, upon the occurrence of a Change in Control: (i) if Grantee is an employee of the Corporation as of the day immediately preceding the Change in Control, the Three-Year Continued
Employment Performance Goal will be
deemed
to have been achieved and the Restricted Period will terminate with respect to all then outstanding Unvested Shares as of the day immediately preceding the Change in Control; (ii) if Grantee’s
employment with the Corporation terminated prior to the occurrence of the Change in Control but the Unvested Shares remained outstanding after such termination of employment pursuant to Section 7.4, Section 7.5 or Section 7.6 and are still
outstanding pending approval of the vesting of such shares by the Designated Person specified in Section A.13 of Annex A, then with respect to all Unvested Shares outstanding as of the day immediately preceding the Change in Control, such vesting
approval will be
deemed
to have been given, the Three-Year Continued Employment Performance Goal will be
deemed
to have been achieved, and the Restricted Period will terminate, all as of the day immediately preceding the Change in
Control,
provided, however,
in the case of Unvested Shares that remained outstanding post-employment solely pursuant to Section 7.6(a), that Grantee entered into and does not revoke the
-8-
waiver and release agreement specified in Section 7.6(a); and (iii) all Restricted Shares that thereby become Awarded Shares will be released and issued or
reissued by PNC pursuant to Section 9 as soon as administratively practicable following such date.
9.
Termination of Prohibitions
. Following termination of the Restricted Period, PNC will release and issue or reissue the certificate or
certificates representing the then outstanding whole Restricted Shares that have become Awarded Shares without the legend referred to in Section 3.
Upon release and issuance or reissuance of shares that have become Awarded Shares, PNC or its designee will deliver the certificate or certificates for
such whole shares to, or at the proper direction of, Grantee or Grantee’s legal representative.
10.
Payment of Taxes
.
10.1
Internal Revenue Code Section 83(b) Election
. In the event that Grantee makes an Internal Revenue Code Section 83(b) election with respect to
the Restricted Shares, Grantee shall satisfy all applicable federal, state or local withholding tax obligations arising from that election either: (a) by payment of cash; (b) by physical delivery to PNC of certificates for whole shares of PNC common
stock that are not subject to any contractual restriction, pledge or other encumbrance and that have been owned by Grantee for at least six (6) months and, in the case of restricted stock, for which it has been at least six (6) months since the
restrictions lapsed; or (c) by a combination of cash and such stock. Any such tax election shall be made pursuant to a form to be provided to Grantee by PNC on request. For purposes of this Section 10.1, shares of PNC common stock that are used to
satisfy applicable withholding tax obligations will be valued at their Fair Market Value on the date the tax withholding obligation arises. Grantee will provide to PNC a copy of any Internal Revenue Code Section 83(b) election filed by Grantee with
respect to the Restricted Shares not later than ten (10) days after the filing of such election.
10.2
Other Tax Liabilities
. Where Grantee has not previously satisfied all applicable withholding tax obligations, PNC will, at the time the tax
withholding obligation arises, retain sufficient whole shares of PNC common stock from the shares granted pursuant to the Agreement to satisfy the minimum amount of taxes required to be withheld by the Corporation in connection with the Restricted
Shares. For purposes of this Section 10.2, shares of PNC common stock retained to satisfy applicable withholding tax requirements will be valued at their Fair Market Value on the date the tax withholding obligation arises.
PNC will
not
retain more than the number of shares sufficient to
satisfy the minimum amount of taxes required to be withheld in connection with the Restricted Shares. If Grantee desires to have an additional amount, up to Grantee’s W-4 obligation, withheld above the required minimum and if PNC so permits,
Grantee may elect to satisfy this additional withholding either: (a) by payment of cash; or (b) using whole shares of PNC common stock (either by physical delivery to PNC of certificates for the
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shares or through PNC’s attestation procedure) that are not subject to any contractual restriction, pledge or other encumbrance and that have been owned
by Grantee for at least six (6) months and, in the case of restricted stock, for which it has been at least six (6) months since the restrictions lapsed. Any such tax election shall be made pursuant to a form provided by PNC. Shares of PNC common
stock that are used for this purpose will be valued at their Fair Market Value on the date the tax withholding obligation arises.
11.
Employment
. Neither the granting and issuance of the Restricted Shares nor any term or provision of the Agreement shall constitute or be
evidence of any understanding, expressed or implied, on the part of PNC or any Subsidiary to employ Grantee for any period or in any way alter Grantee’s status as an employee at will.
12.
Subject to the Plan and the Committee
. In all respects the Grant
and the Agreement are subject to the terms and conditions of the Plan, which has been made available to Grantee and is incorporated herein by reference;
provided, however,
the terms of the Plan shall not be considered an enlargement of any
benefits under the Agreement. Further, the Grant and the Agreement are subject to any interpretation of, and any rules and regulations issued by, the Committee or under the authority of the Committee, whether made or issued before or after the Grant
Date.
13.
Headings; Entire Agreement
. Headings used in
the Agreement are provided for reference and convenience only, shall not be considered part of the Agreement, and shall not be employed in the construction of the Agreement. The Agreement constitutes the entire agreement between Grantee and PNC and
supersedes all other discussions, negotiations, correspondence, representations, understandings and agreements between the parties with respect to the subject matter hereof.
14.
Grantee Covenants
.
14.1
General
. Grantee and PNC acknowledge and agree that Grantee has received adequate consideration with respect to enforcement of the provisions
of Sections 14 and 15, that such provisions are reasonable and properly required for the adequate protection of the business of the Corporation, and that enforcement of such provisions will not prevent Grantee from earning a living.
14.2
Non-Solicitation; No-Hire
. Grantee agrees to comply with the
provisions of subsections (a) and (b) of this Section 14.2 while employed by the Corporation and for a period of twelve (12) months after Grantee’s Termination Date regardless of the reason for such termination of employment.
(a)
Non-Solicitation
. Grantee shall not, directly or indirectly,
either for Grantee’s own benefit or purpose or for the benefit or purpose of any Person other than PNC or any Subsidiary, solicit, call on, do business with, or actively interfere with PNC’s or any Subsidiary’s relationship with, or
attempt to divert or entice away, any Person that Grantee should reasonably know (i) is a customer of PNC or any Subsidiary for which PNC or any Subsidiary provides any services as of the Termination Date, or (ii) was a
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customer of PNC or any Subsidiary for which PNC or any Subsidiary provided any services at any time during the twelve (12) months preceding the Termination
Date, or (iii) was, as of the Termination Date, considering retention of PNC or any Subsidiary to provide any services.
(b)
No-Hire
. Grantee shall not, directly or indirectly, either for Grantee’s own benefit or purpose or for the benefit or purpose of any
Person other than PNC or any Subsidiary, employ or offer to employ, call on, or actively interfere with PNC’s or any Subsidiary’s relationship with, or attempt to divert or entice away, any employee of the Corporation, nor shall Grantee
assist any other Person in such activities.
Notwithstanding
the above, if Grantee’s employment with the Corporation is terminated by the Corporation without Cause or by Grantee with Good Reason and such Termination Date occurs during a Coverage Period (either as Coverage Period is defined in Section
A.12 of Annex A or, if Grantee was a party to a written agreement between Grantee and PNC providing, among other things, for certain change in control severance benefits (a “CIC Severance Agreement”) that was in effect at the time of such
termination of employment, as Coverage Period is defined in such CIC Severance Agreement, if longer), then commencing immediately after such Termination Date, the provisions of subsections (a) and (b) of this Section 14.2 will no longer apply and
will be replaced with the following subsection (c):
(c)
No-Hire
. Grantee agrees that Grantee shall not, for a period of twelve (12) months after the Termination Date, employ or offer to employ, solicit, actively interfere with PNC’s or any PNC affiliate’s relationship with, or attempt to
divert or entice away, any officer of PNC or any PNC affiliate.
14.3
Confidentiality
. During Grantee’s employment with the Corporation, and thereafter regardless of the reason for termination of such employment, Grantee will not disclose or use in any way any confidential business or
technical information or trade secret acquired in the course of such employment, all of which is the exclusive and valuable property of the Corporation whether or not conceived of or prepared by Grantee, other than (a) information generally known in
the Corporation’s industry or acquired from public sources, (b) as required in the course of employment by the Corporation, (c) as required by any court, supervisory authority, administrative agency or applicable law, or (d) with the prior
written consent of PNC.
14.4
Ownership of Inventions
.
Grantee shall promptly and fully disclose to PNC any and all inventions, discoveries, improvements, ideas or other works of inventorship or authorship, whether or not patentable, that have been or will be conceived and/or reduced to practice by
Grantee during the term of Grantee’s employment with the Corporation, whether alone or with others, and that are (a) related directly or indirectly to the business or activities of PNC or any Subsidiary or (b) developed with the use of any
time, material, facilities or other resources of PNC or any Subsidiary (“Developments”). Grantee agrees to assign and hereby does assign to PNC or its designee all of Grantee’s right, title and interest, including copyrights and
patent rights, in and to all
-11-
Developments. Grantee shall perform all actions and execute all instruments that PNC or any Subsidiary shall deem necessary to protect or record PNC’s
or its designee’s interests in the Developments. The obligations of this Section 14.4 shall be performed by Grantee without further compensation and will continue beyond the Termination Date.
15.
Enforcement Provisions
. Grantee understands and agrees to the
following provisions regarding enforcement of the Agreement.
15.1
Governing Law and Jurisdiction
. The Agreement is governed by and construed under the laws of the Commonwealth of Pennsylvania, without regard to conflict of laws rules. Any dispute or claim arising out of or relating to the
Agreement or claim of breach hereof shall be brought exclusively in the federal court for the Western District of Pennsylvania or in the Court of Common Pleas of Allegheny County, Pennsylvania. By execution of the Agreement, Grantee and PNC hereby
consent to the exclusive jurisdiction of such courts, and waive any right to challenge jurisdiction or venue in such courts with regard to any suit, action, or proceeding under or in connection with the Agreement.
15.2
Equitable Remedies
. A breach of the provisions of any of Sections
14.2, 14.3 or 14.4 will cause the Corporation irreparable harm, and the Corporation will therefore be entitled to issuance of immediate, as well as permanent, injunctive relief restraining Grantee, and each and every person and entity acting in
concert or participating with Grantee, from initiation and/or continuation of such breach.
15.3
Tolling Period
. If it becomes necessary or desirable for the Corporation to seek compliance with the provisions of Section 14.2 by legal proceedings, the period during which Grantee shall comply with said
provisions will extend for a period of twelve (12) months from the date of the legal order requiring such compliance.
15.4
No Waiver
. Failure of PNC to demand strict compliance with any of the terms, covenants or conditions of the Agreement will not be deemed a
waiver of such term, covenant or condition, nor will any waiver or relinquishment of any such term, covenant or condition on any occasion or on multiple occasions be deemed a waiver or relinquishment of such term, covenant or condition.
15.5
Severability
. The restrictions and obligations imposed by
Sections 14.2, 14.3 and 14.4 are separate and severable, and it is the intent of Grantee and PNC that if any restriction or obligation imposed by any of these provisions is deemed by a court of competent jurisdiction to be void for any reason
whatsoever, the remaining provisions, restrictions and obligations will remain valid and binding upon Grantee.
15.6
Reform
. In the event any of Sections 14.2, 14.3 and 14.4 are determined by a court of competent jurisdiction to be unenforceable because
unreasonable either as to length of time or area to which said restriction applies, it is the intent of Grantee and PNC that said court reduce and reform the provisions thereof so as to apply the greatest limitations considered enforceable by the
court.
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15.7
Waiver of Jury Trial
. Each of Grantee and PNC hereby waives any right to trial by jury with
regard to any suit, action or proceeding under or in connection with any of Sections 14.2, 14.3 and 14.4.
15.8
Applicable Law
. Notwithstanding anything in the Agreement, PNC will not be required to comply with any term, covenant or condition of the
Agreement if and to the extent prohibited by law, including but not limited to federal banking and securities regulations, or as otherwise directed by one or more regulatory agencies having jurisdiction over PNC or any of its subsidiaries. Further,
to the extent, if any, applicable to Grantee, Grantee agrees to reimburse PNC for any amounts Grantee may be required to reimburse PNC or its subsidiaries pursuant to Section 304 of the Sarbanes-Oxley Act of 2002, and agrees that PNC need not comply
with any term, covenant or condition of the Agreement to the extent that doing so would require that Grantee reimburse PNC or its subsidiaries for such amounts pursuant to Section 304 of the Sarbanes-Oxley Act of 2002.
16.
Amendment of Pre-2004 Stock Options, Restricted Stock and Restricted
Stock Deferrals
. All nonstatutory stock options granted to employees under the Plan outstanding on February 18, 2004, all restricted stock grants to employees under the Plan or PNC’s 1996 Executive Incentive Award Plan outstanding but not
yet vested on February 18, 2004, and all participant restricted stock deferral accounts under the PNC and Affiliates Deferred Compensation Plan that were in place but not yet vested on February 18, 2004, are subject to the amendments approved by the
Committee on that date. These amendments are generally described in the Plan prospectus dated
, 200
under the heading “Recent Amendments” of
the section titled “The Plan.” A copy of this Plan prospectus accompanied or preceded delivery of the Agreement to Grantee.
To the extent that Grantee is the holder of any such stock options or is the grantee of any such restricted stock or is a participant in the PNC and
Affiliates Deferred Compensation Plan with such stock deferral account or accounts in place but not yet vested, Grantee hereby acknowledges and consents to such amendments.
17.
Acceptance of Grant; PNC Right to Cancel
. If Grantee does not accept the Grant by executing and delivering a copy
of the Agreement to PNC, without altering or changing the terms thereof in any way, within sixty (60) days of receipt by Grantee of a copy of the Agreement, PNC may, in its sole discretion, withdraw its offer and cancel the Grant at any time prior
to Grantee’s delivery to PNC of a copy of the Agreement executed by Grantee. Otherwise, upon execution and delivery of the Agreement by both PNC and Grantee and, in the event that Grantee is subject to the reporting requirements of Section
16(a) of the Exchange Act with respect to PNC securities, the filing with and acceptance by the SEC of a Form 4 reporting the Grant, the Agreement is effective.
Grantee will not have any of the rights of a shareholder with respect to the Restricted Shares as set forth in Section 4, and will not have the right
to vote or to receive
-13-
dividends on such shares, until the date the Agreement is effective and the Restricted Shares are issued in accordance with this Section 17.
In the event that one or more record dates for dividends on PNC common stock
occur after the Grant Date but before the date the Agreement is effective in accordance with this Section 17 and the Restricted Shares are issued, then upon the effectiveness of the Agreement, the Corporation will make a cash payment to Grantee
equivalent to the amount of the dividends Grantee would have received had the Agreement been effective and the Restricted Shares had been issued on the Grant Date.
I
N
W
ITNESS
W
HEREOF
, PNC has caused the Agreement to be signed on its behalf as
of the Grant Date.
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THE PNC FINANCIAL SERVICES GROUP, INC.
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By:
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Chairman and Chief Executive Officer
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ATTEST:
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By:
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Corporate Secretary
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A
CCEPTED
AND
A
GREED
TO
by G
RANTEE
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Grantee
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Annual 25/25 Program -
200
Restricted Stock Grant
Continued Employment Performance Goal
Restricted Period: Three Years (100%)
ANNEX A
TO
THE PNC
FINANCIAL SERVICES GROUP, INC.
1997 LONG-TERM INCENTIVE AWARD PLAN
ANNUAL 25/25 PROGRAM — 200
RESTRICTED STOCK GRANT
RESTRICTED
STOCK AGREEMENT
* * *
CERTAIN DEFINITIONS
Except where the context otherwise indicates, the following definitions apply
for purposes of the Restricted Stock Agreement (“Agreement”) to which this Annex A is attached:
A.1 “
Awarded Shares
.” Provided that the Restricted Shares are then outstanding, Restricted Shares become “Awarded Shares” when
both of the following have occurred: (a) the Three-Year Continued Employment Performance Goal has been achieved or is
deemed
to have been achieved pursuant to the terms of the Agreement; and (b) the Restricted Period has terminated.
A.2 “
Board
” means the Board of Directors of
PNC.
A.3 “
Business Day
” means any day when
the New York Stock Exchange is open for business.
A.4
“
Cause
” means:
(a) the willful and continued
failure of Grantee to substantially perform Grantee’s duties with the Corporation (other than any such failure resulting from incapacity due to physical or mental illness), after a written demand for substantial performance is delivered to
Grantee by the Board or the CEO which specifically identifies the manner in which the Board or the CEO believes that Grantee has not substantially performed Grantee’s duties; or
(b) the willful engaging by Grantee in illegal conduct or gross misconduct that is materially and demonstrably injurious to
PNC or any Subsidiary.
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For purposes of the preceding clauses (a) and (b), no act or failure to act, on the part of Grantee,
shall be considered willful unless it is done, or omitted to be done, by Grantee in bad faith and without reasonable belief that Grantee’s action or omission was in the best interests of the Corporation. Any act, or failure to act, based upon
the instructions or prior approval of the Board, the CEO or Grantee’s superior or based upon the advice of counsel for the Corporation, shall be conclusively presumed to be done, or omitted to be done, by Grantee in good faith and in the best
interests of the Corporation.
The cessation of employment of
Grantee will be
deemed
to be a termination of Grantee’s employment with the Corporation for Cause for purposes of the Agreement only if and when there shall have been delivered to Grantee, as part of the notice of Grantee’s
termination, a copy of a resolution duly adopted by the affirmative vote of not less than a majority of the entire membership of the Board, at a Board meeting called and held for the purpose of considering such termination, finding on the basis of
clear and convincing evidence that, in the good faith opinion of the Board, Grantee is guilty of conduct described in clause (a) or clause (b) above and, in either case, specifying the particulars thereof in detail. Such resolution shall be adopted
only after (i) reasonable notice of such Board meeting is provided to Grantee, together with written notice that PNC believes that Grantee is guilty of conduct described in clause (a) or clause (b) above and, in either case, specifying the
particulars thereof in detail, and (ii) Grantee is given an opportunity, together with counsel, to be heard before the Board.
A.5 “
CEO
” means the chief executive officer of PNC.
A.6 “
Change in Control
” means a change of control of PNC of a nature that would be required to be reported
in response to Item 6(e) of Schedule 14A of Regulation 14A (or in response to any similar item on any similar schedule or form) promulgated under the Exchange Act, whether or not PNC is then subject to such reporting requirement;
provided
,
however
, that without limitation, a Change in Control will be
deemed
to have occurred if:
(a) any Person, excluding employee benefits plans of the Corporation, is or becomes the beneficial owner (as defined in Rules 13d-3 and 13d-5 under the
Exchange Act or any successor provisions thereto), directly or indirectly, of securities of PNC representing twenty percent (20%) or more of the combined voting power of PNC’s then outstanding securities;
provided
,
however
, that
such an acquisition of beneficial ownership representing between twenty percent (20%) and forty percent (40%), inclusive, of such voting power will not be considered a Change in Control if the Board approves such acquisition either prior to or
immediately after its occurrence;
(b) PNC consummates a
merger, consolidation, share exchange, division or other reorganization or transaction of PNC (a “Fundamental Transaction”) with any other corporation, other than a Fundamental Transaction that results in the voting securities of PNC
outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least sixty percent (60%) of the combined voting power immediately after such
Fundamental
-16-
Transaction of (i) PNC’s outstanding securities, (ii) the surviving entity’s outstanding securities, or (iii) in the case of a division, the
outstanding securities of each entity resulting from the division;
(c) the shareholders of PNC approve a plan of complete liquidation or winding-up of PNC or an agreement for the sale or disposition (in one transaction or a series of transactions) of all or substantially all of PNC’s assets;
(d) as a result of a proxy contest, individuals who prior to
the conclusion thereof constituted the Board (including for this purpose any new director whose election or nomination for election by PNC’s shareholders in connection with such proxy contest was approved by a vote of at least two-thirds
(2/3rds) of the directors then still in office who were directors prior to such proxy contest) cease to constitute at least a majority of the Board (excluding any Board seat that is vacant or otherwise unoccupied);
(e) during any period of twenty-four (24) consecutive months, individuals who
at the beginning of such period constituted the Board (including for this purpose any new director whose election or nomination for election by PNC’s shareholders was approved by a vote of at least two-thirds (2/3rds) of the directors then
still in office who were directors at the beginning of such period) cease for any reason to constitute at least a majority of the Board (excluding any Board seat that is vacant or otherwise unoccupied); or
(f) the Board determines that a Change in Control has occurred.
Notwithstanding anything to the contrary herein, a divestiture or spin-off
of a subsidiary or division of PNC will not by itself constitute a Change in Control.
A.7 “
CIC Failure
” means the following:
(a) with respect to a CIC Triggering Event described in Section A.8(a), PNC’s shareholders vote against the transaction approved by the Board or the agreement to consummate the transaction is terminated; or
(b) with respect to a CIC Triggering Event described in
Section A.8(b), the proxy contest fails to replace or remove a majority of the members of the Board.
A.8 “
CIC Triggering Event
” means the occurrence of either of the following:
(a) the Board or PNC’s shareholders approve a transaction described in Subsection (b) of the definition of Change in
Control contained in Section A.6; or
(b) the commencement of a
proxy contest in which any Person seeks to replace or remove a majority of the members of the Board.
-17-
A.9 “
Committee
” means the Personnel and Compensation Committee of the Board.
A.10 “
Competitive Activity
” means, for purposes of the
Agreement, any participation in, employment by, ownership of any equity interest exceeding one percent (1%) in, or promotion or organization of, any Person other than PNC or any Subsidiary (a) engaged in business activities similar to some or all of
the business activities of PNC or any Subsidiary as of Grantee’s Termination Date or (b) engaged in business activities which Grantee knows PNC or any Subsidiary intends to enter within the first twelve (12) months after Grantee’s
Termination Date, in either case whether Grantee is acting as agent, consultant, independent contractor, employee, officer, director, investor, partner, shareholder, proprietor or in any other individual or representative capacity therein.
A.11 “
Corporation
” means PNC and its
Subsidiaries.
A.12 “
Coverage Period
” means a
period (a) commencing on the earlier to occur of (i) the date of a CIC Triggering Event and (ii) the date of a Change in Control and (b) ending on the date that is three (3) years after the date of the Change in Control;
provided
,
however
, that in the event that a Coverage Period commences on the date of a CIC Triggering Event, such Coverage Period will terminate upon the earlier to occur of (x) the date of a CIC Failure and (y) the date that is three (3) years after
the date of the Change in Control triggered by the CIC Triggering Event. After the termination of any Coverage Period, another Coverage Period will commence upon the earlier to occur of clause (a)(i) and clause (a)(ii) in the preceding sentence.
A.13 “
Designated Person
” will be either: (a)
the Committee, if Grantee is a member of the Corporate Executive Group (or equivalent successor classification) or is subject to the reporting requirements of Section 16(a) of the Exchange Act with respect to PNC securities; or (a) the Chief Human
Resources Officer of PNC, if Grantee is not within one of the groups specified in Section A.13(a).
A.14 “
Detrimental Conduct
” means:
(a) Grantee has engaged, without the prior written consent of PNC (at PNC’s sole discretion), in any Competitive Activity in the continental United
States at any time during the period commencing on Grantee’s Termination Date through the first (1
st
)
anniversary of Grantee’s Termination Date;
(b) a material
breach by Grantee of (i) any code of conduct of PNC or a Subsidiary or (ii) other written policy of PNC or a Subsidiary, in either case required by law or established to maintain compliance with applicable law;
(c) any act of fraud, misappropriation, material dishonesty, or embezzlement
by Grantee against PNC or a Subsidiary or any client or customer of PNC or a Subsidiary;
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(d) any conviction (including a plea of guilty or of
nolo contendere
) of Grantee for, or entry by
Grantee into a pre-trial disposition with respect to, the commission of a felony which relates to or arises out of Grantee’s employment or other service relationship with the Corporation; or
(e) entry of any order against Grantee by any governmental body having
regulatory authority with respect to the business of PNC or any Subsidiary, which order relates to or arises out of Grantee’s employment or other service relationship with the Corporation.
Grantee will be
deemed
to have engaged in Detrimental Conduct for
purposes of the Agreement only if and when the Committee determines that Grantee has engaged in conduct described in clause (a) above, that Grantee is guilty of conduct described in clause (b) or clause (c) above, or that an event described in
clause (d) or clause (e) above has occurred with respect to Grantee and, if so, determines that Grantee will be
deemed
to have engaged in Detrimental Conduct.
A.15 “
Exchange Act
” means the Securities Exchange Act of 1934 as amended, and the rules and regulations
promulgated thereunder.
A.16 “
Fair Market
Value
” as it relates to PNC common stock means the average of the high and low sale prices of the PNC common stock as reported on the New York Stock Exchange (or such successor reporting system as PNC may select) on the relevant date or, if
no sale of the PNC common stock has been reported for that day, the average of such prices on the next preceding day and the next following day for which there were reported sales.
A.17 “
Good Reason
” means:
(a) the assignment to Grantee of any duties inconsistent in any respect with Grantee’s position (including status,
offices, titles and reporting requirements), authority, duties or responsibilities immediately prior to either the CIC Triggering Event or the Change in Control, or any other action by the Corporation which results in a diminution in any respect in
such position, authority, duties or responsibilities, excluding for this purpose an isolated, insubstantial and inadvertent action not taken in bad faith that is remedied by the Corporation promptly after receipt of notice thereof given by Grantee;
(b) a reduction by the Corporation in Grantee’s annual
base salary as in effect on the Grant Date, as the same may be increased from time to time;
(c) the Corporation’s requiring Grantee to be based at any office or location that is more than fifty (50) miles from Grantee’s office or location immediately prior to either the CIC Triggering Event or the
Change in Control;
(d) the failure by the Corporation (i) to
continue in effect any bonus, stock option or other cash or equity-based incentive plan or program in which Grantee
-19-
participates immediately prior to either the CIC Triggering Event or the Change in Control that is material to Grantee’s total compensation, unless a
substantially equivalent arrangement (embodied in an ongoing substitute or alternative plan or program) has been made with respect to such plan or program, or (ii) to continue Grantee’s participation in such plan or program (or in such
substitute or alternative plan or program) on a basis at least as favorable, both in terms of the amount of benefits provided and the level of Grantee’s participation relative to other participants, as existed immediately prior to the CIC
Triggering Event or the Change in Control; or
(e) the failure
by the Corporation to continue to provide Grantee with benefits substantially similar to those received by Grantee under any of the Corporation’s pension (including, but not limited to, tax-qualified plans), life insurance, health, accident,
disability or other welfare plans or programs in which Grantee was participating, at costs substantially similar to those paid by Grantee, immediately prior to the CIC Triggering Event or the Change in Control.
A.18 “
Grant
” means the Restricted Shares granted and issued
to Grantee pursuant to Section 1 of the Agreement.
A.19
“
Grant Date
” means the Grant Date set forth on page 1 of the Agreement.
A.20 “
Grantee
” means the person identified as Grantee on page 1 of the Agreement.
A.21 “
Internal Revenue Code
” means the Internal Revenue Code of 1986 as amended, and the rules and regulations promulgated thereunder.
A.22 “
Person
” has the meaning given in
Section 3(a)(9) of the Exchange Act and also includes any syndicate or group
deemed
to be a person under Section 13(d)(3) of the Exchange Act.
A.23 “
PNC
” means The PNC Financial Services Group, Inc.
A.24 “
Restricted Period
” means, subject to early termination if so determined by the Committee or pursuant
to Section 7.7 of the Agreement, if applicable, the period from the Grant Date through (and including) the earlier of: (a) the date of Grantee’s death; (b) the day immediately preceding the day a Change in Control is
deemed
to have
occurred; and (c) the day immediately preceding the third (3
rd
) anniversary of the Grant Date or, if later, the last
day of any extension of the Restricted Period pursuant to Section 7.4(a), Section 7.5(a) or Section 7.6(a) of the Agreement, if applicable.
A.25 “
Retiree
” means a Grantee who has Retired.
A.26 “
Retire” or “Retirement
” means termination of Grantee’s employment with the Corporation at any time and for any
reason (other than termination by reason of Grantee’s death or by the Corporation for Cause or, unless the Committee determines
-20-
otherwise, termination in connection with a divestiture of assets or of one or more Subsidiaries) if such termination of employment occurs on or after the
first (1
st
) day of the first (1
st
) month coincident with or next following the date on which Grantee attains age fifty-five (55) and completes five (5) years of service (as determined in the
same manner as the determination of five years of Vesting Service under the provisions of The PNC Financial Services Group, Inc. Pension Plan) with the Corporation.
A.27 “
SEC
” means the United States Securities and Exchange Commission.
A.28 “
Termination Date
” means Grantee’s last date of
employment with the Corporation. If Grantee is employed by a Subsidiary that ceases to be a Subsidiary of PNC and Grantee does not continue to be employed by PNC or a Subsidiary, then for purposes of the Agreement, Grantee’s employment with the
Corporation terminates effective at the time this occurs.
A.29
“
Three-Year Continued Employment Performance Goal
” means, subject to early achievement if so determined by the Committee or to
deemed
achievement pursuant to Section 7.3, Section 7.4, Section 7.5, Section 7.6, Section 7.7, or
Section 8 of the Agreement, if applicable, that Grantee has been continuously employed by the Corporation for the period from the Grant Date through (and including) the day immediately preceding the first of the following to occur: (a) the third
(3
rd
) anniversary of the Grant Date; (b) the date of Grantee’s death; and (c) the day a Change in Control is
deemed
to have occurred.
A.30 “
Total and
Permanent Disability
” means, unless the Committee determines otherwise, Grantee’s disability as determined to be total and permanent by the Corporation for purposes of the Agreement.
A.31 “
Unvested Shares
” means any Restricted Shares that are
not Awarded Shares.
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FORM OF NEO ANNUAL 25/25
PROGRAM
RESTRICTED STOCK GRANT AGREEMENT
Annual 25/25 Program (NEOs) - 200
Restricted Stock Grant
Continued Employment Performance Goal
Restricted Period: Three Years (100%)
THE PNC FINANCIAL SERVICES GROUP, INC.
1996 EXECUTIVE INCENTIVE AWARD PLAN
* * *
RESTRICTED STOCK AGREEMENT
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GRANTEE:
|
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<name>
|
|
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GRANT DATE:
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February
, 200
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SHARES:
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<number of whole shares>
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1.
Grant of
Restricted Shares
. Pursuant to Sections 5 and 6 of The PNC Financial Services Group, Inc. 1996 Executive Incentive Award Plan, as amended from time to time (“Plan”), and subject to the terms and conditions of this Restricted Stock
Agreement (“Agreement”), The PNC Financial Services Group, Inc. (“PNC”) hereby grants to the Grantee named above (“Grantee”) a restricted stock award of the number of shares of PNC common stock set forth above, and,
upon acceptance of the Grant by Grantee in accordance with Section 18, will cause the issuance of said shares to Grantee subject to the terms and conditions of the Agreement and the Plan. The shares granted and issued to Grantee hereby as a
restricted stock award subject to the terms and conditions of the Agreement and the Plan are hereafter referred to as the “Restricted Shares.” The Restricted Shares are being granted and issued to Grantee as part of an Incentive Award and
include Additional Stock as defined in the Plan.
2.
Definitions
. Terms defined in the Plan are used in the Agreement as defined in the Plan unless otherwise defined in Annex A (attached hereto and incorporated herein by reference) or elsewhere in the Agreement.
3.
Terms of Grant
. The Grant will be subject to the following terms
and conditions:
Restricted Shares will be subject to a
Restricted Period as provided in Section A.24 of Annex A. Restricted Shares will be deposited with PNC or its designee,
-1-
or credited to a book-entry account, during the term of the Restricted Period unless and until forfeited pursuant to the terms of the Agreement.
Any certificate or certificates representing such Restricted Shares will
contain the following legend:
“This certificate and the
shares of stock represented hereby are subject to the terms and conditions (including forfeiture and restrictions against transfer) contained in The PNC Financial Services Group, Inc. 1996 Executive Incentive Award Plan as amended and an Agreement
entered into between the registered owner and The PNC Financial Services Group, Inc. Release from such terms and conditions will be made only in accordance with the provisions of such Plan and such Agreement, a copy of each of which is on file in
the office of the Corporate Secretary of The PNC Financial Services Group, Inc.”
Where a book-entry system is used with respect to Restricted Shares, appropriate notation of such forfeiture possibility and transfer restrictions will be made on the system with respect to the account or accounts to
which the Restricted Shares are credited.
Restricted Shares
deposited with PNC or its designee during the term of the Restricted Period that become Awarded Shares will be released and issued or reissued to, or at the proper direction of, Grantee or Grantee’s legal representative pursuant to Section 9 as
soon as administratively practicable following the end of the Restricted Period.
4.
Rights as Shareholder
. Except as provided in Section 6 and subject to Section 7.6(b) or Section 7.7(c), if applicable, and to Section 18, Grantee will have all the rights and privileges of a shareholder with
respect to the Restricted Shares including, but not limited to, the right to vote the Restricted Shares and the right to receive dividends thereon if and when declared by the Board;
provided, however,
that all such rights and privileges will
cease immediately upon any forfeiture of such shares.
5.
Capital Adjustments
. Restricted Shares awarded hereunder will, as issued and outstanding shares of PNC common stock, be subject to such adjustment as may be necessary to reflect corporate transactions, including, without limitation, stock
dividends, stock splits, spin-offs, split-offs, recapitalizations, mergers, consolidations or reorganizations of or by PNC;
provided
,
however
, that any shares received as distributions on or in exchange for Unvested Shares will be
subject to the terms and conditions of the Agreement as if they were Restricted Shares.
6.
Prohibitions Against Sale, Assignment, etc
. Unvested Shares may not be sold, assigned, transferred, exchanged, pledged, hypothecated or otherwise encumbered, other than by will or the laws of descent and
distribution or as may be required pursuant to Section 10.2, unless and until the Restricted Period terminates and the Awarded Shares are released and issued or reissued by PNC pursuant to Section 9.
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7.
Forfeiture; Death; Qualifying Disability, Retirement, or DEAP Termination; Termination in
Anticipation of Change in Control
.
7.1
Forfeiture on
Termination of Employment
. Except as otherwise provided in and subject to the conditions of Section 7.3, Section 7.4(a), Section 7.5(a), Section 7.6(a), Section 7.7(a), Section 7.7(b), or Section 8, if applicable, or unless the Committee
determines otherwise, in the event that Grantee’s employment with the Corporation terminates prior to the third (3
rd
) anniversary of the Grant Date, all Restricted Shares that are Unvested Shares on Grantee’s Termination Date will be forfeited by Grantee to PNC without payment of any consideration by PNC.
Upon forfeiture of Unvested Shares pursuant to the provisions of this Section
7.1 or the provisions of Section 7.2, Section 7.4(b), Section 7.5(b), Section 7.6(c) or Section 7.7(d), neither Grantee nor any successors, heirs, assigns or legal representatives of Grantee will thereafter have any further rights or interest in
such Unvested Shares or any certificate or certificates representing such Unvested Shares.
7.2
Forfeiture for Detrimental Conduct
. Unvested Shares that would otherwise remain outstanding after Grantee’s Termination Date, if any, will be forfeited by Grantee to PNC without payment of any
consideration by PNC in the event that, at any time prior to the date such shares become Awarded Shares, PNC determines that Grantee has engaged in Detrimental Conduct;
provided, however,
that: (a) this Section 7.2 will not apply to
Restricted Shares that remain outstanding after Grantee’s Termination Date pursuant to Section 7.3 or Section 7.7, if any; (b) no determination that Grantee has engaged in Detrimental Conduct may be made on or after the date of Grantee’s
death; (c) Detrimental Conduct will not apply to conduct by or activities of successors to the Restricted Shares by will or the laws of descent and distribution in the event of Grantee’s death; and (d) Detrimental Conduct will cease to apply to
any Restricted Shares upon a Change in Control.
7.3
Death
. In the event of Grantee’s death while an employee of the Corporation and prior to the third (3
rd
)
anniversary of the Grant Date, the Three-Year Continued Employment Performance Goal will be deemed to have been achieved, and the Restricted Period with respect to the then outstanding Unvested Shares will terminate on the date of Grantee’s
death.
The Restricted Shares which thereby become Awarded
Shares will be released and issued or reissued by PNC to, or at the proper direction of, Grantee’s legal representative pursuant to Section 9 as soon as administratively practicable following such date.
7.4
Disability Termination
.
(a) In the event Grantee’s employment with the Corporation is terminated
prior to the third (3
rd
) anniversary of the Grant Date by the Corporation by reason of Grantee’s Total and
Permanent Disability, Unvested Shares will not be forfeited on
-3-
Grantee’s Termination Date. Instead, Unvested Shares will, subject to the forfeiture provisions of Section 7.2, remain outstanding pending approval of
the vesting of the Restricted Shares pursuant to this Section 7.4(a) by the Designated Person specified in Section A.13 of Annex A.
If such Unvested Shares are still outstanding but the Designated Person has not made an affirmative determination to either approve or disapprove the
vesting of the Unvested Shares by the day immediately preceding the third (3
rd
) anniversary of the Grant Date, then
the Restricted Period will be automatically extended through the first to occur of: (1) the day the Designated Person makes an affirmative determination regarding such vesting; and (2) either (i) the 180
th
day following the third (3
rd
) anniversary of the Grant Date, if the Designated Person is the Committee, or (ii) the ninetieth (90
th
) day following such anniversary date, if the Designated Person is the Chief Human Resources Officer of PNC, whichever is applicable.
If the vesting of the then outstanding Unvested Shares is affirmatively approved by the Designated Person on or prior to the last day of the Restricted
Period, including any extension of the Restricted Period, if applicable, then the Three-Year Continued Employment Performance Goal will be
deemed
to have been achieved, and the Restricted Period with respect to any then outstanding Unvested
Shares will terminate as of the end of the day on the date of such approval or the day immediately preceding the third (3
rd
) anniversary of the Grant Date, whichever is later. The Restricted Shares outstanding at the termination of the Restricted Period will become Awarded Shares and will be released and issued or reissued by PNC pursuant to Section 9.
(b) If the Designated Person disapproves the vesting of the
Unvested Shares that had remained outstanding after Grantee’s Termination Date pending approval of vesting, then all such Unvested Shares that are still outstanding will be forfeited by Grantee to PNC on such disapproval date without payment of
any consideration by PNC.
If by the end of the Restricted
Period, including any extension of the Restricted Period pursuant to the second paragraph of Section 7.4(a), if applicable, the Designated Person has neither affirmatively approved nor disapproved the vesting of the Unvested Shares that had remained
outstanding after Grantee’s Termination Date pending approval of vesting, then all such Unvested Shares that are still outstanding will be forfeited by Grantee to PNC at the close of business on the last day of the Restricted Period without
payment of any consideration by PNC.
7.5
Retirement
.
(a) In the event that Grantee Retires prior to the third
(3
rd
) anniversary of the Grant Date, Unvested Shares will not be forfeited on Grantee’s Termination Date.
Instead, Unvested Shares will, subject to the forfeiture provisions of Section 7.2, remain outstanding pending approval of the vesting of the Restricted Shares pursuant to this Section 7.5(a) by the Designated Person specified in Section A.13 of
Annex A.
-4-
If such Unvested Shares are still outstanding but the Designated Person has not made an affirmative
determination to either approve or disapprove the vesting of the Unvested Shares by the day immediately preceding the third (3
rd
) anniversary of the Grant Date, then the Restricted Period will be automatically extended through the first to occur of: (1) the day the Designated Person makes an affirmative determination regarding such vesting; and (2) either (i)
the 180
th
day following the third (3
rd
) anniversary of the Grant Date, if the Designated Person is the Committee, or (ii) the ninetieth (90
th
) day following such anniversary date, if the Designated Person is the Chief Human Resources Officer of PNC, whichever is applicable.
If the vesting of the then outstanding Unvested Shares is affirmatively
approved by the Designated Person on or prior to the last day of the Restricted Period, including any extension of the Restricted Period, if applicable, then the Three-Year Continued Employment Performance Goal will be
deemed
to have been
achieved, and the Restricted Period with respect to any then outstanding Unvested Shares will terminate as of the end of the day on the date of such approval or the day immediately preceding the third (3
rd
) anniversary of the Grant Date, whichever is later. The Restricted Shares outstanding at the termination of the Restricted Period will become Awarded Shares
and will be released and issued or reissued by PNC pursuant to Section 9.
(b) If the Designated Person disapproves the vesting of the Unvested Shares that had remained outstanding after Grantee’s Termination Date pending approval of vesting, then all such Unvested Shares that are still
outstanding will be forfeited by Grantee to PNC on such disapproval date without payment of any consideration by PNC.
If by the end of the Restricted Period, including any extension of the Restricted Period pursuant to the second paragraph of Section 7.5(a), if
applicable, the Designated Person has neither affirmatively approved nor disapproved the vesting of the Unvested Shares that had remained outstanding after Grantee’s Termination Date pending approval of vesting, then all such Unvested Shares
that are still outstanding will be forfeited by Grantee to PNC at the close of business on the last day of the Restricted Period without payment of any consideration by PNC.
7.6
DEAP Termination
.
(a) In the event that Grantee’s employment with the Corporation is terminated prior to the third (3
rd
) anniversary of the Grant Date by the Corporation and Grantee is offered and has entered into the standard Waiver and Release Agreement with PNC or a
Subsidiary under an applicable PNC or Subsidiary Displaced Employee Assistance Plan, or any successor plan by whatever name known (“DEAP”), or Grantee is offered and has entered into a similar waiver and release agreement between PNC or a
Subsidiary and Grantee pursuant to the terms of an agreement or arrangement entered into by PNC or a Subsidiary and Grantee in lieu of or in addition to the DEAP, then Unvested Shares will not be forfeited on Grantee’s Termination Date.
Instead, Unvested Shares will, subject to the forfeiture provisions of Section 7.2, remain outstanding pending approval of the vesting of the Restricted Shares pursuant to this Section 7.6(a) by the Designated Person
-5-
specified in Section A.13 of Annex A,
provided that
Grantee does not revoke such waiver and release agreement within the time for revocation of such
waiver and release agreement by Grantee.
If such Unvested
Shares are still outstanding but the Designated Person has not made an affirmative determination to either approve or disapprove the vesting of the Unvested Shares by the day immediately preceding the third (3
rd
) anniversary of the Grant Date, then the Restricted Period will be automatically extended through the first to occur of: (1) the day the Designated
Person makes an affirmative determination regarding such vesting; and (2) either (i) the 180
th
day following the
third (3
rd
) anniversary of the Grant Date, if the Designated Person is the Committee, or (ii) the ninetieth
(90
th
) day following such anniversary date, if the Designated Person is the Chief Human Resources Officer of PNC,
whichever is applicable.
If the vesting of the then
outstanding Unvested Shares is affirmatively approved by the Designated Person on or prior to the last day of the Restricted Period, including any extension of the Restricted Period, if applicable, then the Three-Year Continued Employment
Performance Goal will be
deemed
to have been achieved, and the Restricted Period with respect to any then outstanding Unvested Shares will terminate as of the end of the day on the date of such approval or the day immediately preceding the
third (3
rd
) anniversary of the Grant Date, whichever is later. The Restricted Shares outstanding at the termination
of the Restricted Period will become Awarded Shares and will be released and issued or reissued by PNC pursuant to Section 9.
(b) In the event that the record date for any dividend payable with respect to the Unvested Shares occurs on or after Grantee’s Termination Date but
prior to the lapse of the time for revocation by Grantee of the waiver and release agreement specified in the first paragraph of Section 7.6(a), then such dividend will be held, without interest, pending satisfaction of the condition of Section
7.6(a) that Grantee enter into the offered waiver and release agreement and not revoke such waiver and release agreement within the time for revocation of such agreement by Grantee. In the event that this condition is
not
met, any dividend
being held pending satisfaction of such condition will be forfeited by Grantee to PNC without payment of any consideration by PNC.
(c) If (i) Grantee does not enter into, or enters into but revokes, the waiver and release agreement specified in the first paragraph of Section 7.6(a) or
(ii) the Designated Person disapproves the vesting of the Unvested Shares that had remained outstanding after Grantee’s Termination Date pending the non-revocation of, and the lapse of the time within which Grantee may revoke, such waiver and
release agreement and pending approval of the vesting of such shares, then all such Unvested Shares that are still outstanding will be forfeited by Grantee to PNC on the date such failure to satisfy the conditions of Section 7.6(a) occurs without
payment of any consideration by PNC.
If, by the end of the
Restricted Period, including any extension of the Restricted Period pursuant to the second paragraph of Section 7.6(a), if applicable, such Unvested Shares are still outstanding but the Designated Person has neither affirmatively approved
-6-
nor disapproved the vesting of such shares, then all such Unvested Shares will be forfeited by Grantee to PNC at the close of business on the last day of the
Restricted Period without payment of any consideration by PNC.
7.7
Termination in Anticipation of a Change in Control
.
(a) Notwithstanding anything in the Agreement to the contrary, if, after the occurrence of a CIC Triggering Event but prior to a CIC Failure and prior to the third (3
rd
) anniversary of the Grant Date, Grantee’s employment is terminated (other than by reason of Grantee’s death) by the Corporation without Cause or by
Grantee for Good Reason, or if Grantee’s employment is deemed to have been so terminated pursuant to Section 7.7(b), then: (i) the Three-Year Continued Employment Performance Goal will be deemed to have been achieved and the Restricted Period
with respect to any then outstanding Unvested Shares will terminate as of the end of the day on the day immediately preceding Grantee’s Termination Date (or, in the case of a qualifying termination pursuant to Section 7.7(b), the date all of
the conditions set forth in clauses (i), (ii) and (iii) of the first or second paragraph, as the case may be, of Section 7.7(b) are met); and (ii) all Restricted Shares that thereby become Awarded Shares will be released and issued or reissued by
PNC pursuant to Section 9 as soon as administratively practicable following such date.
(b) Grantee’s employment will also be deemed to have been terminated by the Corporation without Cause after the occurrence of a CIC Triggering Event but prior to a CIC Failure for purposes of Section 7.7(a) if:
(i) Grantee’s employment is terminated by the Corporation without Cause; (ii) such termination of employment (a) was at the request of a third party that has taken steps reasonably calculated to effect a Change in Control, or (b) otherwise
arose in anticipation of a Change in Control; and (iii) a CIC Triggering Event or a Change in Control occurs within three (3) months of such termination of employment.
Grantee’s employment will also be deemed to have been terminated by Grantee for Good Reason after the occurrence of a
CIC Triggering Event but prior to a CIC Failure for purposes of Section 7.7(a) if: (i) Grantee terminates Grantee’s employment with Good Reason; (ii) the circumstance or event that constitutes Good Reason (a) occurs at the request of a third
party that has taken steps reasonably calculated to effect a Change in Control or (b) otherwise arose in anticipation of a Change in Control; and (iii) a CIC Triggering Event or a Change in Control occurs within three (3) months of such termination
of employment.
For purposes of this Section 7.7(b) only,
Grantee will have the burden of proving that the requirements of clause (ii) of the first or second paragraph of this Section 7.7(b), as the case may be, have been met and the standard of proof to be met by Grantee will be clear and convincing
evidence.
For purposes of this Section 7.7(b) only, the
definition of Change in Control in Section A.6 of Annex A will exclude the proviso in Section A.6(a).
-7-
(c) If the Unvested Shares will be forfeited by Grantee to PNC by reason of Grantee’s termination of
employment with the Corporation pursuant to Section 7.1 unless all of the conditions set forth in clauses (i), (ii) and (iii) of the first or second paragraph, as the case may be, of Section 7.7(b) are met, then in the event that the record date for
any dividend payable with respect to the Unvested Shares occurs on or after Grantee’s Termination Date but prior to the time all of the conditions set forth in clauses (i), (ii) and (iii) of the first or second paragraph, as the case may be, of
Section 7.7(b) have been met, such dividend will be held, without interest, pending satisfaction of all of such conditions. In the event that one or more of the conditions of Section 7.7(b) are
not
met, any dividend being held pending
satisfaction of such conditions will be forfeited by Grantee to PNC without payment of any consideration by PNC.
(d) If the Unvested Shares will be forfeited by Grantee to PNC by reason of Grantee’s termination of employment with the Corporation pursuant to
Section 7.1 unless all of the conditions set forth in clauses (i), (ii) and (iii) of the first or second paragraph, as the case may be, of Section 7.7(b) are met, then the Restricted Shares will remain outstanding pending satisfaction of all of
those conditions. Upon the failure of any required condition, all such Unvested Shares will be forfeited by Grantee to PNC on the date such failure occurs without payment of any consideration by PNC.
8.
Change in Control
. Notwithstanding anything in the Agreement to the
contrary, upon the occurrence of a Change in Control: (i) if Grantee is an employee of the Corporation as of the day immediately preceding the Change in Control, the Three-Year Continued Employment Performance Goal will be
deemed
to have been
achieved and the Restricted Period will terminate with respect to all then outstanding Unvested Shares as of the day immediately preceding the Change in Control; (ii) if Grantee’s employment with the Corporation terminated prior to the
occurrence of the Change in Control but the Unvested Shares remained outstanding after such termination of employment pursuant to Section 7.4, Section 7.5 or Section 7.6 and are still outstanding pending approval of the vesting of such shares by the
Designated Person specified in Section A.13 of Annex A, then with respect to all Unvested Shares outstanding as of the day immediately preceding the Change in Control, such vesting approval will be
deemed
to have been given, the Three-Year
Continued Employment Performance Goal will be
deemed
to have been achieved, and the Restricted Period will terminate, all as of the day immediately preceding the Change in Control,
provided, however,
in the case of Unvested Shares that
remained outstanding post-employment solely pursuant to Section 7.6(a), that Grantee entered into and does not revoke the waiver and release agreement specified in Section 7.6(a); and (iii) all Restricted Shares that thereby become Awarded Shares
will be released and issued or reissued by PNC pursuant to Section 9 as soon as administratively practicable following such date.
9.
Termination of Prohibitions
. Following termination of the Restricted Period, PNC will release and issue or reissue the certificate or
certificates representing the then outstanding whole Restricted Shares that have become Awarded Shares without the legend referred to in Section 3.
-8-
Upon release and issuance or reissuance of shares that have become Awarded Shares, PNC or its designee
will deliver the certificate or certificates for such whole shares to, or at the proper direction of, Grantee or Grantee’s legal representative.
10.
Payment of Taxes
.
10.1
Internal Revenue Code Section 83(b) Election
. In the event that Grantee makes an Internal Revenue Code Section 83(b) election with respect to
the Restricted Shares, Grantee shall satisfy all applicable federal, state or local withholding tax obligations arising from that election either: (a) by payment of cash; (b) by physical delivery to PNC of certificates for whole shares of PNC common
stock that are not subject to any contractual restriction, pledge or other encumbrance and that have been owned by Grantee for at least six (6) months and, in the case of restricted stock, for which it has been at least six (6) months since the
restrictions lapsed; or (c) by a combination of cash and such stock. Any such tax election shall be made pursuant to a form to be provided to Grantee by PNC on request. For purposes of this Section 10.1, shares of PNC common stock that are used to
satisfy applicable withholding tax obligations will be valued at their Fair Market Value on the date the tax withholding obligation arises. Grantee will provide to PNC a copy of any Internal Revenue Code Section 83(b) election filed by Grantee with
respect to the Restricted Shares not later than ten (10) days after the filing of such election.
10.2
Other Tax Liabilities
. Where Grantee has not previously satisfied all applicable withholding tax obligations, PNC will, at the time the tax
withholding obligation arises, retain sufficient whole shares of PNC common stock from the shares granted pursuant to the Agreement to satisfy the minimum amount of taxes required to be withheld by the Corporation in connection with the Restricted
Shares. For purposes of this Section 10.2, shares of PNC common stock retained to satisfy applicable withholding tax requirements will be valued at their Fair Market Value on the date the tax withholding obligation arises.
PNC will
not
retain more than the number of shares sufficient to
satisfy the minimum amount of taxes required to be withheld in connection with the Restricted Shares. If Grantee desires to have an additional amount, up to Grantee’s W-4 obligation, withheld above the required minimum and if PNC so permits,
Grantee may elect to satisfy this additional withholding either: (a) by payment of cash; or (b) using whole shares of PNC common stock (either by physical delivery to PNC of certificates for the shares or through PNC’s attestation procedure)
that are not subject to any contractual restriction, pledge or other encumbrance and that have been owned by Grantee for at least six (6) months and, in the case of restricted stock, for which it has been at least six (6) months since the
restrictions lapsed. Any such tax election shall be made pursuant to a form provided by PNC. Shares of PNC common stock that are used for this purpose will be valued at their Fair Market Value on the date the tax withholding obligation arises.
11.
Employment
. Neither the granting and issuance of
the Restricted Shares nor any term or provision of the Agreement shall constitute or be evidence of any
-9-
understanding, expressed or implied, on the part of PNC or any Subsidiary to employ Grantee for any period or in any way alter Grantee’s status as an
employee at will.
12.
Subject to the Plan and the
Committee
. In all respects the Grant and the Agreement are subject to the terms and conditions of the Plan, which has been made available to Grantee and is incorporated herein by reference;
provided, however,
the terms of the Plan shall
not be considered an enlargement of any benefits under the Agreement. Further, the Grant and the Agreement are subject to any interpretation of, and any rules and regulations issued by, the Committee or under the authority of the Committee, whether
made or issued before or after the Grant Date.
13.
Headings; Entire Agreement
. Headings used in the Agreement are provided for reference and convenience only, shall not be considered part of the Agreement, and shall not be employed in the construction of the Agreement. The Agreement
constitutes the entire agreement between Grantee and PNC and supersedes all other discussions, negotiations, correspondence, representations, understandings and agreements between the parties with respect to the subject matter hereof.
14.
Grantee Covenants
.
14.1
General
. Grantee and PNC acknowledge and agree that Grantee has
received adequate consideration with respect to enforcement of the provisions of Sections 14 and 15, that such provisions are reasonable and properly required for the adequate protection of the business of the Corporation, and that enforcement of
such provisions will not prevent Grantee from earning a living.
14.2
Non-Solicitation; No-Hire
. Grantee agrees to comply with the provisions of subsections (a) and (b) of this Section 14.2 while employed by the Corporation and for a period of twelve (12) months after Grantee’s Termination
Date regardless of the reason for such termination of employment.
(a)
Non-Solicitation
. Grantee shall not, directly or indirectly, either for Grantee’s own benefit or purpose or for the benefit or purpose of any Person other than PNC or any Subsidiary, solicit, call on, do business with, or
actively interfere with PNC’s or any Subsidiary’s relationship with, or attempt to divert or entice away, any Person that Grantee should reasonably know (i) is a customer of PNC or any Subsidiary for which PNC or any Subsidiary provides
any services as of the Termination Date, or (ii) was a customer of PNC or any Subsidiary for which PNC or any Subsidiary provided any services at any time during the twelve (12) months preceding the Termination Date, or (iii) was, as of the
Termination Date, considering retention of PNC or any Subsidiary to provide any services.
(b)
No-Hire
. Grantee shall not, directly or indirectly, either for Grantee’s own benefit or purpose or for the benefit or purpose of any Person other than PNC or any Subsidiary, employ or offer to employ,
call on, or actively interfere with PNC’s or any
-10-
Subsidiary’s relationship with, or attempt to divert or entice away, any employee of the Corporation, nor shall Grantee assist any other Person in such
activities.
Notwithstanding the above, if Grantee’s
employment with the Corporation is terminated by the Corporation without Cause or by Grantee with Good Reason and such Termination Date occurs during a Coverage Period (either as Coverage Period is defined in Section A.12 of Annex A or, if Grantee
was a party to a written agreement between Grantee and PNC providing, among other things, for certain change in control severance benefits (a “CIC Severance Agreement”) that was in effect at the time of such termination of employment, as
Coverage Period is defined in such CIC Severance Agreement, if longer), then commencing immediately after such Termination Date, the provisions of subsections (a) and (b) of this Section 14.2 will no longer apply and will be replaced with the
following subsection (c):
(c)
No-Hire
. Grantee agrees
that Grantee shall not, for a period of twelve (12) months after the Termination Date, employ or offer to employ, solicit, actively interfere with PNC’s or any PNC affiliate’s relationship with, or attempt to divert or entice away, any
officer of PNC or any PNC affiliate.
14.3
Confidentiality
. During Grantee’s employment with the Corporation, and thereafter regardless of the reason for termination of such employment, Grantee will not disclose or use in any way any confidential business or technical information
or trade secret acquired in the course of such employment, all of which is the exclusive and valuable property of the Corporation whether or not conceived of or prepared by Grantee, other than (a) information generally known in the
Corporation’s industry or acquired from public sources, (b) as required in the course of employment by the Corporation, (c) as required by any court, supervisory authority, administrative agency or applicable law, or (d) with the prior written
consent of PNC.
14.4
Ownership of Inventions
. Grantee
shall promptly and fully disclose to PNC any and all inventions, discoveries, improvements, ideas or other works of inventorship or authorship, whether or not patentable, that have been or will be conceived and/or reduced to practice by Grantee
during the term of Grantee’s employment with the Corporation, whether alone or with others, and that are (a) related directly or indirectly to the business or activities of PNC or any Subsidiary or (b) developed with the use of any time,
material, facilities or other resources of PNC or any Subsidiary (“Developments”). Grantee agrees to assign and hereby does assign to PNC or its designee all of Grantee’s right, title and interest, including copyrights and patent
rights, in and to all Developments. Grantee shall perform all actions and execute all instruments that PNC or any Subsidiary shall deem necessary to protect or record PNC’s or its designee’s interests in the Developments. The obligations
of this Section 14.4 shall be performed by Grantee without further compensation and will continue beyond the Termination Date.
15.
Enforcement Provisions
. Grantee understands and agrees to the following provisions regarding enforcement of the Agreement.
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15.1
Governing Law and Jurisdiction
. The Agreement is governed by and construed under the laws of
the Commonwealth of Pennsylvania, without regard to conflict of laws rules. Any dispute or claim arising out of or relating to the Agreement or claim of breach hereof shall be brought exclusively in the federal court for the Western District of
Pennsylvania or in the Court of Common Pleas of Allegheny County, Pennsylvania. By execution of the Agreement, Grantee and PNC hereby consent to the exclusive jurisdiction of such courts, and waive any right to challenge jurisdiction or venue in
such courts with regard to any suit, action, or proceeding under or in connection with the Agreement.
15.2
Equitable Remedies
. A breach of the provisions of any of Sections 14.2, 14.3 or 14.4 will cause the Corporation irreparable harm, and the
Corporation will therefore be entitled to issuance of immediate, as well as permanent, injunctive relief restraining Grantee, and each and every person and entity acting in concert or participating with Grantee, from initiation and/or continuation
of such breach.
15.3
Tolling Period
. If it becomes
necessary or desirable for the Corporation to seek compliance with the provisions of Section 14.2 by legal proceedings, the period during which Grantee shall comply with said provisions will extend for a period of twelve (12) months from the date of
the legal order requiring such compliance.
15.4
No
Waiver
. Failure of PNC to demand strict compliance with any of the terms, covenants or conditions of the Agreement will not be deemed a waiver of such term, covenant or condition, nor will any waiver or relinquishment of any such term, covenant
or condition on any occasion or on multiple occasions be deemed a waiver or relinquishment of such term, covenant or condition.
15.5
Severability
. The restrictions and obligations imposed by Sections 14.2, 14.3 and 14.4 are separate and severable, and it is the intent of
Grantee and PNC that if any restriction or obligation imposed by any of these provisions is deemed by a court of competent jurisdiction to be void for any reason whatsoever, the remaining provisions, restrictions and obligations will remain valid
and binding upon Grantee.
15.6
Reform
. In the event any
of Sections 14.2, 14.3 and 14.4 are determined by a court of competent jurisdiction to be unenforceable because unreasonable either as to length of time or area to which said restriction applies, it is the intent of Grantee and PNC that said court
reduce and reform the provisions thereof so as to apply the greatest limitations considered enforceable by the court.
15.7
Waiver of Jury Trial
. Each of Grantee and PNC hereby waives any right to trial by jury with regard to any suit, action or proceeding under or
in connection with any of Sections 14.2, 14.3 and 14.4.
15.8
Applicable Law
. Notwithstanding anything in the Agreement, PNC will not be required to comply with any term, covenant or condition of the Agreement if and to the extent prohibited by law, including but not limited to federal banking and
securities
-12-
regulations, or as otherwise directed by one or more regulatory agencies having jurisdiction over PNC or any of its subsidiaries. Further, to the extent, if
any, applicable to Grantee, Grantee agrees to reimburse PNC for any amounts Grantee may be required to reimburse PNC or its subsidiaries pursuant to Section 304 of the Sarbanes-Oxley Act of 2002, and agrees that PNC need not comply with any term,
covenant or condition of the Agreement to the extent that doing so would require that Grantee reimburse PNC or its subsidiaries for such amounts pursuant to Section 304 of the Sarbanes-Oxley Act of 2002.
16.
Modification; Interpretation; Rules and Regulations
. The Committee
may modify or amend the terms of the Agreement or the Grant;
provided, however,
no modification or amendment of the Agreement or the Grant shall, without the consent of Grantee, adversely affect the rights or obligations of Grantee.
The Committee will have the power to construe and interpret
the Agreement. The Grant and the Agreement are also subject to any administrative guidelines and other rules and regulations relating to the Grant or the Agreement promulgated by or under the authority of the Committee. The Committee’s
determinations on matters within its authority will be conclusive and binding on Grantee.
17.
Amendment of Pre-2004 Stock Options, Restricted Stock and Restricted Stock Deferrals
. All nonstatutory stock options granted to employees under
PNC’s 1997 Long-Term Incentive Award Plan outstanding on February 18, 2004, all restricted stock grants to employees under the Plan or PNC’s 1997 Long-Term Incentive Award Plan outstanding but not yet vested on February 18, 2004, and all
participant restricted stock deferral accounts under the PNC and Affiliates Deferred Compensation Plan that were in place but not yet vested on February 18, 2004, are subject to the amendments approved by the Committee on that date. These amendments
are generally described in the Plan prospectus dated
, 200
under the heading “Recent Amendments” of the section titled “2004 Restricted
Stock Grants.” A copy of this Plan prospectus accompanied or preceded delivery of the Agreement to Grantee.
To the extent that Grantee is the holder of any such stock options or is the grantee of any such restricted stock or is a participant in the PNC and
Affiliates Deferred Compensation Plan with such stock deferral account or accounts in place but not yet vested, Grantee hereby acknowledges and consents to such amendments.
18.
Acceptance of Grant; PNC Right to Cancel
. If Grantee does not accept the Grant by executing and delivering a copy
of the Agreement to PNC, without altering or changing the terms thereof in any way, within sixty (60) days of receipt by Grantee of a copy of the Agreement, PNC may, in its sole discretion, withdraw its offer and cancel the Grant at any time prior
to Grantee’s delivery to PNC of a copy of the Agreement executed by Grantee. Otherwise, upon execution and delivery of the Agreement by both PNC and Grantee and, in the event that Grantee is subject to the reporting requirements of Section
16(a) of the Exchange Act with respect to PNC securities, the filing with and acceptance by the SEC of a Form 4 reporting the Grant, the Agreement is effective.
-13-
Grantee will not have any of the rights of a shareholder with respect to the Restricted Shares as set
forth in Section 4, and will not have the right to vote or to receive dividends on such shares, until the date the Agreement is effective and the Restricted Shares are issued in accordance with this Section 18.
In the event that one or more record dates for dividends on PNC common stock
occur after the Grant Date but before the date the Agreement is effective in accordance with this Section 18 and the Restricted Shares are issued, then upon the effectiveness of the Agreement, the Corporation will make a cash payment to Grantee
equivalent to the amount of the dividends Grantee would have received had the Agreement been effective and the Restricted Shares had been issued on the Grant Date.
I
N
W
ITNESS
W
HEREOF
, PNC has caused the Agreement to be signed on its behalf as
of the Grant Date.
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THE PNC FINANCIAL SERVICES GROUP, INC.
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By:
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Chairman and Chief Executive Officer
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ATTEST:
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By:
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Corporate Secretary
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A
CCEPTED
AND
A
GREED
TO
by
G
RANTEE
.
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Grantee
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-14-
Annual 25/25 Program (NEOs) -
200
Restricted Stock Grant
Continued Employment Performance Goal
Restricted Period: Three Years (100%)
ANNEX A
TO
THE PNC
FINANCIAL SERVICES GROUP, INC.
1996 EXECUTIVE INCENTIVE AWARD PLAN
RESTRICTED STOCK AGREEMENT
* * *
CERTAIN DEFINITIONS
Except where the context otherwise indicates, the following
definitions apply for purposes of the Restricted Stock Agreement (“Agreement”) to which this Annex A is attached:
A.1 “
Awarded Shares
.” Provided that the Restricted Shares are then outstanding, Restricted Shares become “Awarded Shares” when
both of the following have occurred: (a) the Three-Year Continued Employment Performance Goal has been achieved or is deemed to have been achieved pursuant to the terms of the Agreement; and (b) the Restricted Period has terminated.
A.2 “
Board
” means the Board of Directors of PNC.
A.3 “
Business Day
” means any day when the New York Stock
Exchange is open for business.
A.4 “
Cause
”
means:
(a) the willful and continued failure of Grantee to
substantially perform Grantee’s duties with the Corporation (other than any such failure resulting from incapacity due to physical or mental illness), after a written demand for substantial performance is delivered to Grantee by the Board or
the CEO which specifically identifies the manner in which the Board or the CEO believes that Grantee has not substantially performed Grantee’s duties; or
(b) the willful engaging by Grantee in illegal conduct or gross misconduct that is materially and demonstrably injurious to PNC or any Subsidiary.
For purposes of the preceding clauses (a) and (b), no act or
failure to act, on the part of Grantee, shall be considered willful unless it is done, or omitted to be done, by
-15-
Grantee in bad faith and without reasonable belief that Grantee’s action or omission was in the best interests of the Corporation. Any act, or failure
to act, based upon the instructions or prior approval of the Board, the CEO or Grantee’s superior or based upon the advice of counsel for the Corporation, shall be conclusively presumed to be done, or omitted to be done, by Grantee in good
faith and in the best interests of the Corporation.
The
cessation of employment of Grantee will be deemed to be a termination of Grantee’s employment with the Corporation for Cause for purposes of the Agreement only if and when there shall have been delivered to Grantee, as part of the notice of
Grantee’s termination, a copy of a resolution duly adopted by the affirmative vote of not less than a majority of the entire membership of the Board, at a Board meeting called and held for the purpose of considering such termination, finding on
the basis of clear and convincing evidence that, in the good faith opinion of the Board, Grantee is guilty of conduct described in clause (a) or clause (b) above and, in either case, specifying the particulars thereof in detail. Such resolution
shall be adopted only after (i) reasonable notice of such Board meeting is provided to Grantee, together with written notice that PNC believes that Grantee is guilty of conduct described in clause (a) or clause (b) above and, in either case,
specifying the particulars thereof in detail, and (ii) Grantee is given an opportunity, together with counsel, to be heard before the Board.
A.5 “
CEO
” means the chief executive officer of PNC.
A.6 “
Change in Control
” means a change of control of PNC of a nature that would be required to be reported
in response to Item 6(e) of Schedule 14A of Regulation 14A (or in response to any similar item on any similar schedule or form) promulgated under the Exchange Act, whether or not PNC is then subject to such reporting requirement;
provided
,
however
, that without limitation, a Change in Control will be deemed to have occurred if:
(a) any Person, excluding employee benefits plans of the Corporation, is or becomes the beneficial owner (as defined in Rules 13d-3 and 13d-5 under the
Exchange Act or any successor provisions thereto), directly or indirectly, of securities of PNC representing twenty percent (20%) or more of the combined voting power of PNC’s then outstanding securities;
provided
,
however
, that
such an acquisition of beneficial ownership representing between twenty percent (20%) and forty percent (40%), inclusive, of such voting power will not be considered a Change in Control if the Board approves such acquisition either prior to or
immediately after its occurrence;
(b) PNC consummates a
merger, consolidation, share exchange, division or other reorganization or transaction of PNC (a “Fundamental Transaction”) with any other corporation, other than a Fundamental Transaction that results in the voting securities of PNC
outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least sixty percent (60%) of the combined voting power immediately after such
Fundamental Transaction of (i) PNC’s outstanding securities, (ii) the surviving entity’s outstanding
-16-
securities, or (iii) in the case of a division, the outstanding securities of each entity resulting from the division;
(c) the shareholders of PNC approve a plan of complete liquidation or
winding-up of PNC or an agreement for the sale or disposition (in one transaction or a series of transactions) of all or substantially all of PNC’s assets;
(d) as a result of a proxy contest, individuals who prior to the conclusion thereof constituted the Board (including for this purpose any new director
whose election or nomination for election by PNC’s shareholders in connection with such proxy contest was approved by a vote of at least two-thirds (2/3rds) of the directors then still in office who were directors prior to such proxy contest)
cease to constitute at least a majority of the Board (excluding any Board seat that is vacant or otherwise unoccupied);
(e) during any period of twenty-four (24) consecutive months, individuals who at the beginning of such period constituted the Board (including for this
purpose any new director whose election or nomination for election by PNC’s shareholders was approved by a vote of at least two-thirds (2/3rds) of the directors then still in office who were directors at the beginning of such period) cease for
any reason to constitute at least a majority of the Board (excluding any Board seat that is vacant or otherwise unoccupied); or
(f) the Board determines that a Change in Control has occurred.
Notwithstanding anything to the contrary herein, a divestiture or spin-off of a subsidiary or division of PNC will not by itself constitute a Change in
Control.
A.7 “
CIC Failure
” means the
following:
(a) with respect to a CIC Triggering Event
described in Section A.8(a), PNC’s shareholders vote against the transaction approved by the Board or the agreement to consummate the transaction is terminated; or
(b) with respect to a CIC Triggering Event described in Section A.8(b), the proxy contest fails to replace or remove a
majority of the members of the Board.
A.8 “
CIC
Triggering Event
” means the occurrence of either of the following:
(a) the Board or PNC’s shareholders approve a transaction described in Subsection (b) of the definition of Change in Control contained in Section A.6; or
(b) the commencement of a proxy contest in which any Person seeks to replace
or remove a majority of the members of the Board.
A.9
“
Committee
” means the Personnel and Compensation Committee of the Board.
-17-
A.10 “
Competitive Activity
” means, for purposes of the Agreement, any participation in,
employment by, ownership of any equity interest exceeding one percent (1%) in, or promotion or organization of, any Person other than PNC or any Subsidiary (a) engaged in business activities similar to some or all of the business activities of PNC
or any Subsidiary as of Grantee’s Termination Date or (b) engaged in business activities which Grantee knows PNC or any Subsidiary intends to enter within the first twelve (12) months after Grantee’s Termination Date, in either case
whether Grantee is acting as agent, consultant, independent contractor, employee, officer, director, investor, partner, shareholder, proprietor or in any other individual or representative capacity therein.
A.11 “
Corporation
” means PNC and its Subsidiaries.
A.12 “
Coverage Period
” means a period (a)
commencing on the earlier to occur of (i) the date of a CIC Triggering Event and (ii) the date of a Change in Control and (b) ending on the date that is three (3) years after the date of the Change in Control;
provided
,
however
, that
in the event that a Coverage Period commences on the date of a CIC Triggering Event, such Coverage Period will terminate upon the earlier to occur of (x) the date of a CIC Failure and (y) the date that is three (3) years after the date of the Change
in Control triggered by the CIC Triggering Event. After the termination of any Coverage Period, another Coverage Period will commence upon the earlier to occur of clause (a)(i) and clause (a)(ii) in the preceding sentence.
A.13 “
Designated Person
” will be either: (a) the Committee,
if Grantee is a member of the Corporate Executive Group (or equivalent successor classification) or is subject to the reporting requirements of Section 16(a) of the Exchange Act with respect to PNC securities; or (a) the Chief Human Resources
Officer of PNC, if Grantee is not within one of the groups specified in Section A.13(a).
A.14 “
Detrimental Conduct
” means:
(a) Grantee has engaged, without the prior written consent of PNC (at PNC’s sole discretion), in any Competitive Activity in the continental United States at any time during the period commencing on
Grantee’s Termination Date through the first (1
st
) anniversary of Grantee’s Termination Date;
(b) a material breach by Grantee of (i) any code of conduct of PNC or a
Subsidiary or (ii) other written policy of PNC or a Subsidiary, in either case required by law or established to maintain compliance with applicable law;
(c) any act of fraud, misappropriation, material dishonesty, or embezzlement by Grantee against PNC or a Subsidiary or any client or customer of PNC or a
Subsidiary;
(d) any conviction (including a plea of guilty or
of
nolo contendere
) of Grantee for, or entry by Grantee into a pre-trial disposition with respect to, the
-18-
commission of a felony which relates to or arises out of Grantee’s employment or other service relationship with the Corporation; or
(e) entry of any order against Grantee by any governmental body having
regulatory authority with respect to the business of PNC or any Subsidiary, which order relates to or arises out of Grantee’s employment or other service relationship with the Corporation.
Grantee will be deemed to have engaged in Detrimental Conduct for purposes of
the Agreement only if and when the Committee determines that Grantee has engaged in conduct described in clause (a) above, that Grantee is guilty of conduct described in clause (b) or clause (c) above, or that an event described in clause (d) or
clause (e) above has occurred with respect to Grantee and, if so, determines that Grantee will be deemed to have engaged in Detrimental Conduct.
A.15 “
Exchange Act
” means the Securities Exchange Act of 1934 as amended, and the rules and regulations promulgated thereunder.
A.16 “
Fair Market Value
” as it relates to PNC
common stock means the average of the high and low sale prices of the PNC common stock as reported on the New York Stock Exchange (or such successor reporting system as PNC may select) on the relevant date or, if no sale of the PNC common stock has
been reported for that day, the average of such prices on the next preceding day and the next following day for which there were reported sales.
A.17 “
Good Reason
” means:
(a) the assignment to Grantee of any duties inconsistent in any respect with Grantee’s position (including status, offices, titles and reporting
requirements), authority, duties or responsibilities immediately prior to either the CIC Triggering Event or the Change in Control, or any other action by the Corporation which results in a diminution in any respect in such position, authority,
duties or responsibilities, excluding for this purpose an isolated, insubstantial and inadvertent action not taken in bad faith that is remedied by the Corporation promptly after receipt of notice thereof given by Grantee;
(b) a reduction by the Corporation in Grantee’s annual base salary as in
effect on the Grant Date, as the same may be increased from time to time;
(c) the Corporation’s requiring Grantee to be based at any office or location that is more than fifty (50) miles from Grantee’s office or location immediately prior to either the CIC Triggering Event or the
Change in Control;
(d) the failure by the Corporation (i) to
continue in effect any bonus, stock option or other cash or equity-based incentive plan or program in which Grantee participates immediately prior to either the CIC Triggering Event or the Change in Control that is material to Grantee’s total
compensation, unless a substantially equivalent
-19-
arrangement (embodied in an ongoing substitute or alternative plan or program) has been made with respect to such plan or program, or (ii) to continue
Grantee’s participation in such plan or program (or in such substitute or alternative plan or program) on a basis at least as favorable, both in terms of the amount of benefits provided and the level of Grantee’s participation relative to
other participants, as existed immediately prior to the CIC Triggering Event or the Change in Control; or
(e) the failure by the Corporation to continue to provide Grantee with benefits substantially similar to those received by Grantee under any of the
Corporation’s pension (including, but not limited to, tax-qualified plans), life insurance, health, accident, disability or other welfare plans or programs in which Grantee was participating, at costs substantially similar to those paid by
Grantee, immediately prior to the CIC Triggering Event or the Change in Control.
A.18 “
Grant
” means the Restricted Shares granted and issued to Grantee pursuant to Section 1 of the Agreement.
A.19 “
Grant Date
” means the Grant Date set forth on page 1 of the Agreement.
A.20 “
Grantee
” means the person identified as Grantee on
page 1 of the Agreement.
A.21 “
Internal Revenue
Code
” means the Internal Revenue Code of 1986 as amended, and the rules and regulations promulgated thereunder.
A.22 “
Person
” has the meaning given in Section 3(a)(9) of the Exchange Act and also includes any syndicate or group deemed to be a person
under Section 13(d)(3) of the Exchange Act.
A.23
“
PNC
” means The PNC Financial Services Group, Inc.
A.24 “
Restricted Period
” means, subject to early termination if so determined by the Committee or pursuant to Section 7.7 of the Agreement, if applicable, the period from the Grant Date through (and including) the earlier
of: (a) the date of Grantee’s death; (b) the day immediately preceding the day a Change in Control is deemed to have occurred; and (c) the day immediately preceding the third (3
rd
) anniversary of the Grant Date or, if later, the last day of any extension of the Restricted Period pursuant to Section 7.4(a), Section 7.5(a) or Section
7.6(a) of the Agreement, if applicable.
A.25
“
Retiree
” means a Grantee who has Retired.
A.26 “
Retire” or “Retirement
” means termination of Grantee’s employment with the Corporation at any time and for any reason (other than termination by reason of Grantee’s death or by the Corporation for
Cause or, unless the Committee determines otherwise, termination in connection with a divestiture of assets or of one or more Subsidiaries) if such termination of employment occurs on or after the first (1
st
) day of
-20-
the first (1
st
) month
coincident with or next following the date on which Grantee attains age fifty-five (55) and completes five (5) years of service (as determined in the same manner as the determination of five years of Vesting Service under the provisions of The PNC
Financial Services Group, Inc. Pension Plan) with the Corporation.
A.27 “
SEC
” means the United States Securities and Exchange Commission.
A.28 “
Termination Date
” means Grantee’s last date of employment with the Corporation. If Grantee is employed by a Subsidiary that
ceases to be a Subsidiary of PNC and Grantee does not continue to be employed by PNC or a Subsidiary, then for purposes of the Agreement, Grantee’s employment with the Corporation terminates effective at the time this occurs.
A.29 “
Three-Year Continued Employment Performance Goal
”
means, subject to early achievement if so determined by the Committee or to
deemed
achievement pursuant to Section 7.3, Section 7.4, Section 7.5, Section 7.6, Section 7.7, or Section 8 of the Agreement, if applicable, that Grantee has been
continuously employed by the Corporation for the period from the Grant Date through (and including) the day immediately preceding the first of the following to occur: (a) the third (3
rd
) anniversary of the Grant Date; (b) the date of Grantee’s death; and (c) the day a Change in Control is deemed to have occurred.
A.30 “
Total and Permanent Disability
” means, unless the
Committee determines otherwise, Grantee’s disability as determined to be total and permanent by the Corporation for purposes of the Agreement.
A.31 “
Unvested Shares
” means any Restricted Shares that are not Awarded Shares.
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FORM OF ANNUAL 25/25 PROGRAM
RESTRICTED AWARD DEFERRAL ACCOUNT AGREEMENT
Annual 25/25 Program - 200
Restricted Deferred Award
Continued Employment Performance Goal
Restricted Period: Three Years (100%)
THE PNC FINANCIAL SERVICES GROUP, INC. AND AFFILIATES
DEFERRED COMPENSATION PLAN
* * *
ANNUAL 25/25 PROGRAM
200
RESTRICTED DEFERRED AWARD
* * *
RESTRICTED AWARD DEFERRAL ACCOUNT AGREEMENT
* * *
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PARTICIPANT:
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< name >
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GRANT DATE:
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February
, 200
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DEFERRED SHARES:
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< number of shares, including fractions>
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1.
Definitions
.
Terms defined in The PNC Financial Services Group, Inc. and Affiliates Deferred Compensation Plan, as amended from time to time (“Plan”), are used in this Restricted Award Deferral Account Agreement (“Agreement”) as defined in
the Plan unless otherwise defined in Annex A (attached hereto and incorporated herein by reference) or elsewhere in the Agreement.
2.
200 Restricted Award Deferral Account
. Subject to the terms and conditions of the Agreement, The PNC Financial Services Group, Inc.
(“PNC”) has, in connection with the Corporation’s Annual 25/25 Program for 200
, granted to the Participant named above (“Participant”) a restricted stock award in the amount of the number of shares of PNC
common stock set forth above under “Deferred Shares.” In accordance with Participant’s prior Deferral Election, such award has been deferred under the Plan, subject to the terms and conditions of the Agreement.
Upon acceptance of the award of the Deferred Shares (“Award”) and
the terms and conditions of the deferral of such shares under the Plan and the Agreement in accordance with Section 17, a separate subaccount of Participant’s Plan Account will be established for Participant under the Plan to reflect the
deferral of such shares (“200
Restricted Award Deferral Account”). The Deferral Amounts credited to such
subaccount will be
deemed
to be invested in the phantom PNC Common Stock Fund, such that the initial balance of the 200_ Restricted Award Deferral
Account will be a number of units of phantom PNC common stock equal to the number of Deferred Shares set forth above (“Deferred Share Units”). Except as otherwise provided in the Agreement, the 200
Restricted Award
Deferral Account will be treated in the same manner and will be subject to the same terms and conditions as a subaccount established under the Plan for Participant for cash deferrals.
3.
Restricted Period
. The 200
Restricted Award Deferral Account will be subject to the following
terms and conditions:
The 200
Restricted
Award Deferral Account and the Deferred Share Units will be subject to forfeiture and transfer restrictions pursuant to the terms and conditions of the Agreement during the term of a Restricted Period as provided in Section A.23 of Annex A.
An appropriate notation that the 200
Restricted Award Deferral Account and the Deferred Share Units are subject to the terms and conditions of the Agreement, including such forfeiture possibility and restrictions against transfer, will be made on the Plan system with respect to the
200
Restricted Award Deferral Account and the Deferred Share Units. It will also be noted that release from such terms and conditions will be made only in accordance with the provisions of the Agreement, a copy of which is on file
in the office of the Corporate Secretary of The PNC Financial Services Group, Inc.
To the extent that the Deferred Share Units become Awarded Share Units and are not forfeited pursuant to Section 7, the 200
Restricted Award Deferral Account and Deferred Share Units will be
released from the terms and conditions of the Agreement and the 200
Restricted Award Deferral Account will become a regular subaccount under the Plan pursuant to Section 9 as soon as administratively practicable following
termination of the Restricted Period.
4.
Phantom
Dividends
. Subject to Section 7.6(b) or Section 7.7(c), if applicable, and to Section 17, any earnings credited to Participant under the Plan with respect to the Deferred Share Units in the 200
Restricted Award Deferral
Account will not be restricted by the Agreement and will be credited to the subaccount of Participant’s Plan Account that reflects deferrals of cash annual incentive awards for 200
.
5.
Capital Adjustments
. Deferred Share Units, as units of phantom PNC
common stock, will be subject to such adjustment as may be necessary to reflect the effect on such units of corporate transactions, including, without limitation, stock dividends, stock splits, spin-offs, split-offs, recapitalizations, mergers,
consolidations or reorganizations of or by PNC, on shares of PNC common stock;
provided
,
however
, that any share units credited to Participant as
deemed
distributions on or in exchange for Unvested Share Units will be credited
to the 200
Restricted Award Deferral Account as Deferred Share Units and will be subject to the terms and conditions of the Agreement as such.
-2-
6.
Prohibitions Against Transfer and Other Limitations
. Deferred Share Units may not be
transferred to a subaccount other than the 200_ Restricted Award Deferral Account unless and until they become Awarded Share Units and are released from the terms and conditions of the Agreement pursuant to Section 9 following termination of the
Restricted Period.
Participant may not elect to begin
distributions or make hardship withdrawals from the 200_ Restricted Award Deferral Account until that subaccount has been released from the terms and conditions of the Agreement pursuant to Section 9. Any accelerated or other distribution of the
200_ Restricted Award Deferral Account that would otherwise occur pursuant to the Plan, or otherwise, will be delayed until that subaccount has been released from the terms and conditions of the Agreement pursuant to Section 9.
7.
Forfeiture; Death; Qualifying Disability, Retirement or DEAP
Termination; Termination in Anticipation of CIC
.
7.1
Forfeiture on Termination of Employment
. Except as otherwise provided in and subject to the conditions of Section 7.3, Section 7.4(a), Section 7.5(a), Section 7.6(a), Section 7.7 (a), Section 7.7(b), or Section 8, if applicable, or unless the
Committee determines otherwise, in the event that Participant’s employment with the Corporation terminates prior to the third (3
rd
) anniversary of the Grant Date, all Deferred Share Units that are Unvested Share Units on Participant’s Termination Date will be forfeited by Participant to PNC without payment of any consideration by PNC.
Upon forfeiture of Unvested Share Units pursuant to the provisions of this
Section 7.1 or the provisions of Section 7.2, Section 7.4(b), Section 7.5(b), Section 7.6(c) or Section 7.7(d), neither Participant nor any successors, heirs, assigns or legal representatives of Participant will thereafter have any further rights or
interest in such Unvested Share Units.
7.2
Forfeiture for
Detrimental Conduct
. Unvested Share Units that would otherwise remain in effect after Participant’s Termination Date, if any, will be forfeited by Participant to PNC without payment of any consideration by PNC in the event that, at any time
prior to the date such units become Awarded Share Units, PNC determines that Participant has engaged in Detrimental Conduct;
provided, however,
that: (a) this Section 7.2 will not apply to Deferred Share Units that remain outstanding after
Participant’s Termination Date pursuant to Section 7.3 or Section 7.7, if any; (b) no determination that Participant has engaged in Detrimental Conduct may be made on or after the date of Participant’s death; (c) Detrimental Conduct will
not apply to conduct by or activities of successors to Participant’s interests under the Plan in the event of Participant’s death; and (d) Detrimental Conduct will cease to apply to any Deferred Share Units upon a Change in Control.
7.3
Death
. In the event of Participant’s death
while an employee of the Corporation and prior to the third (3
rd
) anniversary of the Grant Date, the Three-Year
-3-
Continued Employment Performance Goal will be
deemed
to have been achieved, and the Restricted Period with respect to those Unvested Share Units then
in effect will terminate on the date of Participant’s death.
The Deferred Share Units which thereby become Awarded Share Units will be released from the terms and conditions of the Agreement pursuant to Section 9 as soon as administratively practicable following such date.
7.4
Disability Termination
.
(a) In the event Participant’s employment with the Corporation is
terminated prior to the third (3
rd
) anniversary of the Grant Date by the Corporation by reason of Participant’s
Total and Permanent Disability, Unvested Share Units will not be forfeited on Participant’s Termination Date. Instead, Unvested Share Units will, subject to the forfeiture provisions of Section 7.2, remain in effect pending approval of the
vesting of the Deferred Share Units pursuant to this Section 7.4(a) by the Designated Person specified in Section A.14 of Annex A.
If such Unvested Share Units are still in effect but the Designated Person has not made an affirmative determination to either approve or disapprove the
vesting of the Unvested Share Units by the day immediately preceding the third (3
rd
) anniversary of the Grant Date,
then the Restricted Period will be automatically extended through the first to occur of: (1) the day the Designated Person makes an affirmative determination regarding such vesting; and (2) either (i) the ninetieth (90
th
) day following the third (3
rd
) anniversary of the Grant Date, if the Designated Person is the Chief Human Resources Officer of PNC, or (ii) the 180
th
day following such anniversary date if the Designated Person is the Committee, whichever is applicable.
If the vesting of the Unvested Share Units that are then in effect is
affirmatively approved by the Designated Person on or prior to the last day of the Restricted Period, including any extension of the Restricted Period, if applicable, then the Three-Year Continued Employment Performance Goal will be
deemed
to
have been achieved, and the Restricted Period with respect to any Unvested Share Units then in effect will terminate as of the end of the day on the date of such approval or the day immediately preceding the third (3
rd
) anniversary of the Grant Date, whichever is later. The Deferred Share Units in effect at the termination of the Restricted
Period will become Awarded Share Units and will be released from the terms and conditions of the Agreement pursuant to Section 9.
(b) If the Designated Person disapproves the vesting of the Unvested Share Units that had remained in effect after Participant’s Termination Date
pending approval of vesting, then all such Unvested Share Units that are still in effect will be forfeited by Participant to PNC on such disapproval date without payment of any consideration by PNC.
-4-
If by the end of the Restricted Period, including any extension of the Restricted Period pursuant to the
second paragraph of Section 7.4(a), if applicable, the Designated Person has neither affirmatively approved nor disapproved the vesting of the Unvested Share Units that had remained in effect after Participant’s Termination Date pending
approval of vesting, then all such Unvested Share Units that are still in effect will be forfeited by Participant to PNC at the close of business on the last day of the Restricted Period without payment of any consideration by PNC.
7.5
Retirement
.
(a) In the event that Participant Retires prior to the third (3
rd
) anniversary of the Grant Date, Unvested Share Units will not be forfeited on Participant’s Termination Date. Instead,
Unvested Share Units will, subject to the forfeiture provisions of Section 7.2, remain in effect pending approval of the vesting of the Deferred Share Units pursuant to this Section 7.5(a) by the Designated Person specified in Section A.14 of Annex
A.
If such Unvested Share Units are still in effect but the
Designated Person has not made an affirmative determination to either approve or disapprove the vesting of the Unvested Share Units by the day immediately preceding the third (3
rd
) anniversary of the Grant Date, then the Restricted Period will be automatically extended through the first to occur of: (1) the day the Designated Person
makes an affirmative determination regarding such vesting; and (2) either (i) the ninetieth (90
th
) day following the
third (3
rd
) anniversary of the Grant Date, if the Designated Person is the Chief Human Resources Officer of PNC, or
(ii) the 180
th
day following such anniversary date if the Designated Person is the Committee, whichever is
applicable.
If the vesting of the Unvested Share Units that
are then in effect is affirmatively approved by the Designated Person on or prior to the last day of the Restricted Period, including any extension of the Restricted Period, if applicable, then the Three-Year Continued Employment Performance Goal
will be
deemed
to have been achieved, and the Restricted Period with respect to any Unvested Share Units then in effect will terminate as of the end of the day on the date of such approval or the day immediately preceding the third
(3
rd
) anniversary of the Grant Date, whichever is later. The Deferred Share Units in effect at the termination of
the Restricted Period will become Awarded Shares and will be released and issued or reissued by PNC pursuant to Section 9.
(b) If the Designated Person disapproves the vesting of the Unvested Share Units that had remained in effect after Participant’s Termination Date
pending approval of vesting, then all such Unvested Share Units that are still in effect will be forfeited by Participant to PNC on such disapproval date without payment of any consideration by PNC.
If by the end of the Restricted Period, including any extension of the
Restricted Period pursuant to the second paragraph of Section 7.5(a), if applicable, the Designated Person has neither affirmatively approved nor disapproved the vesting of the Unvested Share Units that had remained outstanding after
Participant’s Termination Date pending
-5-
approval of vesting, then all such Unvested Share Units that are still in effect will be forfeited by Participant to PNC at the close of business on the last
day of the Restricted Period without payment of any consideration by PNC.
7.6
DEAP Termination
.
(a) In the event that Participant’s employment with the Corporation is terminated prior to the third (3
rd
) anniversary of the Grant Date by the Corporation and Participant is offered and has entered into the standard Waiver and Release Agreement with PNC or a Subsidiary under an applicable PNC or Subsidiary Displaced Employee Assistance
Plan, or any successor plan by whatever name known (“DEAP”), or Participant is offered and has entered into a similar waiver and release agreement between PNC or a Subsidiary and Participant pursuant to the terms of an agreement or
arrangement entered into by PNC or a Subsidiary and Participant in lieu of or in addition to the DEAP, then Unvested Share Units will not be forfeited on Participant Termination Date. Instead, Unvested Share Units will, subject to the forfeiture
provisions of Section 7.2, remain in effect pending approval of the vesting of the Deferred Share Units pursuant to this Section 7.6(a) by the Designated Person specified in Section A.14 of Annex A,
provided that
Participant does not revoke
such waiver and release agreement within the time for revocation of such waiver and release agreement by Participant.
If such Unvested Share Units are still in effect but the Designated Person has not made an affirmative determination to either approve or disapprove the
vesting of the Unvested Share Units by the day immediately preceding the third (3
rd
) anniversary of the Grant Date,
then the Restricted Period will be automatically extended through the first to occur of: (1) the day the Designated Person makes an affirmative determination regarding such vesting; and (2) either (i) the ninetieth (90
th
) day following the third (3
rd
) anniversary of the Grant Date, if the Designated Person is the Chief Human Resources Officer of PNC, or (ii) the 180
th
day following such anniversary date if the Designated Person is the Committee, whichever is applicable.
If the vesting of the Unvested Share Units that are then in effect is
affirmatively approved by the Designated Person on or prior to the last day of the Restricted Period, including any extension of the Restricted Period, if applicable, then the Three-Year Continued Employment Performance Goal will be
deemed
to
have been achieved, and the Restricted Period with respect to any Unvested Share Units then in effect will terminate as of the end of the day on the date of such approval or the day immediately preceding the third (3
rd
) anniversary of the Grant Date, whichever is later. The Deferred Share Units in effect at the termination of the Restricted
Period will become Awarded Share Units and will be released from the terms and conditions of the Agreement pursuant to Section 9.
(b) In the event that the record date for any phantom dividend to be credited to Participant’s Plan Account with respect to the Unvested Share Units
occurs on or after Participant’s Termination Date but prior to the lapse of the time for revocation by Participant of the waiver and release agreement specified in the first paragraph of
-6-
Section 7.6(a), then such phantom dividend will be held, without interest, pending satisfaction of the condition of Section 7.6(a) that Participant enter
into the offered waiver and release agreement and not revoke such waiver and release agreement within the time for revocation of such agreement by Participant. In the event that this condition is
not
met, any phantom dividend being held
pending satisfaction of such condition will be forfeited by Participant to PNC without payment of any consideration by PNC.
(c) If (i) Participant does not enter into, or enters into but revokes, the waiver and release agreement specified in the first paragraph of Section
7.6(a) or (ii) the Designated Person disapproves the vesting of the Unvested Share Units that had remained in effect after Participant’s Termination Date pending the non-revocation of, and the lapse of the time within which Participant may
revoke, such waiver and release agreement and pending approval of the vesting of such share units, then all such Unvested Share Units that are still in effect will be forfeited by Participant to PNC on the date such failure to satisfy the conditions
of Section 7.6(a) occurs without payment of any consideration by PNC.
If, by the end of the Restricted Period, including any extension of the Restricted Period pursuant to the second paragraph of Section 7.6(a), if applicable, such Unvested Share Units are still outstanding but the Designated Person has
neither affirmatively approved nor disapproved the vesting of such shares units, then all such Unvested Share Units will be forfeited by Participant to PNC at the close of business on the last day of the Restricted Period without payment of any
consideration by PNC.
7.7
Termination in Anticipation of a
Change in Control
.
(a) Notwithstanding anything in the
Agreement to the contrary, if, after the occurrence of a CIC Triggering Event but prior to a CIC Failure and prior to the third (3
rd
) anniversary of the Grant Date, Participant’s employment is terminated (other than by reason of Participant’s death) by the Corporation without Cause or by Participant for Good Reason, or if Participant’s employment
is
deemed
to have been so terminated pursuant to Section 7.7(b), then: (i) the Three-Year Continued Employment Performance Goal will be
deemed
to have been achieved and the Restricted Period with respect to any Unvested Share Units
then in effect will terminate as of the end of the day on the day immediately preceding Participant’s Termination Date (or, in the case of a qualifying termination pursuant to Section 7.7(b), the date all of the conditions set forth in clauses
(i), (ii) and (iii) of the first or second paragraph, as the case may be, of Section 7.7(b) are met); and (ii) all Deferred Share Units that thereby become Awarded Share Units will be released from the terms and conditions of the Agreement pursuant
to Section 9 as soon as administratively practicable following such date.
(b) Participant’s employment will also be
deemed
to have been terminated by the Corporation without Cause after the occurrence of a CIC Triggering Event but prior to a CIC Failure for purposes of Section
7.7(a) if: (i) Participant’s employment is terminated by the Corporation without Cause; (ii) such termination of employment (a) was at the request of a third party that has taken steps reasonably calculated to effect a Change in Control or (b)
otherwise arose in anticipation of a Change in Control; and
-7-
(iii) a CIC Triggering Event or a Change in Control occurs within three (3) months of such termination of employment.
Participant’s employment will also be
deemed
to have been
terminated by Participant for Good Reason after the occurrence of a CIC Triggering Event but prior to a CIC Failure for purposes of Section 7.7(a) if: (i) Participant terminates Participant’s employment with Good Reason; (ii) the circumstance
or event that constitutes Good Reason (a) occurs at the request of a third party that has taken steps reasonably calculated to effect a Change in Control or (b) otherwise arose in anticipation of a Change in Control; and (iii) a CIC Triggering Event
or a Change in Control occurs within three (3) months of such termination of employment.
For purposes of this Section 7.7(b) only, Participant will have the burden of proving that the requirements of clause (ii) of the first or second paragraph of this Section 7.7(b), as the case may be, have been met and
the standard of proof to be met by Participant will be clear and convincing evidence.
For purposes of this Section 7.7(b) only, the definition of Change in Control in Section A.6 of Annex A will exclude the
proviso
in Section A.6(a).
(c) If the Unvested Share Units will be forfeited by Participant to PNC by reason of Participant’s termination of
employment with the Corporation pursuant to Section 7.1 unless all of the conditions set forth in clauses (i), (ii) and (iii) of the first or second paragraph, as the case may be, of Section 7.7(b) are met, then in the event that the record date for
any phantom dividend to be credited to Participant’s Plan Account with respect to the Unvested Share Units occurs on or after Participant’s Termination Date but prior to the time all of the conditions set forth in clauses (i), (ii) and
(iii) of the first or second paragraph, as the case may be, of Section 7.7(b) are met, such phantom dividend will be held, without interest, pending satisfaction of all of such conditions. In the event that one or more of the conditions of Section
7.7(b) are
not
met, any phantom dividend being held pending satisfaction of such conditions will be forfeited by Participant to PNC without payment of any consideration by PNC.
(d) If the Unvested Share Units will be forfeited by Participant to PNC by reason of Participant’s termination of
employment with the Corporation pursuant to Section 7.1 unless all of the conditions set forth in clauses (i), (ii) and (iii) of the first or second paragraph, as the case may be, of Section 7.7(b) are met, then the Deferred Share Units will remain
in effect pending satisfaction of all of those conditions. Upon the failure of any required condition, all such Unvested Share Units will be forfeited by Participant to PNC on the date such failure occurs without payment of any consideration by PNC.
8.
Change in Control
. Notwithstanding anything in the
Agreement to the contrary, upon the occurrence of a Change in Control: (i) if Participant is an employee of the Corporation as of the day immediately preceding the Change in Control, the Three-Year Continued Employment Performance Goal will be
deemed
to have been
-8-
achieved and the Restricted Period will terminate with respect to all Unvested Share Units then in effect as of the day immediately preceding the Change in
Control; (ii) if Participant’s employment with the Corporation terminated prior to the occurrence of the Change in Control but the Unvested Share Units remained in effect after such termination of employment pursuant to Section 7.4, Section 7.5
or Section 7.6 and are still in effect pending approval of the vesting of such share units by the Designated Person specified in Section A.14 of Annex A, then with respect to all Unvested Share Units in effect as of the day immediately preceding the
Change in Control, such vesting approval will be
deemed
to have been given, the Three-Year Continued Employment Performance Goal will be
deemed
to have been achieved, and the Restricted Period will terminate, all as of the day
immediately preceding the Change in Control,
provided, however,
in the case of Unvested Share Units that remained outstanding post-employment solely pursuant to Section 7.6(a), that Participant entered into and does not revoke the waiver and
release agreement specified in Section 7.6(a); and (iii) all Deferred Share Units that thereby become Awarded Share Units will be released from the terms and conditions of the Agreement pursuant to Section 9 as soon as administratively practicable
following such date.
9.
Release of Agreement
Restrictions
. To the extent that the Deferred Share Units become Awarded Share Units and are not forfeited pursuant to Section 7, PNC will release the 200_ Restricted Award Deferral Account and Deferred Share Units from the terms and conditions
of the Agreement and the 200_ Restricted Award Deferral Account will become a regular subaccount under the Plan as soon as administratively practicable following termination of the Restricted Period.
10.
FICA Withholding Taxes
. During the term of the Restricted Period,
any earnings credited to Participant’s Plan Account with respect to the Deferred Share Units in the 200_ Restricted Award Deferral Account (phantom dividends) will be treated as wages for purposes of the Federal Insurance Contributions Act
(“FICA”) in the year they are credited to Participant and will be subject to Social Security and Medicare withholding at that time. Otherwise, the Deferred Shares amount will be treated as wages for FICA purposes and will be subject to
Social Security and Medicare withholding at the time the 200_ Restricted Award Deferral Account and Deferred Share Units are released from the terms and conditions of the Agreement pursuant to Section 9.
11.
Employment
. Neither the granting of the Award, the release of the
200_ Restricted Award Deferral Account and Deferred Share Units from the terms and conditions of the Agreement pursuant to Section 9, nor any term or provision of the Agreement shall constitute or be evidence of any understanding, expressed or
implied, on the part of PNC or any Subsidiary to employ Participant for any period or in any way alter Participant’s status as an employee at will.
12.
Subject to the Plan
. Except as otherwise provided in the Agreement, the 200_ Restricted Award Deferral Account and Deferred Share Units are in
all respects subject to the terms and conditions of the Plan, which has been made available to Participant and is incorporated herein by reference.
-9-
13.
Headings; Entire Agreement
. Headings used in the Agreement are provided for reference and
convenience only, shall not be considered part of the Agreement, and shall not be employed in the construction of the Agreement. The Agreement constitutes the entire agreement between Participant and PNC and supersedes all other discussions,
negotiations, correspondence, representations, understandings and agreements between the parties with respect to the subject matter hereof.
|
|
14.
|
Participant Covenants
.
|
14.1
General
. Participant and PNC acknowledge and agree that Participant has received adequate consideration with respect to enforcement of the
provisions of Sections 14 and 15, that such provisions are reasonable and properly required for the adequate protection of the business of the Corporation, and that enforcement of such provisions will not prevent Participant from earning a living.
14.2
Non-Solicitation; No-Hire
. Participant agrees to
comply with the provisions of subsections (a) and (b) of this Section 14.2 while employed by the Corporation and for a period of twelve (12) months after Participant’s Termination Date regardless of the reason for such termination of
employment.
(a)
Non-Solicitation
. Participant shall
not, directly or indirectly, either for Participant’s own benefit or purpose or for the benefit or purpose of any Person other than PNC or any Subsidiary, solicit, call on, do business with, or actively interfere with PNC’s or any
Subsidiary’s relationship with, or attempt to divert or entice away, any Person that Participant should reasonably know (i) is a customer of PNC or any Subsidiary for which PNC or any Subsidiary provides any services as of the Termination Date,
or (ii) was a customer of PNC or any Subsidiary for which PNC or any Subsidiary provided any services at any time during the twelve (12) months preceding the Termination Date, or (iii) was, as of the Termination Date, considering retention of PNC or
any Subsidiary to provide any services.
(b)
No-Hire
.
Participant shall not, directly or indirectly, either for Participant’s own benefit or purpose or for the benefit or purpose of any Person other than PNC or any Subsidiary, employ or offer to employ, call on, or actively interfere with
PNC’s or any Subsidiary’s relationship with, or attempt to divert or entice away, any employee of the Corporation, nor shall Participant assist any other Person in such activities.
Notwithstanding the above, if Participant’s employment with the
Corporation is terminated by the Corporation without Cause or by Participant with Good Reason and such Termination Date occurs during a Coverage Period (either as Coverage Period is defined in Section A.12 of Annex A or, if Participant was a party
to a written agreement between Participant and PNC providing, among other things, for certain change in control severance benefits (a “CIC Severance Agreement”) that was in effect at the time of such termination of employment, as Coverage
Period is defined in such CIC Severance
-10-
Agreement, if longer), then commencing immediately after such Termination Date, the provisions of subsections (a) and (b) of this Section 14.2 will no longer
apply and will be replaced with the following subsection (c):
(c)
No-Hire
. Participant agrees that Participant shall not, for a period of twelve (12) months after the Termination Date, employ or offer to employ, solicit, actively interfere with PNC’s or any PNC affiliate’s
relationship with, or attempt to divert or entice away, any officer of PNC or any PNC affiliate.
14.3
Confidentiality
. During Participant’s employment with the Corporation, and thereafter regardless of the reason for termination of such
employment, Participant will not disclose or use in any way any confidential business or technical information or trade secret acquired in the course of such employment, all of which is the exclusive and valuable property of the Corporation whether
or not conceived of or prepared by Participant, other than (a) information generally known in the Corporation’s industry or acquired from public sources, (b) as required in the course of employment by the Corporation, (c) as required by any
court, supervisory authority, administrative agency or applicable law, or (d) with the prior written consent of PNC.
14.4
Ownership of Inventions
. Participant shall promptly and fully disclose to PNC any and all inventions, discoveries, improvements, ideas or
other works of inventorship or authorship, whether or not patentable, that have been or will be conceived and/or reduced to practice by Participant during the term of Participant’s employment with the Corporation, whether alone or with others,
and that are (a) related directly or indirectly to the business or activities of PNC or any Subsidiary or (b) developed with the use of any time, material, facilities or other resources of PNC or any Subsidiary (“Developments”).
Participant agrees to assign and hereby does assign to PNC or its designee all of Participant’s right, title and interest, including copyrights and patent rights, in and to all Developments. Participant shall perform all actions and execute all
instruments that PNC or any Subsidiary shall deem necessary to protect or record PNC’s or its designee’s interests in the Developments. The obligations of this Section 14.4 shall be performed by Participant without further compensation and
will continue beyond the Termination Date.
15.
Enforcement
Provisions
. Participant understands and agrees to the following provisions regarding enforcement of the Agreement.
15.1
Governing Law and Jurisdiction
. The Agreement is governed by and construed under the laws of the Commonwealth of Pennsylvania, without regard
to conflict of laws rules. Any dispute or claim arising out of or relating to the Agreement or claim of breach hereof shall be brought exclusively in the federal court for the Western District of Pennsylvania or in the Court of Common Pleas of
Allegheny County, Pennsylvania. By execution of the Agreement, Participant and PNC hereby consent to the exclusive jurisdiction of such courts, and waive any right to challenge jurisdiction or venue in such courts with regard to any suit, action, or
proceeding under or in connection with the Agreement.
-11-
15.2
Equitable Remedies
. A breach of the provisions of any of Sections 14.2, 14.3 or 14.4 will
cause the Corporation irreparable harm, and the Corporation will therefore be entitled to issuance of immediate, as well as permanent, injunctive relief restraining Participant, and each and every person and entity acting in concert or participating
with Participant, from initiation and/or continuation of such breach.
15.3
Tolling Period
. If it becomes necessary or desirable for the Corporation to seek compliance with the provisions of Section 14.2 by legal proceedings, the period during which Participant shall comply with said provisions will
extend for a period of twelve (12) months from the date of the legal order requiring such compliance.
15.4
No Waiver
. Failure of PNC to demand strict compliance with any of the terms, covenants or conditions of the Agreement will not be deemed a
waiver of such term, covenant or condition, nor will any waiver or relinquishment of any such term, covenant or condition on any occasion or on multiple occasions be deemed a waiver or relinquishment of such term, covenant or condition.
15.5
Severability
. The restrictions and obligations imposed by
Sections 14.2, 14.3 and 14.4 are separate and severable, and it is the intent of Participant and PNC that if any restriction or obligation imposed by any of these provisions is deemed by a court of competent jurisdiction to be void for any reason
whatsoever, the remaining provisions, restrictions and obligations will remain valid and binding upon Participant.
15.6
Reform
. In the event any of Sections 14.2, 14.3 and 14.4 are determined by a court of competent jurisdiction to be unenforceable because
unreasonable either as to length of time or area to which said restriction applies, it is the intent of Participant and PNC that said court reduce and reform the provisions thereof so as to apply the greatest limitations considered enforceable by
the court.
15.7
Waiver of Jury Trial
. Each of
Participant and PNC hereby waives any right to trial by jury with regard to any suit, action or proceeding under or in connection with any of Sections 14.2, 14.3 and 14.4.
15.8
Applicable Law
. Notwithstanding anything in the Agreement, PNC will not be required to comply with any term,
covenant or condition of the Agreement if and to the extent prohibited by law, including but not limited to federal banking and securities regulations, or as otherwise directed by one or more regulatory agencies having jurisdiction over PNC or any
of its subsidiaries. Further, to the extent, if any, applicable to Participant, Participant agrees to reimburse PNC for any amounts Participant may be required to reimburse PNC or its subsidiaries pursuant to Section 304 of the Sarbanes-Oxley Act of
2002, and agrees that PNC need not comply with any term, covenant or condition of the Agreement to the extent that doing so would require that Participant reimburse PNC or its subsidiaries for such amounts pursuant to Section 304 of the
Sarbanes-Oxley Act of 2002.
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16.
Amendment of Pre-2004 Stock Options, Restricted Stock and Restricted Stock Deferrals
. All
nonstatutory stock options granted to employees under the Plan outstanding on February 18, 2004, all restricted stock grants to employees under PNC’s 1997 Long-Term Incentive Award Plan or 1996 Executive Incentive Award Plan outstanding but not
yet vested on February 18, 2004, and all participant restricted stock deferral accounts under the PNC and Affiliates Deferred Compensation Plan that were in place but not yet vested on February 18, 2004, are subject to the amendments approved by the
Committee on that date. These amendments are generally described in the prospectus supplement dated
, 200
under the heading “Recent
Amendments.” A copy of this prospectus supplement accompanied or preceded delivery of the Agreement to Participant.
To the extent that Participant is the holder of any such stock options or is the grantee of any such restricted stock or is a participant in the PNC and
Affiliates Deferred Compensation Plan with such stock deferral account or accounts in place but not yet vested, Participant hereby acknowledges and consents to such amendments.
17.
Acceptance of Award; PNC Right to Cancel
. If Participant does not accept the Award and the terms and conditions
of the deferral of the Deferred Shares by executing and delivering a copy of the Agreement to PNC, without altering or changing the terms thereof in any way, within sixty (60) days of receipt by Participant of a copy of the Agreement, PNC may, in
its sole discretion, withdraw its offer and cancel the Award at any time prior to Participant’s delivery to PNC of a copy of the Agreement executed by Participant. Otherwise, upon execution and delivery of the Agreement by both PNC and
Participant and, in the event that Participant is subject to the reporting requirements of Section 16(a) of the Exchange Act with respect to PNC securities, the filing with and acceptance by the SEC of a Form 4 reporting the Award, the Award and the
Agreement are effective.
The 200
Restricted
Award Deferral Account will not be established and Participant’s Plan Account will not be credited with any phantom dividends with respect to the Deferred Share Units as set forth in Section 4 unless and until the date the Award and the terms
and conditions of the deferral of the Deferred Shares are accepted and are effective in accordance with this Section 17.
In the event that one or more record dates for dividends on PNC common stock occur after the Grant Date but before the date the Award and the terms and
conditions of the deferral of the Deferred Shares are accepted and are effective in accordance with this Section 17, then upon the effectiveness of the Award and the Agreement, Participant’s Plan Account will be credited with an amount
equivalent to the amount that would have been credited to such Plan Account with respect to phantom dividends had the Agreement been effective and the Deferred Share Units had been credited to Participant’s 200
Restricted
Award Deferral Account on the Grant Date.
-13-
I
N
W
ITNESS
W
HEREOF
, PNC has caused the Agreement to be
signed on its behalf as of the Grant Date.
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THE PNC FINANCIAL SERVICES GROUP, INC.
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By:
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Chairman and Chief Executive Officer
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ATTEST:
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By:
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Corporate Secretary
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A
CCEPTED
AND
A
GREED
TO
by
P
ARTICIPANT
.
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Participant
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-14-
Annual 25/25 Program -
200
Restricted Deferred Award
Continued Employment Performance Goal
Restricted Period: Three Years (100%)
ANNEX A
TO
THE PNC
FINANCIAL SERVICES GROUP, INC. AND AFFILIATES
DEFERRED COMPENSATION PLAN
ANNUAL 25/25 PROGRAM — 200
RESTRICTED DEFERRED AWARD
RESTRICTED
AWARD DEFERRAL ACCOUNT AGREEMENT
* * *
CERTAIN DEFINITIONS
Except where the context otherwise indicates, the following definitions apply
for purposes of the Restricted Award Deferral Account Agreement (“Agreement”) to which this Annex A is attached:
A.1 “
Awarded Share Units
.” Provided that the Deferred Share Units have not been forfeited pursuant to Section 7 of the Agreement,
Deferred Share Units become “Awarded Share Units” when both of the following have occurred: (a) the Three-Year Continued Employment Performance Goal has been achieved or is
deemed
to have been achieved pursuant to the terms of the
Agreement; and (b) the Restricted Period has terminated.
A.2
“
Board
” means the Board of Directors of PNC.
A.3 “
Business Day
” means any day when the New York Stock Exchange is open for business.
A.4 “
Cause
” means:
(a) the willful and continued failure of Participant to substantially perform Participant’s duties with the Corporation (other than any such failure
resulting from incapacity due to physical or mental illness), after a written demand for substantial performance is delivered to Participant by the Board or the CEO which specifically identifies the manner in which the Board or the CEO believes that
Participant has not substantially performed Participant’s duties; or
(b) the willful engaging by Participant in illegal conduct or gross misconduct that is materially and demonstrably injurious to PNC or any Subsidiary.
-15-
For purposes of the preceding clauses (a) and (b), no act or failure to act, on the part of Participant,
shall be considered willful unless it is done, or omitted to be done, by Participant in bad faith and without reasonable belief that Participant’s action or omission was in the best interests of the Corporation. Any act, or failure to act,
based upon the instructions or prior approval of the Board, the CEO or Participant’s superior or based upon the advice of counsel for the Corporation, shall be conclusively presumed to be done, or omitted to be done, by Participant in good
faith and in the best interests of the Corporation.
The
cessation of employment of Participant will be
deemed
to be a termination of Participant’s employment with the Corporation for Cause for purposes of the Agreement only if and when there shall have been delivered to Participant, as part
of the notice of Participant’s termination, a copy of a resolution duly adopted by the affirmative vote of not less than a majority of the entire membership of the Board, at a Board meeting called and held for the purpose of considering such
termination, finding on the basis of clear and convincing evidence that, in the good faith opinion of the Board, Participant is guilty of conduct described in clause (a) or clause (b) above and, in either case, specifying the particulars thereof in
detail. Such resolution shall be adopted only after (i) reasonable notice of such Board meeting is provided to Participant, together with written notice that PNC believes that Participant is guilty of conduct described in clause (a) or clause (b)
above and, in either case, specifying the particulars thereof in detail, and (ii) Participant is given an opportunity, together with counsel, to be heard before the Board.
A.5 “
CEO
” means the chief executive officer of PNC.
A.6 “
Change in Control
” means a change of control of PNC of
a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A (or in response to any similar item on any similar schedule or form) promulgated under the Exchange Act, whether or not PNC is then subject to
such reporting requirement;
provided
,
however
, that without limitation, a Change in Control will be
deemed
to have occurred if:
(a) any Person, excluding employee benefits plans of the Corporation, is or becomes the beneficial owner (as defined in Rules 13d-3 and 13d-5 under the
Exchange Act or any successor provisions thereto), directly or indirectly, of securities of PNC representing twenty percent (20%) or more of the combined voting power of PNC’s then outstanding securities;
provided
,
however
, that
such an acquisition of beneficial ownership representing between twenty percent (20%) and forty percent (40%), inclusive, of such voting power will not be considered a Change in Control if the Board approves such acquisition either prior to or
immediately after its occurrence;
(b) PNC consummates a
merger, consolidation, share exchange, division or other reorganization or transaction of PNC (a “Fundamental Transaction”) with any other corporation, other than a Fundamental Transaction that results in the voting securities of PNC
outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least
-16-
sixty percent (60%) of the combined voting power immediately after such Fundamental Transaction of (i) PNC’s outstanding securities, (ii) the surviving
entity’s outstanding securities, or (iii) in the case of a division, the outstanding securities of each entity resulting from the division;
(c) the shareholders of PNC approve a plan of complete liquidation or winding-up of PNC or an agreement for the sale or disposition (in one transaction or
a series of transactions) of all or substantially all of PNC’s assets;
(d) as a result of a proxy contest, individuals who prior to the conclusion thereof constituted the Board (including for this purpose any new director whose election or nomination for election by PNC’s
shareholders in connection with such proxy contest was approved by a vote of at least two-thirds (2/3rds) of the directors then still in office who were directors prior to such proxy contest) cease to constitute at least a majority of the Board
(excluding any Board seat that is vacant or otherwise unoccupied);
(e) during any period of twenty-four (24) consecutive months, individuals who at the beginning of such period constituted the Board (including for this purpose any new director whose election or nomination for election by PNC’s
shareholders was approved by a vote of at least two-thirds (2/3rds) of the directors then still in office who were directors at the beginning of such period) cease for any reason to constitute at least a majority of the Board (excluding any Board
seat that is vacant or otherwise unoccupied); or
(f) the Board
determines that a Change in Control has occurred.
Notwithstanding anything to the contrary herein, a divestiture or spin-off of a subsidiary or division of PNC will not by itself constitute a Change in Control.
A.7 “
CIC Failure
” means the following:
(a) with respect to a CIC Triggering Event described in Section A.8(a), PNC’s shareholders vote against the transaction
approved by the Board or the agreement to consummate the transaction is terminated; or
(b) with respect to a CIC Triggering Event described in Section A.8(b), the proxy contest fails to replace or remove a majority of the members of the Board.
A.8 “
CIC Triggering Event
” means the occurrence of either of
the following:
(a) the Board or PNC’s shareholders
approve a transaction described in Subsection (b) of the definition of Change in Control contained in Section A.6; or
(b) the commencement of a proxy contest in which any Person seeks to replace or remove a majority of the members of the Board.
-17-
A.9 “
Committee
” means the Personnel and Compensation Committee of the Board.
A.10 “
Competitive Activity
” means, for purposes of the
Agreement, any participation in, employment by, ownership of any equity interest exceeding one percent (1%) in, or promotion or organization of, any Person other than PNC or any Subsidiary (a) engaged in business activities similar to some or all of
the business activities of PNC or any Subsidiary as of Participant’s Termination Date or (b) engaged in business activities which Participant knows PNC or any Subsidiary intends to enter within the first twelve (12) months after
Participant’s Termination Date, in either case whether Participant is acting as agent, consultant, independent contractor, employee, officer, director, investor, partner, shareholder, proprietor or in any other individual or representative
capacity therein.
A.11 “
Corporation
” means
PNC and its Subsidiaries.
A.12 “
Coverage
Period
” means a period (a) commencing on the earlier to occur of (i) the date of a CIC Triggering Event and (ii) the date of a Change in Control and (b) ending on the date that is three (3) years after the date of the Change in Control;
provided
,
however
, that in the event that a Coverage Period commences on the date of a CIC Triggering Event, such Coverage Period will terminate upon the earlier to occur of (x) the date of a CIC Failure and (y) the date that is three
(3) years after the date of the Change in Control triggered by the CIC Triggering Event. After the termination of any Coverage Period, another Coverage Period will commence upon the earlier to occur of clause (a)(i) and clause (a)(ii) in the
preceding sentence.
A.13 “
Deferred Share
Units
” means the units of phantom PNC common stock credited to Participant’s 200_ Restricted Award Deferral Account.
A.14 “
Designated Person
” will be either: (a) the Committee, if Participant is a member of the Corporate Executive Group (or equivalent
successor classification) or is subject to the reporting requirements of Section 16(a) of the Exchange Act with respect to PNC securities; or (a) the Chief Human Resources Officer of PNC, if Participant is not within one of the groups specified in
Section A.14(a).
A.15 “
Detrimental Conduct
”
means:
(a) Participant has engaged, without the prior written
consent of PNC (at PNC’s sole discretion), in any Competitive Activity in the continental United States at any time during the period commencing on Participant’s Termination Date through the first (1
st
) anniversary of Participant’s Termination Date;
(b) a material breach by Participant of (i) any code of conduct of PNC or a Subsidiary or (ii) other written policy of PNC or a Subsidiary, in either case
required by law or established to maintain compliance with applicable law;
-18-
(c) any act of fraud, misappropriation, material dishonesty, or embezzlement by Participant against PNC
or a Subsidiary or any client or customer of PNC or a Subsidiary;
(d) any conviction (including a plea of guilty or of
nolo contendere
) of Participant for, or entry by Participant into a pre-trial disposition with respect to, the commission of a felony which relates to or arises out of
Participant’s employment or other service relationship with the Corporation; or
(e) entry of any order against Participant by any governmental body having regulatory authority with respect to the business of PNC or any Subsidiary, which order relates to or arises out of Participant’s
employment or other service relationship with the Corporation.
Participant will be
deemed
to have engaged in Detrimental Conduct for purposes of the Agreement only if and when the Committee determines that Participant has engaged in conduct described in clause (a) above, that Participant is
guilty of conduct described in clause (b) or clause (c) above, or that an event described in clause (d) or clause (e) above has occurred with respect to Participant and, if so, determines that Participant will be
deemed
to have engaged in
Detrimental Conduct.
A.16 “
Exchange Act
”
means the Securities Exchange Act of 1934 as amended, and the rules and regulations promulgated thereunder.
A.17 “
Good Reason
” means:
(a) the assignment to Participant of any duties inconsistent in any respect with Participant’s position (including status, offices, titles and
reporting requirements), authority, duties or responsibilities immediately prior to either the CIC Triggering Event or the Change in Control, or any other action by the Corporation which results in a diminution in any respect in such position,
authority, duties or responsibilities, excluding for this purpose an isolated, insubstantial and inadvertent action not taken in bad faith that is remedied by the Corporation promptly after receipt of notice thereof given by Participant;
(b) a reduction by the Corporation in Participant’s annual base
salary as in effect on the Grant Date, as the same may be increased from time to time;
(c) the Corporation’s requiring Participant to be based at any office or location that is more than fifty (50) miles from Participant’s office or location immediately prior to either the CIC Triggering Event
or the Change in Control;
(d) the failure by the Corporation
(i) to continue in effect any bonus, stock option or other cash or equity-based incentive plan or program in which Participant participates immediately prior to either the CIC Triggering Event or the Change in Control that is material to
Participant’s total compensation, unless a substantially
-19-
equivalent arrangement (embodied in an ongoing substitute or alternative plan or program) has been made with respect to such plan or program, or (ii) to
continue Participant’s participation in such plan or program (or in such substitute or alternative plan or program) on a basis at least as favorable, both in terms of the amount of benefits provided and the level of Participant’s
participation relative to other participants, as existed immediately prior to the CIC Triggering Event or the Change in Control; or
(e) the failure by the Corporation to continue to provide Participant with benefits substantially similar to those received by Participant under any of
the Corporation’s pension (including, but not limited to, tax-qualified plans), life insurance, health, accident, disability or other welfare plans or programs in which Participant was participating, at costs substantially similar to those paid
by Participant, immediately prior to the CIC Triggering Event or the Change in Control.
A.18 “
Grant Date
” means the Grant Date set forth on page 1 of the Agreement.
A.19 “
Internal Revenue Code
” means the Internal Revenue Code of 1986 as amended, and the rules and regulations promulgated thereunder.
A.20 “
Participant
” means the Participant
named on page 1 of the Agreement.
A.21
“
Person
” has the meaning given in Section 3(a)(9) of the Exchange Act and also includes any syndicate or group deemed to be a person under Section 13(d)(3) of the Exchange Act.
A.22 “
PNC
” means The PNC Financial Services Group, Inc.
A.23 “
Restricted Period
” means, subject to
early termination if so determined by the Committee or pursuant to Section 7.7 of the Agreement, if applicable, the period from the Grant Date through (and including) the earlier of: (a) the date of Participant’s death; (b) the day immediately
preceding the day a Change in Control is
deemed
to have occurred; and (c) the day immediately preceding the third (3
rd
) anniversary of the Grant Date or, if later, the last day of any extension of the Restricted Period pursuant to Section 7.4(a), Section 7.5(a) or Section 7.6(a) of the Agreement, if applicable.
A.24 “
Retiree
” means a Participant who has Retired.
A.25 “
Retire” or “Retirement
” means
termination of Participant’s employment with the Corporation at any time and for any reason (other than termination by reason of Participant’s death or by the Corporation for Cause or, unless the Committee determines otherwise, termination
in connection with a divestiture of assets or of one or more Subsidiaries) if such termination of employment occurs on or after the first (1
st
) day of the first (1
st
) month coincident with or next following the date on which
Participant attains age fifty-five (55) and completes five (5) years of service (as determined in the same manner as the determination of five years of Vesting Service under the provisions of The PNC Financial Services Group, Inc. Pension Plan) with
the Corporation.
-20-
A.26 “
SEC
” means the United States Securities and Exchange Commission.
A.27 “
Termination Date
” means Participant’s last date
of employment with the Corporation. If Participant is employed by a Subsidiary that ceases to be a Subsidiary of PNC and Participant does not continue to be employed by PNC or a Subsidiary, then for purposes of the Agreement, Participant’s
employment with the Corporation terminates effective at the time this occurs.
A.28 “
Three-Year Continued Employment Performance Goal
” means, subject to early achievement if so determined by the Committee or to
deemed
achievement pursuant to Section 7.3, Section 7.4,
Section 7.5, Section 7.6, Section 7.7, or Section 8 of the Agreement, if applicable, that Participant has been continuously employed by the Corporation for the period from the Grant Date through (and including) the day immediately preceding the
first of the following to occur: (a) the third (3
rd
) anniversary of the Grant Date; (b) the date of
Participant’s death; and (c) the day a Change in Control is
deemed
to have occurred.
A.29 “
Total and Permanent Disability
” means, unless the Committee determines otherwise, Participant’s disability as determined to be
total and permanent by the Corporation for purposes of the Agreement.
A.30 “
200_ Restricted Award Deferral Account
” means the subaccount of Participant’s Plan Account established for Participant under the Plan in accordance with Section 2 of the Agreement.
A.31 “
Unvested Share Units
” means any Deferred Share Units
that are not Awarded Share Units.
-21-
FORM OF 2003 INCENTIVE SHARE
AGREEMENT
2003 LTI Program Incentive Share Grant
Three Year Performance Period (January 1, 2003 - December 31, 2005)
Performance Goals: Relative PNC Return on Common Equity and Relative PNC Total Shareholder Return
50%: Vest on Award; 50%: Restricted Period
Through December 31, 2006
THE PNC FINANCIAL SERVICES GROUP,
INC.
1997 LONG-TERM INCENTIVE AWARD PLAN
* * *
2003 INCENTIVE SHARE AGREEMENT
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GRANTEE:
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< name >
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GRANT DATE:
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January 3, 2003
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TARGET INCENTIVE SHARES:
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< number of whole shares>
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PREMIUM INCENTIVE SHARES:
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< number of whole shares> [50% of the number of Target Incentive Shares]
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1.
Grant of
Incentive Shares
. Pursuant to Article 12 of The PNC Financial Services Group, Inc. 1997 Long-Term Incentive Award Plan, as amended from time to time (“Plan”), The PNC Financial Services Group, Inc. (“PNC”) hereby grants to
the Grantee named above (“Grantee”) an Incentive Share Award (as defined in the Plan) of the number of shares of PNC Common Stock set forth above as “Target Incentive Shares” and “Premium Incentive Shares,” subject to
the terms and conditions of this 2003 Incentive Share Agreement (“Agreement”) and the Plan and to acceptance of the Grant by Grantee in accordance with Section 15. The Target Incentive Shares and Premium Incentive Shares are hereafter
collectively referred to as “Incentive Shares.”
2.
Definitions
. Terms defined in the Plan are used in the Agreement as defined in the Plan unless otherwise defined in Annex A (attached hereto and incorporated herein by reference) or elsewhere in the Agreement.
-1-
3.
Terms and Conditions of Grant
. The Grant will be subject to the following terms and conditions:
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3.1
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Certification of Attainment of PNC Performance Goals; Award of Incentive Shares
.
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(a) As soon as practicable after December 31, 2005, PNC will calculate the ROCE and TSR for the Performance Period for PNC
and for the other members of the Peer Group and present to the Committee information concerning the extent, if any, to which PNC has attained each of the PNC Performance Goals. Upon certification of the level of achievement of the PNC Performance
Goals by the Committee and provided that the Grant is still outstanding, the Committee will have the authority, subject to Section 3.2, to award to Grantee (“award”) and direct PNC to issue Incentive Shares as follows:
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(i)
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up to and including 50% of the Target Incentive Shares if PNC’s level of ROCE performance for the Performance Period is within the top half of the ROCE performance of the
members of the Peer Group at the time the award is determined (“Target ROCE Performance Goal”);
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(ii)
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up to and including 50% of the Target Incentive Shares if PNC’s level of TSR performance for the Performance Period is within the top half of the TSR performance of the members
of the Peer Group at the time the award is determined (“Target TSR Performance Goal”);
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(iii)
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up to and including 50% of the Premium Incentive Shares if PNC’s level of ROCE performance for the Performance Period is within the top quartile of the ROCE performance of the
members of the Peer Group at the time the award is determined (“Premium ROCE Performance Goal”); and
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(iv)
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up to and including 50% of the Premium Incentive Shares if PNC’s level of TSR performance for the Performance Period is within the top quartile of the TSR performance of the
members of the Peer Group at the time the award is determined (“Premium TSR Performance Goal”).
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Attainment of each PNC Performance Goal shall be determined separately, and Grantee may be awarded Incentive Shares under one or more of subsections (i),
(ii), (iii) and (iv) of this Section 3.1(a) as indicated above. For purposes of determining PNC’s level of performance, PNC will be within the top half or the top quartile, respectively, if its Peer Group ranking with respect to the performance
being measured is at least equal to the number of members of the Peer Group at the time the award is determined divided by 2 or 4, as the case may be, rounded up to the nearest whole number (
e.g.
, if there are eleven Peer Group members,
ranking 6
th
or higher would be in the top half and ranking 3
rd
or higher would be in the top quartile).
The date on which the Committee makes its determination as to whether the respective PNC Performance Goals have been achieved and whether to award
Incentive Shares hereunder is hereafter referred to as the “Award Date.”
-2-
(b) Except as otherwise set forth in Section 3.1(d), if applicable, or unless the Committee determines
otherwise, in the event that Grantee’s employment with the Corporation terminates on or prior to the Award Date, the Grant will terminate as of Grantee’s Termination Date (and therefore no Incentive Shares may be awarded by the Committee
pursuant to the Grant).
(c) In the event of Grantee’s
death while an employee of the Corporation and on or prior to the Award Date, or in the event that Grantee’s employment with the Corporation is terminated on or prior to the Award Date by reason of Grantee’s Total and Permanent Disability
or as otherwise determined by the Committee, the Committee may in its sole discretion, but need not, permit the Grant to remain outstanding in light of the facts and circumstances applicable to Grantee notwithstanding such termination of employment
and may consider Grantee for an award of Incentive Shares on the Award Date if and to the extent that the PNC Performance Goals have been achieved.
(d) Notwithstanding anything in the Agreement to the contrary, if Grantee’s employment is terminated prior to January 1, 2006 (other than by reason
of Grantee’s death) during a Coverage Period by the Corporation without Cause or by Grantee for Good Reason, Grantee will be deemed to have been awarded all of the Target Incentive Shares as of the end of the day on the day immediately
preceding Grantee’s Termination Date, such shares shall all be Vested Shares from the time of issuance, and PNC shall issue a certificate or certificates for all of such shares to Grantee or Grantee’s legal representative without further
restriction under the Agreement as soon as administratively practicable following such award date.
Further, notwithstanding anything in the Agreement to the contrary, if Grantee’s employment is terminated (other than by reason of Grantee’s
death) during a Coverage Period by the Corporation without Cause or by Grantee for Good Reason on or after January 1, 2006 but on or before the Award Date, Grantee shall be awarded the maximum number of Incentive Shares authorized by Section 3.1(a)
for the level of performance attained by PNC with respect to the PNC Performance Goals, such shares shall all be Vested Shares from the time of issuance, and PNC shall issue a certificate or certificates for all of such shares to Grantee or
Grantee’s legal representative without further restriction under the Agreement as soon as administratively practicable following the Award Date.
Grantee’s employment shall also be deemed to have been terminated by the Corporation without Cause during a Coverage Period for purposes of this
Section 3.1(d) if: (i) Grantee’s employment is terminated by the Corporation other than during a Coverage Period without Cause (as defined in Section A.4(a) of Annex A); (ii) such termination of employment (a) was at the request of a third
party that has taken steps reasonably calculated to effect a Change in Control, or (b) otherwise arose in anticipation of a Change in Control; and (iii) a Coverage Period commences within three (3) months of such termination of employment.
-3-
Grantee’s employment shall also be deemed to have been terminated by Grantee for Good Reason during
a Coverage Period for purposes of this Section 3.1(d) if: (i) Grantee terminates Grantee’s employment other than during a Coverage Period with Good Reason (as defined in Section A.18 of Annex A); (ii) the circumstance or event that constitutes
Good Reason (a) occurs at the request of a third party that has taken steps reasonably calculated to effect a Change in Control or (b) otherwise arose in anticipation of a Change in Control; and (iii) a Coverage Period commences within three (3)
months of such termination of employment.
For purposes of this
Section 3.1(d) only, Grantee shall have the burden of proving that the requirements of clauses (ii)(a) and (ii)(b) of the third or fourth paragraph of this Section 3.1(d), as the case may be, have been met and the standard of proof to be met by
Grantee shall be clear and convincing evidence.
For purposes
of this Section 3.1(d) only, the definition of Change in Control in Section A.6 of Annex A shall exclude the proviso in Section A.6(a).
3.2
Negative Committee Discretion
.
(a) The Committee may, other than during a Coverage Period, exercise negative discretion with respect to the Grant and determine, in light of such
Corporation or individual performance factors as the Committee may deem appropriate, that, notwithstanding the achievement of one or more of the applicable PNC Performance Goals, the Committee will not award, and PNC will not issue, some or all of
the Incentive Shares that the Committee is authorized to award pursuant to Section 3.1(a).
(b) If the time for the Committee to make its determination as to whether the PNC Performance Goals have been achieved and whether to award Incentive Shares occurs during a Coverage Period, the Committee may not
exercise negative discretion with respect to the Grant, and in the event that PNC has achieved one or more of the applicable PNC Performance Goals and the Grant is still outstanding, Grantee shall be awarded and PNC shall issue the maximum number of
Incentive Shares authorized by Section 3.1(a) for the level of performance attained by PNC with respect to the PNC Performance Goals.
3.3
Termination of Grant
. The Grant is subject to termination prior to the Award Date without the issuance of Incentive Shares pursuant to Section
3.1(b). If and to the extent that the Committee determines at the Award Date (a) that the PNC Performance Goals applicable to the issuance of some or all of the Incentive Shares have not been achieved or (b) to exercise negative discretion with
respect to the Grant pursuant to Section 3.2 (a) and not award some or all of the Incentive Shares, the Grant shall terminate as to such Incentive Shares and such shares shall not be issued to Grantee.
3.4
Issuance of Awarded Shares; Dividend Equivalents
. PNC will cause
the issuance to Grantee of such Incentive Shares as have been awarded to Grantee by the Committee as soon as practicable after the Award Date;
provided, however,
that other
-4-
than during a Coverage Period, the Committee may, in its sole discretion, defer the issuance of Incentive Shares to Grantee when, in the judgment of the
Committee, such deferral may be required in order to obtain or preserve more favorable tax treatment for the Corporation, including deductions for compensation.
One half of the Awarded Shares will be Vested Shares at the time of issuance, and PNC will issue a certificate or certificates to Grantee or
Grantee’s legal representative for such shares without further restriction under the Agreement. Except as otherwise provided in Section 3.1(d), if applicable, the remaining Awarded Shares will be issued as “Restricted Shares” and will
continue to be subject to the terms and conditions of the Agreement, including forfeiture provisions and restrictions against transfer, unless and until they become Vested Shares and are released and reissued by PNC to Grantee or Grantee’s
legal representative pursuant to Section 8.
In the event that
one or more record dates for dividends on PNC Common Stock occur after the end of the Performance Period but before the date the Awarded Shares are issued, PNC will make a cash payment to Grantee equivalent to the amount of the dividends Grantee
would have received had the Awarded Shares been issued and outstanding on January 1, 2005.
3.5
Restricted Shares
. Restricted Shares will be subject to a Restricted Period as provided in Section A.25 of Annex A. Restricted Shares will be deposited with PNC or its designee, or credited to a book-entry
account, during the term of the Restricted Period unless and until forfeited pursuant to the terms of the Agreement.
Any certificate or certificates representing such Restricted Shares will contain the following legend:
“This certificate and the shares of stock represented hereby are
subject to the terms and conditions (including forfeiture and restrictions against transfer) contained in The PNC Financial Services Group, Inc. 1997 Long-Term Incentive Award Plan, as amended, and an Agreement entered into between the registered
owner and The PNC Financial Services Group, Inc. Release from such terms and conditions will be made only in accordance with the provisions of such Plan and such Agreement, a copy of each of which is on file in the office of the Corporate Secretary
of The PNC Financial Services Group, Inc.”
Where a
book-entry system is used with respect to Restricted Shares, appropriate notation of such forfeiture possibility and transfer restrictions will be made on the system with respect to the account or accounts to which the Restricted Shares are
credited.
Restricted Shares deposited with PNC or its designee
during the term of the Restricted Period that become Vested Shares will be released and reissued to Grantee or Grantee’s legal representative pursuant to Section 8 as soon as administratively practicable following the end of the Restricted
Period.
-5-
4.
Rights as Shareholder
. Except as provided in Section 6 and subject to Section 7.5(c), if
applicable, and to Section 15, Grantee will have all the rights and privileges of a shareholder with respect to Awarded Shares once they have been issued including, but not limited to, the right to vote the shares and the right to receive dividends
thereon if and when declared by the Board;
provided, however,
all such rights and privileges will cease immediately upon any forfeiture of such shares.
5.
Capital Adjustments
. The number and class of Incentive Shares subject to award under the Agreement will be subject to such adjustment, if
any, as the Committee in its sole discretion deems appropriate to reflect such events as stock dividends, stock splits, recapitalizations, mergers, consolidations or reorganizations of or by PNC. Restricted Shares awarded under the Agreement will,
as issued and outstanding shares of PNC Common Stock, be subject to such adjustment as may be necessary to reflect such events as stock dividends, stock splits, recapitalizations, mergers, consolidations or reorganizations of or by PNC;
provided
,
however
, that any shares received as distributions on or in exchange for Unvested Shares will be subject to the terms and conditions of the Agreement as if they were unvested Restricted Shares.
6.
Prohibitions Against Sale, Assignment, etc.
The Grant may not be
sold, assigned, transferred, exchanged, pledged, hypothecated or otherwise encumbered, other than by will or the laws of descent and distribution if permitted by the Committee pursuant to Section 7.1. Unvested Shares may not be sold, assigned,
transferred, exchanged, pledged, hypothecated or otherwise encumbered, other than by will or the laws of descent and distribution, unless and until the Restricted Period terminates and the Vested Shares are released and reissued by PNC to Grantee or
Grantee’s legal representative pursuant to Section 8.
7.
Forfeiture of Unvested Shares; Death; Qualifying Disability or Other Termination; Qualifying CIC Termination
.
7.1
Forfeiture on Termination of Employment
. Except as otherwise set forth in Section 7.3, Section 7.4 or Section 7.5, if applicable, or unless the
Committee determines otherwise, in the event that Grantee’s employment with the Corporation terminates prior to January 1, 2007, all Restricted Shares that are Unvested Shares on Grantee’s Termination Date will be forfeited by Grantee to
PNC without payment of any consideration by PNC. Neither Grantee nor any successors, heirs, assigns or legal representatives of Grantee will thereafter have any further rights or interest in such Unvested Shares or the certificate or certificates
representing such Unvested Shares.
7.2
Forfeiture for
Detrimental Conduct
. Unvested Shares that would otherwise remain outstanding after Grantee’s Termination Date, if any, will be forfeited by Grantee to PNC without payment of any consideration by PNC in the event that, at any time prior to
the date such shares become Vested Shares, PNC determines that Grantee has engaged in Detrimental Conduct;
provided, however,
that no determination that Grantee has engaged in Detrimental Conduct may be made on or after the date of
Grantee’s death, and Detrimental Conduct will not apply to conduct by or activities of
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successors to the Restricted Shares by will or the laws of descent and distribution in the event of Grantee’s death.
This Section 7.2 will not apply to Restricted Shares that remain outstanding
after Grantee’s Termination Date pursuant to Section 7.3 or Section 7.5, if any.
7.3
Death
. In the event of Grantee’s death while an employee of the Corporation and prior to January 1, 2007, the Continued Employment Performance Goal shall be deemed to have been achieved, and the
Restricted Period with respect to the then outstanding Restricted Shares will terminate on the date of Grantee’s death.
The Restricted Shares which thereby become Vested Shares will be released and reissued by PNC to Grantee’s legal representative pursuant to Section 8
as soon as administratively practicable following such date.
7.4
Qualifying Disability or Other Termination
. In the event Grantee’s employment with the Corporation is terminated prior to January 1, 2007 by the Corporation by reason of Grantee’s Total and Permanent Disability or as
otherwise determined by the Committee, then the Continued Employment Performance Goal shall be deemed to have been achieved, in the case of Grantee’s Total and Permanent Disability, with respect to all Unvested Shares, and otherwise, to the
extent determined by the Committee.
The Committee may, but
need not, accelerate termination of the Restricted Period. The Restricted Shares outstanding at the termination of the Restricted Period will become Vested Shares and will be released and reissued to Grantee pursuant to Section 8.
7.5
Qualifying CIC Termination
.
(a) Notwithstanding anything in the Agreement to the contrary, the Continued
Employment Performance Goal shall be deemed to have been achieved and the Restricted Period with respect to the then outstanding Restricted Shares will terminate at the end of the day on the day immediately preceding Grantee’s Termination Date
if Grantee’s employment is terminated (other than by reason of Grantee’s death) during a Coverage Period by the Corporation without Cause or by Grantee for Good Reason.
The Restricted Shares which thereby become Vested Shares will be released and reissued to Grantee pursuant to Section 8 as
soon as administratively practicable following such date.
(b)
Grantee’s employment shall also be deemed to have been terminated by the Corporation without Cause during a Coverage Period for purposes of Section 7.5 if: (i) Grantee’s employment is terminated by the Corporation other than during a
Coverage Period without Cause (as defined in Section A.4(a) of Annex A); (ii) such termination of employment (a) was at the request of a third party that has taken steps reasonably calculated to effect a Change in Control, or (b) otherwise arose in
anticipation of a
-7-
Change in Control; and (iii) a Coverage Period commences within three (3) months of such termination of employment.
Grantee’s employment shall also be deemed to have been terminated by
Grantee for Good Reason during a Coverage Period for purposes of Section 7.5 if: (i) Grantee terminates Grantee’s employment other than during a Coverage Period with Good Reason (as defined in Section A.18 of Annex A); (ii) the circumstance or
event that constitutes Good Reason (a) occurs at the request of a third party that has taken steps reasonably calculated to effect a Change in Control or (b) otherwise arose in anticipation of a Change in Control; and (iii) a Coverage Period
commences within three (3) months of such termination of employment.
For purposes of Section 7.5(b) only, Grantee shall have the burden of proving that the requirements of clauses (ii)(a) and (ii)(b) of the first or second paragraph of Section 7.5(b), as the case may be, have been met and the standard of
proof to be met by Grantee shall be clear and convincing evidence.
For purposes of Section 7.5(b) only, the definition of Change in Control in Section A.6 of Annex A shall exclude the proviso in Section A.6(a).
(c) If the Restricted Shares will be forfeited by Grantee to PNC on Grantee’s Termination Date pursuant to Section 7.1 unless all of the conditions
set forth in clauses (i), (ii) and (iii) of the first or second paragraph, as the case may be, of Section 7.5(b) are met, then in the event that the record date for any dividends payable with respect to the Restricted Shares occurs on or after
Grantee’s Termination Date but prior to the time all of the conditions set forth in clauses (i), (ii) and (iii) of the first or second paragraph, as the case may be, of Section 7.5(b) are met, such dividends will be held, without interest,
pending satisfaction of such conditions. In the event that the conditions of Section 7.5(b) are not met, any dividends being held pending satisfaction of such conditions will be forfeited by Grantee to PNC without payment of any consideration by
PNC.
8.
Termination of Prohibitions on Restricted
Stock
. Following termination of the Restricted Period, PNC will release and issue or reissue the certificate or certificates representing the then outstanding whole Restricted Shares that have become Vested Shares without the legend referred to
in Section 3.5. PNC or its designee will deliver such certificate or certificates for whole shares to, or at the proper direction of, Grantee or Grantee’s legal representative.
9.
Payment of Taxes
.
9.1
Code Section 83(b) Election
. Grantee may satisfy any or all applicable federal, state or local withholding tax obligations arising from a Code
Section 83(b) election with respect to the Restricted Shares (a) by payment of cash or (b) through the surrender (including by means of an attestation procedure) of whole shares of PNC Common Stock that are not subject to any contractual
restriction, pledge or other encumbrance and that have been owned by Grantee for at least six (6) months and, in the
-8-
case of restricted stock, for which it has been at least six (6) months since the restrictions lapsed. Any such tax election shall be made pursuant to a form
to be provided to Grantee by PNC on request. For purposes of this Section 9.1, shares of PNC Common Stock that are surrendered to satisfy applicable withholding tax obligations will be valued at their Fair Market Value on the date the tax
withholding obligation arises. Grantee will provide to PNC a copy of any Code Section 83(b) election filed by Grantee with respect to the Restricted Shares not later than ten (10) days after the filing of such election.
9.2
Other Tax Liabilities
. Where Grantee has not previously satisfied
all applicable withholding tax obligations, PNC will retain sufficient whole Awarded Shares to satisfy the minimum amount of taxes required to be withheld in connection with the issuance of Awarded Shares hereunder, or the release and issuance or
reissuance of Restricted Shares hereunder, as the case may be. For purposes of this Section 9.2, shares of PNC Common Stock retained to satisfy applicable withholding taxes will be valued at their Fair Market Value on the date the tax withholding
obligation arises.
10.
Employment
. Neither the Grant
nor the award and issuance of Awarded Shares nor any term or provision of the Agreement shall constitute or be evidence of any understanding, expressed or implied, on the part of PNC or any Subsidiary to employ Grantee for any period or in any way
alter Grantee’s status as an employee at will.
11.
Subject to the Plan and the Committee
. In all respects the Grant and the Agreement are subject to the terms and conditions of the Plan, which has been made available to Grantee and is incorporated herein by reference;
provided, however,
the terms of the Plan shall not be considered an enlargement of any benefits under the Agreement. Further, the Grant and the Agreement are subject to any interpretation of, and any rules and regulations issued by, the Committee or under the
authority of the Committee, whether made or issued before or after the Grant Date.
12.
Headings; Entire Agreement
. Headings used in the Agreement are provided for reference and convenience only, shall not be considered part of the Agreement, and shall not be employed in the construction of
the Agreement. The Agreement constitutes the entire agreement between Grantee and PNC and supersedes all other discussions, negotiations, correspondence, representations, understandings and agreements between the parties with respect to the subject
matter hereof.
13.
Grantee Covenants
.
13.1
General
. Grantee and PNC acknowledge and agree that Grantee has
received adequate consideration with respect to enforcement of the provisions of Sections 13 and 14, that such provisions are reasonable and properly required for the adequate protection of the business of the Corporation, and that enforcement of
such provisions will not prevent Grantee from earning a living.
13.2
Non-Solicitation; No-Hire
. Grantee agrees to comply with the provisions of subsections (a) and (b) of this Section 13.2 while employed by the Corporation and for
-9-
a period of twelve (12) months after Grantee’s Termination Date regardless of the reason for such termination of employment.
(a)
Non-Solicitation
. Grantee shall not, directly or indirectly,
either for Grantee’s own benefit or purpose or for the benefit or purpose of any Person other than PNC or any Subsidiary, solicit, call on, do business with, or actively interfere with PNC’s or any Subsidiary’s relationship with, or
attempt to divert or entice away, any Person which Grantee should reasonably know (i) is a customer of PNC or any Subsidiary for which PNC or any Subsidiary provides any services as of the Termination Date, or (ii) was a customer of PNC or any
Subsidiary for which PNC or any Subsidiary provided any services at any time during the twelve (12) months preceding the Termination Date, or (iii) was, as of the Termination Date, considering retention of PNC or any Subsidiary to provide any
services.
(b)
No-Hire
. Grantee shall not, directly or
indirectly, either for Grantee’s own benefit or purpose or for the benefit or purpose of any Person other than PNC or any Subsidiary, employ or offer to employ, call on, or actively interfere with PNC’s or any Subsidiary’s
relationship with, or attempt to divert or entice away, any employee of the Corporation, nor shall Grantee assist any other Person in such activities.
Notwithstanding the above, if Grantee’s employment with the Corporation is terminated by the Corporation without Cause or by Grantee with Good Reason
and such Termination Date occurs during a Coverage Period (either as Coverage Period is defined in Section A.14 of Annex A or, if Grantee was a party to a written agreement between Grantee and PNC providing, among other things, for certain change in
control severance benefits (a “CIC Severance Agreement”) that was in effect at the time of such termination of employment, as Coverage Period is defined in such CIC Severance Agreement, if longer), then commencing immediately after such
Termination Date, the provisions of subsections (a) and (b) of this Section 13.2 shall no longer apply and shall be replaced with the following subsection (c):
(c)
No-Hire
. Grantee agrees that Grantee shall not, for a period of twelve (12) months after the Termination Date, employ or offer to employ,
solicit, actively interfere with PNC’s or any PNC affiliate’s relationship with, or attempt to divert or entice away, any officer of PNC or any PNC affiliate.
13.3
Confidentiality
. During Grantee’s employment with the Corporation, and thereafter regardless of the reason
for termination of such employment, Grantee will not disclose or use in any way any confidential business or technical information or trade secret acquired in the course of such employment, all of which is the exclusive and valuable property of the
Corporation whether or not conceived of or prepared by Grantee, other than (a) information generally known in the Corporation’s industry or acquired from public sources, (b) as required in the course of employment by the Corporation, (c) as
required by any court, supervisory authority, administrative agency or applicable law, or (d) with the prior written consent of PNC.
-10-
13.4
Ownership of Inventions
. Grantee shall promptly and fully disclose to PNC any and all
inventions, discoveries, improvements, ideas or other works of inventorship or authorship, whether or not patentable, that are conceived and/or reduced to practice by Grantee during the term of Grantee’s employment with the Corporation, whether
alone or with others, and that are (a) related directly or indirectly to the business or activities of PNC or any Subsidiary or (b) developed with the use of any time, material, facilities or other resources of PNC or any Subsidiary
(“Developments”). Grantee agrees to assign and hereby does assign to PNC or its designee all of Grantee’s right, title and interest, including copyrights and patent rights, in and to all Developments. Grantee shall perform all actions
and execute all instruments that PNC or any Subsidiary shall deem necessary to protect or record PNC’s or its designee’s interests in the Developments. The obligations of this Section 13.4 shall be performed by Grantee without further
compensation and shall continue beyond the Termination Date.
14.
Enforcement Provisions
. Grantee understands and agrees to the following provisions regarding enforcement of the Agreement.
14.1
Governing Law and Jurisdiction
. The Agreement is governed by and construed under the laws of the Commonwealth of Pennsylvania, without regard
to conflict of laws rules. Any dispute or claim arising out of or relating to the Agreement or claim of breach hereof shall be brought exclusively in the federal court for the Western District of Pennsylvania or in the Court of Common Pleas of
Allegheny County, Pennsylvania. By execution of the Agreement, Grantee and PNC hereby consent to the exclusive jurisdiction of such courts, and waive any right to challenge jurisdiction or venue in such courts with regard to any suit, action, or
proceeding under or in connection with the Agreement.
14.2
Equitable Remedies
. A breach of the provisions of any of Sections 13.2, 13.3 or 13.4 will cause the Corporation irreparable harm, and the Corporation will therefore be entitled to issuance of immediate, as well as permanent, injunctive relief
restraining Grantee, and each and every person and entity acting in concert or participating with Grantee, from initiation and/or continuation of such breach.
14.3
Tolling Period
. If it becomes necessary or desirable for the Corporation to seek compliance with the provisions of Section 13.2 by legal
proceedings, the period during which Grantee shall comply with said provisions shall extend for a period of twelve (12) months from the date of the legal order requiring such compliance.
14.4
No Waiver
. Failure of PNC to demand strict compliance with any of the terms, covenants or conditions of the
Agreement shall not be deemed a waiver of such term, covenant or condition, nor shall any waiver or relinquishment of any such term, covenant or condition on any occasion or on multiple occasions be deemed a waiver or relinquishment of such term,
covenant or condition.
14.5
Severability
. The
restrictions and obligations imposed by Sections 13.2, 13.3 and 13.4 are separate and severable, and it is the intent of Grantee and PNC that if
-11-
any restriction or obligation imposed by any of these provisions is deemed by a court of competent jurisdiction to be void for any reason whatsoever, the
remaining provisions, restrictions and obligations shall remain valid and binding upon Grantee.
14.6
Reform
. In the event any of Sections 13.2, 13.3 and 13.4 are determined by a court of competent jurisdiction to be unenforceable because
unreasonable either as to length of time or area to which said restriction applies, it is the intent of Grantee and PNC that said court reduce and reform the provisions thereof so as to apply the greatest limitations considered enforceable by the
court.
14.7
Waiver of Jury Trial
. Each of Grantee and
PNC hereby waives any right to trial by jury with regard to any suit, action or proceeding under or in connection with any of Sections 13.2, 13.3 and 13.4.
14.8
Applicable Law
. Notwithstanding anything in the Agreement, PNC will not be required to comply with any term, covenant or condition of the
Agreement if and to the extent prohibited by law, including but not limited to federal banking and securities regulations, or as otherwise directed by one or more regulatory agencies having jurisdiction over PNC or any of its subsidiaries. Further,
to the extent, if any, applicable to Grantee, Grantee agrees to reimburse PNC for any amounts Grantee may be required to reimburse PNC or its subsidiaries pursuant to Section 304 of the Sarbanes-Oxley Act of 2002, and agrees that PNC need not comply
with any term, covenant or condition of the Agreement to the extent that doing so would require that Grantee reimburse PNC or its subsidiaries for such amounts pursuant to Section 304 of the Sarbanes-Oxley Act of 2002.
15.
Acceptance of Grant; PNC Right to Cancel
. If Grantee does not
accept the Grant by executing and delivering a copy of the Agreement to PNC within sixty (60) days of receipt by Grantee of a copy of the Agreement, PNC may, in its sole discretion, withdraw its offer and cancel the Grant at any time prior to
Grantee’s delivery to PNC of a copy of the Agreement executed by Grantee. Otherwise, upon execution and delivery of the Agreement by both PNC and Grantee, the Agreement is effective.
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I
N
W
ITNESS
W
HEREOF
, PNC has caused the Agreement to be
signed on its behalf as of the Grant Date.
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THE PNC FINANCIAL SERVICES GROUP, INC.
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By:
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Chairman and Chief Executive Officer
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ATTEST:
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By:
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Corporate Secretary
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A
CCEPTED
AND
A
GREED
TO
by G
RANTEE
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<name>
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2003 LTI Program Incentive Share Grant
Three Year Performance Period (January 1, 2003 - December 31, 2005)
Performance Goals: Relative PNC Return on Common Equity and Relative PNC Total Shareholder Return
50%: Vest on Award; 50%: Restricted Period
Through December 31, 2006
ANNEX A
TO
THE PNC FINANCIAL SERVICES GROUP, INC.
1997 LONG-TERM INCENTIVE AWARD PLAN
2003 INCENTIVE SHARE AGREEMENT
* * *
CERTAIN DEFINITIONS
Except where the context otherwise indicates, the following definitions apply
for purposes of the 2003 Incentive Share Agreement (“Agreement”) to which this Annex A is attached:
A.1 “
Awarded Shares
” means any Incentive Shares that have been awarded by the Committee, or are deemed to have been awarded, pursuant to
Section 3 of the Agreement and have been issued in accordance with Section 3.1(d) or Section 3.4 of the Agreement.
A.2 “
Board
” means the Board of Directors of The PNC Financial Services Group, Inc.
A.3 “
Business Day
” means any day when the New York Stock
Exchange is open for business.
A.4 “
Cause
.”
(a)
“Cause” during a Coverage Period
. If the
termination of Grantee’s employment occurs during a Coverage Period, then, for purposes of the Agreement, “Cause” means:
(i) the willful and continued failure of Grantee to substantially perform Grantee’s duties with the Corporation (other than any such failure
resulting from incapacity due to physical or mental illness), after a written demand for substantial performance is delivered to Grantee by the Board or the CEO which specifically
-14-
identifies the manner in which the Board or the CEO believes that Grantee has not substantially performed Grantee’s duties; or
(ii) the willful engaging by Grantee in illegal conduct or gross misconduct
that is materially and demonstrably injurious to PNC or any Subsidiary.
For purposes of the preceding clauses (i) and (ii), no act or failure to act, on the part of Grantee, shall be considered willful unless it is done, or omitted to be done, by Grantee in bad faith and without reasonable belief that
Grantee’s action or omission was in the best interests of the Corporation. Any act, or failure to act, based upon the instructions or prior approval of the Board, the CEO or Grantee’s superior or based upon the advice of counsel for the
Corporation, shall be conclusively presumed to be done, or omitted to be done, by Grantee in good faith and in the best interests of the Corporation.
The cessation of employment of Grantee will be deemed to be a termination of Grantee’s employment with the Corporation for Cause for purposes of the
Agreement only if and when there shall have been delivered to Grantee, as part of the notice of Grantee’s termination, a copy of a resolution duly adopted by the affirmative vote of not less than a majority of the entire membership of the
Board, at a Board meeting called and held for the purpose of considering such termination, finding on the basis of clear and convincing evidence that, in the good faith opinion of the Board, Grantee is guilty of conduct described in clause (i) or
clause (ii) above and, in either case, specifying the particulars thereof in detail. Such resolution shall be adopted only after (1) reasonable notice of such Board meeting is provided to Grantee, together with written notice that PNC believes that
Grantee is guilty of conduct described in clause (i) or clause (ii) above and, in either case, specifying the particulars thereof in detail, and (2) Grantee is given an opportunity, together with counsel, to be heard before the Board.
(b)
“Cause” other than during a Coverage Period
. If the
termination of Grantee’s employment with the Corporation occurs other than during a Coverage Period, then, for purposes of the Agreement, “Cause” means:
(i) the willful and continued failure of Grantee to substantially perform Grantee’s duties with the Corporation (other
than any such failure resulting from incapacity due to physical or mental illness), after a written demand for substantial performance is delivered to Grantee by PNC which specifically identifies the manner in which it is believed that Grantee has
not substantially performed Grantee’s duties;
(ii) a
material breach by Grantee of (1) any code of conduct of PNC or a Subsidiary or (2) other written policy of PNC or a Subsidiary, in either case required by law or established to maintain compliance with applicable law;
(iii) any act of fraud, misappropriation, material dishonesty, or
embezzlement by Grantee against PNC or a Subsidiary or any client or customer of PNC or a Subsidiary;
-15-
(iv) any conviction (including a plea of guilty or of
nolo contendere
) of Grantee for, or entry by
Grantee into a pre-trial disposition with respect to, the commission of a felony; or
(v) entry of any order against Grantee by any governmental body having regulatory authority with respect to the business of PNC or any Subsidiary, which order relates to or arises out of Grantee’s employment or
other service relationship with the Corporation.
The cessation
of employment of Grantee will be deemed to have been a termination of Grantee’s employment with the Corporation for Cause for purposes of the Agreement only if and when the Committee determines that Grantee is guilty of conduct described in
clause (i), (ii) or (iii) above or that an event described in clause (iv) or (v) above has occurred with respect to Grantee and, if so, determines that the termination of Grantee’s employment with the Corporation will be deemed to have been for
Cause.
A.5 “
CEO
” means the chief executive
officer of The PNC Financial Services Group, Inc.
A.6
“
Change in Control
” means a change of control of PNC of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A (or in response to any similar item on any similar schedule or form)
promulgated under the Exchange Act, whether or not PNC is then subject to such reporting requirement;
provided
,
however
, that without limitation, a Change in Control shall be deemed to have occurred if:
(a) any Person, excluding employee benefits plans of the Corporation, is or
becomes the beneficial owner (as defined in Rules 13d-3 and 13d-5 under the Exchange Act or any successor provisions thereto), directly or indirectly, of securities of PNC representing twenty percent (20%) or more of the combined voting power of
PNC’s then outstanding securities;
provided
,
however
, that such an acquisition of beneficial ownership representing between twenty percent (20%) and forty percent (40%), inclusive, of such voting power shall not be considered a
Change in Control if the Board approves such acquisition either prior to or immediately after its occurrence;
(b) PNC consummates a merger, consolidation, share exchange, division or other reorganization or transaction of PNC (a “Fundamental
Transaction”) with any other corporation, other than a Fundamental Transaction that results in the voting securities of PNC outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity) at least sixty percent (60%) of the combined voting power immediately after such Fundamental Transaction of (i) PNC’s outstanding securities, (ii) the surviving entity’s outstanding
securities, or (iii) in the case of a division, the outstanding securities of each entity resulting from the division;
-16-
(c) the shareholders of PNC approve a plan of complete liquidation or winding-up of PNC or an agreement
for the sale or disposition (in one transaction or a series of transactions) of all or substantially all of PNC’s assets;
(d) as a result of a proxy contest, individuals who prior to the conclusion thereof constituted the Board (including for this purpose any new director
whose election or nomination for election by PNC’s shareholders in connection with such proxy contest was approved by a vote of at least two-thirds (2/3rds) of the directors then still in office who were directors prior to such proxy contest)
cease to constitute at least a majority of the Board (excluding any Board seat that is vacant or otherwise unoccupied);
(e) during any period of twenty-four (24) consecutive months, individuals who at the beginning of such period constituted the Board (including for this
purpose any new director whose election or nomination for election by PNC’s shareholders was approved by a vote of at least two-thirds (2/3rds) of the directors then still in office who were directors at the beginning of such period) cease for
any reason to constitute at least a majority of the Board (excluding any Board seat that is vacant or otherwise unoccupied); or
(f) the Board determines that a Change in Control has occurred.
Notwithstanding anything to the contrary herein, a divestiture or spin-off of a subsidiary or division of PNC shall not by itself constitute a Change
in Control.
A.7 “
CIC Failure
” means the
following:
(a) with respect to a CIC Triggering Event
described in Section A.8(a), PNC’s shareholders vote against the transaction approved by the Board or the agreement to consummate the transaction is terminated; or
(b) with respect to a CIC Triggering Event described in Section A.8(b), the proxy contest fails to replace or remove a
majority of the members of the Board.
A.8 “
CIC
Triggering Event
” means the occurrence of either of the following:
(a) the Board or PNC’s shareholders approve a transaction described in Subsection (b) of the definition of Change in Control contained in Section A.6; or
(b) the commencement of a proxy contest in which any Person seeks to replace
or remove a majority of the members of the Board.
A.9
“
Code
” means the Internal Revenue Code of 1986, as amended, and the rules and regulations promulgated thereunder.
A.10 “
Committee
” means the Personnel and Compensation Committee of the Board of Directors of The PNC Financial Services Group, Inc.
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A.11 “
Competitive Activity
” means, for purposes of the Agreement, any participation in,
employment by, ownership of any equity interest exceeding one percent (1%) in, or promotion or organization of, any Person other than PNC or any Subsidiary (a) engaged in business activities similar to some or all of the business activities of PNC
or any Subsidiary as of Grantee’s Termination Date or (b) engaged in business activities which Grantee knows PNC or any Subsidiary intends to enter within the first twelve (12) months after Grantee’s Termination Date, in either case
whether Grantee is acting as agent, consultant, independent contractor, employee, officer, director, investor, partner, shareholder, proprietor or in any other individual or representative capacity therein.
A.12 “
Continued Employment Performance Goal
” means, subject
to early achievement if so determined by the Committee or pursuant to Section 7.5 of the Agreement, if applicable, that Grantee has been continuously employed by the Corporation for the period commencing on the Award Date through (and including)
December 31, 2006 or, if earlier, through (and including) the day immediately preceding the first of the following to occur: (a) the date Grantee’s employment is terminated by the Corporation by reason of Total and Permanent Disability or as
otherwise determined by the Committee; and (b) the date of Grantee’s death.
A.13 “
Corporation
” means PNC and its Subsidiaries.
A.14 “
Coverage Period
” means a period (a) commencing on the earlier to occur of (i) the date of a CIC Triggering Event and (ii) the date
of a Change in Control and (b) ending on the date that is three (3) years after the date of the Change in Control;
provided
,
however
, that in the event that a Coverage Period commences on the date of a CIC Triggering Event, such
Coverage Period shall terminate upon the earlier to occur of (x) the date of a CIC Failure and (y) the date that is three (3) years after the date of the Change in Control triggered by the CIC Triggering Event. After the termination of any Coverage
Period, another Coverage Period shall commence upon the earlier to occur of clause (a)(i) and clause (a)(ii) in the preceding sentence.
A.15 “
Detrimental Conduct
.”
(a)
“Detrimental Conduct” during a Coverage Period
. If the determination of whether Grantee has engaged in Detrimental Conduct occurs
during a Coverage Period, then for purposes of the Agreement, “Detrimental Conduct” means:
(i) Grantee has engaged, without the prior written consent of PNC (at PNC’s sole discretion), in any Competitive Activity in the continental United
States at any time during the period commencing on Grantee’s Termination Date through (and including) the first (1
st
) anniversary of Grantee’s Termination Date; or
(ii) Grantee has willfully engaged in illegal conduct or gross misconduct that is materially and demonstrably injurious to PNC or any Subsidiary.
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For purposes of the preceding clause (ii), no act or failure to act, on the part of Grantee, shall be
considered willful unless it is done, or omitted to be done, by Grantee in bad faith and without reasonable belief that Grantee’s action or omission was in the best interests of the Corporation. Any act, or failure to act, based upon the
instructions or prior approval of the Board, the CEO or Grantee’s superior while employed by the Corporation or based upon the advice of counsel for the Corporation, shall be conclusively presumed to be done, or omitted to be done, by Grantee
in good faith and in the best interests of the Corporation.
Grantee will be deemed to have engaged in Detrimental Conduct for purposes of the Agreement only if and when there shall have been delivered to Grantee a copy of a resolution duly adopted by the affirmative vote of not less than a majority
of the entire membership of the Board, at a Board meeting called and held for the purpose of considering such determination, finding on the basis of clear and convincing evidence that, in the good faith opinion of the Board, Grantee has engaged in
conduct described in clause (i) above or is guilty of conduct described in clause (ii) above and, in either case, specifying the particulars thereof in detail. Such resolution shall be adopted only after (1) reasonable notice of such Board meeting
is provided to Grantee, together with written notice that PNC believes that Grantee has engaged in conduct described in clause (i) above or is guilty of conduct described in clause (ii) above and, in either case, specifying the particulars thereof
in detail, and (2) Grantee is given an opportunity, together with counsel, to be heard before the Board.
(b)
“Detrimental Conduct” other than during a Coverage Period
. If the determination of whether Grantee has engaged in Detrimental Conduct
occurs other than during a Coverage Period, then for purposes of the Agreement, “Detrimental Conduct” means:
(i) Grantee has engaged, without the prior written consent of PNC (at PNC’s sole discretion), in any Competitive Activity in the continental United
States at any time during the period commencing on Grantee’s Termination Date through (and including) the first (1
st
) anniversary of Grantee’s Termination Date;
(ii) a material breach by Grantee of (1) any code of conduct of PNC or a Subsidiary or (2) other written policy of PNC or a Subsidiary, in either case required by law or established to maintain compliance with applicable law;
(iii) any act of fraud, misappropriation, material dishonesty, or
embezzlement by Grantee against PNC or a Subsidiary or any client or customer of PNC or a Subsidiary;
(iv) any conviction (including a plea of guilty or of
nolo contendere
) of Grantee for, or entry by Grantee into a pre-trial disposition with
respect to, the commission of a felony which relates to or arises out of Grantee’s employment or other service relationship with the Corporation; or
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(v) entry of any order against Grantee by any governmental body having regulatory authority with respect
to the business of PNC or any Subsidiary, which order relates to or arises out of Grantee’s employment or other service relationship with the Corporation.
Grantee will be deemed to have engaged in Detrimental Conduct for purposes of the Agreement only if and when the Committee determines that Grantee has
engaged in conduct described in clause (i) above, that Grantee is guilty of conduct described in clause (ii) or clause (iii) above, or that an event described in clause (iv) or clause (v) above has occurred with respect to Grantee and, if so,
determines that Grantee will be deemed to have engaged in Detrimental Conduct.
A.16 “
Exchange Act
” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
A.17 “
Fair Market Value
” as it relates to PNC Common Stock means the average of the high and low sale
prices of the PNC Common Stock as reported on the New York Stock Exchange (or such successor reporting system as PNC may select) on the relevant date or, if no sale of the PNC Common Stock has been reported for that day, the average of such prices
on the next preceding day and the next following day for which there were reported sales.
A.18 “
Good Reason
” means:
(a) the assignment to Grantee of any duties inconsistent in any respect with Grantee’s position (including status, offices, titles and reporting requirements), authority, duties or responsibilities immediately
prior to either the CIC Triggering Event or the Change in Control, or any other action by the Corporation which results in a diminution in any respect in such position, authority, duties or responsibilities, excluding for this purpose an isolated,
insubstantial and inadvertent action not taken in bad faith that is remedied by the Corporation promptly after receipt of notice thereof given by Grantee;
(b) a reduction by the Corporation in Grantee’s annual base salary as in effect on the Grant Date, as the same may be increased from time to time;
(c) the Corporation’s requiring Grantee to be based at
any office or location that is more than fifty (50) miles from Grantee’s office or location immediately prior to either the CIC Triggering Event or the Change in Control;
(d) the failure by the Corporation (i) to continue in effect any bonus, stock option or other cash or equity-based incentive
plan or program in which Grantee participates immediately prior to either the CIC Triggering Event or the Change in Control that is material to Grantee’s total compensation, unless a substantially equivalent arrangement (embodied in an ongoing
substitute or alternative plan or program) has been made with respect to such plan or program, or (ii) to continue Grantee’s participation in such plan or program (or in such substitute or alternative plan or program) on a basis at
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least as favorable, both in terms of the amount of benefits provided and the level of Grantee’s participation relative to other participants, as existed
immediately prior to the CIC Triggering Event or the Change in Control; or
(e) the failure by the Corporation to continue to provide Grantee with benefits substantially similar to those received by Grantee under any of the Corporation’s pension (including, but not limited to,
tax-qualified plans), life insurance, health, accident, disability or other welfare plans or programs in which Grantee was participating, at costs substantially similar to those paid by Grantee, immediately prior to the CIC Triggering Event or the
Change in Control.
A.19 “
Grant
” means the
grant of Incentive Shares to Grantee pursuant to Section 1 of the Agreement.
A.20 “
Grant Date
” means the Grant Date set forth on page 1 of the Agreement.
A.21 “
Peer Group
” means U.S. Bancorp, National City Corporation, PNC, Fifth Third Bancorp, Wells Fargo & Company, The Bank of New
York Company, Inc., SunTrust Banks, Inc., Bank One Corporation, KeyCorp, Wachovia Corporation and FleetBoston Financial Corporation, as such group may be adjusted from time to time by the Committee to reflect mergers, consolidations, or other
material corporate reorganizations or changes affecting one or more members of the Peer Group or other changes in PNC’s Peer Group.
A.22 “
Performance Period
” means the period commencing January 1, 2003 through (and including) December 31, 2005.
A.23 “
Person
” has the meaning given in Section 3(a)(9) of
the Exchange Act and also includes any syndicate or group deemed to be a person under Section 13(d)(3) of the Exchange Act.
A.24 “
PNC Performance Goal
” means: (a) with respect to one half (1/2) of the Target Incentive Shares, the Target ROCE Performance Goal;
(b) with respect to the remaining half (1/2) of the Target Incentive Shares, the Target TSR Performance Goal; (c) with respect to one half (1/2) of the Premium Incentive Shares, the Premium ROCE Performance Goal; and (d) with respect to the
remaining half (1/2) of the Premium Incentive Shares, the Premium TSR Performance Goal, as applicable.
A.25 “
Restricted Period
” means, subject to early termination pursuant to Section 7.4 or Section 7.5 of the Agreement, if applicable, the
period commencing on the Award Date through (and including) the earlier of (a) the date of Grantee’s death and (b) December 31, 2006.
A.26 “
ROCE
” or “
Return on Common Equity
” means, with respect to each of PNC and the other members of the Peer Group, the
annualized cumulative return on common equity for the period commencing January 1, 2003 through (and including)
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December 31, 2005. The Return on Common Equity of PNC or any other Peer Group member may be adjusted to reflect significant nonrecurring items, including,
without limitation, merger-related charges or gains or losses on a sale of a business unit, as approved by the Committee. ROCE will be expressed as a percent rounded to the nearest one-hundredth (
e.g.
, 0.00%, with 0.005% being rounded upward
to 0.01%).
A.27 “
Termination Date
” means
Grantee’s last date of employment with the Corporation. If Grantee is employed by a Subsidiary that ceases to be a Subsidiary of PNC and Grantee does not continue to be employed by PNC or a Subsidiary, then for purposes of the Agreement,
Grantee’s employment with the Corporation terminates effective at the time this occurs.
A.28 “
Total and Permanent Disability
” means, unless the Committee determines otherwise, Grantee’s disability as determined to be total and permanent by the Corporation for purposes of the
Agreement.
A.29 “
TSR
” or “
Total
Shareholder Return
” means, with respect to PNC, the cumulative total shareholder return on its common stock and, with respect to each other member of the Peer Group, the cumulative total shareholder return on a class of common stock of such
other Peer Group member registered under Section 12 of the Exchange Act. For each of PNC and the other members of the Peer Group, cumulative total shareholder return will be calculated by dividing: (a) the sum of: (i) the cumulative amount of
dividends for the measurement period, assuming dividend reinvestment, with dividends reinvested on a monthly basis at the dividend yield rate using share price at month end and ex-date dividends per share, and (ii) the difference between the share
price at the end and the beginning of the measurement period; by (b) the closing share price on December 31, 2002. The term “measurement period” will be the period beginning at the “measurement point” established by the market
close on December 31, 2002 and continuing through (and including) the market close on December 31, 2005. With respect to dividends, it will be assumed that dividends are reinvested into additional shares of the same class of equity securities at the
frequency with which dividends are paid on such securities during the applicable period. TSR will be expressed as a percent rounded to the nearest one-hundredth (
e.g.
, 0.00%, with 0.005% being rounded upward to 0.01%).
A.30 “
Unvested Shares
” means any Restricted Shares that are
not Vested Shares.
A.31 “
Vested Shares
.”
Awarded Shares that are
not
issued as Restricted Shares pursuant to the Agreement are “Vested Shares” upon issuance and are not subject to further restriction under the Agreement. Awarded Shares that are issued as Restricted Shares
pursuant to Section 3.4 of the Agreement become “Vested Shares” if and when both of the following have occurred, provided that the Restricted Shares are then outstanding: (a) the Continued Employment Performance Goal has been achieved or
is deemed to have been achieved pursuant to the Agreement; and (b) the Restricted Period has terminated.
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FORM OF 2004 INCENTIVE SHARE
AGREEMENT
2004 Incentive Share Grant
Two Year Performance Period (January 1, 2004 - December 31, 2005)
PNC
Performance Goals: Relative PNC Return on Common Equity and Total Shareholder Return
50%: Vests on Award; 50%: Restricted Period From Award Through
December 31, 2006
THE PNC FINANCIAL SERVICES GROUP, INC.
1997 LONG-TERM INCENTIVE AWARD PLAN
* * *
2004 INCENTIVE SHARE AGREEMENT
* * *
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GRANTEE:
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< name >
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GRANT DATE:
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January 6, 2004
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TARGET ROCE INCENTIVE SHARES:
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< number of whole shares>
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TARGET TSR INCENTIVE SHARES:
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< number of whole shares>
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MAXIMUM ROCE INCENTIVE SHARES:
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200% of Adjusted Target ROCE Incentive Shares
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MAXIMUM TSR INCENTIVE SHARES:
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200% of Adjusted Target TSR Incentive Shares
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1.
Grant of 2004
Incentive Shares
. Pursuant to Article 12 of The PNC Financial Services Group, Inc. 1997 Long-Term Incentive Award Plan as amended from time to time (“Plan”), The PNC Financial Services Group, Inc. (“PNC”) hereby grants to the
Grantee named above (“Grantee”) an Incentive Share Award (as defined in the Plan) opportunity of the number of shares of PNC common stock described above and defined in Sections A.31 and A.32 of Annex A as the “Maximum ROCE Incentive
Shares” and “Maximum TSR Incentive Shares,” subject to the terms and conditions of this 2004 Incentive Share Agreement (“Agreement”) and the Plan and to acceptance of the Grant by Grantee in accordance with Section 17. The
Maximum ROCE Incentive Shares and Maximum TSR Incentive Shares are hereafter collectively referred to as the “2004 Incentive Shares,” as provided in Section A.3 of Annex A.
In general, the Grant of incentive shares pursuant to the Agreement and the Plan is an opportunity for Grantee to receive an
award of unrestricted and restricted shares of PNC common stock, not to exceed collectively the number of 2004 Incentive Shares, as
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determined by the Committee or otherwise in accordance with the terms of the Agreement, provided that Grantee satisfies or is
deemed
to have satisfied
the continued employment conditions specified in the Agreement and the other conditions of the Agreement are met. The number of the 2004 Incentive Shares that may be awarded to Grantee by the Committee is limited to a percentage of the target
incentive share numbers specified above, as adjusted for phantom dividends on target shares converted to additional target incentive shares, less the number of the 2003 Incentive Shares, if any, awarded to Grantee pursuant to the 2003 Incentive
Share Agreement, and is subject to the Committee’s negative discretion. The potential payout percentages applicable to the adjusted target incentive shares are determined by the levels of performance of the PNC Performance Goals achieved by PNC
relative to its peers over the Performance Period. The potential payout percentage could be as high as 200% of the adjusted target incentive shares for each performance measure, if PNC outperforms its peers in both performance measure categories, or
could be zero for one or both categories of target incentive shares if PNC fails to achieve at least the threshold level of performance specified in the Agreement. The Grant is subject to the terms and conditions set forth in the Agreement and to
the Plan.
2.
Definitions
. Terms defined in the Plan are
used in the Agreement as defined in the Plan unless otherwise defined in Annex A (attached hereto and incorporated herein by reference) or elsewhere in the Agreement.
3.
Terms and Conditions of Grant
. The Grant will be subject to the following terms and conditions:
3.1
Certification of Attainment of Threshold Performance Goals and Final
Potential Payout Percentages; Award of 2004 Incentive Shares
.
(a) After the end of each year of the Performance Period, PNC will determine the Return on Common Equity (ROCE) and Total Shareholder Return (TSR) for that year for each member of the Peer Group, including PNC, and will calculate the
Adjusted Annual Potential Payout Percentage with respect to each PNC Performance Measure for that year.
(b) As soon as practicable after December 31, 2005, PNC will present to the Committee information concerning the levels of ROCE and TSR performance
achieved by PNC and the other members of the Peer Group for the Performance Period, whether or not PNC has achieved at least the Threshold ROCE Performance Goal and/or the Threshold TSR Performance Goal, and, if so, the Final Potential Payout
Percentages for ROCE and/or TSR performance calculated on the basis of the levels of such performance achieved by PNC relative to the other Peers.
Upon certification of PNC’s levels of achievement of the PNC Performance Goals and the resulting Final Potential Payout Percentages by the Committee,
and
provided that
the Grant is still outstanding, that the continued employment requirement set forth in Section 3.1(c) has been met or is
deemed
to have been met pursuant to the terms of the Agreement, and that at least the threshold
level of performance of at least one of the
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Goals has been met, the Committee will have the authority, subject to the exercise of negative discretion by the Committee pursuant to Section 3.2 and
subject to Section 3.4, if applicable, to award to Grantee (“award”), and direct PNC to issue pursuant to Section 3.5, a number of the 2004 Incentive Shares as follows:
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(i)
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up to and including the number that is the Final ROCE Potential Payout Percentage of the Adjusted Target ROCE Incentive Shares,
provided that
PNC has achieved at least the
Threshold ROCE Performance Goal;
plus
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(ii)
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up to and including the number that is the Final TSR Potential Payout Percentage of the Adjusted Target TSR Incentive Shares,
provided that
PNC has achieved at least the
Threshold TSR Performance Goal;
minus
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(iii)
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the aggregate number of unrestricted and restricted shares of PNC common stock awarded to Grantee pursuant to the 2003 Incentive Share Agreement.
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The date on which the Committee makes its determination as to whether, and if
so, the extent to which, an award of the 2004 Incentive Shares may be made pursuant to the Agreement, and within those limits, whether to award any of the 2004 Incentive Shares hereunder, and if so, how many to award, is hereafter referred to as the
“Award Date.” The Award Date cannot occur any earlier that the date on which the Committee makes its award determination pursuant to the 2003 Incentive Share Agreement.
(c) Except as otherwise provided in and subject to the conditions of Section 3.1(d), Section 3.1(e), or Section 3.4, if
applicable, or unless the Committee determines otherwise: (i) Grantee must remain an employee of the Corporation through the Award Date to be eligible to receive an award of any 2004 Incentive Shares; and (ii) in the event that Grantee’s
employment with the Corporation terminates on or prior to the Award Date, the Grant will terminate as of Grantee’s Termination Date (and therefore no 2004 Incentive Shares may be awarded to Grantee pursuant to the Grant).
(d) In the event of Grantee’s death while an employee of the Corporation
and on or prior to the Award Date, or in the event that Grantee’s employment with the Corporation is terminated on or prior to the Award Date by reason of Grantee’s Total and Permanent Disability or as otherwise determined by the
Committee, the Committee may in its sole discretion, but need not,
deem
the continued employment requirement of Section 3.1(c) to have been met and permit the Grant or a portion thereof to remain outstanding in light of the facts and
circumstances applicable to Grantee notwithstanding such termination of employment.
To the extent that the Grant is outstanding on the Award Date and if at least one of the threshold levels of PNC performance has been achieved, the Committee may consider Grantee for an award of 2004 Incentive Shares
pursuant to Section 3.1(b) within the limits determined by the Final Potential Payout Percentages and subject to reduction for any award of 2003 Incentive Shares to Grantee. Any award that the Committee may
-3-
determine to make after Grantee’s death will be delivered to Grantee’s legal representative.
(e) (i) Notwithstanding anything in the Agreement to the contrary, if, prior
to the Award Date, (1) Grantee’s employment is terminated (other than by reason of Grantee’s death) by the Corporation without Cause or by Grantee for Good Reason after the occurrence of a CIC Triggering Event but prior to a CIC Failure,
or if Grantee’s employment is
deemed
to have been so terminated pursuant to Section 3.1(e)(ii), and (2) a Change in Control occurs within three (3) months of Grantee’s Termination Date, then the continued employment requirement of
Section 3.1(c) will be
deemed
to have been met and Grantee will receive an award pursuant to Section 3.4.
(ii) Grantee’s employment will be
deemed
to have been terminated by the Corporation without Cause after the occurrence of a CIC Triggering
Event but prior to a CIC Failure for purposes of Section 3.1(e)(i) if: (1) Grantee’s employment is terminated by the Corporation without Cause; (2) such termination of employment (a) was at the request of a third party that has taken steps
reasonably calculated to effect a Change in Control or (b) otherwise arose in anticipation of a Change in Control; and (3) a Change in Control occurs within three (3) months of such termination of employment.
Grantee’s employment will be
deemed
to have been terminated by
Grantee for Good Reason after the occurrence of a CIC Triggering Event but prior to a CIC Failure for purposes of Section 3.1(e)(i) if: (1) Grantee terminates Grantee’s employment with Good Reason; (2) the circumstance or event that constitutes
Good Reason (a) occurs at the request of a third party that has taken steps reasonably calculated to effect a Change in Control or (b) otherwise arose in anticipation of a Change in Control; and (3) a Change in Control occurs within three (3) months
of such termination of employment.
For purposes of this
Section 3.1(e)(ii) only, Grantee will have the burden of proving that the requirements of clause (2) of the first or second paragraph of this Section 3.1(e)(ii), as the case may be, have been met and the standard of proof to be met by Grantee will
be clear and convincing evidence.
For purposes of this Section
3.1(e)(ii) only, the definition of Change in Control in Section A.12 of Annex A will exclude the proviso in Section A.12(a).
(iii) If the Grant will terminate by reason of Grantee’s termination of employment with the Corporation pursuant to Section 3.1(c) unless all of the
conditions set forth in Section 3.1(e)(i), including Section 3.1(e)(ii), if applicable, are met, then the Grant will remain outstanding pending satisfaction of all of those conditions. Upon the failure of any required condition, including the
condition that a Change in Control occur within three (3) months of Grantee’s Termination Date, the Grant will terminate on the date such failure occurs.
3.2
Negative Committee Discretion
. The Committee may exercise negative discretion with respect to the Grant and determine, in light of such
Corporation or
-4-
individual performance factors as the Committee may deem appropriate, that, notwithstanding the level of ROCE and/or TSR performance achieved by PNC relative
to the other members of the Peer Group, the Committee will not award, and PNC will not issue, some or all of the number of the 2004 Incentive Shares that the Committee is authorized to award pursuant to Section 3.1(b);
provided, however
, that
the Committee may not exercise such negative discretion upon or after the occurrence of a Change in Control.
3.3
Termination of Grant
. Except as otherwise provided in Section 3.1(d), Section 3.1(e), or Section 3.4, if applicable, the Grant is subject to
termination on or prior to the Award Date pursuant to Section 3.1(c) without the issuance of any of the 2004 Incentive Shares.
Once the Committee has made its determinations at the Award Date, the Grant will terminate as to any portion of the 2004 Incentive Shares that the
Committee is not authorized to award pursuant to Section 3.1(b) and as to any portion that the Committee could but elects not to award by exercise of its negative discretion pursuant to Section 3.2, and such shares shall not be issued to Grantee. In
the event that an award of a number of the 2004 Incentive Shares is made pursuant to Section 3.4, the Grant will terminate as to any portion of the 2004 Incentive Shares not so awarded.
Termination of all or a portion of the Grant will in no way affect Grantee’s covenants or the other provisions of
Section 14 and Section 15.
3.4
Change in Control Prior to
Award Date
. Notwithstanding anything in the Agreement to the contrary, upon the occurrence of a Change in Control at any time prior to the Award Date, the Performance Period, if not already ended, will end as of the end of the day on the day the
Change in Control is
deemed
to occur, and,
provided that
either (i) Grantee is an employee of the Corporation as of the day immediately preceding the day the Change in Control is
deemed
to occur, or (ii) if Grantee’s
employment with the Corporation terminated prior to the occurrence of the Change in Control, the Grant is still outstanding and the continued employment requirement is
deemed
to have been met pursuant to Section 3.1(e)(i) or because the
Committee so determined pursuant to Section 3.1(c) or Section 3.1(d), then Grantee will be
deemed
to have been awarded, and PNC will cause the issuance pursuant to this Section 3.4 to Grantee as Awarded Shares as soon as administratively
practicable following such Change in Control date, an award of the number of the 2004 Incentive Shares determined as follows:
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(i)
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the percentage of the number of Adjusted Target ROCE Incentive Shares that is the greater of (1) 100% of such shares, and (2) the percentage of such shares
determined as described below on the basis of PNC’s level of ROCE performance relative to its peers through the date of the Change in Control if the Change in Control occurs before December 31, 2005 (or the Final ROCE Potential
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Payout Percentage of such shares if the Change in Control occurs on or after December 31, 2005 but before the Award Date);
plus
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(ii)
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the percentage of the number of Adjusted Target TSR Incentive Shares that is the greater of (1) 100% of such shares, and (2) the percentage of such shares determined as described
below on the basis of PNC’s level of TSR performance relative to its peers through the date of the Change in Control if the Change in Control occurs before December 31, 2005 (or the Final TSR Potential Payout Percentage of such shares if the
Change in Control occurs on or after December 31, 2005 but before the Award Date);
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(b)
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prorated
by multiplying the sum determined in Section 3.4(a) above by a fraction (not to exceed 1) equal to the number of days from and including January 1, 2004 through and
including the day the Change in Control is
deemed
to have occurred, divided by 731 (the number of days in the 2-year performance period);
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(c)
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then reduced
by the aggregate number of shares of PNC common stock, if any, that Grantee receives as an award upon the occurrence of the Change in Control pursuant to the
2003 Incentive Share Agreement.
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For purposes of
Section 3.4(a)(i)(2) and (a)(ii)(2) above, the percentages to be determined on the basis of PNC’s levels of ROCE and TSR performance relative to its peers through the date of the Change in Control (if the Change in Control occurs before
December 31, 2005) will be calculated using the same methodology as that set forth in Section A.4 of Annex A for calculating the Adjusted Annual ROCE and TSR Potential Payout Percentages with respect to a given year, but (1) in calculating the ROCE
performance of PNC and the other then existing members of the Peer Group to be used in the calculation of the percentage for purposes of Section 3.4(a)(i)(2), using the period commencing January 1, 2004 through and including the end of the last
completed calendar quarter prior to the occurrence of the Change in Control rather than the period specified in the definition of Return on Common Equity set forth in Section A.41 of Annex A for 2004 or 2005, and (2) in calculating the TSR
performance of PNC and the other then existing members of the Peer Group to be used in the calculation of the percentage for purposes of Section 3.4(a)(ii)(2), using the period beginning at the measuring point established by the market close on
December 31, 2003 and continuing through (and including) the market close on the day the Change in Control is
deemed
to have occurred as the measurement period and using the closing share price on December 31, 2003 for the closing share price
in clause (b), respectively, of the definition of Total Shareholder Return set forth in Section A.49 of Annex A rather than the measurement period and the closing share price, respectively, specified in that definition for the 2004 or 2005
measurement period.
All of the Awarded Shares that are awarded
pursuant to this Section 3.4 will be Vested Shares at the time of issuance, and PNC will issue a certificate or certificates to,
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or at the proper direction of, Grantee or Grantee’s legal representative for such shares without further restriction under the Agreement;
provided,
however
, that no fractional shares will be issued, and if the award includes a fractional interest, such fractional interest will be liquidated on the basis of the then current market value of PNC common stock and paid to Grantee or
Grantee’s legal representative in cash at the time the Awarded Shares are issued.
In the event that a record date for dividends on PNC common stock occurs after the date the Change in Control is
deemed
to have occurred (or after January 1, 2006, if earlier) but before the date the Awarded
Shares are issued, the Corporation will make a cash payment to Grantee equivalent to the amount of the dividends Grantee would have received had the Awarded Shares been issued and outstanding on the date the Change in Control is
deemed
to
have occurred (or on January 1, 2006, if earlier).
In the
event of a corporate transaction or transactions (including, without limitation, stock dividends, stock splits, spin-offs, split-offs, recapitalizations, mergers, consolidations or reorganizations of or by PNC (each, a “Corporate
Transaction”)), the Committee may, subject to the last paragraph of this Section 3.4, make such adjustments in the number and class of the 2004 Incentive Shares subject to award pursuant to this Section 3.4 as it deems appropriate in its sole
discretion to reflect the Corporate Transaction(s), including without limitation payment of the award in cash in an amount equal to the product of (a) the per share value of the consideration payable to a PNC common shareholder in connection with
such Corporate Transaction and (b) the total number of the 2004 Incentive Shares awarded to Grantee pursuant to this Section 3.4.
The Committee may not exercise any negative discretion pursuant to Section 3.2 or otherwise exercise discretion pursuant to the Agreement in any way that
would serve to reduce an award to Grantee pursuant to this Section 3.4.
3.5
Issuance of Awarded Shares; Dividend Equivalents
. Unless a Change in Control occurs prior to the Award Date and Section 3.4 is applicable, PNC will cause the issuance pursuant to this Section 3.5 to Grantee as Awarded Shares of
such number of the 2004 Incentive Shares as have been awarded to Grantee by the Committee as soon as practicable after the Award Date;
provided, however,
that the Committee may in its sole discretion, other than during a Coverage Period,
defer the issuance of an award of 2004 Incentive Shares to Grantee when, in the judgment of the Committee, such deferral may be required in order to obtain or preserve more favorable tax treatment for the Corporation, including deductions for
compensation.
One half (1/2) of the Awarded Shares issued
pursuant to this Section 3.5 will be Vested Shares at the time of issuance, and PNC will issue a certificate or certificates to, or at the proper direction of, Grantee or Grantee’s legal representative for such shares without further
restriction under the Agreement.
The remaining Awarded Shares
issued pursuant to this Section 3.5 will be issued as Restricted Shares and will continue to be subject to the terms and conditions of the
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Agreement, including forfeiture provisions and restrictions against transfer, unless and until they become Vested Shares and are released and reissued by PNC
to, or at the proper direction of, Grantee or Grantee’s legal representative pursuant to Section 9.
No fractional shares will be issued. If an award includes a fractional interest or if the division of the award into unrestricted shares and Restricted
Shares results in fractional interests, any such fractional interest or interests will be liquidated on the basis of the then current market value of PNC common stock and paid to Grantee in cash at the time the Awarded Shares are issued.
In the event that one or more record dates for dividends on PNC common
stock occur after the end of the Performance Period but before the date the Awarded Shares are issued pursuant to this Section 3.5, the Corporation will make a cash payment to Grantee equivalent to the amount of the dividends Grantee would have
received had the Awarded Shares been issued and outstanding on January 1, 2006.
3.6
Restricted Shares
. Restricted Shares will be subject to a Restricted Period as provided in Section A.39 of Annex A. Restricted Shares will be deposited with PNC or its designee, or credited to a book-entry
account, during the term of the Restricted Period and until released pursuant to Section 9 unless and until forfeited pursuant to the terms of the Agreement.
Any certificate or certificates representing such Restricted Shares will contain the following legend:
“This certificate and the shares of stock represented hereby are
subject to the terms and conditions (including forfeiture and restrictions against transfer) contained in The PNC Financial Services Group, Inc. 1997 Long-Term Incentive Award Plan as amended and an Agreement entered into between the registered
owner and The PNC Financial Services Group, Inc. Release from such terms and conditions will be made only in accordance with the provisions of such Plan and such Agreement, a copy of each of which is on file in the office of the Corporate Secretary
of The PNC Financial Services Group, Inc.”
Where a
book-entry system is used with respect to Restricted Shares, appropriate notation of such forfeiture possibility and transfer restrictions will be made on the system with respect to the account or accounts to which the Restricted Shares are
credited.
Restricted Shares deposited with PNC or its designee
during the term of the Restricted Period that become Vested Shares will be released and reissued to, or at the proper direction of, Grantee or Grantee’s legal representative pursuant to Section 9 as soon as administratively practicable
following the end of the Restricted Period.
4.
Rights as
Shareholder
. Except as provided in Section 6, if applicable, and subject to Section 7.5(c), if applicable, Grantee will have all the rights and privileges of a shareholder with respect to Awarded Shares once they have been issued including, but
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not limited to, the right to vote the shares and the right to receive dividends thereon if and when declared by the Board;
provided, however,
that all
such rights and privileges will cease immediately upon any forfeiture of Awarded Shares that have not become Vested Shares.
5.
Capital Adjustments
. Except as otherwise provided in Section 3.4, the number and class of 2004 Incentive Shares subject to award under the
Agreement will be subject to such adjustment, if any, as the Committee in its sole discretion deems appropriate to reflect corporation transactions including, without limitation, stock dividends, stock splits, spin-offs, split-offs,
recapitalizations, mergers, consolidations or reorganizations of or by PNC (each, a “Corporate Transaction”). Awarded Shares issued as Restricted Shares pursuant to Section 3.5 will, as issued and outstanding shares of PNC common stock, be
subject to such adjustment as may be necessary to reflect Corporate Transactions;
provided
,
however
, that any shares received as distributions on or in exchange for Unvested Shares will be subject to the terms and conditions of the
Agreement as if they were unvested Restricted Shares.
6.
Prohibitions Against Sale, Assignment, etc.
The Grant may not be sold, assigned, transferred, exchanged, pledged, hypothecated or otherwise encumbered, other than by will or the laws of descent and distribution if permitted by the Committee
pursuant to Section 3.5(d). Unvested Shares may not be sold, assigned, transferred, exchanged, pledged, hypothecated or otherwise encumbered, other than by will or the laws of descent and distribution or as may be required pursuant to Section 10.2,
unless and until the Restricted Period terminates and the Vested Shares are released and reissued by PNC pursuant to Section 9.
7.
Forfeiture of Unvested Shares; Death; Certain Disability or Other Terminations; Termination in Anticipation of a Change in Control
.
7.1
Forfeiture on Termination of Employment
. Except as otherwise
provided in and subject to the conditions of Section 7.3, Section 7.4(a), Section 7.4(c), Section 7.5, or Section 8, if applicable, or unless the Committee determines otherwise, in the event that Grantee’s employment with the Corporation
terminates prior to January 1, 2007, all Restricted Shares that are Unvested Shares on Grantee’s Termination Date will be forfeited by Grantee to PNC without payment of any consideration by PNC.
Upon forfeiture of Unvested Shares pursuant to the provisions of this Section
7.1 or the provisions of Section 7.2, Section 7.4(b), Section 7.4(c) or Section 7.5(d), neither Grantee nor any successors, heirs, assigns or legal representatives of Grantee will thereafter have any further rights or interest in such Unvested
Shares or in any certificate or certificates representing such Unvested Shares.
7.2
Forfeiture for Detrimental Conduct
. Unvested Shares that would otherwise remain outstanding after Grantee’s Termination Date, if any, will be forfeited by Grantee to PNC without payment of any
consideration by PNC in the event that, at any time prior to the date such shares become Vested Shares, PNC determines that
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Grantee has engaged in Detrimental Conduct;
provided, however,
that: (a) this Section 7.2 will not apply to Restricted Shares that remain outstanding
after Grantee’s Termination Date pursuant to Section 7.3 or Section 7.5, if any; (b) no determination that Grantee has engaged in Detrimental Conduct may be made on or after the date of Grantee’s death; (c) Detrimental Conduct will not
apply to conduct by or activities of successors to the Restricted Shares by will or the laws of descent and distribution in the event of Grantee’s death; and (d) Detrimental Conduct will cease to apply to any Restricted Shares upon a Change in
Control.
7.3
Death
. In the event of Grantee’s
death while an employee of the Corporation and prior to January 1, 2007, the Continued Employment Performance Goal will be
deemed
to have been achieved, and the Restricted Period with respect to the then outstanding Unvested Shares will
terminate on the date of Grantee’s death.
The Restricted
Shares which thereby become Vested Shares will be released and reissued by PNC to, or at the proper direction of, Grantee’s legal representative pursuant to Section 9 as soon as administratively practicable following such date.
7.4
Disability or Other Termination
.
(a) In the event Grantee’s employment with the Corporation is terminated
prior to January 1, 2007 by the Corporation by reason of Grantee’s Total and Permanent Disability, Unvested Shares will not be forfeited on Grantee’s Termination Date. Instead, Unvested Shares will, subject to the forfeiture provisions of
Section 7.2, remain outstanding pending approval of the vesting of the Restricted Shares pursuant to this Section 7.4(a) by the Designated Person specified in Section A.20 of Annex A.
If such Unvested Shares are still outstanding but the Designated Person has not made an affirmative determination to either
approve or disapprove the vesting of the Unvested Shares by December 31, 2006, then the Restricted Period will be automatically extended through the first to occur of: (1) the day the Designated Person makes an affirmative determination regarding
such vesting; and (2) either (i) the ninetieth (90
th
) day following January 1, 2007, if the Designated Person is the
Chief Human Resources Officer of PNC, or (ii) the 180
th
day following January 1, 2007 if the Designated Person is
the Committee, whichever is applicable.
If the vesting of the
then outstanding Unvested Shares is affirmatively approved by the Designated Person on or prior to the last day of the Restricted Period, including any extension of the Restricted Period if applicable, then the Continued Employment Performance Goal
will be
deemed
to have been achieved, and the Restricted Period with respect to any then outstanding Unvested Shares will terminate as of the end of the day on the date of such approval or December 31, 2006, whichever is later. The Restricted
Shares outstanding at the termination of the Restricted Period will become Vested Shares and will be released and reissued by PNC pursuant to Section 9.
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(b) If the Designated Person disapproves the vesting of the Unvested Shares that had remained outstanding
after Grantee’s Termination Date pending approval of vesting, then all such Unvested Shares that are still outstanding will be forfeited by Grantee to PNC on such disapproval date without payment of any consideration by PNC.
If by the end of the Restricted Period, including any extension of the
Restricted Period pursuant to the second paragraph of Section 7.4(a) if applicable, the Designated Person has neither affirmatively approved nor disapproved the vesting of the Unvested Shares that had remained outstanding after Grantee’s
Termination Date pending approval of vesting, then all such Unvested Shares that are still outstanding will be forfeited by Grantee to PNC at the close of business on the last day of the Restricted Period without payment of any consideration by PNC.
(c) In the event that Grantee’s employment with the
Corporation is terminated prior to January 1, 2007 other than by reason of death, by the Corporation by reason of Grantee’s Total and Permanent Disability, or in circumstances that qualify for vesting pursuant to Section 7.5(a) or Section
7.5(b), all Restricted Shares that are Unvested Shares on Grantee’s Termination Date will be forfeited by Grantee to PNC on such date without payment of any consideration by PNC unless the Committee determines otherwise. The Committee may in
its sole discretion, with respect to some or all of the Unvested Shares, treat such shares in the same manner that such shares would be treated pursuant to Section 7.4 if Grantee’s employment had been terminated by the Corporation by reason of
Total and Permanent Disability.
7.5
Termination in
Anticipation of a Change in Control
.
(a) Notwithstanding
anything in the Agreement to the contrary, if, after the occurrence of a CIC Triggering Event but prior to a CIC Failure and prior to January 1, 2007, Grantee’s employment is terminated (other than by reason of Grantee’s death) by the
Corporation without Cause or by Grantee for Good Reason, or if Grantee’s employment is
deemed
to have been so terminated pursuant to Section 7.5(b), then: (i) the Continued Employment Performance Goal will be
deemed
to have been
achieved and the Restricted Period with respect to any then outstanding Unvested Shares will terminate as of the end of the day on the day immediately preceding Grantee’s Termination Date (or, in the case of a qualifying termination pursuant to
Section 7.5(b), the date all of the conditions set forth in clauses (i), (ii) and (iii) of the first or second paragraph, as the case may be, of Section 7.5(b) are met); and (ii) all Restricted Shares that thereby become Vested Shares will be
released and reissued by PNC pursuant to Section 9 as soon as administratively practicable following such date.
(b) Grantee’s employment will also be
deemed
to have been terminated by the Corporation without Cause after the occurrence of a CIC Triggering
Event but prior to a CIC Failure for purposes of Section 7.5(a) if: (i) Grantee’s employment is terminated by the Corporation without Cause; (ii) such termination of employment (a) was at the request of a third party that has taken steps
reasonably calculated to effect a Change in Control or (b) otherwise arose in anticipation of a Change in Control; and (iii) a CIC
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Triggering Event or a Change in Control occurs within three (3) months of such termination of employment.
Grantee’s employment will also be
deemed
to have been terminated
by Grantee for Good Reason after the occurrence of a CIC Triggering Event but prior to a CIC Failure for purposes of Section 7.5(a) if: (i) Grantee terminates Grantee’s employment with Good Reason; (ii) the circumstance or event that
constitutes Good Reason (a) occurs at the request of a third party that has taken steps reasonably calculated to effect a Change in Control or (b) otherwise arose in anticipation of a Change in Control; and (iii) a CIC Triggering Event or a Change
in Control occurs within three (3) months of such termination of employment.
For purposes of this Section 7.5(b) only, Grantee will have the burden of proving that the requirements of clause (ii) of the first or second paragraph of this Section 7.5(b), as the case may be, have been met and the
standard of proof to be met by Grantee will be clear and convincing evidence.
For purposes of this Section 7.5(b) only, the definition of Change in Control in Section A.12 of Annex A will exclude the
proviso
in Section A.12(a).
(c) If the Unvested Shares will be forfeited by Grantee to PNC by reason of
Grantee’s termination of employment with the Corporation pursuant to Section 7.1 unless all of the conditions set forth in clauses (i), (ii) and (iii) of the first or second paragraph, as the case may be, of Section 7.5(b) are met, then in the
event that the record date for any dividend payable with respect to the Unvested Shares occurs on or after Grantee’s Termination Date but prior to the time all of the conditions set forth in clauses (i), (ii) and (iii) of the first or second
paragraph, as the case may be, of Section 7.5(b) have been met, such dividend will be held, without interest, pending satisfaction of all of such conditions. In the event that one or more of the conditions of Section 7.5(b) are
not
met, any
dividend being held pending satisfaction of such conditions will be forfeited by Grantee to PNC without payment of any consideration by PNC.
(d) If the Unvested Shares will be forfeited by Grantee to PNC by reason of Grantee’s termination of employment with the Corporation pursuant to
Section 7.1 unless all of the conditions set forth in clauses (i), (ii) and (iii) of the first or second paragraph, as the case may be, of Section 7.5(b) are met, then the Restricted Shares will remain outstanding pending satisfaction of all of
those conditions. Upon the failure of any required condition, all such Unvested Shares will be forfeited by Grantee to PNC on the date such failure occurs without payment of any consideration by PNC.
8.
Change in Control on or After Award Date
. Notwithstanding anything
in the Agreement to the contrary, upon the occurrence of a Change in Control: (i) if Grantee is an employee of the Corporation as of the day immediately preceding the Change in Control, the Continued Employment Performance Goal will be
deemed
to have been achieved and the Restricted Period will terminate with respect to all then outstanding Unvested Shares as of the day immediately preceding the Change in Control;
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(ii) if Grantee’s employment with the Corporation terminated prior to the occurrence of the Change in Control but the Unvested Shares remained
outstanding after such termination of employment pursuant to Section 7.4 and are still outstanding pending approval of the vesting of such shares by the Designated Person specified in Section A.20 of Annex A, then with respect to all Unvested Shares
outstanding as of the day immediately preceding the Change in Control, such vesting approval will be
deemed
to have been given, the Continued Employment Performance Goal will be
deemed
to have been achieved, and the Restricted Period
will terminate, all as of the day immediately preceding the Change in Control; and (iii) all Restricted Shares that thereby become Vested Shares will be released and reissued by PNC pursuant to Section 9 as soon as administratively practicable
following such date.
9.
Termination of Prohibitions on
Restricted Shares
. Following termination of the Restricted Period, PNC will release and issue or reissue the certificate or certificates representing the then outstanding whole Restricted Shares that have become Vested Shares without the legend
referred to in Section 3.5; any fractional interest will be liquidated on the basis of the then current market value of the PNC common stock.
Upon release and reissuance of shares that have become Vested Shares, PNC or its designee will deliver the certificate or certificates for such whole
shares, together with the proceeds of any such fractional interest to, or at the proper direction of, Grantee or Grantee’s legal representative.
10.
Payment of Taxes
.
10.1
Internal Revenue Code Section 83(b) Election
. In the event that Grantee makes an Internal Revenue Code Section 83(b) election with respect to
the Restricted Shares, Grantee will satisfy all applicable federal, state or local withholding and payroll tax obligations (“withholding tax obligations”) arising from that election either: (a) by payment of cash; (b) by physical delivery
to PNC of certificates for whole shares of PNC common stock that are not subject to any contractual restriction, pledge or other encumbrance and that have been owned by Grantee for at least six (6) months and, in the case of restricted stock, for
which it has been at least six (6) months since the restrictions lapsed; or (c) by a combination of cash and such stock. Any such tax election will be made pursuant to a form to be provided to Grantee by PNC on request. For purposes of this Section
10.1, shares of PNC common stock that are used to satisfy applicable withholding tax obligations will be valued at their Fair Market Value on the date the tax withholding obligation arises. Grantee will provide to PNC a copy of any Internal Revenue
Code Section 83(b) election filed by Grantee with respect to the Restricted Shares not later than ten (10) days after the filing of such election.
10.2
Other Tax Liabilities
. Where Grantee has not previously satisfied all applicable withholding tax obligations, PNC will, at the time the tax
withholding obligation arises, retain sufficient whole shares of PNC common stock from the shares awarded to Grantee pursuant to the Agreement to satisfy the minimum amount of taxes required to be withheld by the Corporation in connection with the
Awarded Shares. For
-13-
purposes of this Section 10.2, shares of PNC common stock retained to satisfy applicable withholding tax requirements will be valued at their Fair Market
Value on the date the tax withholding obligation arises.
PNC
will
not
retain more than the number of shares sufficient to satisfy the minimum amount of taxes required to be withheld in connection with the Awarded Shares. If Grantee desires to have an additional amount, up to Grantee’s W-4
obligation, withheld above the required minimum and if PNC so permits, Grantee may elect to satisfy this additional withholding either: (a) by payment of cash; or (b) using whole shares of PNC common stock (either by physical delivery to PNC of
certificates for the shares or through PNC’s share attestation procedure) that are not subject to any contractual restriction, pledge or other encumbrance and that have been owned by Grantee for at least six (6) months and, in the case of
restricted stock, for which it has been at least six (6) months since the restrictions lapsed. PNC will not be responsible for determining whether shares of PNC common stock so used by Grantee for this purpose satisfy the requirements set forth in
this paragraph, and will be entitled to rely on Grantee’s share attestation or certification for all purposes, including but not limited to taxes and tax withholding. Any such tax election will be made pursuant to a form provided by PNC. Shares
of PNC common stock that are used for this purpose will be valued at their Fair Market Value on the date the tax withholding obligation arises.
11.
Employment
. Neither the Grant nor the award and issuance of Awarded Shares nor any term or provision of the Agreement shall constitute or be
evidence of any understanding, expressed or implied, on the part of PNC or any Subsidiary to employ Grantee for any period or in any way alter Grantee’s status as an employee at will.
12.
Subject to the Plan and the Committee
. In all respects the Grant,
any Awarded Shares and the Agreement are subject to the terms and conditions of the Plan, which has been made available to Grantee and is incorporated herein by reference;
provided, however,
the terms of the Plan shall not be considered an
enlargement of any benefits under the Agreement. Further, the Grant, any Awarded Shares and the Agreement are subject to any interpretation of, and any rules and regulations issued by, the Committee or under the authority of the Committee, whether
made or issued before or after the Grant Date.
13.
Headings; Entire Agreement
. Headings used in the Agreement are provided for reference and convenience only, shall not be considered part of the Agreement, and shall not be employed in the construction of the Agreement. The Agreement
constitutes the entire agreement between Grantee and PNC and supersedes all other discussions, negotiations, correspondence, representations, understandings and agreements between the parties with respect to the subject matter hereof.
14.
Grantee Covenants
.
14.1
General
. Grantee and PNC acknowledge and agree that Grantee has
received adequate consideration with respect to enforcement of the provisions of
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Sections 14 and 15, that such provisions are reasonable and properly required for the adequate protection of the business of the Corporation, and that
enforcement of such provisions will not prevent Grantee from earning a living.
14.2
Non-Solicitation; No-Hire
. Grantee agrees to comply with the provisions of subsections (a) and (b) of this Section 14.2 while employed by the Corporation and for a period of twelve (12) months after
Grantee’s Termination Date regardless of the reason for such termination of employment.
(a)
Non-Solicitation
. Grantee shall not, directly or indirectly, either for Grantee’s own benefit or purpose or for the benefit or purpose of any Person other than PNC or any Subsidiary, solicit, call on,
do business with, or actively interfere with PNC’s or any Subsidiary’s relationship with, or attempt to divert or entice away, any Person that Grantee should reasonably know (i) is a customer of PNC or any Subsidiary for which PNC or any
Subsidiary provides any services as of the Termination Date, or (ii) was a customer of PNC or any Subsidiary for which PNC or any Subsidiary provided any services at any time during the twelve (12) months preceding the Termination Date, or (iii)
was, as of the Termination Date, considering retention of PNC or any Subsidiary to provide any services.
(b)
No-Hire
. Grantee shall not, directly or indirectly, either for Grantee’s own benefit or purpose or for the benefit or purpose of any
Person other than PNC or any Subsidiary, employ or offer to employ, call on, or actively interfere with PNC’s or any Subsidiary’s relationship with, or attempt to divert or entice away, any employee of the Corporation, nor shall Grantee
assist any other Person in such activities.
Notwithstanding
the above, if Grantee’s employment with the Corporation is terminated by the Corporation without Cause or by Grantee with Good Reason and such Termination Date occurs during a Coverage Period (either as Coverage Period is defined in Section
A.19 of Annex A or, if Grantee was a party to a written agreement between Grantee and PNC providing, among other things, for certain change in control severance benefits (a “CIC Severance Agreement”) that was in effect at the time of such
termination of employment, as Coverage Period is defined in such CIC Severance Agreement, if longer), then commencing immediately after such Termination Date, the provisions of subsections (a) and (b) of this Section 14.2 will no longer apply and
will be replaced with the following subsection (c):
(c)
No-Hire
. Grantee agrees that Grantee shall not, for a period of twelve (12) months after the Termination Date, employ or offer to employ, solicit, actively interfere with PNC’s or any PNC affiliate’s relationship with, or attempt to
divert or entice away, any officer of PNC or any PNC affiliate.
14.3
Confidentiality
. During Grantee’s employment with the Corporation, and thereafter regardless of the reason for termination of such employment, Grantee will not disclose or use in any way any confidential business or
technical information or trade secret acquired in the course of such employment, all of which is the exclusive and
-15-
valuable property of the Corporation whether or not conceived of or prepared by Grantee, other than (a) information generally known in the Corporation’s
industry or acquired from public sources, (b) as required in the course of employment by the Corporation, (c) as required by any court, supervisory authority, administrative agency or applicable law, or (d) with the prior written consent of PNC.
14.4
Ownership of Inventions
. Grantee shall promptly
and fully disclose to PNC any and all inventions, discoveries, improvements, ideas or other works of inventorship or authorship, whether or not patentable, that have been or will be conceived and/or reduced to practice by Grantee during the term of
Grantee’s employment with the Corporation, whether alone or with others, and that are (a) related directly or indirectly to the business or activities of PNC or any Subsidiary or (b) developed with the use of any time, material, facilities or
other resources of PNC or any Subsidiary (“Developments”). Grantee agrees to assign and hereby does assign to PNC or its designee all of Grantee’s right, title and interest, including copyrights and patent rights, in and to all
Developments. Grantee shall perform all actions and execute all instruments that PNC or any Subsidiary shall deem necessary to protect or record PNC’s or its designee’s interests in the Developments. The obligations of this Section 14.4
shall be performed by Grantee without further compensation and will continue beyond the Termination Date.
15.
Enforcement Provisions
. Grantee understands and agrees to the following provisions regarding enforcement of the Agreement.
15.1
Governing Law and Jurisdiction
. The Agreement is governed by and
construed under the laws of the Commonwealth of Pennsylvania, without regard to conflict of laws rules. Any dispute or claim arising out of or relating to the Agreement or claim of breach hereof shall be brought exclusively in the federal court for
the Western District of Pennsylvania or in the Court of Common Pleas of Allegheny County, Pennsylvania. By execution of the Agreement, Grantee and PNC hereby consent to the exclusive jurisdiction of such courts, and waive any right to challenge
jurisdiction or venue in such courts with regard to any suit, action, or proceeding under or in connection with the Agreement.
15.2
Equitable Remedies
. A breach of the provisions of any of Sections 14.2, 14.3 or 14.4 will cause the Corporation irreparable harm, and the
Corporation will therefore be entitled to issuance of immediate, as well as permanent, injunctive relief restraining Grantee, and each and every person and entity acting in concert or participating with Grantee, from initiation and/or continuation
of such breach.
15.3
Tolling Period
. If it becomes
necessary or desirable for the Corporation to seek compliance with the provisions of Section 14.2 by legal proceedings, the period during which Grantee shall comply with said provisions will extend for a period of twelve (12) months from the date of
the legal order requiring such compliance.
15.4
No
Waiver
. Failure of PNC to demand strict compliance with any of the terms, covenants or conditions of the Agreement will not be deemed a waiver of such
-16-
term, covenant or condition, nor will any waiver or relinquishment of any such term, covenant or condition on any occasion or on multiple occasions be deemed
a waiver or relinquishment of such term, covenant or condition.
15.5
Severability
. The restrictions and obligations imposed by Sections 14.2, 14.3 and 14.4 are separate and severable, and it is the intent of Grantee and PNC that if any restriction or obligation imposed by any of these provisions
is deemed by a court of competent jurisdiction to be void for any reason whatsoever, the remaining provisions, restrictions and obligations will remain valid and binding upon Grantee.
15.6
Reform
. In the event any of Sections 14.2, 14.3 and 14.4 are determined by a court of competent jurisdiction to
be unenforceable because unreasonable either as to length of time or area to which said restriction applies, it is the intent of Grantee and PNC that said court reduce and reform the provisions thereof so as to apply the greatest limitations
considered enforceable by the court.
15.7
Waiver of Jury
Trial
. Each of Grantee and PNC hereby waives any right to trial by jury with regard to any suit, action or proceeding under or in connection with any of Sections 14.2, 14.3 and 14.4.
15.8
Applicable Law
. Notwithstanding anything in the Agreement, PNC will not be required to comply with any term,
covenant or condition of the Agreement if and to the extent prohibited by law, including but not limited to federal banking and securities regulations, or as otherwise directed by one or more regulatory agencies having jurisdiction over PNC or any
of its subsidiaries. Further, to the extent, if any, applicable to Grantee, Grantee agrees to reimburse PNC for any amounts Grantee may be required to reimburse PNC or its subsidiaries pursuant to Section 304 of the Sarbanes-Oxley Act of 2002, and
agrees that PNC need not comply with any term, covenant or condition of the Agreement to the extent that doing so would require that Grantee reimburse PNC or its subsidiaries for such amounts pursuant to Section 304 of the Sarbanes-Oxley Act of
2002.
16.
Amendment of Change in Control Provisions of 2003
Incentive Share Agreement
. The terms and conditions of the 2003 Incentive Share Agreement are hereby amended as follows:
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(1)
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Section 3.1(d) is amended and restated in its entirety to read as follows:
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“(d)(1)
(i) Notwithstanding anything in the Agreement to the contrary, if, prior to the Award Date, (1) Grantee’s employment is terminated
(other than by reason of Grantee’s death) by the Corporation without Cause or by Grantee for Good Reason after the occurrence of a CIC Triggering Event but prior to a CIC Failure, or if Grantee’s employment is deemed to have been so
terminated pursuant to Section 3.1(d)(1)(ii), and (2) a Change in Control occurs within three
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(3) months of Grantee’s Termination Date, then the continued employment requirement of Section 3.1(b) will be deemed to have been met and Grantee will
receive an award pursuant to Section 3.1(d)(2).
(ii) Grantee’s employment will be deemed to have been terminated by the Corporation without Cause after the occurrence of a CIC Triggering Event but prior to a CIC Failure for purposes of Section 3.1(d)(1)(i) if: (1) Grantee’s
employment is terminated by the Corporation without Cause (as defined in Section A.4(a) of Annex A; (2) such termination of employment (a) was at the request of a third party that has taken steps reasonably calculated to effect a Change in Control
or (b) otherwise arose in anticipation of a Change in Control; and (3) a Change in Control occurs within three (3) months of such termination of employment.
Grantee’s employment will be deemed to have been terminated by Grantee for Good Reason after the occurrence of a CIC Triggering Event
but prior to a CIC Failure for purposes of Section 3.1(d)(1)(i) if: (1) Grantee terminates Grantee’s employment with Good Reason (as defined in Section A.18 of Annex A); (2) the circumstance or event that constitutes Good Reason (a) occurs at
the request of a third party that has taken steps reasonably calculated to effect a Change in Control or (b) otherwise arose in anticipation of a Change in Control; and (3) a Change in Control occurs within three (3) months of such termination of
employment.
For purposes of this Section
3.1(d)(1)(ii) only, Grantee will have the burden of proving that the requirements of clause (2) of the first or second paragraph of this Section 3.1(d)(1)(ii), as the case may be, have been met and the standard of proof to be met by Grantee will be
clear and convincing evidence.
For purposes
of this Section 3.1(d)(1)(ii) only, the definition of Change in Control in Section A.6 of Annex A will exclude the proviso in Section A.6(a).
(iii) If the Grant will terminate by reason of Grantee’s termination of employment with the Corporation pursuant to Section 3.1(b)
unless all of the conditions set forth in Section 3.1(d)(1)(i) (including those set forth in Section 3.1(d)(1)(ii), if applicable) are met, then the Grant will remain outstanding pending satisfaction of all of those conditions. Upon the failure of
any required condition, including the condition that a Change in Control occur within three (3) months of Grantee’s Termination Date, the Grant will terminate on the date such failure occurs.
(d)(2)
Notwithstanding anything in the Agreement to the contrary, upon the occurrence of a Change in Control at any
time prior to the Award Date, the Performance Period, if not already ended, will end as of the end of the day on the
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day the Change in Control is deemed to occur, and,
provided that
either (i) Grantee is an employee of the Corporation as of the day immediately
preceding the day the Change in Control is deemed to occur, or (ii) if Grantee’s employment with the Corporation terminated prior to the occurrence of the Change in Control, the Grant is still outstanding and the continued employment
requirement is deemed to have been met pursuant to Section 3.1(d)(1) or because the Committee so determined pursuant to Section 3.1(b) or Section 3.1(c), then Grantee will be deemed to have been awarded, and PNC will cause the issuance pursuant to
this Section 3.1(d)(2) to Grantee as Awarded Shares as soon as administratively practicable following such Change in Control date, an award of the number of the Incentive Shares determined as follows:
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(i)
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100% of the Target Incentive Shares;
plus
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(ii)
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50% of the Premium Incentive Shares if PNC’s level of ROCE performance relative to its peers, determined as described below, through the date of the Change in Control is within
the top quartile of the ROCE performance of the members of the Peer Group at that time;
plus
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(iii)
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50% of the Premium Incentive Shares if PNC’s level of TSR performance relative to its peers, determined as described below, through the date of the Change in Control is within
the top quartile of the TSR performance of the members of the Peer Group at that time;
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(b)
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prorated
by multiplying the sum determined in Section 3.1(d)(2)(a) above by a fraction (not to exceed 1) equal to the number of days from and including January 1, 2003
through and including the day the Change in Control is deemed to have occurred, divided by 1,096 (the number of days in the 3-year performance period).
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In determining the levels of ROCE performance of PNC and the other then existing members of the Peer Group
for purposes of Section 3.1(d)(2)(a)(ii) above, the period commencing January 1, 2003 through and including the end of the last completed calendar quarter prior to the occurrence of the Change in Control will be used in the definition of Return on
Common Equity set forth in Section A.26 of Annex A rather than the period specified in that definition.
In determining the levels of TSR performance of PNC and the other then existing members of the Peer Group for purposes of Section
3.1(d)(2)(a)(iii) above, the period beginning at the measuring point established by the market close on December 31, 2002 and continuing through (and including) the market close on the day the Change in Control is deemed to have occurred will be
used as
-19-
the measurement period in the definition of Total Shareholder Return set forth in Section A.29 of Annex A rather than the period specified in that
definition.
All of the Awarded Shares that
are awarded pursuant to this Section 3.1(d)(2) will be Vested Shares at the time of issuance, and PNC will issue a certificate or certificates to, or at the proper direction of, Grantee or Grantee’s legal representative for such shares without
further restriction under the Agreement;
provided, however
, that no fractional shares will be issued, and if the award includes a fractional interest, such fractional interest will be liquidated on the basis of the then current market value
of PNC Common Stock and paid to Grantee or Grantee’s legal representative in cash at the time the Awarded Shares are issued.
In the event that a record date for dividends on PNC Common Stock occurs after the date the Change in Control is deemed to have occurred
(or after January 1, 2006, if earlier) but before the date the Awarded Shares are issued, the Corporation will make a cash payment to Grantee equivalent to the amount of the dividends Grantee would have received had the Awarded Shares been issued
and outstanding on the date the Change in Control is deemed to have occurred (or on January 1, 2006, if earlier).
In the event of a corporate transaction or transactions (including, without limitation, stock dividends, stock splits, spin-offs,
split-offs, recapitalizations, mergers, consolidations or reorganizations of or by PNC (each, a “Corporate Transaction”)), the Committee may, subject to the last paragraph of this Section 3.1(d)(2), make such adjustments in the number and
class of Incentive Shares subject to award pursuant to this Section 3.1(d)(2) as it deems appropriate in its sole discretion to reflect the Corporate Transaction(s), including without limitation payment of the award in cash in an amount equal to the
product of (a) the per share value of the consideration payable to a PNC Common Stock shareholder in connection with such Corporate Transaction and (b) the total number of the Incentive Shares awarded to Grantee pursuant to this Section 3.1(d)(2).
The Committee may not exercise any negative
discretion pursuant to Section 3.2 or otherwise exercise discretion pursuant to the Agreement in any way that would serve to reduce an award to Grantee pursuant to this Section 3.1(d)(2).”
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(2)
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Section 3.2 is amended by: (i) deleting the phrase “other than during a Coverage Period” from the first line of Section 3.2(a) and adding the following proviso to the end
of Section 3.2(a): “
provided, however,
that the Committee may not exercise such negative discretion upon or after the occurrence of a Change in Control”; and (ii) deleting Section 3.2(b) in its entirety.
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(3)
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Section 3.3 is amended by adding the following to the end of the section: “In the event that an award of a number of Incentive Shares is made pursuant to Section 3.1(d)(2), the
Grant will terminate as to any portion of the Incentive Shares not so awarded. Termination of all or a portion of the Grant will in no way affect Grantee’s covenants or the other provisions of Section 13 and Section 14.”
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(4)
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Section 3.4 is amended to correct the typographical error in the last line of the section by changing “2005” to “2006.”
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(5)
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A new Section 8A that reads as follows is added immediately prior to Section 8:
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“8A.
Change in Control on or After Award Date
. Notwithstanding anything in the Agreement to the
contrary, upon the occurrence of a Change in Control: (i) if Grantee is an employee of the Corporation as of the day immediately preceding the Change in Control, the Continued Employment Performance Goal will be deemed to have been achieved and the
Restricted Period will terminate with respect to all then outstanding Unvested Shares as of the day immediately preceding the Change in Control; (ii) if Grantee’s employment with the Corporation terminated prior to the occurrence of the Change
in Control but Unvested Shares remained outstanding after such termination of employment pursuant to Section 7.4, then with respect to all such Unvested Shares outstanding as of the day immediately preceding the Change in Control, the Restricted
Period will terminate as of the day immediately preceding the Change in Control; and (iii) all Restricted Shares that thereby become Vested Shares will be released and reissued by PNC pursuant to Section 8 as soon as administratively practicable
following such date.”
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(6)
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The following amendments are made to the definitions in Annex A:
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The definition of Continued Employment Performance Goal in Section A.12 is amended by: (i) replacing the phrase “or pursuant to
Section 7.5 of the Agreement” with the phrase “or to deemed achievement pursuant to Section 7.5 or Section 8A of the Agreement”; and (ii) deleting the word “and” immediately preceding subsection (b) and adding the following
subsection (c) at the end of the definition: “and (c) the day a Change in Control is deemed to have occurred.”
The definition of Performance Period in Section A.22 is amended by adding the phrase “subject to early termination pursuant to
Section 3.1(d)(2) of the Agreement,” after the word “means.”
The definition of Restricted Period in Section A.25 is amended by deleting the word “and” immediately preceding subsection (b), and by adding the following subsection (c) at the end of the definition:
“and (c) the day immediately preceding the day a Change in Control is deemed to have occurred.”
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17.
Acceptance of Grant; PNC Right to Cancel; Effectiveness of Agreement
. If Grantee does not
accept the Grant by executing and delivering a copy of the Agreement to PNC, without altering or changing the terms thereof in any way, within sixty (60) days of receipt by Grantee of a copy of the Agreement, PNC may, in its sole discretion,
withdraw its offer and cancel the Grant at any time prior to Grantee’s delivery to PNC of a copy of the Agreement executed by Grantee. Otherwise, upon execution and delivery of the Agreement by both PNC and Grantee, the Agreement is effective.
I
N
W
ITNESS
W
HEREOF
, PNC has caused the Agreement to be signed on its behalf as of the Grant Date.
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THE PNC FINANCIAL SERVICES GROUP, INC.
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By:
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Chairman and Chief Executive Officer
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ATTEST:
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By:
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Corporate Secretary
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A
CCEPTED
AND
A
GREED
TO
by G
RANTEE
.
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Grantee
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2004 Incentive Share Grant
Two Year Performance Period (January 1, 2004 - December 31, 2005)
PNC
Performance Goals: Relative PNC Return on Common Equity and Total Shareholder Return
50%: Vests on Award; 50%: Restricted Period From Award Through
December 31, 2006
ANNEX A
TO
THE PNC FINANCIAL SERVICES GROUP, INC.
1997 LONG-TERM INCENTIVE AWARD PLAN
2004 INCENTIVE SHARE AGREEMENT
* * *
CERTAIN DEFINITIONS
Except where the context otherwise indicates, the following definitions apply
for purposes of the 2004 Incentive Share Agreement (“Agreement”) to which this Annex A is attached:
A.1 “
2003 Incentive Share Agreement
” means the 2003 Incentive Share Agreement between Grantee and PNC relating to the January 3, 2003
grant of a certain incentive share award opportunity (the 2003 Incentive Shares) to Grantee, as amended.
A.2 “
2003 Incentive Shares
” means the incentive share award opportunity granted to Grantee January 3, 2003 pursuant to the 2003 Incentive
Share Agreement and subject to the terms and conditions of that agreement, as amended, and the Plan.
A.3 “
2004 Incentive Shares
” means, collectively, the Maximum ROCE Incentive Shares and the Maximum TSR Incentive Shares, representing the
maximum number of shares of PNC common stock that could be awarded to Grantee as Awarded Shares, subject to the terms and conditions of the Agreement and the Plan.
A.4 “
Adjusted Annual Potential Payout Percentage(s)
.” The Adjusted Annual Potential Payout Percentage for a
given year within the Performance Period (2004 or 2005) with respect to a given Performance Measure (ROCE or TSR) (the “Adjusted Annual ROCE Potential Payout Percentage” or the “Adjusted Annual TSR Potential Payout Percentage,”
as the case may be) is the percentage determined as follows.
If PNC achieves the best ROCE or TSR performance, as the case may be, of any of the then existing members of the Peer Group for a given year (Top Performer ranking), the Adjusted Annual Potential Payout Percentage for that Performance
Measure for that year will be 200%. If PNC’s ROCE or TSR performance for a given year compared to the ROCE or TSR performance, as the case may be, of the other then existing Peers for that year ranks PNC as #10 or lower, however many Peers are
then in the Peer Group, the
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Adjusted Annual Potential Payout Percentage for that Performance Measure for that year will be 0%.
Otherwise, the Adjusted Annual Potential Payout Percentage for a given year
with respect to a given Performance Measure will be equal to: the sum of the unadjusted potential payout percentage set forth in the schedule below (“Schedule”) for the Peer ranking immediately
below
PNC (“Peer B”)
plus
X%, where X is (1) the difference between the unadjusted potential payout percentage set forth in the Schedule for the Peer ranking immediately
above
PNC (“Peer A”) and the unadjusted potential payout percentage set
forth in the Schedule for Peer B,
times
(2) a fraction equal to (i) the difference between PNC’s ROCE or TSR performance, as the case may be, for the given year and Peer B’s ROCE or TSR performance for the given year, divided by
(ii) the difference between Peer A’s ROCE or TSR performance, as the case may be, for the given year and Peer B’s ROCE or TSR performance for the given year. If there is no Peer B at that time, the Adjusted Annual Potential Payout
Percentage for the given year will be the same as the unadjusted potential payout percentage set forth in the Schedule for PNC’s ranking.
S
CHEDULE
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Peer Group Position
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Unadjusted Potential Payout Percentage
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Top Performer
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200%
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#2
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180%
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#3
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160%
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#4
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140%
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#5
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120%
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#6
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100%
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#7
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80%
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#8
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60%
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#9
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40%
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#10
or lower
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0%
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Peer Group positions
in the Schedule will be determined by calculating the ROCE or TSR performance, as the case may be, achieved by each then existing member of the Peer Group for the given year and then ranking each such member of the Peer Group by that performance,
with the Peer with the best performance being ranked the Top Performer, the Peer with the second best performance being ranked #2, and so on.
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The unadjusted potential payout percentages by Peer Group position in the Schedule will not change even
if the number of Peers in the Peer Group increases or is reduced, for example, due to industry consolidation.
A.5 “
Adjusted Target ROCE Incentive Shares
” means the number of incentive shares equal to the Target ROCE Incentive Shares plus the
Dividend Adjustment Shares related to target ROCE incentive shares for all PNC common stock cash dividend payment dates that occur from and after the Grant Date through and including December 31, 2005 or, if earlier, the day a Change in Control is
deemed
to have occurred.
A.6 “
Adjusted Target
TSR Incentive Shares
” means the number of incentive shares equal to the Target TSR Incentive Shares plus the Dividend Adjustment Shares related to target TSR incentive shares for all PNC common stock cash dividend payment dates that occur
from and after the Grant Date through and including December 31, 2005 or, if earlier, the day a Change in Control is
deemed
to have occurred.
A.7 “
Award Date
” means the date on which the Committee makes its determination as to whether, and if so, the extent to which, an award of
the 2004 Incentive Shares may be made pursuant to the Agreement, and within those limits, whether to award any of the 2004 Incentive Shares pursuant to Section 3.1(b) of the Agreement, and if so, how many to award.
A.8 “
Awarded Shares
” means any 2004 Incentive Shares that
have been (a) awarded by the Committee and issued in accordance with Section 3.5 of the Agreement as Vested Shares or Restricted Shares or (b)
deemed
awarded and issued pursuant to Section 3.4 of the Agreement as Vested Shares.
A.9 “
Board
” means the Board of Directors of PNC.
A.10 “
Cause
” means:
(a) the willful and continued failure of Grantee to substantially perform
Grantee’s duties with the Corporation (other than any such failure resulting from incapacity due to physical or mental illness), after a written demand for substantial performance is delivered to Grantee by the Board or the CEO which
specifically identifies the manner in which the Board or the CEO believes that Grantee has not substantially performed Grantee’s duties; or
(b) the willful engaging by Grantee in illegal conduct or gross misconduct that is materially and demonstrably injurious to PNC or any Subsidiary.
For purposes of the preceding clauses (a) and (b), no act or
failure to act, on the part of Grantee, shall be considered willful unless it is done, or omitted to be done, by Grantee in bad faith and without reasonable belief that Grantee’s action or omission was in the best interests of the Corporation.
Any act, or failure to act, based upon the instructions or prior approval of the Board, the CEO or Grantee’s superior or based upon
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the advice of counsel for the Corporation, shall be conclusively presumed to be done, or omitted to be done, by Grantee in good faith and in the best
interests of the Corporation.
The cessation of employment of
Grantee will be
deemed
to be a termination of Grantee’s employment with the Corporation for Cause for purposes of the Agreement only if and when there shall have been delivered to Grantee, as part of the notice of Grantee’s
termination, a copy of a resolution duly adopted by the affirmative vote of not less than a majority of the entire membership of the Board, at a Board meeting called and held for the purpose of considering such termination, finding on the basis of
clear and convincing evidence that, in the good faith opinion of the Board, Grantee is guilty of conduct described in clause (a) or clause (b) above and, in either case, specifying the particulars thereof in detail. Such resolution shall be adopted
only after (i) reasonable notice of such Board meeting is provided to Grantee, together with written notice that PNC believes that Grantee is guilty of conduct described in clause (a) or clause (b) above and, in either case, specifying the
particulars thereof in detail, and (ii) Grantee is given an opportunity, together with counsel, to be heard before the Board.
A.11 “
CEO
” means the chief executive officer of PNC.
A.12 “
Change in Control
” means a change of control of PNC of a nature that would be required to be reported
in response to Item 6(e) of Schedule 14A of Regulation 14A (or in response to any similar item on any similar schedule or form) promulgated under the Exchange Act, whether or not PNC is then subject to such reporting requirement;
provided
,
however
, that without limitation, a Change in Control will be
deemed
to have occurred if:
(a) any Person, excluding employee benefits plans of the Corporation, is or becomes the beneficial owner (as defined in Rules 13d-3 and 13d-5 under the
Exchange Act or any successor provisions thereto), directly or indirectly, of securities of PNC representing twenty percent (20%) or more of the combined voting power of PNC’s then outstanding securities;
provided
,
however
, that
such an acquisition of beneficial ownership representing between twenty percent (20%) and forty percent (40%), inclusive, of such voting power will not be considered a Change in Control if the Board approves such acquisition either prior to or
immediately after its occurrence;
(b) PNC consummates a
merger, consolidation, share exchange, division or other reorganization or transaction of PNC (a “Fundamental Transaction”) with any other corporation, other than a Fundamental Transaction that results in the voting securities of PNC
outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least sixty percent (60%) of the combined voting power immediately after such
Fundamental Transaction of (i) PNC’s outstanding securities, (ii) the surviving entity’s outstanding securities, or (iii) in the case of a division, the outstanding securities of each entity resulting from the division;
-26-
(c) the shareholders of PNC approve a plan of complete liquidation or winding-up of PNC or an agreement
for the sale or disposition (in one transaction or a series of transactions) of all or substantially all of PNC’s assets;
(d) as a result of a proxy contest, individuals who prior to the conclusion thereof constituted the Board (including for this purpose any new director
whose election or nomination for election by PNC’s shareholders in connection with such proxy contest was approved by a vote of at least two-thirds (2/3rds) of the directors then still in office who were directors prior to such proxy contest)
cease to constitute at least a majority of the Board (excluding any Board seat that is vacant or otherwise unoccupied);
(e) during any period of twenty-four (24) consecutive months, individuals who at the beginning of such period constituted the Board (including for this
purpose any new director whose election or nomination for election by PNC’s shareholders was approved by a vote of at least two-thirds (2/3rds) of the directors then still in office who were directors at the beginning of such period) cease for
any reason to constitute at least a majority of the Board (excluding any Board seat that is vacant or otherwise unoccupied); or
(f) the Board determines that a Change in Control has occurred.
Notwithstanding anything to the contrary herein, a divestiture or spin-off of a subsidiary or division of PNC will not by itself constitute a Change in
Control.
A.13 “
CIC Failure
” means the
following:
(a) with respect to a CIC Triggering Event
described in Section A.14(a), PNC’s shareholders vote against the transaction approved by the Board or the agreement to consummate the transaction is terminated; or
(b) with respect to a CIC Triggering Event described in Section A.14(b), the proxy contest fails to replace or remove a
majority of the members of the Board.
A.14 “
CIC
Triggering Event
” means the occurrence of either of the following:
(a) the Board or PNC’s shareholders approve a transaction described in Subsection (b) of the definition of Change in Control contained in Section A.12; or
(b) the commencement of a proxy contest in which any Person seeks to replace
or remove a majority of the members of the Board.
A.15
“
Committee
” means the Personnel and Compensation Committee of the Board.
A.16 “
Competitive Activity
” means, for purposes of the Agreement, any participation in, employment by, ownership of any equity interest exceeding one percent
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(1%) in, or promotion or organization of, any Person other than PNC or any Subsidiary (a) engaged in business activities similar to some or all of the
business activities of PNC or any Subsidiary as of Grantee’s Termination Date or (b) engaged in business activities which Grantee knows PNC or any Subsidiary intends to enter within the first twelve (12) months after Grantee’s Termination
Date, in either case whether Grantee is acting as agent, consultant, independent contractor, employee, officer, director, investor, partner, shareholder, proprietor or in any other individual or representative capacity therein.
A.17 “
Continued Employment Performance Goal
” means, subject
to early achievement if so determined by the Committee or to
deemed
achievement pursuant to Section 7.3, Section 7.4, Section 7.5, or Section 8 of the Agreement, if applicable, that Grantee has been continuously employed by the Corporation
for the period commencing on the Award Date through (and including) the first of the following to occur: (a) December 31, 2006; (b) the day immediately preceding the date of Grantee’s death; and (c) the day immediately preceding the day a
Change in Control is
deemed
to have occurred.
A.18
“
Corporation
” means PNC and its Subsidiaries.
A.19 “
Coverage Period
” means a period (a) commencing on the earlier to occur of (i) the date of a CIC Triggering Event and (ii) the date of a Change in Control and (b) ending on the date that is three (3) years after the
date of the Change in Control;
provided
,
however
, that in the event that a Coverage Period commences on the date of a CIC Triggering Event, such Coverage Period will terminate upon the earlier to occur of (x) the date of a CIC Failure
and (y) the date that is three (3) years after the date of the Change in Control triggered by the CIC Triggering Event. After the termination of any Coverage Period, another Coverage Period will commence upon the earlier to occur of clause (a)(i)
and clause (a)(ii) in the preceding sentence.
A.20
“
Designated Person
” will be either: (a) the Committee, if Grantee is a member of the Corporate Executive Group (or equivalent successor classification) or is subject to the reporting requirements of Section 16(a) of the Exchange Act
with respect to PNC securities; or (a) the Chief Human Resources Officer of PNC, if Grantee is not within one of the groups specified in Section A.20(a).
A.21 “
Detrimental Conduct
” means:
(a) Grantee has engaged, without the prior written consent of PNC (at PNC’s sole discretion), in any Competitive Activity in the continental United
States at any time during the period commencing on Grantee’s Termination Date through (and including) the first (1
st
) anniversary of Grantee’s Termination Date;
(b) a material breach by Grantee of (i) any code of conduct of PNC or a Subsidiary or (ii) other written policy of PNC or a Subsidiary, in either case required by law or established to maintain compliance with applicable law;
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(c) any act of fraud, misappropriation, material dishonesty, or embezzlement by Grantee against PNC or a
Subsidiary or any client or customer of PNC or a Subsidiary;
(d) any conviction (including a plea of guilty or of
nolo contendere
) of Grantee for, or entry by Grantee into a pre-trial disposition with respect to, the commission of a felony which relates to or arises out of Grantee’s
employment or other service relationship with the Corporation; or
(e) entry of any order against Grantee by any governmental body having regulatory authority with respect to the business of PNC or any Subsidiary, which order relates to or arises out of Grantee’s employment or other service
relationship with the Corporation.
Grantee will be
deemed
to have engaged in Detrimental Conduct for purposes of the Agreement only if and when the Committee determines that Grantee has engaged in conduct described in clause (a) above, that Grantee is guilty of conduct described in clause (b)
or clause (c) above, or that an event described in clause (d) or clause (e) above has occurred with respect to Grantee and, if so, determines that Grantee will be
deemed
to have engaged in Detrimental Conduct.
A.22 “
Dividend Adjustment Shares
.” Once the Agreement has
become effective in accordance with Section 17 of the Agreement, for each PNC common stock cash dividend payment date that occurs during the period from and after the Grant Date through and including December 31, 2005 or, if earlier, the day a
Change in Control is
deemed
to have occurred, there will be added, subject to any applicable Plan limits, as of that dividend payment date to the number of Target ROCE Incentive Shares and to the number of Target TSR Incentive Shares,
respectively, a number of incentive shares (including fractional shares) equal to (i) the amount of the cash dividends that would have been paid on that dividend payment date on the target number of ROCE or TSR incentive shares, as the case may be,
as adjusted for all previous additions to such target number pursuant to this Section A.22, had such target incentive shares been issued and outstanding shares of PNC common stock on the record date for such dividend, divided by (ii) the Fair Market
Value of a share of PNC common stock on that dividend payment date.
Cumulatively, these additional ROCE or TSR incentive shares are referred to as the “Dividend Adjustment Shares” related to the target ROCE incentive shares or the target TSR incentive shares, as the case may be, and the Target
ROCE Incentive Shares and Target TSR Incentive Shares as adjusted for the addition of all Dividend Adjustment Shares related to such respective target incentive shares are referred to as the “Adjusted Target ROCE Incentive Shares” and the
“Adjusted Target TSR Incentive Shares.”
A.23
“
Exchange Act
” means the Securities Exchange Act of 1934 as amended, and the rules and regulations promulgated thereunder.
-29-
A.24 “
Fair Market Value
” as it relates to PNC common stock means the average of the high
and low sale prices of PNC common stock as reported on the New York Stock Exchange (or such successor reporting system as PNC may select) on the relevant date or, if no sale of PNC common stock has been reported for that day, the average of such
prices on the next preceding day and the next following day for which there were reported sales.
A.25 “
Final Potential Payout Percentage(s)
.” The Final Potential Payout Percentage with respect to each Performance Measure (ROCE or TSR)
(the “Final ROCE Potential Payout Percentage” or the “Final TSR Potential Payout Percentage,” as the case may be) will be the percentage that is the average of the Adjusted Annual Potential Payout Percentages for that Performance
Measure (ROCE or TSR) for the years in the Performance Period (2004 and 2005).
If the Adjusted Annual Potential Payout Percentage for a Performance Measure is 0% for one of the years in the Performance Period but is a positive number for the other year, then the Final Potential Payout Percentage
for that Performance Measure will be the percentage that is one-half (1/2) of that positive number.
If the Adjusted Annual Potential Payout Percentage for a Performance Measure is 0% for both of the years in the Performance Period, then the Final
Potential Payout Percentage for that Performance Measure will be 0%.
A.26 “
Good Reason
” means:
(a) the
assignment to Grantee of any duties inconsistent in any respect with Grantee’s position (including status, offices, titles and reporting requirements), authority, duties or responsibilities immediately prior to either the CIC Triggering Event
or the Change in Control, or any other action by the Corporation which results in a diminution in any respect in such position, authority, duties or responsibilities, excluding for this purpose an isolated, insubstantial and inadvertent action not
taken in bad faith that is remedied by the Corporation promptly after receipt of notice thereof given by Grantee;
(b) a reduction by the Corporation in Grantee’s annual base salary as in effect on the Grant Date, as the same may be increased from time to time;
(c) the Corporation’s requiring Grantee to be based at
any office or location that is more than fifty (50) miles from Grantee’s office or location immediately prior to either the CIC Triggering Event or the Change in Control;
(d) the failure by the Corporation (i) to continue in effect any bonus, stock option or other cash or equity-based incentive
plan or program in which Grantee participates immediately prior to either the CIC Triggering Event or the Change in Control that is material to Grantee’s total compensation, unless a substantially equivalent arrangement (embodied in an ongoing
substitute or alternative plan or program) has been made with respect to such plan or program, or (ii) to continue Grantee’s participation in
-30-
such plan or program (or in such substitute or alternative plan or program) on a basis at least as favorable, both in terms of the amount of benefits
provided and the level of Grantee’s participation relative to other participants, as existed immediately prior to the CIC Triggering Event or the Change in Control; or
(e) the failure by the Corporation to continue to provide Grantee with benefits substantially similar to those received by
Grantee under any of the Corporation’s pension (including, but not limited to, tax-qualified plans), life insurance, health, accident, disability or other welfare plans or programs in which Grantee was participating, at costs substantially
similar to those paid by Grantee, immediately prior to the CIC Triggering Event or the Change in Control.
A.27 “
Grant
” means the grant, subject to the terms and conditions of the Agreement and the Plan, of the 2004 Incentive Shares award
opportunity to Grantee pursuant to Section 1 of the Agreement.
A.28 “
Grant Date
” means the Grant Date set forth on page 1 of the Agreement.
A.29 “
Grantee
” means the person identified as Grantee on page 1 of the Agreement.
A.30 “
Internal Revenue Code
” means the Internal Revenue Code
of 1986 as amended, and the rules and regulations promulgated thereunder.
A.31 “
Maximum ROCE Incentive Shares
” is the number of incentive shares that is 200% of the Adjusted Target ROCE Incentive Shares, and represents Grantee’s maximum incentive share award
opportunity pursuant to the Agreement with respect to the PNC ROCE Performance Goal.
A.32 “
Maximum TSR Incentive Shares
” is the number of incentive shares that is 200% of the Adjusted Target TSR Incentive Shares, and represents Grantee’s maximum incentive share award opportunity
pursuant to the Agreement with respect to the PNC TSR Performance Goal.
A.33 “
Peer Group
” means The Bank of New York Company, Inc., Bank One Corporation, Fifth Third Bancorp, FleetBoston Financial Corporation, KeyCorp, National City Corporation, PNC, SunTrust Banks, Inc., U.S. Bancorp, Wachovia
Corporation, and Wells Fargo & Company as such group may be adjusted from time to time by the Committee to reflect mergers, consolidations, or other material corporate reorganizations or changes affecting one or more members of the Peer Group or
other changes in PNC’s peer group. A member of the Peer Group is sometimes referred to as a “Peer.”
A.34 “
Performance Measure(s)
.” The Performance Measures are Return on Common Equity and Total Shareholder Return.
-31-
A.35 “
Performance Period
” means, subject to early termination pursuant to Section 3.4 of
the Agreement, the period commencing January 1, 2004 through (and including) December 31, 2005. The two years in the Performance Period are 2004 and 2005.
A.36 “
Person
” has the meaning given in Section 3(a)(9) of the Exchange Act and also includes any syndicate or group deemed to be a person
under Section 13(d)(3) of the Exchange Act.
A.37
“
PNC
” means The PNC Financial Services Group, Inc.
A.38 “
PNC Performance Goal(s)
.” The PNC Performance Goals are the level of PNC Return on Common Equity (“PNC ROCE Performance Goal”) and the level of PNC Total Shareholder Return (“PNC TSR Performance
Goal”) relative to the levels of ROCE and TSR performance, respectively, of the other members of the Peer Group.
A.39 “
Restricted Period
” means, subject to early termination if so determined by the Committee or pursuant to Section 7.5 of the
Agreement, if applicable, the period commencing on the Award Date through (and including) the earlier of: (a) the date of Grantee’s death; (b) the day immediately preceding the day a Change in Control is
deemed
to have occurred; and (c)
December 31, 2006 or, if later, the last day of any extension of the Restricted Period pursuant to Section 7.4(a) of the Agreement, if applicable.
A.40 “
Restricted Shares
” are shares of PNC common stock that have been awarded to Grantee by the Committee as Awarded Shares and issued
as Restricted Shares pursuant to Section 3.5 of the Agreement. Restricted Shares are subject to the terms and conditions of the Agreement, including forfeiture provisions and restrictions against transfer, unless and until they become Vested Shares
as set forth in Section A.51 and are released and reissued by PNC pursuant to Section 9 of the Agreement. Restricted Shares that have not yet become Vested Shares are sometimes referred to as “Unvested Shares.”
A.41 “
Return on Common Equity
” or “
ROCE
”
means, with respect to each of PNC and the other members of the Peer Group: (a) for 2004, the annualized cumulative return on common equity for the period commencing January 1, 2004 through (and including) December 31, 2004; and (b) for 2005, the
annualized cumulative return on common equity for the period commencing January 1, 2005 through (and including) December 31, 2005. The Return on Common Equity of PNC or any other Peer may be adjusted to reflect significant nonrecurring items,
including, without limitation, merger-related charges or gains or losses on a sale of a business unit, as approved by the Committee. ROCE will be expressed as a percent rounded to the nearest one-hundredth (
e.g.
, 0.00%, with 0.005% being
rounded upward to 0.01%).
A.42 “
SEC
” means
the United States Securities and Exchange Commission.
-32-
A.43 “
Target ROCE Incentive Shares
” means the number of incentive shares specified on
page 1 of the Agreement as Target ROCE Incentive Shares.
A.44
“
Target TSR Incentive Shares
” means the number of incentive shares specified on page 1 of the Agreement as Target TSR Incentive Shares.
A.45 “
Termination Date
” means Grantee’s last date of employment with the Corporation. If Grantee is employed by a Subsidiary that
ceases to be a Subsidiary of PNC and Grantee does not continue to be employed by PNC or a Subsidiary, then for purposes of the Agreement, Grantee’s employment with the Corporation terminates effective at the time this occurs.
A.46 “
Threshold ROCE Performance Goal
.” PNC will have
achieved the Threshold ROCE Performance Goal if PNC’s ranking relative to the other then existing members of the Peer Group with respect to ROCE performance was ninth (9
th
) or better for at least one year of the Performance Period (2004 or 2005), where Peer Group positions for a given year were determined by calculating the ROCE
performance achieved by each then existing member of the Peer Group for the given year and then ranking each such member of the Peer Group by that performance, with the Peer with the best performance being ranked the Top Performer, the Peer with the
second best performance being ranked second (2
nd
), and so on. The ranking required to achieve this threshold will
not change whether or not the number of then existing members of the Peer Group changes.
A.47 “
Threshold TSR Performance Goal
.” PNC will have achieved the Threshold TSR Performance Goal if PNC’s ranking relative to the other then existing members of the Peer Group with respect to TSR
performance was ninth (9
th
) or better for at least one year of the Performance Period (2004 or 2005), where Peer
Group positions for a given year were determined by calculating the TSR performance achieved by each then existing member of the Peer Group for the given year and then ranking each such member of the Peer Group by that performance, with the Peer
with the best performance being ranked the Top Performer, the Peer with the second best performance being ranked second (2
nd
), and so on. The ranking required to achieve this threshold will not change whether or not the number of then existing members of the Peer Group changes.
A.48 “
Total and Permanent Disability
” means, unless the Committee determines otherwise, Grantee’s
disability as determined to be total and permanent by the Corporation for purposes of the Agreement.
A.49 “
Total Shareholder Return
” or “
TSR
” means, with respect to PNC, the cumulative total shareholder return on
PNC’s common stock and, with respect to each other member of the Peer Group, the cumulative total shareholder return on a class of such other Peer’s common stock that is registered under Section 12 of the Exchange Act. For each of PNC and
the other members of the Peer Group, cumulative total shareholder return will be calculated by dividing: (a) the sum of: (i) the cumulative amount of dividends for the measurement period, assuming dividend reinvestment, with dividends
-33-
reinvested on a monthly basis at the dividend yield rate using share price at month end and ex-date dividends per share, and (ii) the difference between the
share price at the end and the beginning of the measurement period; by (b) the closing share price on December 31, 2003, for the 2004 measurement period, or the closing share price on December 31, 2004, for the 2005 measurement period. The term
“measurement period” will be: (1) for the 2004 measurement period, the period beginning at the measurement point established by the market close on December 31, 2003 and continuing through (and including) the market close on December 31,
2004; and (2) for the 2005 measurement period, the period beginning at the measurement point established by the market close on December 31, 2004 and continuing through (and including) the market close on December 31, 2005. With respect to
dividends, it will be assumed that dividends are reinvested into additional shares of the same class of equity securities at the frequency with which dividends are paid on such securities during the applicable period. TSR will be expressed as a
percent rounded to the nearest one-hundredth (
e.g.
, 0.00%, with 0.005% being rounded upward to 0.01%).
A.50 “
Unvested Shares
” means any Restricted Shares that have not yet become Vested Shares.
A.51 “
Vested Shares
.” Vested Shares are Awarded Shares that
are not subject to further restriction under the Agreement.
Awarded Shares that are issued pursuant to Section 3.5 of the Agreement as Restricted Shares become Vested Shares and are released and reissued by PNC pursuant to Section 9 of the Agreement if and when both of the following have occurred,
provided that
the Restricted Shares are then outstanding: (a) the Continued Employment Performance Goal has been achieved or is
deemed
to have been achieved pursuant to the terms of the Agreement; and (b) the Restricted Period has
terminated.
Awarded Shares issued pursuant to Section 3.5 of
the Agreement that are
not
issued as Restricted Shares are Vested Shares upon issuance and are not subject to further restriction under the Agreement.
All Awarded Shares issued pursuant to Section 3.4 of the Agreement will be Vested Shares upon issuance.
-34-
Exhibit 99.13
AGREEMENT AND PLAN OF MERGER
dated as of July
16, 2004
between
THE PNC FINANCIAL SERVICES GROUP, INC.
and
RIGGS NATIONAL CORPORATION
TABLE OF CONTENTS
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Page
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RECITALS
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A.
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PNC
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1
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B.
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Company
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1
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C.
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Intention of the Parties
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1
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D.
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Approvals
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1
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ARTICLE I
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The Merger
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1.1
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The Merger
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2
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1.2
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Effective Time
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2
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1.3
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Closing
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3
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ARTICLE II
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Conversion or Cancellation of Shares
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2.1
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Conversion or Cancellation of Shares
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3
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2.2
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Fractional Shares
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8
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2.3
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Exchange of Old Certificates for New Certificates.
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9
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2.4
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Adjustment of Exchange Ratio
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10
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ARTICLE III
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Conduct of Business Pending Merger
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3.1
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Company Forbearances
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11
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3.2
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PNC Forbearances
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14
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ARTICLE IV
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Representations
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4.1
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Disclosure Schedules
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14
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4.2
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Standard
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14
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4.3
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Representations
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15
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ARTICLE V
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Covenants
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5.1
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Reasonable Best Efforts
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26
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5.2
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Stockholder Approvals.
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26
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5.3
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Registration Statement/Proxy Statement.
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27
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5.4
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Press Releases
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28
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5.5
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Access; Information.
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28
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i
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5.6
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Acquisition Proposals
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29
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5.7
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Affiliate Agreements
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30
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5.8
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Takeover Laws and Provisions
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30
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5.9
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Regulatory Applications.
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30
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5.10
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Options
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31
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5.11
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Indemnification and Insurance.
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31
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5.12
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Benefit Plans.
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33
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5.13
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Notification of Certain Matters
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34
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5.14
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Exemption from Liability Under Section 16(b)
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34
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5.15
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Coordination of Dividends
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35
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ARTICLE VI
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Conditions
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6.1
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Conditions to Each Party’s Obligation to Effect the Merger
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36
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6.2
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Conditions to Obligation of PNC
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37
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6.3
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Conditions to Obligation of the Company
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37
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ARTICLE VII
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Termination
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7.1
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Termination by Mutual Consent
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38
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7.2
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Termination by PNC
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38
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7.3
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Termination by the Company
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39
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7.4
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Effect of Termination and Abandonment
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39
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ARTICLE VIII
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Miscellaneous
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8.1
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Survival
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40
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8.2
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Modification or Amendment
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41
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8.3
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Waiver of Conditions
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41
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8.4
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Counterparts
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41
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8.5
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Governing Law
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41
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8.6
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Notices
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41
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8.7
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Entire Agreement, Etc
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42
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8.8
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Definition of “subsidiary” and “affiliate”; Covenants with Respect to Subsidiaries and Affiliates
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42
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8.9
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Interpretation; Effect
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42
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8.10
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Severability
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42
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8.11
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No Third Party Beneficiaries
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43
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8.12
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Waiver of Jury Trial
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43
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ii
INDEX OF DEFINED TERMS
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Term
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Location of
Definition
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Acquisition Proposal
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5.6
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Affiliate
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8.8
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Benefit Plans
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4.3(m)(1)
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PNC
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Preamble
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PNC State Law
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1.1(b)
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PNC Benefit Plans
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5.12(a)
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PNC Common Stock
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Recital A
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PNC Meeting
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5.2(a)
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PNC Preferred
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Recital A
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PNC Preferred Stock
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Recital A
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PNC Rights Agreement
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Recital A
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PNC Stockholder Rights
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Recital A
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Cash Election Shares
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2.1(d)
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Certificate of Merger
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1.4(a)
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Closing
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1.5
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Closing Date
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1.5
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Company
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Preamble
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Company Bank
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5.11(a)
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Company Benefit Plans
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5.12(a)
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Company Common Stock
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Recital B
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Company Insiders
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5.15
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Company Meeting
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5.2(a)
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Company Option
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5.10(a)
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Company Options
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5.10(a)
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Company Section 16 Information
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5.15
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Confidentiality Agreement
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5.5(c)
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Converted Cash Election Share
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2.1(e)(1)(C)
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Converted Stock Election Share
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2.1(e)(2)(B)
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DGCL
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1.1(b)
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Disclosure Schedule
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4.1
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Effective Time
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1.4(a)
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Election
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2.1(d)
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Election Deadline
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2.3(b)
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Election Form
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2.1(d)
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Employees
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4.3(m)(1)
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Environmental Laws
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4.3(o)
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ERISA
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4.3(m)(1)
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ERISA Affiliate
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4.3(m)(3)
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ERISA Plans
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4.3(m)(2)
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Exception Shares
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2.1(c)
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Exchange Act
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4.3(c)(1)
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Exchange Agent
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2.1(d)
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Exchange Ratio
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2.1(a)
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Governing Documents
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3.1(h)
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iii
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Governmental Entity
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4.3(f)(1)
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Indemnified Liabilities
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5.11(a)
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Indemnified Party
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5.11(a)
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Insurance Amount
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5.11(b)
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Internal Revenue Code
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Recital C
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IRS
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4.3(m)(2)
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Proxy Statement/Prospectus
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5.3(a)
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Liens
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4.3(c)(1)
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Material Adverse Effect
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4.2(b)
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Measurement Price
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2.2
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Merger
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1.1(a)
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Multiemployer Plan
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4.3(m)(2)
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New Certificate
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2.3(a)
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New Option
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5.10(a)
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New Shares
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2.3(a)
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No-Election Shares
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2.1(d)
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NYSE
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2.2
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Old Certificate
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2.1(c)
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Old Share
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2.1(c)
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Pension Plan
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4.3(m)(2)
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Per Share Cash Consideration
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2.1(a)(2)
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Per Share Stock Consideration
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2.1(a)(1)
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Person
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2.3(b)
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Plan
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Preamble
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Previously Disclosed
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3.1
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Registration Statement
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5.3(a)
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Regulatory Approvals
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4.3(f)(2)
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Regulatory Authorities
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4.3(i)(1)
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Regulatory Filings
|
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4.3(g)(1)
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Representatives
|
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5.6
|
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Rights
|
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4.3(b)(3)
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Securities Act
|
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4.3(g)(1)
|
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Significant Subsidiary
|
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4.3(c)(1)
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Stock Election Shares
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2.1(d)
|
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Stock Selected No-Election Share
|
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2.1(e)(1)(B)
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Subsidiary
|
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8.8
|
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Superior Proposal
|
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5.6
|
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Surviving Corporation
|
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1.1(a)
|
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Takeover Laws
|
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4.3(t)
|
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Takeover Provisions
|
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4.3(t)
|
|
Tax
|
|
4.3(p)(2)
|
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Tax Returns
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4.3(p)(1)
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Taxes
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4.3(p)(2)
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Termination Date
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7.2(b)
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iv
AGREEMENT AND PLAN OF MERGER
, dated as of July 16, 2004, (this “
Plan
”), between
The PNC Financial Services Group, Inc. (“
PNC
”) and Riggs National Corporation (“
Company
”).
RECITALS
A.
PNC
. PNC is a Pennsylvania corporation with its principal executive offices located in Pittsburgh, Pennsylvania. As of the date hereof, PNC has
(i) 800,000,000 authorized shares of common stock, par value $5.00 per share (“
PNC Common Stock
”), of which not more than 284,500,000 shares are outstanding, together with the rights (“
PNC Stockholder Rights
”)
issued pursuant to the Rights Agreement, dated as of May 15, 2000, as amended, between PNC and Computershare Investor Services, LLC, as Rights Agent (“
PNC Rights Agreement
”); and (ii) 20,000,000 authorized shares of preferred stock,
par value $1.00 per share (“
PNC Preferred Stock
”), of which 98,583 shares have been designated as $1.80 Cumulative Convertible Preferred Stock - Series A (“
PNC Series A Preferred Stock
”), of which 8,542 shares are
outstanding, 38,542 shares have been designated as $1.80 Cumulative Convertible Preferred Stock - Series B (“
PNC Series B Preferred Stock
”), of which 2,356 shares are outstanding, 1,433,935 shares have been designated as $1.60
Cumulative Convertible Preferred Stock-Series C (“
PNC Series C Preferred Stock
”), of which 173,877 shares are outstanding, 1,766,140 shares have been designated as $1.80 Cumulative Convertible Preferred Stock-Series D (“
PNC
Series D Preferred Stock
”), of which 255,863 shares are outstanding, 338,100 shares have been designated as $2.60 Cumulative Nonvoting Preferred Stock, Series E (“
PNC Series E Preferred Stock
”), of which no shares are
outstanding, 6,000 shares have been designated as Fixed/Adjustable Rate Noncumulative Preferred Stock, Series F (“
PNC Series F Preferred Stock
”), of which no shares are outstanding, and 450,000 shares have been designated as Series
G Junior Participating Preferred Share Purchase Rights (“
PNC Series G Preferred Stock
”).
B.
Company
. The Company is a Delaware corporation with its principal executive offices located in Washington, DC. As of the date hereof, the
Company has (i) 50,000,000 authorized shares of common stock, par value $2.50 per share (“
Company Common Stock
“), of which not more than 29,202,595 shares are outstanding, (ii) 20,000,000 authorized shares of Class B common stock,
par value $2.50 per share, of which no shares are outstanding and (iii) 25,000,000 authorized shares of preferred stock, par value $1.00 per share, of which no shares are outstanding.
C.
Intention of the Parties
. Each of the parties to this Plan intends that the Merger (as hereinafter defined) shall
qualify as a reorganization under Section 368(a) of the Internal Revenue Code of 1986, as amended (the “
Internal Revenue Code
”) and that this Plan shall constitute a “plan of reorganization” for purposes of Sections 354
and 361 of the Internal Revenue Code.
D.
Approvals
. The
board of directors of each of PNC and the Company has (1) determined that this Plan and the transactions contemplated hereby are advisable and in the best interests of PNC and the Company,
respectively, and in the best interests of their respective stockholders, (2) determined that this Plan and the
transactions contemplated hereby are consistent with, and in furtherance of, its respective business strategies and (3) authorized and approved this Plan.
E.
Voting Agreement
. As a condition and inducement to PNC’s willingness to enter into this Agreement, a certain stockholder of the Company is
concurrently entering into a Voting Agreement with PNC in substantially the form attached hereto as Exhibit A, pursuant to which, among other things, such stockholder agrees to vote certain of his shares of Company Common Stock in favor of this
Agreement and the transactions contemplated hereby.
NOW, THEREFORE
, in consideration of their mutual promises and obligations, the parties hereto approve, adopt and make this Plan and prescribe the terms and conditions hereof and the manner and mode of carrying it into effect, which
are as follows:
ARTICLE I
The Merger
1.1
The Merger
. (a) Subject to the terms and conditions of this Plan, at the Effective Time (as hereinafter defined), the Company shall merge with
and into PNC (the “
Merger
”), and the separate corporate existence of the Company shall thereupon cease. PNC shall be the surviving corporation in the Merger (hereinafter sometimes referred to as the “
Surviving
Corporation
”) and shall continue to be governed by the laws of the State of Pennsylvania.
(b) The Merger shall have the effects specified in this Plan, the Delaware General Corporation Law (the “
DGCL
”) and the Business
Corporation Law of the Commonwealth of Pennsylvania (the “
PBCL
”).
(c) At the Effective Time, the Articles of Incorporation of PNC, as then in effect, shall be the certificate of incorporation of the Surviving Corporation and the By-laws of PNC, as then in effect, shall be the
By-laws of the Surviving Corporation.
(d) The name of the
Surviving Corporation shall be the name of PNC.
1.2
Effective Time
. (a) Subject to the terms and conditions of this Plan, on or before the Closing Date, the parties shall execute, and PNC will cause to be filed with the Department of State of the Commonwealth of Pennsylvania, articles of
merger as provided in Sections 1926 and 1927 of the PBCL (the “
Certificate of Merger
”), and PNC will cause a certificate of merger to be filed with the Office of the Secretary of State of the State of Delaware as provided in Section
252 of the DGCL. The Merger shall become effective at such time as the Certificate of Merger has been filed, or at such other time as may be specified therein. The date and time at which the Merger becomes effective is herein referred to as the
“
Effective Time
”.
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(b) PNC and the Company will each cause the Effective Time to occur not later than the third business day
following the satisfaction or waiver of the last of the conditions specified in Sections 6.1(a), (b), (c), (e) and (f) of this Plan. Notwithstanding anything to the contrary in this Section 1.2(b), PNC and the Company may cause the Effective Time to
occur on such earlier or later day following the satisfaction or waiver of such conditions as they may agree, consistent with the provisions of the DGCL and the PBCL.
1.3
Closing
. The closing of the Merger (the “
Closing
”) shall take place at such time and place as
PNC and the Company shall agree, on the date when the Effective Time is to occur (the “
Closing Date
”).
1.4
Bank Merger
. PNC and the Company shall take all action necessary and appropriate to cause their respective subsidiaries PNC Bank, National
Association (“
PNC Bank
”) and Riggs Bank N.A. (“
Company Bank
”) to merge, and to convert the operating systems of the Company Bank to those of the PNC Bank, immediately after the Merger, with PNC Bank being the
surviving bank (“
Surviving Bank
”) thereof pursuant to the provisions of applicable law (the
“Bank Merger
”). At the effective time of the Bank Merger, the Certificate of Organization and Bylaws of the Surviving Bank
shall be the Certificate of Organization and Bylaws of PNC Bank in effect immediately prior to the effective time of the Bank Merger.
ARTICLE II
Conversion or
Cancellation of Shares
2.1
Conversion or Cancellation
of Shares
. At the Effective Time, by virtue of the Merger and without any action on the part of any stockholder:
(a)
Company Common Stock
. Each share of Company Common Stock issued and outstanding immediately prior to the Effective Time, other than Exception
Shares and Dissenting Shares (each as hereinafter defined), shall be converted into the right to receive, at the election of each holder thereof, but subject to the election and allocation procedures of Sections 2.1(d) and (e), the other provisions
of this Section 2.1 and possible adjustment as set forth in Section 2.4, either:
(1) that number of shares of PNC Common Stock equal to the Exchange Ratio (as defined in Section 2.1(b)) (the “
Per Share Stock Consideration
”), or
(2) an amount in cash, without interest, equal to the Per Share Amount (the
“
Per Share Cash Consideration
” and, together with the Per Share Stock Consideration, the “
Consideration
”).
(b)
Certain Definitions
. For purposes of this Agreement, the following terms shall have the following meanings:
(1) “
Aggregate Cash Amount
” means, subject to Section
2.1(e), 45% of the product of (x) the Aggregate Company Share Amount (as hereinafter defined) less the number of Exception Shares cancelled pursuant to Section 2.1(d)
3
hereof (but excluding from such reduction the 3,341,921 treasury shares as of the date hereof) and (y) $24.25, rounded to
the nearest whole cent;
provided
,
however
, that if, at the Effective Time, the aggregate number of shares of Company Common Stock issuable upon exercise of then outstanding Company Options (as defined under Section 5.10(a)) exceeds the
difference between (A) 7,530,482 less (B) the aggregate number of shares of Company Common Stock issued upon exercise of Company Options after the date hereof and prior to the Effective Time (such excess being referred to herein as the
“
Excess Option Shares
”), then the “
Aggregate Cash Amount
” shall be reduced by the product of (A) the Excess Option Shares and (B) an amount equal to the excess of $24.25 over the weighted average exercise price of
the options related to the Excess Option Shares at the Effective Time, in each case rounded to the nearest whole cent.
(2) “
Aggregate Company Share Amount
” shall equal 29,202,595 shares of Company Common Stock;
provided
,
however
, that the
Aggregate Company Share Amount shall be increased by virtue of the issuance of any shares of Company Common Stock upon (i) the exercise from and after the date hereof and prior to the Effective Time of Company Options outstanding on the date hereof,
(ii) the funding of the trust under the Company Amended and Restated Deferred Compensation Plan, in each case, after July 15, 2004 and prior to the Effective Time, (iii) the distribution of interests under the Riggs National Corporation and Riggs
Bank N.A. Deferred Compensation Plan for Directors in accordance with the terms of such plan and (iv) the vesting of deferred share awards or performance share awards under the Riggs National Corporation 2002 Long-Term Incentive Plan (including by
reason of Section 5.12(c)) to the extent not outstanding on the date hereof.
(3) “
Aggregate PNC Share Amount
” shall, subject to Section 2.1(e), be equal to 7,533,648 shares of PNC Common Stock;
provided
,
however
, that the “Aggregate PNC Share Amount”
shall be (x) increased by virtue of the issuance of any shares of Company Common Stock upon (i) the exercise from and after the date hereof and prior to the Effective Time of Company Stock Options outstanding on the date hereof , (ii) the funding of
the trust under the Company Amended and Restated Deferred Compensation Plan, in each case, after July 15, 2004 and prior to the Effective Time, (iii) the distribution of interests under the Riggs National Corporation and Riggs Bank N.A. Deferred
Compensation Plan for Directors in accordance with the terms of such plan or (iv) the vesting of deferred share awards or performance share awards under the Riggs National Corporation 2002 Long-Term Incentive Plan (including by reason of Section
5.12(c)) to the extent not outstanding on the date hereof and (y) shall be decreased in the event any shares of Company Common Stock are cancelled pursuant to Section 2.1(d) hereof, other than the 3,341,921 treasury shares as of the date hereof, in
each case on a basis of 0.2580 additional shares of PNC Common Stock for each share of Company Common Stock so issued or cancelled.
(4) “
Measurement Price
” means the average of the daily high and low per share sales prices of PNC Common Stock on the New York Stock
Exchange (the “
NYSE
”), as reported in the New York City edition of
The Wall Street Journal
or, if not reported therein, in another authoritative source mutually agreed by PNC and the Company, for the five (5) full consecutive
NYSE trading days ending on the trading day immediately prior to the Closing Date.
4
(5) “
Closing Transaction Value
” means the sum of (A) the Aggregate Cash Amount and (B)
the product obtained by multiplying the Aggregate PNC Share Amount by the Measurement Price, rounded to the nearest whole cent.
(6) “
Per Share Amount
” means the amount obtained by dividing the Closing Transaction Value by the number of Exchangeable Shares, rounded
to the nearest whole cent.
(7) “
Exchange
Ratio
” means that fraction of a share of PNC Common Stock as shall be obtained by dividing the Per Share Amount by the Measurement Price, rounded to the nearest one-ten-thousandth.
(8) “
Exchangeable Shares
” means the aggregate number of
shares of Company Common Stock issued and outstanding immediately prior to the Effective Time, rounded to the nearest whole share.
(e)
Adjustments to Preserve Tax Treatment.
(i) In the event that the quotient obtained by dividing (x) the product of (i) the Aggregate PNC Share Amount and (ii) the Final PNC Share Value by (y)
the sum of (A) the Aggregate Cash Amount, (B) the Other Cash Consideration (as defined below), and (C) the product of (i) the Aggregate PNC Share Amount and (ii) the Final PNC Share Value is less than 0.425, the Aggregate PNC Share Amount shall be
increased by the Share Adjustment Amount (as defined in this Section 2.1(e)) and the Aggregate Cash Amount shall be decreased by the product of (x) the Final PNC Share Value and (y) the Share Adjustment Amount. The “
Share Adjustment
Amount
” shall be equal to the quotient obtained by dividing (x) the difference obtained by subtracting (i) the product of (a) the Aggregate PNC Share Amount and (b) the Final PNC Share Value from (ii) the product of (a) 0.425 and (b) the
sum of (1) the Aggregate Cash Amount, (2) Other Cash Consideration and (3) the product of the Aggregate PNC Share Amount and the Final PNC Share Value by (y) the Final PNC Share Value.
(ii) In the event that the Aggregate PNC Share Amount and the Aggregate Cash
Amount are adjusted as provided for in this Section 2.1(e), all references in this Agreement to the “Aggregate PNC Share Amount” and the “Aggregate Cash Amount” shall refer to the Aggregate PNC Share Amount and the Aggregate Cash
Amount as adjusted in this Section 2.1(e).
(iii) For purposes
of this Agreement, “
Final PNC Share Value
” means the arithmetic average of the daily high and low per share sales prices of PNC Common Stock on the NYSE on the Closing Date or if the Closing Date is not a trading day, the trading
day prior to the Closing Date; and “
Other Cash Consideration
” means the sum of (i) the product of the number of Dissenting Shares (except to the extent that the holder of such Dissenting Shares, as of the Closing Date, has
effectively withdrawn or lost his right to dissent from the Merger under the DGCL) and the Per Share Cash Consideration and (ii) any other amounts
5
received by a holder of Company stock prior to the Merger, either in a redemption of Company stock or in a distribution
with respect to Company stock (but only to the extent such amount is treated as other property or money received in the exchange for purposes of Section 356 of the Code, or would be so treated if the Company shareholder also had received stock of
PNC in exchange for stock owned by the shareholder in the Company).
(c)
PNC Common Stock
. Each share of PNC Common Stock outstanding immediately prior to the Effective Time shall remain outstanding and shall be unaffected by the Merger.
(d)
Cancellation of Old Shares
. Each Exception Share shall cease to be outstanding, shall be canceled and retired and
shall cease to exist, and no consideration shall be delivered in exchange therefor. Each share of Company Common Stock issued and outstanding immediately prior to the Effective Time, other than Exception Shares, is hereinafter defined as an
“
Old Share
”. Old Shares shall cease to be outstanding, shall be canceled and retired and shall cease to exist, and each holder of a certificate (an “
Old Certificate
”) formerly representing Old Shares shall
thereafter cease to have any rights with respect to such shares, except the right to receive, without interest, upon exchange of such Old Certificate in accordance with Section 2.3, the Consideration. “
Exception Shares
” means shares
of Company Common Stock owned or held by PNC or by the Company, other than shares owned or held in a bona fide fiduciary or agency capacity or in satisfaction of a debt previously contracted in good faith.
(e) Subject to the allocation procedures set forth in Section 2.1(e), each
record holder of Company Common Stock will be entitled (i) to elect to receive shares of PNC Common Stock for all or some of the shares of Company Common Stock (“
Stock Election Shares
”) held by such record holder, (ii) to elect to
receive cash for all or some of the shares of Company Common Stock (“
Cash Election Shares
”) held by such record holder or (iii) to indicate that such holder makes no such election for all or some of the shares of Company Common
Stock (“
No-Election Shares
”) held by such record holder. All such elections (each, an “
Election
”) shall be made on a form designed for that purpose and agreed to by PNC and the Company (an “
Election
Form
”). Any shares of Company Common Stock for which the record holder has not, as of the Election Deadline (as defined below), properly submitted to the Exchange Agent a properly completed Election Form will be deemed No-Election Shares. A
record holder acting in different capacities or acting on behalf of other persons in any way will be entitled to submit an Election Form for each capacity in which such record holder so acts with respect to each person for which it so acts. The
exchange agent (the “
Exchange Agent
”) will be a bank or trust company in the United States selected by PNC and reasonably acceptable to the Company. In order to make a valid election, the properly completed Election Form must be
accompanied by certificates of the shares of Company Common Stock to which such Form of Election relates or by an appropriate customary guarantee of delivery of such certificates, as set forth in such Form of Election, from a member of any
registered national securities exchange or a commercial bank or trust company in the United States (provided that such certificates are in fact delivered to the Exchange Agent by the time required in such guarantee of delivery; failure to
6
deliver shares of Company Common Stock covered by such a guarantee of delivery within the time set forth on such
guarantee shall be deemed to invalidate any otherwise properly made Election, unless otherwise determined by PNC, in its sole discretion). Notwithstanding anything contained herein to the contrary, each share of Company Common Stock owned by a
subsidiary of PNC or by a subsidiary of the Company (in each case, other than those shares held by any such subsidiary in a bona fide fiduciary or agency capacity) shall be converted in the Merger solely into PNC Common Stock.
(f) The allocation among the holders of shares of Company Common Stock of
rights to receive the Per Share Stock Consideration or the Per Share Cash Consideration will be made as follows:
(1)
Number of Stock Elections Less Than the Stock Conversion Number
. If the aggregate number of Stock Election Shares (on the basis of valid
Election Forms received as of the Election Deadline) is less than the number obtained by dividing the Aggregate PNC Share Amount by the Exchange Ratio (the “
Stock Conversion Number
”), then
(A) each Stock Election Share will be, as of the Effective
Time, converted into the right to receive the Per Share Stock Consideration,
(B) the Exchange Agent will allocate from among the No-Election Shares, pro rata to the holders of No-Election Shares in accordance with their respective numbers of No-Election Shares, a sufficient number of
No-Election Shares so that the sum of such number and the number of Stock Election Shares equals as closely as practicable the Stock Conversion Number, and each such allocated No-Election Share (each, a “
Stock-Selected No-Election
Share
”) will be, as of the Effective Time, converted into the right to receive the Per Share Stock Consideration,
provided
that if the sum of all No-Election Shares and Stock Election Shares is equal to or less than the Stock
Conversion Number, all No-Election Shares will be Stock-Selected No-Election Shares,
(C) if the sum of Stock Election Shares and No-Election Shares is less than the Stock Conversion Number, the Exchange Agent will allocate
from among the Cash Election Shares, pro rata to the holders of Cash Election Shares in accordance with their respective numbers of Cash Election Shares, a sufficient number of Cash Election Shares so that the sum of such number, the number of all
Stock Election Shares and the number of all No-Election Shares equals as closely as practicable the Stock Conversion Number, and each such allocated Cash Election Share (each, a “
Converted Cash Election Share
”) will be, as of the
Effective Time, converted into the right to receive the Per Share Stock Consideration, and
(D) each No-Election Share and Cash Election Share that is not a Stock-Selected No-Election Share or a Converted Cash Election Share (as
the case may be) will be, as of the Effective Time, converted into the right to receive the Per Share Cash Consideration; or
7
(2)
Number of Stock Elections Greater Than the Stock Conversion Number
. If the aggregate number of
Stock Election Shares (on the basis of valid Election Forms received by the Election Deadline) is greater than the Stock Conversion Number, then
(A) each Cash Election Share and No-Election Share will be, as of the Effective Time, converted into the right to receive the Per Share
Cash Consideration,
(B) the Exchange Agent
will allocate from among the Stock Election Shares, pro rata to the holders of Stock Election Shares in accordance with their respective numbers of Stock Election Shares, a sufficient number of Stock Election Shares (“
Converted Stock
Election Shares
”) so that the difference of (x) the number of Stock Election Shares less (y) the number of the Converted Stock Election Shares equals as closely as practicable the Stock Conversion Number, and each Converted Stock Election
Share will be, as of the Effective Time, converted into the right to receive the Per Share Cash Consideration; provided that if an Election Form designates by stock certificate number the priority in which the Stock Election Shares governed by such
Election Form are to be reallocated pursuant to this clause (B), such Stock Election Shares shall be deemed reallocated in accordance with such priority, and
(C) each Stock Election Share that is not a Converted Stock Election Share will be, as of the Effective Time, converted into the right
to receive the Per Share Stock Consideration.
(3)
Number of
Stock Elections is Equal to the Stock Conversion Number
. If the aggregate number of Stock Election Shares (on the basis of Election Forms received by the Election Deadline) is equal to the Stock Conversion Number, then
(A) each Stock Election Share will be, as of the Effective
Time, converted into the right to receive the Per Share Stock Consideration, and
(B) each Cash Election Share and No-Election Share will be, as of the Effective Time, converted into the right to receive the Per Share
Cash Consideration.
2.2
Fractional Shares
.
Notwithstanding any other provision of this Article II, no fractional shares of PNC Common Stock will be issued pursuant to the Merger. Instead, PNC will pay or cause to be paid to the holder of any Old Shares that would, pursuant to paragraph 2.1,
otherwise be entitled to receive fractional shares of PNC Common Stock an amount in cash, rounded to the nearest cent and without interest, equal to the product of (i) the fraction of a share to which such holder would otherwise have been entitled
and (ii) the Measurement Price.
8
2.3
Exchange of Old Certificates for New Certificates
.
(a)
Exchange Agent.
Until the first anniversary of the Effective
Time, PNC shall make available or cause to be made available to the Exchange Agent certificates (each, a “
New Certificate
”) representing the shares of PNC Common Stock (each, a “
New Share
”) and cash in amounts
sufficient to allow the Exchange Agent to make all deliveries of New Certificates and payments that may be required in exchange for Old Certificates pursuant to this Article II. Upon such anniversary, any such New Certificates and cash remaining in
the possession of the Exchange Agent (together with any dividends or earnings in respect thereof) shall be delivered to PNC. Any holder of Old Certificates who has not theretofore exchanged his or her Old Certificates for New Certificates and/or
cash pursuant to this Article II shall thereafter be entitled to look exclusively to PNC, and only as a general creditor thereof in the case of cash, for the shares of PNC Common Stock and/or cash to which he or she may be entitled upon exchange of
such Old Certificates pursuant to this Article II. Notwithstanding the foregoing, neither the Exchange Agent nor any party hereto, shall be liable to any holder of Old Certificates for any amount properly delivered to a public official pursuant to
applicable abandoned property, escheat or similar laws.
(b)
Exchange Procedures
. At least twenty business days prior to the expected Election Deadline, and thereafter from time to time as the Company may reasonably request until the Election Deadline, PNC shall cause the Exchange Agent to mail or
deliver to each individual, bank, corporation, partnership, trust, association or other entity or organization (any of the foregoing, a
“Person
”) who is a holder of record of Company Common Stock an Election Form and a form of
letter of transmittal in form reasonably satisfactory to PNC and the Company containing instructions for use in effecting the surrender of Old Certificates in exchange for New Certificates and any payments pursuant to this Article II. To be
effective, the Election Form must be properly completed, signed and actually received by the Exchange Agent not later than 5:00 p.m., New York City time, on the business day that is ten (10) trading days prior to the Closing Date (which date shall
be publicly announced by PNC as soon as practicable prior to such date) (the “
Election Deadline
”) and accompanied by the Old Certificates as to which such Election Form is being made, duly endorsed in blank or otherwise in a form
acceptable for transfer on the books of Company (or accompanied by an appropriate guarantee of delivery by an eligible organization) in the case of shares that are not held in book entry form. For shares that are held in book entry form, PNC shall
establish procedures for the delivery of such shares, which procedures shall be reasonably acceptable to Company. The Exchange Agent shall make all computations contemplated by Section 2.1 hereof, and after consultation with PNC and the Company, all
such computations will be conclusive and binding on the former holders of Company Common Stock absent manifest error. Any shares of Company Common Stock for which the record holder has not, as of the Election Deadline, properly submitted to the
Exchange Agent a properly completed Election Form will be deemed No-Election Shares. Any Election Form may be revoked, by the stockholder who submitted such Election Form to the Exchange Agent, only by written notice received by the Exchange Agent
prior to the Election Deadline. In addition, all Election Forms shall automatically be revoked if the Exchange Agent is notified in writing by PNC and the Company that the Merger has been abandoned. Promptly after the Effective Time, each holder who
has surrendered to the Exchange Agent an Old Certificate for cancellation together with such letter of transmittal, duly executed and
9
completed in accordance with the instructions thereto, shall be entitled to receive in exchange therefor a New
Certificate representing the New Shares and/or a check in the amount to which such holder is entitled pursuant to this Article II, and the Old Certificate so surrendered shall forthwith be canceled. No interest will accrue or be paid with respect to
any property to be delivered upon surrender of Old Certificates. If any New Certificate is to be issued, or cash payment made, in a name other than that in which the Old Certificate surrendered in exchange therefor is registered, it shall be a
condition of such exchange that the Person requesting such exchange shall pay any transfer or other taxes required by reason of the issuance of such New Certificate or the making of such cash payment in a name other than that of the registered
holder of the Old Certificate surrendered, or shall establish to the satisfaction of the PNC and the Exchange Agent that any such taxes have been paid or are not applicable.
(c)
Distributions with Respect to Unexchanged Shares
. Notwithstanding any other provision of this Plan, no dividends
or other distributions in respect of New Shares with a record date after the Effective Time shall be paid to any Person holding an Old Certificate until such Old Certificate has been surrendered for exchange as provided herein. Subject to the effect
of applicable laws and the immediately preceding sentence, following surrender of any such Old Certificates, there shall be paid to the holder of the New Certificates issued in exchange therefor, without interest, at the time of such surrender, the
amount of dividends or other distributions with a record date on or after the Effective Time theretofore payable with respect to the New Shares represented thereby, as well as any dividends with respect to Company Common Stock declared prior to the
Effective time but unpaid.
(d)
Transfers
. At or after
the Effective Time, there shall be no transfers on the stock transfer books of PNC or the Company of Old Shares.
(e)
Lost, Stolen or Destroyed Certificates
. If any Old Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit of
that fact by the Person claiming such Old Certificate to be lost, stolen or destroyed and, if required by PNC or the Exchange Agent, the posting by such Person of a bond in such reasonable amount as PNC or the Exchange Agent may direct as indemnity
against any claim that may be made against it with respect to such Old Certificate, PNC or the Exchange Agent shall, in exchange for such lost, stolen or destroyed Old Certificate, issue or cause to be issued a New Certificate and/or pay or cause to
be paid the amounts, if any, deliverable in respect to the Old Shares formerly represented by such Old Certificate pursuant to this Article II.
2.4
Adjustment of Consideration
. In the event that, subsequent to the date of this Plan but prior to the Effective Time, the shares of PNC Common
Stock issued and outstanding shall, through a reorganization, recapitalization, reclassification, stock dividend, stock split, reverse stock split or other similar change in the capitalization of PNC, increase or decrease in number or be changed
into or exchanged for a different kind or number of securities, then an appropriate and proportionate adjustment shall be made to the Per Share Cash Consideration and the Per Share Stock Consideration.
10
2.5
Shares of Dissenting Stockholders
. Notwithstanding anything in this Agreement to the contrary,
any shares of Company Common Stock that are issued and outstanding as of the Effective Time and that are held by a stockholder who has properly exercised his appraisal rights under the DGCL (the “
Dissenting Shares
”) shall not be
converted into the right to receive the Consideration unless and until the holder shall have failed to perfect, or shall have effectively withdrawn or lost, his right to dissent from the Merger under the DGCL and to receive such consideration as may
be determined to be due with respect to such Dissenting Shares pursuant to and subject to the requirements of the DGCL. If any such holder shall have so failed to perfect or have effectively withdrawn or lost such right after the Election Deadline,
each share of such holder’s Company Common Stock shall thereupon be deemed to have been converted into and to have become, as of the Effective Time, the right to receive, without any interest thereon, the Per Share Stock Consideration or the
Per Share Cash Consideration, or a combination thereof, as determined by PNC in its sole discretion. The Company shall give PNC (i) prompt notice of any notice or demands for appraisal or payment for shares of Company Common Stock received by the
Company and (ii) the opportunity to participate in and direct all negotiations and proceedings with respect to any such demands or notices. The Company shall not, without the prior written consent of PNC, make any payment with respect to, or settle,
offer to settle or otherwise negotiate, any such demands.
2.7
Withholding Rights
. PNC shall be entitled to deduct and withhold from the Consideration such amounts as it is required to deduct and withhold under the Code and the rules and regulations promulgated thereunder, or any provision of state,
local or foreign Tax law. To the extent that amounts are so withheld by PNC, such withheld amounts shall be treated for all purposes of this Plan as having been paid to the Company stockholder in respect to which such deduction and withholding was
made by PNC.
ARTICLE III
Conduct of Business Pending Merger
3.1
Company Forbearances
.
The Company agrees that from the date hereof until the Effective Time, except as contemplated by this Plan, or as
set forth in the applicable paragraph of its Disclosure Schedule (“
Previously Disclosed
”), without the prior written consent of the other party hereto (which consent shall not be unreasonably withheld), it will not, and will cause
each of its subsidiaries not to:
(a)
Ordinary Course
.
Conduct its business and the business of its subsidiaries other than in the ordinary and usual course or fail to use reasonable efforts to preserve intact their business organizations and assets and maintain their rights, franchises and existing
relations with customers, suppliers, employees and business associates, or take any action reasonably likely to materially impair its ability to perform its obligations under this Plan or to consummate the transactions contemplated hereby and
thereby.
(b)
Capital Stock
. (1) Issue, sell or
otherwise permit to become outstanding, or dispose of or encumber or pledge or authorize or propose the creation of, any additional shares of its stock other than pursuant to Rights
11
outstanding on the date hereof, (2) enter into any agreement with respect to the foregoing or (3) permit any additional
shares of its stock to become subject to new grants, other Rights or similar stock-based employee rights.
(c)
Dividends, Etc.
(1) Make, declare, pay or set aside for payment any dividend (other than (A) dividends from its direct or indirect wholly owned
subsidiaries to it or another of its wholly owned subsidiaries, (B) dividends on preferred stock of subsidiaries, the common stock of which is wholly owned directly or indirectly by the Company, in accordance with the terms thereof, and (C) regular
quarterly dividends on its common stock at a rate equal to the rate paid by it during the fiscal quarter immediately preceding the date hereof or (2) directly or indirectly adjust, split, combine, redeem, reclassify, purchase or otherwise acquire,
any shares of its capital stock.
(d)
Compensation;
Employment Agreements; Etc.
Enter into or amend or renew any employment, consulting, severance or similar agreements or arrangements with any of its directors, officers or employees or those of its subsidiaries or grant any salary or wage
increase or increase any employee benefit (including incentive or bonus payments), except (1) for normal individual increases in compensation to employees (other than executive officers or directors) in the ordinary course of business consistent
with past practice, (2) for other changes that are required by applicable law and (3) to satisfy Previously Disclosed contractual obligations.
(e)
Benefit Plans.
Enter into, establish, adopt or materially amend any Benefit Plan, except (1) as may be required by applicable law, (2) to
satisfy Previously Disclosed contractual obligations or (3) as provided in this Plan.
(f)
Dispositions
. Sell, transfer, mortgage, encumber or otherwise dispose of or discontinue any of its assets, deposits, business or properties except for sales, transfers, mortgages, encumbrances or other
dispositions or discontinuances in the ordinary course of business consistent with past practice and in a transaction that, together with other such transactions, is not material to it and its subsidiaries, taken as a whole.
(g)
Acquisitions
. Acquire (other than by way of foreclosures or
acquisitions of control in a fiduciary or similar capacity or in satisfaction of debts previously contracted in good faith, in each case in the ordinary and usual course of business consistent with past practice) all or any portion of the assets,
business, deposits or properties of any other entity except in the ordinary course of business consistent with past practice and in a transaction that, together with other such transactions, is not material to it and its subsidiaries, taken as a
whole.
(h)
Governing Documents
. Amend its articles of
incorporation, bylaws or similar governing documents (“
Governing Documents
”) or the Governing Documents of any of its subsidiaries, except as contemplated by this Plan.
(i)
Accounting Methods
. Implement or adopt any change in its accounting principles, practices or methods, other than
as may be required by generally accepted accounting principles, applicable regulatory accounting requirements or applicable law.
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(j)
Contracts
. (1) Enter into, renew or terminate, or make any payment not then required under,
any contract or agreement (other than loans, funding arrangements and other transactions made in the ordinary course of the banking business and that do not contain (A) any non-competition or exclusive dealing agreements or other agreement or
obligation which purports to limit or restrict in any respect the ability of the Company or its subsidiaries to solicit customers or the manner in which, or the localities in which, all or any portion of the business of the Company and its or could
be conducted or (B) any agreement that grants any right of first refusal or right of first offer or similar right or that limits or purports to limit the ability of the Company or any of its subsidiaries (or, following consummation of the
transactions contemplated hereby, the ability of PNC or any of its subsidiaries) to own, operate, sell, transfer, pledge or otherwise dispose of any assets or business) that calls for aggregate annual payments of $300,000 or more and which is not
terminable on 60 days or less notice without payment of any termination fee or penalty and (2) enter into any contract or agreement pertaining to the use of the name “Riggs” or any derivative thereof.
(k)
Claims
. Settle any claim, action or proceeding against it, except
for any claim, action or proceeding settled in the ordinary course of business in an amount or for such consideration not in excess of $100,000, individually, or $300,000 in the aggregate for all such settlements, and would not impose any material
restriction on the business of the Company or its subsidiaries or, after the Effective Time, PNC or its subsidiaries or create precedent for claims that are reasonably likely to be material to the Company or its subsidiaries or, after the Effective
Time, PNC or its subsidiaries.
(l)
Adverse Actions
.
Notwithstanding anything herein to the contrary, (1) take any action that would, or is reasonably likely to, prevent the Merger from qualifying as a reorganization within the meaning of Section 368(a) of the Code or (2) take any action that is
reasonably likely to result in (A) any of the conditions to the Merger set forth in Article VI not being satisfied in a timely manner or (B) a material violation of any provision of this Plan except, in each case, as may be required by applicable
law or regulation.
(m)
Capital Expenditures
. Other than
in the ordinary course of business, make any capital expenditures in excess of (1) $100,000 per project or related series of projects or (2) $300,000 in the aggregate.
(n)
Certain Tax Matters.
Make, change or revoke any material Tax election, file any material amended Tax Return,
enter into any material closing agreement, settle any material Tax claim or assessment, or surrender any right to claim a material refund of Taxes.
(o)
Commitments
. Agree or commit to do any of the foregoing.
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3.2
PNC Forbearances
. PNC agrees that from the date hereof until the Effective Time, except as
expressly contemplated by this Plan or as Previously Disclosed, without the prior written consent of the Company (which consent shall not be unreasonably withheld), it will not, and, in the case of (b) only, will cause each of its subsidiaries not
to:
(a)
Governing Documents
. Amend its Governing
Documents in a manner that would adversely affect the Company’s stockholders.
(b)
Adverse Actions
. Notwithstanding anything herein to the contrary, (1) take any action that would, or is reasonably likely to, prevent the Merger from qualifying as a reorganization within the meaning of
Section 368(a) of the Code, (2) take any action that is reasonably likely to result in (A) any of the conditions to the Merger set forth in Article VI not being satisfied in a timely manner or (B) a material violation of any provision of this Plan
except, in each case, as may be required by applicable law or regulation or (3) declare or pay any extraordinary or special dividends on or make any other extraordinary or special distributions in respect of any of its capital stock.
ARTICLE IV
Representations
4.1
Disclosure Schedules
. On or prior to the date hereof, PNC has delivered to the Company a schedule and the Company has delivered to PNC a schedule (respectively, each schedule a “
Disclosure
Schedule
”) setting forth, among other things, items the disclosure of which is necessary or appropriate either in response to an express disclosure requirement contained in a provision hereof or as an exception to one or more
representations contained in Section 4.3 or to one or more of its covenants contained herein; provided, that the mere inclusion of an item in a Disclosure Schedule as an exception to a representation shall not be deemed an admission by a party that
such item was required to be disclosed therein.
4.2
Standard
. (a) For all purposes of this Plan, no representation of PNC or the Company contained in Section 4.3 (other than the representations contained in Section 4.3(b), which shall be true and correct in all material respects, and in
Section 4.3(g)(3), which shall be true and correct in all respects) shall be deemed untrue and no party hereto shall be deemed to have breached a representation, as a consequence of the existence of any fact, event or circumstance unless such fact,
circumstance or event, individually or taken together with all other facts, events or circumstances inconsistent with any representation contained in Section 4.3 (read for this purpose without regard to any individual reference to
“materiality” or “Material Adverse Effect” set forth therein) has had or is reasonably likely to have a Material Adverse Effect with respect to PNC or the Company, as the case may be.
(b) The term “
Material Adverse Effect
” means an effect which
(1) is materially adverse to the business, financial condition or results of operations of PNC or the Company, as the context may dictate, and its subsidiaries, taken as a whole, or (2) materially impairs the ability of PNC or the Company to
consummate the Merger;
provided
,
however
, that in determining whether a Material Adverse Effect has occurred there shall be excluded any effect to the extent attributable to or resulting from (A) any changes in laws, regulations or
interpretations of laws or
14
regulations generally affecting the banking or bank holding company businesses, but not uniquely relating to PNC or the
Company, (B) any change in generally accepted accounting principles or regulatory accounting requirements, generally affecting the banking or bank holding company businesses, but not uniquely relating to PNC or the Company, (C) events, conditions or
trends in economic, business or financial conditions generally or affecting the banking or bank holding company businesses specifically (including changes in interest rates and changes in the markets for securities), except to the extent any such
events, conditions or trends in economic, business or financial conditions have a materially disproportionate adverse effect upon PNC or the Company, as the context may dictate, (D) changes in national or international political or social conditions
including the engagement by the United States in hostilities, whether or not pursuant to the declaration of a national emergency or war, or the occurrence of any military or terrorist attack upon or within the United States, or any of its
territories, possessions or diplomatic or consular offices or upon any military installation, equipment or personnel of the United States, (E) actions or omissions of PNC or the Company taken with the prior written consent of the other party in
contemplation of the transactions contemplated hereby and (F) any change, effect, event or occurrence arising out of the announcement or performance of this Plan and the transactions contemplated hereby, including any expenses incurred in connection
herewith.
4.3
Representations
. Except as Previously
Disclosed, the Company hereby represents and warrants to PNC, and PNC hereby represent and warrant to the Company, to the extent applicable, in each case with respect to itself and its subsidiaries, as follows:
(a)
Organization, Standing and Authority
. It is a corporation duly
organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation. It is duly qualified to do business and is in good standing in the states of the United States and any foreign jurisdictions where its
ownership or leasing of property or assets or the conduct of its business requires it to be so qualified.
(b)
Capital Stock.
(1) The information in Recital A, in the case of PNC, and in Recital B, in the case of the Company, is true and correct.
(2) Its outstanding shares of common stock have been duly authorized and are
validly issued and outstanding, fully paid and nonassessable, not subject to any preemptive rights and were not issued in violation of any preemptive rights.
(3) Except as set forth in this Plan or as Previously Disclosed, as of the date hereof, there are no shares of its common stock authorized and reserved
for issuance, it does not have any Rights outstanding with respect to its common stock, and it does not have any commitment to authorize, issue or sell any of its common stock or Rights, except pursuant to this Plan, outstanding options to purchase
its common stock and the Benefit Plans. All Company Options
15
(as defined in Section 5.10(a)) under the Riggs National Corporation 1993 Stock Option Plan, Riggs National Corporation
1994 Stock Option Plan, Riggs National Corporation 1996 Stock Option Plan and Riggs National Corporation 1997 Non-Employee Directors Stock Option Plan are fully vested and exercisable, or will become such in accordance with their regular vesting
schedule prior to October 11, 2004. As used herein, “
Rights
” means, with respect to any Person, securities or obligations convertible into or exercisable or exchangeable for, or giving any Person any right to subscribe for or
acquire, or any options, calls or commitments relating to, or any stock appreciation right or other instrument the value of which is determined in whole or in part by reference to the market price or value of, shares of capital stock or earnings of
such Person.
(4) In the case of PNC, any shares of PNC Common
Stock issued in connection with the Merger have been duly authorized and are validly issued and outstanding, fully paid and nonassessable, not subject to any preemptive rights and were not issued in violation of any preemptive rights.
(c)
Subsidiaries.
(1) The Company has Previously Disclosed a list of all of its subsidiaries.
(2) (A) It owns, directly or indirectly, all the issued and
outstanding equity securities of each of its Significant Subsidiaries, (B) no equity securities of any of its Significant Subsidiaries are or may become required to be issued (other than to it or its wholly owned subsidiaries) by reason of any Right
or otherwise, (C) there are no contracts, commitments, understandings or arrangements by which any of its Significant Subsidiaries is or may be bound to sell or otherwise transfer any equity securities of any its subsidiaries (other than to it or
its wholly owned subsidiaries), (D) there are no contracts, commitments, understandings, or arrangements relating to its rights to vote or to dispose of such securities and (E) all the equity securities of each Significant Subsidiary held by it or
its subsidiaries have been duly authorized and are validly issued and outstanding, fully paid and nonassessable (except as provided in 12 U.S.C. § 55 or comparable state laws) and are owned by it or its subsidiaries free and clear of all liens,
pledges, security interests, claims, provisions, preemptive or subscriptive rights or other encumbrances or restrictions of any kind or Rights (“
Liens
”). For purposes of this Plan,
“Significant Subsidiary”
has the
meaning ascribed to that term in Rule 1-02 of Regulation S-X under the Securities Exchange Act of 1934, as amended (the “
Exchange Act”
).
(3) Each of its Significant Subsidiaries has been duly organized and is validly existing in good standing under the laws of the jurisdiction of its
organization, and is duly qualified to do business and in good standing in the jurisdictions where its ownership or leasing of property or the conduct of its business requires it to be so qualified.
(d)
Corporate Power
. It and each of its Significant Subsidiaries has
the corporate power and authority to carry on its business as it is now being conducted and to own all its properties and assets; and it has the corporate power and authority to execute, deliver and perform its obligations under this Plan and to
consummate the transactions contemplated hereby and thereby.
16
(e)
Corporate Authority.
(1) Subject to receipt of the stockholder approval described in Section 4.3(e)(3), in the case of the Company, this Plan
and the transactions contemplated hereby and thereby have been authorized by all necessary corporate action. This Plan is its valid and legally binding obligation, enforceable in accordance with its terms (except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and similar laws of general applicability relating to or affecting creditors’ rights or by general equity principles).
(2) In the case of PNC, no vote of the holders of any class or series of
PNC’s capital stock is necessary to approve and adopt this Plan and the transactions contemplated hereby.
(3) In the case of the Company, the affirmative vote of the holders of a majority of the outstanding shares of Company Common Stock to adopt this Plan is
the only vote of the holders of any class or series of the Company’s capital stock necessary to approve and adopt this Plan and the transactions contemplated hereby.
(f)
Regulatory Approvals; No Defaults.
(1) No consents or approvals of, or filings or registrations with, any governmental or regulatory authority, agency, court,
commission or other entity, domestic or foreign (“
Governmental Entity
”) or with any third party are required to be made or obtained by it or any of its subsidiaries in connection with the execution, delivery or performance by it of
this Plan or to consummate the Merger or the Bank Merger except for (A) filings and approvals of applications with and by federal, state and other authorities as Previously Disclosed, (B) filings with the SEC, the National Association of Securities
Dealers, and state securities authorities, (C) filings and approvals under the Hart-Scott-Rodino Antitrust Improvements Act, if required by applicable law and regulation (D) the applicable stockholder approval described in Section 5.2(a), (E) any
consents, notices or approvals required pursuant to any investment advisory contract or the Investment Advisers Act of 1940, and (F) the filing of the Certificate of Merger with the Secretary of State of the State of Delaware pursuant to the DGCL
and the filing of the Articles of Merger with the Department of State of the Commonwealth of Pennsylvania.
(2) Subject to receipt of the regulatory approvals referred to in the preceding paragraph (the “
Regulatory Approvals
”), and the
expiration of related waiting periods, and required filings under federal and state securities laws, the execution, delivery and performance of this Plan and the consummation of the transactions contemplated hereby do not and will not (A) constitute
a breach or violation of, or a default under, or give rise to any Lien, any acceleration of remedies or any right of termination under, any law, rule or regulation or any judgment,
17
decree, order, governmental permit or license, or agreement, indenture or instrument of it or of any of its subsidiaries
or to which it or any of its subsidiaries or properties is subject or bound, (B) constitute a breach or violation of, or a default under, its Governing Documents or (C) require any consent or approval under any such law, rule, regulation, judgment,
decree, order, governmental permit or license, agreement, indenture or instrument.
(3) As of the date hereof, it (a) knows of no reason why (1) all Regulatory Approvals from any Governmental Entity required for the consummation of the transactions contemplated by this Plan should not be obtained on
a timely basis or (2) the opinion of tax counsel referred to, in the case of PNC, in Section 6.2(c) and, in the case of the Company, in Section 6.3(c) should not be obtained on a timely basis and (b) has no reason to believe that the Merger will
fail to qualify as a reorganization under Section 368(a) of the Internal Revenue Code.
(g)
Financial Reports and Regulatory Documents; Material Adverse Effect.
(1) Its Annual Report on Form 10-K for the fiscal year ended December 31, 2003, and all other reports, registration statements, definitive proxy
statements or information statements filed by it or any of its subsidiaries subsequent to December 31, 2003 under the Securities Act of 1933, as amended (“
Securities Act
”), or under Section 13(a), 13(c), 14 or 15(d) of the Exchange
Act or under the securities regulations of the SEC, in the form filed (collectively, its “
Regulatory Filings
”) with the SEC as of the date filed, (A) complied in all material respects as to form with the applicable requirements
under the Securities Act or the Exchange Act, as the case may be, and (B) did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the
light of the circumstances under which they were made, not misleading; and each of the balance sheets or statements of condition contained in or incorporated by reference into any such Regulatory Filing (including the related notes and schedules
thereto) fairly presented in all material respects its financial position and that of its subsidiaries as of its date, and each of the statements of income and changes in shareholders’ equity and cash flows or equivalent statements in such
Regulatory Filings (including any related notes and schedules thereto) fairly presented in all material respects, the results of operations, changes in shareholders’ equity and changes in cash flows, as the case may be, of it and its
subsidiaries for the periods to which they relate, in each case in accordance with GAAP consistently applied during the periods involved, except in each case as may be noted therein, subject to normal year-end audit adjustments in the case of
unaudited statements.
(2) Since December 31, 2003, it and its
subsidiaries have not incurred any liability other than in the ordinary course of business consistent with past practice.
(3) In the case of the Company only, since December 31, 2003, (A) it and its subsidiaries have conducted their businesses in the ordinary and usual
course consistent with past practice (excluding the incurrence of
18
expenses related to this Plan and the transactions contemplated hereby) and (B) no event has occurred or circumstance
arisen that, individually or taken together with all other facts, circumstances and events (described in any paragraph of Section 4.3 or otherwise), is reasonably likely to have a Material Adverse Effect with respect to it.
(4) In the case of the PNC only, since December 31, 2003, no event has
occurred or circumstance arisen that, individually or taken together with all other facts, circumstances and events (described in any paragraph of Section 4.3 or otherwise), is reasonably likely to have a Material Adverse Effect with respect to it.
(h)
Litigation
. Except as set forth in its Regulatory
Filings prior to the date hereof, there is no suit, action or proceeding pending or, to the knowledge of it, threatened against or affecting it or any of its subsidiaries (and it is not aware of any basis for any such suit, action or proceeding) (1)
that, individually or in the aggregate, is material to it and its subsidiaries, taken as a whole, or (2) that is reasonably likely to prevent or delay it in any material respect from performing its obligations under, or consummating the transactions
contemplated by, this Plan.
(i)
Regulatory Matters.
(1) Except as Previously Disclosed, neither it nor any of
its subsidiaries is a party to or is subject to any written order, decree, agreement, memorandum of understanding or similar arrangement with, or a commitment letter or similar submission to, or extraordinary supervisory letter from, any
Governmental Entity charged with the supervision or regulation of financial institutions or issuers of securities or engaged in the insurance of deposits or the supervision or regulation of it or any of its subsidiaries (collectively, the
“
Regulatory Authorities
”).
(2) Except as
Previously Disclosed, neither it nor any of its subsidiaries has been advised by any Regulatory Authority that such Regulatory Authority is contemplating issuing or requesting (or is considering the appropriateness of issuing or requesting) any such
written order, decree, agreement, memorandum of understanding, commitment letter, supervisory letter or similar submission. Except as Previously Disclosed, there are no material formal or informal investigations relating to any material regulatory
matters pending before any Governmental Entity with respect to it or its subsidiaries.
(j)
Compliance with Laws
. Except as Previously Disclosed, it and each of its subsidiaries:
(1) conducts its business in compliance with all applicable federal, state, local and foreign statutes, laws, regulations, ordinances, rules, judgments,
orders or decrees applicable thereto or to the employees conducting such businesses, including, without limitation, the Sarbanes-Oxley Act of 2002, the Equal Credit Opportunity Act, the Fair Housing Act, the Community Reinvestment Act, the Home
Mortgage Disclosure Act, the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism (USA PATRIOT) Act of 2001, the Bank Secrecy Act and all other applicable fair lending laws and other laws
relating to discriminatory business practices; and
19
(2) has all permits, licenses, authorizations, orders and approvals of, and has made all filings,
applications and registrations with, all Governmental Entities that are required in order to permit them to own or lease their properties and to conduct their businesses as presently conducted; all such permits, licenses, certificates of authority,
orders and approvals are in full force and effect and, to its knowledge, no suspension or cancellation of any of them is threatened.
(k)
Material Contracts; Defaults
. Except for those agreements and other documents filed as exhibits to its Regulatory Filings, neither it nor any
of its subsidiaries is a party to, bound by or subject to any agreement, contract, arrangement, commitment or understanding (1) that is a “material contract” within the meaning of Item 601(b)(10) of the SEC’s Regulation S-K, (2) in
the case of the Company only, any agreement, contract, arrangement, commitment or understanding that contains (A) any non-competition or exclusive dealing agreements or other agreement or obligation which purports to limit or restrict in any respect
the ability of the Company or its subsidiaries to solicit customers or the manner in which, or the localities in which, all or any portion of the business of the Company and its Subsidiaries is or would be conducted or (B) any agreement that grants
any right of first refusal or right of first offer or similar right or that limits or purports to limit the ability of the Company or any of its subsidiaries; (3) in the case of the Company only, any agreement, contract, arrangement, commitment or
understanding that involves performance of services or delivery of goods or materials to or by, or expenditures or receipts of, it or any of its subsidiaries of an amount or value in excess of $300,000, other than any loan commitment entered in the
ordinary course or any such agreement, contract, arrangement, commitment or understanding that is terminable on 60 days or less notice without payment of any termination fee or penalty; (4) in the case of the Company only, any joint venture,
partnership or similar arrangement providing for the sharing of profits, losses, costs or liabilities by it or any of its subsidiaries with any other Person; and (5) in the case of the Company only, any agreement providing for the indemnification by
the Company or its subsidiaries of any Person (other than customary agreements with vendors providing goods or services to the Company or its Subsidiaries where the potential indemnity obligations thereunder are not reasonably expected to be
material to the Company). Neither PNC nor any of its subsidiaries, nor Seller nor any of its subsidiaries, is in default under any material contract, agreement, commitment, arrangement, lease, insurance policy or other instrument to which it is a
party, by which its respective assets, business, or operations may be bound or affected, or under which it or its respective assets, business, or operations receives benefits, and there has not occurred any event that, with the lapse of time or the
giving of notice or both, would constitute such a default.
(l)
No Brokers; Fairness Opinions
. (i) No action has been taken by it that would give rise to any valid claim against any party hereto for a brokerage commission, finder’s fee or other like payment with respect to the transactions
contemplated by this Plan, excluding a Previously Disclosed fee to be paid to Sandler O’Neill & Partners, L.P., in the case of PNC, and Previously Disclosed fee to be paid to Lehman Brothers Inc., in the case of the Company.
20
(ii) As of the date of this Plan, it has received the written opinion, dated the date of this
Plan, of its financial advisor, Lehman Brothers Inc., in the case of the Company, and of its financial advisor, Sandler O’Neill & Partners, L.P., in the case of PNC, to the effect that the Consideration is fair, from a financial point of
view, to, in the case of PNC, PNC and in the case of the Company, the holders of Company Common Stock.
(m)
Employee Benefit Plans
. In the case of the Company only,
(1) All benefit and compensation plans, contracts, policies or arrangements covering its current or former employees of it
and its subsidiaries (the “
Employees
”) and its current or former directors, including, but not limited to, “employee benefit plans” within the meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended (“
ERISA
”), and deferred compensation, stock option, stock purchase, stock appreciation rights, stock based, incentive and bonus plans (the “
Benefit Plans
”) have been Previously Disclosed. Copies of all
Benefit Plans and all amendments thereto, all summary plan descriptions, the most recently filed Form 5500 and the most recent IRS determination letter have been made available to the other party.
(2) All Benefit Plans, other than “multiemployer plans” within the
meaning of Section 3(37) of ERISA (each a “
Multiemployer Plan
”) are in substantial compliance with ERISA, the Internal Revenue Code and other applicable laws. Each Benefit Plan which is subject to ERISA (the “
ERISA
Plans
”) that is an “employee pension benefit plan” within the meaning of Section 3(2) of ERISA (“
Pension Plan
”), and that is intended to be qualified under Section 401(a) of the Internal Revenue Code has received
a favorable determination letter from the Internal Revenue Service (the “
IRS
”), and it is not aware of any circumstances likely to result in the loss of the qualification of such plan under Section 401(a) of the Internal Revenue
Code. Neither it nor any of its subsidiaries has engaged in a transaction with respect to any ERISA Plan that, assuming the taxable period of such transaction expired as of the date hereof, could subject it or any subsidiary to a tax or penalty
imposed by either Section 4975 of the Internal Revenue Code or Section 502(i) of ERISA in an amount which would be material. Neither it nor any of its subsidiaries has incurred or reasonably expects to incur a material tax or penalty imposed by
Section 4980F of the Internal Revenue Code or Section 502 of ERISA.
(3) No liability under Subtitle C or D of Title IV of ERISA has been or is reasonably expected to be incurred by it or any of its subsidiaries with respect to any ongoing, frozen or terminated “single-employer plan”, within the
meaning of Section 4001(a)(15) of ERISA, currently or formerly maintained by any of them, or the single-employer plan of any entity which is considered one employer with it under Section 4001 of ERISA or Section 414 of the Internal Revenue Code (an
“
ERISA Affiliate
”). None of it, any of its subsidiaries or any of its ERISA Affiliates has contributed to a Multiemployer Plan or a plan that has two or more contributing sponsors at least two of whom are not under common control,
within
21
the meaning of Section 4063 of ERISA, within the past six years. No notice of a “reportable event”, within the
meaning of Section 4043 of ERISA for which the 30-day reporting requirement has not been waived or extended other than pursuant to Pension Benefit Guaranty Corporation Reg. Section 4043.66, has been required to be filed for any Pension Plan or by
any ERISA Affiliate within the 12-month period ending on the date hereof or will be required to be filed in connection with the transactions contemplated by this Plan.
(4) All contributions required to be made under each Benefit Plan have been timely made and all obligations in respect of
each Benefit Plan have been properly accrued and reflected in the Regulatory Filings as of the date of such filings. Neither any Pension Plan nor any single-employer plan of an ERISA Affiliate has an “accumulated funding deficiency”
(whether or not waived) within the meaning of Section 412 of the Internal Revenue Code or Section 302 of ERISA and no ERISA Affiliate has an outstanding funding waiver. It is not reasonably anticipated that required minimum contributions to any
Pension Plan under Section 412 of the Internal Revenue Code will be materially increased by application of Section 412(l) of the Internal Revenue Code. Neither it nor any of its subsidiaries has provided, or is required to provide, security to any
Pension Plan or to any single-employer plan of an ERISA Affiliate pursuant to Section 401(a)(29) of the Internal Revenue Code.
(5) Under each Pension Plan which is a single-employer plan, as of the last day of the most recent plan year ended prior to the date hereof, the
actuarially determined present value of all “benefit liabilities”, within the meaning of Section 4001(a)(16) of ERISA (as determined on the basis of the actuarial assumptions contained in such Pension Plan’s most recent actuarial
valuation), did not exceed the then current value of the assets of such Pension Plan, and there has been no material change in the financial condition of such Pension Plan since the last day of the most recent plan year.
(6) As of the date hereof, there is no material pending or, to its knowledge
threatened, litigation relating to the Benefit Plans. Neither it nor any of its subsidiaries has any obligations for retiree health and life benefits under any ERISA Plan or collective bargaining agreement. It or its subsidiaries may amend or
terminate any such plan or agreement at any time without incurring any liability thereunder other in respect of claims owed prior to such amendment or termination.
(7) Neither the execution of this Plan, shareholder approval of this Plan nor the consummation of the transactions
contemplated hereby (either alone or in conjunction with any other event) will (w) entitle any of its employees or any of its subsidiaries to severance pay or any increase in severance pay upon any termination of employment after the date hereof,
(x) accelerate the time of payment or vesting or result in any payment or funding (through a grantor trust or otherwise) of compensation or benefits under, increase the amount payable or result in any other material obligation pursuant to, any of
the Benefit Plans, (y) limit or restrict the right of the Company or, after the consummation of the transactions contemplated hereby, PNC to merge, amend or terminate any of the Benefit Plans or (z) result in payments under any of the Benefit Plans
which would not be deductible under Section 162(m) or Section 280G of the Internal Revenue Code.
22
(n)
Labor Matters
. Neither it nor any of its subsidiaries is a party to or is bound by any
collective bargaining agreement, contract or other agreement or understanding with a labor union or labor organization, nor is it or any of its subsidiaries the subject of a proceeding asserting that it or any such subsidiary has committed an unfair
labor practice (within the meaning of the National Labor Relations Act) or seeking to compel it or any of its subsidiaries to bargain with any labor organization as to wages or conditions of employment, nor is there any strike or other material
labor dispute involving it or any of its subsidiaries pending or, to its knowledge, threatened, nor to its knowledge is there any activity involving its or any of its subsidiaries’ employees seeking to certify a collective bargaining unit or
engaging in other organizational activity.
(o)
Environmental Matters
. To its knowledge, neither its conduct nor its operation or the conduct or operation of its subsidiaries nor any condition of any property presently or previously owned, leased or operated by any of them (including,
without limitation, in a fiduciary or agency capacity), violates or violated Environmental Laws and no condition has existed or event has occurred with respect to any of them or any such property that, with notice or the passage of time, or both, is
reasonably likely to result in liability under Environmental Laws. To its knowledge, no property on which it or any of its subsidiaries holds a Lien, violates or violated Environmental Laws and no condition has existed or event has occurred with
respect to any such property that, with notice or the passage of time, or both, is reasonably likely to result in liability under Environmental Laws. Neither it nor any of its subsidiaries has received any written notice from any person or entity
that it or its subsidiaries or the operation or condition of any property ever owned, leased, operated, or held as collateral or in a fiduciary capacity by any of them are or were in violation of or otherwise are alleged to have liability under any
Environmental Law, including, but not limited to, responsibility (or potential responsibility) for the cleanup or other remediation of any pollutants, contaminants, or hazardous or toxic wastes, substances or materials at, on, beneath, or
originating from, any such property. “
Environmental Laws
” means all applicable local, state and federal environmental, health and safety laws and regulations, including the Resource Conservation and Recovery Act, the Comprehensive
Environmental Response, Compensation, and Liability Act, the Clean Water Act, the Federal Clean Air Act, and the Occupational Safety and Health Act, each as amended, regulations promulgated thereunder, and state counterparts.
(p) Tax Matters.
(1) (A) All returns, amended returns or other reports (including elections,
declarations, disclosures, schedules, estimates and information returns) with respect to Taxes (as hereinafter defined) (“
Tax Returns
”) that are required to be filed (taking into account any validly obtained extensions of time
within which to file) by or with respect to it and its subsidiaries have been duly and timely filed, and all such Tax Returns are complete and accurate in all material respects, (B) all Taxes shown to be due on the Tax Returns referred to in clause
(A)
23
have been paid in full in a timely manner, (C) all Taxes that it or any of its Subsidiaries is obligated to withhold from
amounts owing to any employee, creditor or third party have been withheld and, to the extent due and payable, paid over to the proper Governmental Authority in a timely manner, (D) the Tax Returns referred to in clause (A) have been examined by the
Internal Revenue Service or the appropriate Tax authority or the period for assessment of the Taxes in respect of which such Tax Returns were required to be filed has expired, (E) all deficiencies asserted or assessments made as a result of such
examinations have been paid in full, (F) no issues that have been raised by the relevant taxing authority in connection with the examination of any of the Tax Returns referred to in clause (A) are currently pending, and (G) no extensions or waivers
of statutes of limitation have been given by, or requested with respect to any Taxes of, it or any of its subsidiaries.
(2) (A) It has made available to the other party hereto true and correct copies of the U.S. federal income Tax Returns filed by it and its subsidiaries
for each of the three most recent fiscal years ended on or before December 31, 2003; (B) it has made provision in accordance with GAAP, in the financial statements included in the Regulatory Filings filed prior to the date hereof, for all Taxes that
accrued on or before the end of the most recent period covered by its Regulatory Filings filed prior to the date hereof; (C) neither it nor any of its subsidiaries is a party to any Tax allocation or sharing agreement, is or has been a member of an
affiliated group filing consolidated or combined Tax returns (other than a group over which it is or was the common parent) or otherwise has any liability for the Taxes of any person (other than its own Taxes and those of its subsidiaries); (D) as
of the date hereof, neither it nor any of its subsidiaries has any reason to believe that any conditions exist that could reasonably be expected to prevent or impede the Merger from qualifying as a reorganization within the meaning of Section 368(a)
of the Internal Revenue Code; (E) no Liens for Taxes exist with respect to any of its assets or properties or those of its subsidiaries, except for statutory Liens for Taxes not yet due and payable or that are being contested in good faith and
reserved for in accordance with GAAP; (F) neither it nor any of its subsidiaries has been a party to any distribution occurring during the last three years in which the parties to such distribution treated the distribution as one to which Section
355 of the Internal Revenue Code applied; (G) neither it nor any of its subsidiaries has been a party to any “listed transaction” as defined in Treasury Regulation Section 1.6011-4; and (H) no Tax is required to be withheld pursuant to
Section 1445 of the Internal Revenue Code as a result of the transfer contemplated by this Plan.
(3) As used herein, “
Tax
” and “
Taxes
” means all federal, state, local or foreign taxes, charges, levies or other
assessments, however denominated, including, without limitation, all net income, gross income, gains, gross receipts, sales, use, ad valorem, goods and services, capital, production, transfer, franchise, windfall profits, license, withholding,
payroll, employment, disability, employer health, excise, estimated, severance, stamp, occupation, property, environmental, unemployment or other taxes, custom duties, assessments or charges of any kind whatsoever, together with any interest and any
penalties, additions to tax or additional amounts imposed by any taxing authority whether arising before, on or after the Closing Date.
24
(q)
Derivative Instruments
. All interest rate swaps, caps, floors, option agreements, futures and
forward contracts and other similar risk management arrangements, whether entered into for its own account, or for the account of one or more of its subsidiaries or their customers, if any, were entered into (1) in accordance with prudent business
practices and all applicable laws, rules, regulations and regulatory policies and (2) with counterparties believed to be financially responsible at the time; and each of them constitutes the valid and legally binding obligation of such party or one
of its subsidiaries, enforceable in accordance with its terms (except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and similar laws of general applicability relating to or
affecting creditors’ rights or by general equity principles), and are in full force and effect. Neither it nor its subsidiaries, nor to its knowledge, any other party thereto, is in breach of any of its obligations under any such agreement or
arrangement.
(r)
Insurance
. It and its subsidiaries are
insured with reputable insurers against such risks and in such amounts as its management reasonably has determined to be prudent in accordance with industry practices. All of the insurance policies, binders, or bonds maintained by it or its
subsidiaries are in full force and effect; it and its subsidiaries are not in material default thereunder.
(s)
Takeover Laws and Provisions
. It has taken all action required to be taken by it in order to exempt this Plan and the transactions contemplated
hereby from, and this Plan and the transactions contemplated hereby are exempt from, the requirements of any “moratorium”, “control share”, “fair price”, “affiliate transaction”, “business
combination” or other antitakeover laws and regulations of any state (collectively, “
Takeover Laws
”). It has taken all action required to be taken by it in order to make this Plan and the transactions contemplated hereby comply
with, and this Plan, and the transactions contemplated hereby comply with, the requirements of any Articles, Sections or provisions of its Governing Documents concerning “business combinations”, “fair price”, “voting
requirements”, “constituency requirements” or other related provisions (collectively, “
Takeover Provisions
”).
(t)
Transactions with Affiliates
. There are no outstanding amounts payable to or receivable from, or advances by the Company or any of its
subsidiaries to, and neither the Company nor any of its subsidiaries is otherwise a creditor or debtor to, any present or former director or executive officer of the Company or any of its subsidiaries, other than as part of the normal and customary
terms of such Persons’ respective employment or service as a director with the Company or any of its subsidiaries. Neither the Company nor any subsidiary of the Company is a party to any transaction or agreement with any present or former
director or executive officer of the Company, other than the terms of such Person’s respective employment or service as a director with the Company or any of its subsidiaries.
(u)
Available Funds
. In the case of PNC, PNC has or will have available to it all funds necessary to satisfy all of
its obligations hereunder and in connection with the Merger and the other transactions contemplated by this Plan.
25
ARTICLE V
Covenants
5.1
Reasonable Best Efforts
. Subject to the terms and conditions of this Plan, each of PNC and the Company agrees to use its respective reasonable best efforts in good faith to take, or cause to be taken, all actions, and to do, or cause to be
done, all things necessary, proper or desirable, or advisable under applicable laws, so as to permit consummation of the Merger as soon as possible and otherwise to enable consummation of the transactions contemplated hereby and shall cooperate
fully with the other party hereto to that end.
5.2
Stockholder Approvals
.
(a) The Company agrees to take
in accordance with applicable law and its Governing Documents all action necessary to convene a meeting of its stockholders (including any adjournment or postponement, the “
Company Meeting
”), as promptly as practicable, to consider
and vote upon the adoption and approval of this Plan, as well as any other matters required to be approved by the Company’s stockholders for consummation of the Merger.
(b) The board of directors of the Company has adopted resolutions recommending to the stockholders of the Company the
adoption of this Plan and the other matters required to be approved or adopted in order to carry out the intentions of this Plan, and the board of directors of the Company shall recommend to the Company’s stockholders the approval and adoption
of this Plan and the other matters required to be approved or adopted in order to carry out the intentions of this Plan. Notwithstanding the foregoing, the board of directors of the Company may withdraw, modify, condition or refuse to recommend the
adoption of this Plan and the other matters required to be approved or adopted in order to carry out the intentions of this Plan if the board of directors of the Company determines, in good faith after consultation with its outside financial and
legal advisors, that the failure to take such action would breach its fiduciary obligations under applicable law. Notwithstanding the foregoing, this Plan and such other matters shall be submitted to the stockholders of the Company at the Company
Meeting for the purpose of approving the Plan and such other matters and nothing contained herein shall be deemed to relieve the Company of such obligation,
provided
,
however
, that if the Board of Directors of the Company shall have
withdrawn, modified, conditioned or refused to recommend the adoption of this Plan and such other matters in accordance with the terms of this Agreement, then in submitting this Agreement to the Company’s stockholders, the board of directors of
the Company may submit this Agreement to the Company’s stockholders without recommendation (although the resolutions adopting this Plan as of the date hereof may not be rescinded or amended), in which event the board of directors of the Company
may communicate the basis for its lack of a recommendation to the Company’s stockholders in the Proxy Statement (as defined in Section 5.3(a)) or an appropriate amendment or supplement thereto to the extent required by law.
26
5.3
Registration Statement/Proxy Statement
.
(a) The parties agree jointly to prepare a registration statement on Form
S-4 or other applicable form (the “
Registration Statement
”) to be filed by PNC with the SEC in connection with the issuance of PNC Common Stock in the Merger (including the proxy statement and prospectus and other proxy solicitation
materials of the Company constituting a part thereof (the “
Proxy Statement
”) and all related documents). The parties agree to cooperate in the preparation of the Registration Statement and the Proxy Statement; and, provided that the
Company has cooperated as required above, PNC agrees to file the Registration Statement with the SEC within twenty-one (21) days of the date hereof. Each of PNC and the Company agrees to use all reasonable efforts to cause the Registration Statement
to be declared effective under the Securities Act as promptly as reasonably practicable after filing thereof. PNC also agrees to use all reasonable efforts to obtain all necessary state securities law or “Blue Sky” permits and approvals
required to carry out the transactions contemplated by this Plan. Each of PNC and the Company agrees to furnish all information concerning it, its subsidiaries, officers, directors and stockholders as may be reasonably requested in connection with
the foregoing.
(b) Each of PNC and the Company agrees (1) as
to itself and its subsidiaries, that none of the information supplied or to be supplied by it for inclusion or incorporation by reference in (a) the Registration Statement will, at the time the Registration Statement and each amendment or supplement
thereto, if any, becomes effective under the Securities Act, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading and (b) the
Proxy Statement and any amendment or supplement thereto will, at the date of mailing to stockholders and at the time of the Company Meeting contain any untrue statement of a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in the light of the circumstances under which such statement was made, not misleading and (2) that the Registration Statement and Proxy Statement shall comply with all applicable laws as they
relate to PNC and the Company. Each of PNC and the Company further agrees that if it shall become aware prior to the Effective Date of any information furnished by it that would cause any of the statements in the Proxy Statement or the Registration
Statement to be false or misleading with respect to any material fact, or to omit to state any material fact necessary to make the statements therein not false or misleading, to promptly inform the other party thereof and to take the necessary steps
to correct the Proxy Statement or the Registration Statement.
(c) PNC agrees to advise the Company, promptly after PNC receives notice thereof, of the time when the Registration Statement has become effective or any supplement or amendment has been filed, of the issuance of any stop order or the
suspension of the qualification of PNC Common Stock for offering or sale in any jurisdiction, of the initiation or threat of any proceeding for any such purpose, or of any request by the SEC for the amendment or supplement of the Registration
Statement or for additional information.
27
5.4
Press Releases
. PNC and the Company shall consult with each other before issuing any press
release with respect to the Merger or this Plan and shall not issue any such press release or make any such public statement without the prior consent of the other party, which shall not be unreasonably withheld;
provided
,
however
,
that a party may, without the prior consent of the other party (but after prior consultation, to the extent practicable in the circumstances) issue such press release or make such public statement as may upon the advice of counsel be required by law
or the rules and regulations of the NASDAQ National Market or the NYSE, as the case may be. PNC and the Company shall cooperate to develop all public announcement materials and make appropriate management available at presentations related to the
transactions contemplated by this Plan as reasonably requested by the other party.
5.5
Access; Information
.
(a) Each of PNC and the Company agrees that upon reasonable notice and subject to applicable laws relating to the exchange of information, it shall afford the other party, and the other party’s officers, employees, counsel, accountants
and other authorized representatives, such access during normal business hours throughout the period prior to the Effective Time to the books, records (including, without limitation, tax returns and work papers of independent auditors), properties,
personnel and to such other information as any party may reasonably request and, during such period, it shall furnish promptly to such other party (1) a copy of each material report, schedule and other document filed by it pursuant to the
requirements of federal or state securities or banking laws (including pursuant to any agreements with, commitments to or orders of any Governmental Entity, including any related action plan), and (2) all other information concerning the business,
properties and personnel of it as the other may reasonably request;
provided
that
the foregoing shall not require PNC or the Company (i) to permit any inspection, or to disclose any information, that in the reasonable judgment of PNC
or the Company, as the case may be, would result in disclosure of any trade secrets of third parties or violate any of its obligations with respect to confidentiality if PNC or the Company, as the case may be, shall have used reasonable efforts to
obtain the consent of such third party to such inspection or disclosure or (ii) to disclose any privileged information of PNC or the Company, as the case may be, or any of its subsidiaries. All requests for information made pursuant to this Section
5.5 shall be directed to an executive officer of PNC or the Company, as the case may be, or such Person as may be designated by either of their executive officers, as the case may be.
(b) Each party agrees that it will not, and will cause its representatives not to, use any information obtained pursuant to
this Section 5.5 (as well as any other information obtained prior to the date hereof in connection with the entering into of this Plan) for any purpose unrelated to the consummation of the transactions contemplated by this Plan. Subject to the
requirements of law, each party will keep confidential, and will cause its representatives to keep confidential, all information and documents obtained pursuant to this Section 5.5 (as well as any other information obtained prior to the date hereof
in connection with the entering into of this Plan) unless such information (1) was already known to such party, (2) becomes available to such party from other sources not known by
28
such party to be bound by a confidentiality obligation, (3) is disclosed with the prior written approval of the providing
party or (4) is or becomes readily ascertainable from publicly available sources. If this Plan is terminated or the transactions contemplated by this Plan shall otherwise fail to be consummated, each party shall promptly cause all copies of
documents or extracts thereof containing information and data as to the other party to be returned to the other party.
(c) In addition to the confidentiality arrangements contained in this Plan, all information provided or obtained in connection with the transactions
contemplated by this Plan (including pursuant to clause (a) above) will be held by PNC in accordance with and subject to the terms of the Confidentiality Agreement, dated May 21, 2004, between PNC and the Company (the “
Confidentiality
Agreement
”). In the event of a conflict or inconsistency between the terms of this Plan and the Confidentiality Agreement, the terms of this Plan will govern.
5.6
Acquisition Proposals
. The Company agrees that neither it nor any of its subsidiaries nor any of its respective
officers and directors or the officers and directors of any of its subsidiaries shall, and it shall direct and use all reasonable best efforts to cause its employees and agents, including any investment banker, attorney or accountant retained by it
or by any of its subsidiaries (collectively, its “
Representatives
”) not to, initiate, solicit or encourage, directly or indirectly, any inquiries or the making or implementation of any Acquisition Proposal, or, except to the extent
that the board of directors of the Company determines, in good faith, after consultation with its outside financial and legal advisors, that such action is required in order for the board of directors of the Company to comply with its fiduciary
duties, engage in any negotiations concerning, or provide any confidential information or data to, or have any discussions with, any Person relating to an Acquisition Proposal or otherwise facilitate any effort or attempt to implement or make an
Acquisition Proposal (and in any event, the Company shall not provide any confidential information or data to any Person in connection with an Acquisition Proposal unless such person shall have executed a confidentiality agreement on terms at least
as favorable as those contained in the Confidentiality Agreement). “
Acquisition Proposal
” means any proposal or offer with respect to the following involving the Company or any of its Significant Subsidiaries: (1) any merger,
consolidation, share exchange, business combination or other similar transaction; (2) any sale, lease, exchange, pledge, transfer or other disposition of 30% or more of its consolidated assets or liabilities in a single transaction or series of
transactions; (3) any tender offer or exchange offer for 30% or more of the outstanding shares of its capital stock; or (4) any public announcement of a proposal, plan or intention to do any of the foregoing or any agreement to engage in any of the
foregoing, other than the Merger provided for in this Plan. Notwithstanding anything in this Plan to the contrary, the Company shall (i) promptly advise PNC, orally and in writing, of (A) the receipt by it (or any of the other persons referred to
above) of any Acquisition Proposal, or any inquiry which could reasonably be expected to lead to an Acquisition Proposal, (B) the material terms and conditions of such proposal or inquiry (whether written or oral), and (C) the identity of the person
making any such proposal or inquiry and (ii) keep the other party hereto fully informed of the status and details of any such proposal or inquiry and any developments with respect thereto. The Company shall use its reasonable best efforts to enforce
any existing confidentiality or standstill agreements in accordance with the terms thereof.
29
5.7
Affiliate Agreements
. The Company shall use its reasonable best efforts to cause each
director, executive officer and other person who is an “affiliate” (for purposes of Rule 145 under the Securities Act) of the Company to deliver to PNC, as soon as practicable after the date of this Plan, a written agreement in the form
Previously Disclosed.
5.8
Takeover Laws and Provisions
.
No party hereto shall take any action that would cause the transactions contemplated by this Plan to be subject to requirements imposed by any Takeover Law and each of them shall take all necessary steps within its control to exempt (or ensure the
continued exemption of) the transactions contemplated by this Plan from, or if necessary challenge the validity or applicability of, any applicable Takeover Law, as now or hereafter in effect. No party hereto shall take any action that would cause
the transactions contemplated by this Plan not to comply with any Takeover Provisions and each of them shall take all necessary steps within its control to make the transactions contemplated by this Plan comply with (or continue to comply with) the
Takeover Provisions.
5.9
Regulatory Applications
.
(a) PNC and the Company shall cooperate and use their
respective reasonable best efforts to prepare as promptly as possible all documentation, to effect all filings and to obtain all permits, consents, approvals and authorizations of all third parties and Governmental Entities necessary to consummate
the transactions contemplated by this Plan, and PNC shall file its applications for approval of the Merger and the Bank Merger by the Board of Governors of the Federal Reserve (the “
Board of Governors
”) and the Office of the
Comptroller of the Currency (the “
OCC
”), respectively, within 21 days of the date hereof, and shall promptly make all other necessary regulatory filings. Each of PNC and the Company shall have the right to review in advance, and to
the extent practicable each will consult with the other, in each case subject to applicable laws relating to the exchange of information, with respect to all material written information submitted to any third party or any Governmental Entity in
connection with the transactions contemplated by this Plan. In exercising the foregoing right, each of the parties hereto agrees to act reasonably and as promptly as practicable. Each party hereto agrees that it will consult with the other party
hereto with respect to the obtaining of all material permits, consents, approvals and authorizations of all third parties and Governmental Entities necessary or advisable to consummate the transactions contemplated by this Plan and each party will
keep the other party appraised of the status of material matters relating to completion of the transactions contemplated hereby. Notwithstanding the foregoing, nothing contained herein shall be deemed to require the Company or PNC to take any
action, or commit to take any action, or agree to any condition or restriction, in connection with obtaining the foregoing permits, consents, approvals and authorizations of Governmental Entities, that would reasonably be expected to have a material
adverse effect (measured on a scale relative to the Company) on either PNC or the Company (a “
Materially Burdensome Regulatory Condition
”).
30
(b) Each party agrees, upon request, to furnish the other party with all information concerning itself,
its subsidiaries, directors, officers and stockholders and such other matters as may be reasonably necessary or advisable in connection with any filing, notice or application made by or on behalf of such other party or any of its subsidiaries with
or to any third party or Governmental Entity.
5.10
Options
. (a)
Cashout of Options.
Immediately after the Effective Time, each option granted by the Company to purchase shares of Company Common Stock that is outstanding and unexercised under any employee stock option or equity
compensation plan or arrangement of the Company (any such option to purchase Company Common Stock being referred to as a “
Company Option
” or the “
Company Options
”), whether or not vested or exercisable, shall be
terminated and the holder shall be paid by PNC as soon as reasonably possible following the Effective Time, an amount in cash determined by multiplying (i) the excess, if any, of the Per Share Cash Consideration over the applicable per share
exercise price of that option by (ii) the number of shares of Company Common Stock that the holder could have purchased (assuming full vesting of all options) had that holder exercised that option immediately before the Effective Time, less
applicable tax withholding.
(b)
Actions.
Prior to the
Effective Time, (1) the Company shall take such actions as PNC may reasonably request (but without expenditure of any funds) to give effect to the transactions contemplated by Section 5.10(a), including, without limitation, the provision of any
notices to option holders as may be provided for in the Company’s stock option and equity compensation arrangements, and (2) the Board of Directors of the Company or the Compensation Committee thereof, as applicable, will use its reasonable
best efforts to adopt any resolutions and/or plan amendments necessary to effectuate the provisions of Section 5.10(a).
5.11
Indemnification and Insurance
.
(a) Following the Effective Time, PNC shall indemnify, defend and hold harmless and advance expenses to the present and former directors, officers,
employees and agents of the Company or any of its subsidiaries (including the Company Bank), and any person presently or formerly serving at the request of the Company or any of its subsidiaries as a director, officer, employee, agent, trustee or
fiduciary of another corporation, partnership, joint venture, trust or other enterprise or under or with respect to any employee benefit plan (each, an “
Indemnified Party
” and collectively, the “
Indemnified
Parties
”) against all costs or expenses (including reasonable attorneys’ fees), judgments, fines, losses, claims, damages, penalties, amounts paid in settlement or other liabilities (collectively, “
Indemnified
Liabilities
”) incurred in connection with any claim, action, suit, proceeding or investigation, whether civil, criminal, administrative or investigative, arising out of actions or omissions occurring at or prior to the Effective Time
(including the transactions contemplated by this Plan), whether asserted or claimed prior to, at or after the Effective Time (x) to the same extent as such persons are indemnified or have the right to advancement of expenses pursuant to the
Governing Documents and indemnification agreements, if any, in effect on the date of this Plan with the Company or any of its subsidiaries and (y) without limitation
31
of, and in addition to, clause (x), to the fullest extent permitted by law. In the event of any such Indemnified
Liabilities, (i) PNC shall pay the reasonable fees and expenses of counsel selected by an Indemnified Party promptly after statements therefor are received and shall otherwise advance to such Indemnified Party upon request reimbursement of
documented expenses reasonably incurred and (ii) PNC shall cooperate in the defense of such matter. If any Indemnified Party is required to bring any action to enforce rights or to collect moneys due under this Plan and is successful in obtaining a
decision that it is entitled to enforcement of any right or collection of any money in such action, PNC shall reimburse such Indemnified Party for all of its expenses reasonably incurred in connection with bringing and pursuing such action
including, without limitation, reasonable attorneys’ fees and costs.
(b) For a period of six years from the Effective Time, PNC shall use its reasonable best efforts to provide directors’ and officers’ liability insurance (including excess coverage) and fiduciary liability
insurance in respect of any Company Benefit Plans that serves to reimburse the present and former officers and directors of the Company or any of its subsidiaries (including the Company Bank) with respect to claims against such directors and
officers arising from facts or events occurring at or prior to the Effective Time (including, without limitation, the transactions contemplated by this Plan) which insurance shall contain at least the same coverage and amounts, and contain terms and
conditions no less advantageous, as that coverage currently provided by the Company,
provided
, that if PNC is unable to maintain or obtain the insurance called for by this Section 5.11(b), PNC will use its reasonable best efforts to obtain as
much comparable insurance as is reasonably available.
(c) Any
Indemnified Party wishing to claim indemnification under Section 5.11(a), upon learning of any claim, action, suit, proceeding or investigation described above, shall notify PNC thereof;
provided
that the failure to so notify shall not affect
the obligations of PNC under Section 5.11(a) unless and to the extent that PNC is actually and materially prejudiced as a result of such failure. PNC hereby acknowledges notice of all matters Previously Disclosed.
(d) If PNC or any of its successors or assigns shall consolidate with or
merge into any other entity and shall not be the continuing or surviving entity of such consolidation or merger or shall transfer all or substantially all of its assets or deposits to any other entity, or engage in any similar transaction, then and
in each case, PNC shall cause proper provision to be made so that the successors and assigns of PNC shall assume the obligations set forth in this Section 5.11.
(e) The provisions of this Section 5.11 are intended to be for the benefit of, and shall be enforceable by, each Indemnified Party and his or her heirs
and representatives. The indemnification rights granted in this Section 5.11 are in addition to, and not in substitution for, any other rights to indemnification or contribution that any Indemnified Party may have by contract or otherwise.
32
5.12
Benefit Plans
.
(a) PNC shall, or shall cause the Company to, from and after the Effective Time, (1) comply with the Benefit Plans of the
Company (the “
Company Benefit Plans
”) in accordance with their terms, (2) provide the employees of the Company with (A) until December 31, 2005, benefits under employee benefit plans that are no less favorable in the aggregate than
those provided by the Company on the date hereof and (B) until the first anniversary of the Effective Time, severance benefits on an individual-by-individual basis that are equal to the severance benefits provided by the Company under the Riggs
National Corporation Employee Severance Policy on the date hereof other than any such employees who as of the Effective Time are parties to Senior Executive Change of Control and Retention Agreements or other individual agreements providing for
payments in connection with the termination of any such employee party, (3) provide employees of the Company credit for years of service with the Company or any of its subsidiaries or their predecessors prior to the Effective Time for the purpose of
eligibility, vesting and benefit accruals (other than benefit accruals under a defined benefit pension plan), (4) cause any and all pre-existing condition limitations (to the extent such limitations did not apply to a pre-existing condition under
comparable Company Benefit Plans) and eligibility waiting periods under group health plans of PNC to be waived with respect to employees of the Company who remain as employees of PNC or its subsidiaries (and their eligible dependents) and (5) cause
to be credited any deductibles or out-of-pocket expenses incurred by employees of the Company and their beneficiaries and dependents during the portion of the calendar year prior to their participation in PNC’s health plans with the objective
that there be no double counting during the year in which the Closing Date occurs of such deductibles or out-of-pocket expenses. PNC and the Company agree to honor, or to cause to be honored, in accordance with their terms, all vested or accrued
benefit obligations to, and contractual rights of, current and former employees of the Company and its subsidiaries, including, without limitation, any benefits or rights arising as a result of the transactions contemplated by this Plan (either
alone or in combination with any other event); it being understood and agreed to by the parties hereto that the transactions contemplated by this Plan shall constitute a “change of control” for purposes of the Company Benefit Plans.
(b) PNC hereby expressly assumes at the Effective Time (i) the
Previously Disclosed special retention letter agreements, (ii) the Riggs National Corporation Senior Executive Change of Control and Retention Agreements (and the related trust agreement), (iii) the Riggs National Corporation Amended and Restated
Deferred Compensation Plan (and the related trust agreement), (iv) the Riggs National Corporation and Riggs Bank N.A. Deferred Compensation Plan for Directors and (v) the Split Dollar Life Insurance Agreements, each as more specifically identified
on Section 5.12(b) of the Disclosure Schedule, and PNC agrees to honor and perform the Company’s obligations under such plans and agreements in accordance with their terms.
(c) Prior to the Effective Time, the Company shall take any actions it determines are warranted to cause the interests in
the Company Deferred Compensation Plan and the Riggs National Corporation and Riggs Bank N.A. Deferred Compensation Plan for Directors that are in the Company stock fund to be converted into a dollar amount equal to the Per Share Cash Consideration
that could be invested in the same way interests that are not in the Company stock fund
33
can be invested at the Effective Time. Prior to the Effective Time, the Company shall take any actions that are necessary
to cause all unvested deferred share awards and all unvested performance share awards which are outstanding under the Riggs National Corporation 2002 Long-Term Incentive Plan to be terminated immediately prior to the Effective Time and
simultaneously therewith will issue one share of Company Common Stock for each underlying share that is so terminated to the grantee of such award.
5.13
Notification of Certain Matters
. Each of PNC and the Company shall give prompt notice to the other of any fact, event or circumstance known to
it that (1) is reasonably likely, individually or taken together with all other facts, events and circumstances known to it, to result in any Material Adverse Effect with respect to it or (2) would cause or constitute a material breach of any of its
representations, covenants or agreements contained herein.
5.14
Exemption from Liability Under Section 16(b)
. PNC and the Company agree that, in order to most effectively compensate and retain the Company Insiders (as defined below) in connection with the Merger, both prior to and after the
Effective Time, it is desirable that the Company Insiders not be subject to a risk of liability under Section 16(b) of the Exchange Act to the fullest extent permitted by applicable law in connection with the conversion of shares of Company Common
Stock and Company Options into shares or options of PNC in the Merger, and for that compensatory and retentive purpose agree to the provisions of this Section 5.14. Assuming that the Company delivers to PNC the Company Section 16 Information (as
defined below) in a timely fashion prior to the Effective Time, the board of directors of PNC, or a committee of non-employee directors thereof (as such term is defined for purposes of Rule 16b-3(d) under the Exchange Act), shall reasonably promptly
thereafter and in any event prior to the Effective Time adopt a resolution providing in substance that the receipt by the Company Insiders (as defined below) of PNC Common Stock in exchange for shares of Company Common Stock pursuant to the
transactions contemplated hereby and to the extent such securities are listed in the Company Section 16 Information, are intended to be exempt from liability pursuant to Section 16(b) under the Exchange Act to the fullest extent permitted by
applicable law. “
Company Section 16 Information
” shall mean information accurate in all material respects regarding the Company Insiders, the number of shares of Company Common Stock held by each such Company Insider and expected to
be exchanged for PNC Common Stock in the Merger, and the number and description of the options to purchase shares of Company Common Stock held by each such Company Insider and expected to be converted into options to purchase shares of PNC Common
Stock in connection with the Merger;
provided
that the requirement for a description of any Company Options shall be deemed to be satisfied if copies of all plans, and forms of agreements, under which such Options have been granted have been
made available to PNC. “
Company Insiders
” shall mean those present or former officers and directors of the Company who are subject to the reporting requirements of Section 16(a) of the Exchange Act and who are listed in the Company
Section 16 Information. Prior to the Effective Time, the board of directors of the Company, or a committee of non-employee directors thereof (as such term is defined for purposes of Rule 16b-3(d) under the Exchange Act), shall adopt a resolution
providing in substance that the disposition by the Company Insiders of Company Common Stock in exchange for the Consideration pursuant to
34
the transactions contemplated hereby us intended to be exempt from liability pursuant to Section 16(b) under the Exchange
Act to the fullest extent permitted by applicable law.
5.15
Coordination of Dividends
. The board of directors of the Company shall cause its regular quarterly dividend record dates and payment dates for Company Common Stock to be the same as PNC’s regular quarterly dividend record dates and
payment dates for PNC Common Stock (
i.e.
, the Company shall move its next dividend record and payment dates to on or about October 8 and October 24, respectively), and the Company shall not thereafter change its regular dividend payment dates
and record dates.
5.16
Certain Transition Matters
. (a)
Commencing following the date hereof, PNC and the Company shall cooperate and take all actions reasonably necessary to facilitate the integration of their respective businesses and operating systems, effective as of the Closing Date, including by
causing their respective employees and officers, and their respective outside vendors and contractors, to provide support and to assist in performing all tasks, including equipment installation, reasonably required to result in a successful
integration and conversion at the Closing.
(b) PNC and the
Company shall consult with respect to the character, amount and timing of restructuring charges to be taken by each of them in connection with the transactions contemplated hereby, and shall take such charges as PNC shall reasonably request;
provided, however, that the Company shall not be obligated to take any such charges pursuant to this Section 5.16(b) unless and until (i) PNC irrevocably acknowledges to the Company in writing that all conditions to its obligation to consummate the
Merger have been satisfied; and (ii) PNC irrevocably waives in writing any and all rights that it may have to terminate this Plan and the Company has obtained the approval of this Plan from its stockholders. The Company shall consult and cooperate
with PNC in connection with the development, enhancement and performance of the Company’s system of internal control over financial reporting.
(c) Prior to the Effective Time, the Company shall (i) continue to use all reasonable efforts to comply with the terms of all agreements with, commitments
to or orders of any Governmental Entity, including any related action plan, in accordance with their terms, and (ii) continue to work with the independent consultant retained by the Company in connection with Section 1 of the May 14, 2004 Cease and
Desist Order with the Board of Governors (the “
Independent Consultant
”), and shall provide the Independent Consultant with such authority, and with such access to and cooperation of the Company and its personnel, necessary to allow
the Independent Consultant to oversee the efforts of the Company addressed in clause (i) of this sentence. In addition, the Company agrees that it shall use all reasonable efforts to cause the Company Bank to complete, prior to the earlier of
December 31, 2004 and the anticipated Closing Date, the review contemplated by Section 1(d) of Article II of the May 13, 2004 consent order with the OCC to the satisfaction of the OCC. The Company also agrees that it shall use all reasonable efforts
to complete the anticipated sale of, or winding down of the operations identified in Section 5.16(c) of the Company Disclosure Schedule prior to
35
the Closing Date, and that it shall timely inform PNC of all material developments relating thereto, and shall consult
and cooperate with PNC with respect thereto. The Company shall keep PNC fully informed of all efforts in these regards.
ARTICLE VI
Conditions
6.1
Conditions to Each Party’s Obligation to
Effect the Merger
. The respective obligation of each of PNC and the Company to consummate the Merger is subject to the fulfillment or written waiver by PNC and the Company prior to the Effective Time of each of the following conditions:
(a)
Stockholder Approval
. This Plan and the Merger
shall have been duly adopted and approved by the requisite votes of the stockholders of the Company.
(b)
Governmental and Regulatory Consents
. All statutory waiting periods applicable to the consummation of the Merger and the Bank Merger shall have
expired or been terminated, and, other than the filing provided for in Section 1.4(a), all notices, reports and other filings required to be made prior to the Effective Time by PNC or the Company or any of their respective subsidiaries with, and all
regulatory consents, registrations, approvals, permits and authorizations required to be obtained prior to the Effective Time by PNC or the Company or any of their respective subsidiaries from, any Governmental Entity in connection with the
consummation of the Merger and the Bank Merger, and the other transactions contemplated hereby by PNC and the Company, shall have been made or obtained (as the case may be) and become final, unless the failure to obtain any such consent or approval
would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on PNC or the Company, and no such consent, registration, approval, permit or authorization shall have resulted in the imposition of any Materially
Burdensome Regulatory Condition.
(c)
Third Party
Consents
. All consents or approvals of all Persons (other than Governmental Entities) required for consummation of the Merger shall have been obtained and shall be in full force and effect, unless the failure to obtain any such consent or
approval would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on PNC or the Company.
(d)
No Prohibitions
. No United States or state court or other Governmental Entity of competent jurisdiction shall have enacted, issued,
promulgated, enforced or entered any law, statute, rule, regulation, judgment, decree, injunction or other order (whether temporary, preliminary or permanent) which is in effect and prohibits consummation of the Merger.
(e)
Registration Statement
. The Registration Statement shall have
become effective under the Securities Act and no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall have been initiated or threatened by the SEC or any other
Governmental Entity.
36
(f)
Blue Sky Approvals
. All permits and other authorizations under the Securities Laws (other than
that referred to in Section 6.1(e)) and other authorizations necessary to consummate the Merger and to issue the shares of PNC Common Stock to be issued in the Merger shall have been received and be in full force and effect.
6.2
Conditions to Obligation of PNC
. The obligation of PNC to
consummate the Merger is also subject to the fulfillment, or the written waiver by PNC prior to the Effective Time, of each of the following conditions:
(a)
Representations
. The representations of the Company set forth in this Plan shall be, giving effect to Sections 4.1 and 4.2, true and correct as
of the date of this Plan and as of the Effective Time as though made at and as of the Effective Time (except that representations that by their terms speak specifically as of the date of this Plan or some other date shall be true and correct as of
such date) and PNC shall have received a certificate, dated the Closing Date, signed on behalf of the Company by the Chief Executive Officer and the Chief Financial Officer of the Company to such effect.
(b)
Performance of Obligations of the Company
. The Company shall have
performed in all material respects all obligations required to be performed by it under this Plan at or prior to the Effective Time, and PNC shall have received a certificate, dated the Closing Date, signed on behalf of the Company by the Chief
Executive Officer and the Chief Financial Officer of the Company to such effect.
(c)
Opinion of Tax Counsel
. PNC shall have received an opinion from Wachtell, Lipton, Rosen & Katz, special counsel to PNC, dated the Closing Date, to the effect that, on the basis of the facts,
representations and assumptions set forth in such opinion, (1) the Merger will be treated for federal income tax purposes as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code and (2) each of PNC and the Company will
be a party to that reorganization within the meaning of Section 368(b) of the Internal Revenue Code. In rendering its opinion, Wachtell, Lipton, Rosen & Katz may require and rely upon representations contained in letters from each of PNC and the
Company.
6.3
Conditions to Obligation of the Company
.
The obligation of the Company to consummate the Merger is also subject to the fulfillment, or the written waiver by the Company, prior to the Effective Time of each of the following conditions:
(a)
Representations
. The representations of PNC set forth in this
Plan shall be, giving effect to Sections 4.1 and 4.2, true and correct as of the date of this Plan and as of the Effective Time as though made at and as of the Effective Time (except that representations that by their terms speak specifically as of
the date of this Plan or some other date shall be true and correct as of such date); and the Company shall have received a certificate, dated the Closing Date, signed on behalf of PNC by the Chief Executive Officer and the Chief Financial Officer of
PNC to such effect.
37
(b)
Performance of Obligations of PNC
. PNC shall have performed in all material respects all
obligations required to be performed by it under this Plan at or prior to the Effective Time, and the Company shall have received a certificate, dated the Closing Date, signed on behalf of PNC by the Chief Executive Officer and the Chief Financial
Officer of PNC to such effect.
(c)
Opinion of Tax
Counsel
. The Company shall have received an opinion of Sullivan & Cromwell LLP, special counsel to the Company, dated the Closing Date, to the effect that on the basis of the facts, representations and assumptions set forth in such opinion,
(1) the Merger will be treated for federal income tax purposes as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code, and (2) each of PNC and the Company will be a party to that reorganization within the meaning of
Section 368(b) of the Internal Revenue Code. In rendering its opinion, Sullivan & Cromwell LLP may require and rely upon representations contained in letters from each of PNC and the Company.
ARTICLE VII
Termination
7.1
Termination by Mutual Consent
. This Plan may be terminated and the Merger may be abandoned at any time prior to the Effective Time (whether or not the stockholders of Company Common Stock have adopted and approved this Plan),
upon the mutual consent of PNC and the Company, by action of their respective boards of directors.
7.2
Termination by PNC
. This Plan may be terminated and the Merger may be abandoned at any time prior to the Effective Time, whether before or
after the approval by stockholders of the Company referred to in Section 6.1(a), by action of the board of directors of PNC:
(a) if there has been a breach of any representation, covenant or agreement made by the Company in this Plan, or any such representation shall have become
untrue after the date of this Plan, such that Section 6.2(a) or 6.2(b) would not be satisfied and such breach or condition is not curable or, if curable, is not cured within 30 days after written notice thereof is given by PNC to the Company;
(b) if the Merger shall not have been consummated by April 30,
2005 (the “
Termination Date
”),
provided
that the right to terminate this Plan shall not be available if PNC has breached in any material respect its obligations under this Plan in any manner that shall have proximately
contributed to the occurrence of the failure of the Merger to be consummated;
(c) if the approval of the Company’s stockholders required by Section 6.1(a) shall not have been obtained at its stockholders’ meeting or at any adjournment or postponement thereof;
(d) if any order permanently restraining, enjoining or otherwise prohibiting
consummation of the Merger shall become final and non-appealable (whether before or after the approval by the stockholders of the Company); or
38
(e) if (i) the Board of Directors of the Company has failed to recommend that the Company Stockholders
vote in favor of this Agreement and the transactions contemplated hereby or has withdrawn, modified or qualified such recommendation in a manner adverse to PNC, (ii) the Company has failed to substantially comply with its obligations under Section
5.2 or 5.6, or (iii) the Board of Directors of the Company has publicly recommended or endorsed an Acquisition Proposal other than the Merger.
7.3
Termination by the Company
. This Plan may be terminated and the Merger may be abandoned at any time prior to the Effective Time, whether before
or after the approval by stockholders of the Company referred to in Section 6.1(a), by action of the board of directors of the Company:
(a) if the Merger shall not have been consummated by the Termination Date;
provided
that the right to terminate this Plan pursuant to this clause
(a) shall not be available if the Company has breached in any material respect its obligations under this Plan in any manner that shall have proximately contributed to the occurrence of the failure of the Merger to be consummated;
(b) if the approval of the Company’s stockholders required by Section
6.1(a) shall not have been obtained at its stockholders’ meeting or at any adjournment or postponement thereof;
(c) if any order permanently restraining, enjoining or otherwise prohibiting consummation of the Merger shall become final and non-appealable (whether
before or after the approval by the stockholders of the Company);
(d) if there has been a breach of any representation, covenant or agreement made by PNC in this Plan, or any such representation shall have become untrue after the date of this Plan, such that Section 6.3(a) or 6.3(b) would not be satisfied
and such breach or condition is not curable or, if curable, is not cured within 30 days after written notice thereof is given by the Company to PNC.
7.4
Effect of Termination and Abandonment
. In the event of termination of this Plan and the abandonment of the Merger pursuant to this Article VII,
this Plan (other than as set forth in Sections 7.5 and 8.1) shall become void and of no effect with no liability on the part of any party hereto (or of any of its directors, officers, employees, agents, legal and financial advisors or other
representatives);
provided
,
however
, no such termination shall relieve any party hereto of any liability or damages resulting from any willful breach of this Plan.
7.5
Termination Fee
. (a) In the event that (i) a Company Pre-Termination Takeover Proposal Event (as hereinafter
defined) shall occur after the date of this Agreement and thereafter this Agreement is terminated by either PNC or the Company pursuant to Section 7.2(c) or 7.3(b), respectively, by PNC pursuant to Section 7.2(e)(i) or (ii), or by PNC pursuant to
Section 7.2(a) as a result of a willful breach by the Company, and (ii) prior to the date that is twelve (12) months after the date of such termination the Company consummates an Acquisition Proposal or enters into any acquisition or other similar
agreement, including any letter of intent, related to any Acquisition Proposal (each, a “
Company Acquisition Agreement
“), then
39
the Company shall, (i) on the date such Company Acquisition Agreement is entered into, pay PNC a fee equal to $10 million
by wire transfer of same day funds and (ii) on the date an Acquisition Proposal is consummated (if consummated within one year of the date of termination, or if consummated at any time (without regard to such one-year period) if the Acquisition
Proposal is the Acquisition Proposal relating to the Company Acquisition Agreement addressed in the preceding clause (i)), pay PNC a fee equal to $30 million by wire transfer of same day funds, less any fee paid pursuant to the preceding clause (i).
(b) In the event that this Agreement is terminated by PNC
pursuant to Section 7.2(e)(iii), then the Company shall, (i) on the date of such termination, pay PNC a fee equal to $10 million by wire transfer of same day funds and (ii) on the date the Company consummates an Acquisition Proposal (if consummated
within one year of the date of termination, or at any time if the Acquisition Proposal is the Acquisition Proposal that resulted in such termination), pay PNC a fee equal to $20 million by wire transfer of same day funds.
(c) For purposes of this Section 7.5, a “
Pre-Termination Takeover
Proposal Event
” shall be deemed to occur if, prior to the event giving rise to the right to terminate this Agreement, a bona fide Acquisition Proposal shall have been made known to the Company or any of its Subsidiaries or has been made
directly to its shareholders generally or any person shall have publicly announced an intention (whether or not conditional) to make a Acquisition Proposal, and such Acquisition Proposal or public announcement shall not have been irrevocably
withdrawn not less than five business days prior to the Company Meeting.
(d) Notwithstanding anything to the contrary herein, the maximum aggregate amount of fees payable under this Section 7.5 shall be $30 million.
(e) The Company acknowledges that the agreements contained in this Section 7.5 are an integral part of the transactions
contemplated by this Plan, and that, without these agreements, PNC would not enter into this Agreement; accordingly, if the Company fails promptly to pay the amount due pursuant to this Section 7.5, and, in order to obtain such payment, PNC
commences a suit which results in a judgment against the Company for the fee set forth in this Section 7.5, the Company shall pay to PNC its costs and expenses (including attorneys’ fees and expenses) in connection with such suit, together with
interest on the amount of the fee at the rate on six-month U.S. Treasury obligations plus 300 basis points in effect on the date such payment was required to be made.
ARTICLE VIII
Miscellaneous
8.1
Survival
. Except for
the agreements and covenants contained in Articles I and II, Sections 5.10, 5.11, 5.12, 5.14 and 7.5 and this Article VIII, the representations, agreements and covenants contained in this Plan shall be deemed only to be conditions of the Merger and
shall not survive the Effective Time.
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8.2
Modification or Amendment
. Subject to applicable law, at any time prior to the Effective Time,
the parties hereto may modify or amend this Plan, by written agreement executed and delivered by duly authorized officers of the respective parties.
8.3
Waiver of Conditions
. The conditions to each party’s obligation to consummate the Merger are for the sole benefit of such party and may be
waived by such party as a whole or in part to the extent permitted by applicable law. No waiver shall be effective unless it is in a writing signed by a duly authorized officer of the waiving party that makes express reference to the provision or
provisions subject to such waiver.
8.4
Counterparts
.
For the convenience of the parties hereto, this Plan may be executed in any number of separate counterparts, each such counterpart being deemed to be an original instrument, and all such counterparts shall together constitute the same agreement. The
execution and delivery of this Plan may be effected by telecopier.
8.5
Governing Law
. This Plan shall be governed by and construed in accordance with the laws of the State of Delaware applicable to contracts made and to be performed entirely within the State of Delaware.
8.6
Notices
. Any notice, request, instruction or other document to be
given hereunder by any party to the other shall be in writing and shall be deemed to have been duly given (a) on the date of delivery if delivered personally, or by facsimile, upon confirmation of receipt, (b) on the first business day following the
date of dispatch if delivered by a recognized next-day courier service, or (c) on the third business day following the date of mailing if delivered by registered or certified mail, return receipt requested, postage prepaid. All notices hereunder
shall be delivered as set forth below, or pursuant to such other instructions as may be designated in writing by the party to receive such notice.
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To PNC:
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To the Company:
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The PNC Financial Services Group, Inc.
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Riggs National Corporation
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One PNC Plaza
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800 17
th
Street, NW
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249 Fifth Avenue
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Washington, DC 20006
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Pittsburgh, Pennsylvania 15222
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Attention: Chairman and Chief Executive Officer
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Attention: Mergers & Acquisition Department
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Telecopy No.: (202) 835-5226
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Telecopy No.: (412) 762-6238
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and
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Attention: General Counsel
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Telecopy: (412) 705-2679
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with copies to:
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with copies to:
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Wachtell, Lipton, Rosen & Katz
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Sullivan & Cromwell LLP
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51 West 52
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Street
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125 Broad Street
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New York, NY 10019
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New York, NY 10004-2498
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Attention: Craig M. Wasserman
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Attention: Mark J. Menting
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Facsimile: 212-403-2000
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Facsimile: 212-558-3588
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8.7
Entire
Agreement, Etc.
This Plan (including the Disclosure Schedules) and the Confidentiality Agreement constitute the entire agreement, and supersedes all other prior agreements, understandings, representations, both written and oral, between the
parties, with respect to the subject matter hereof, and this Plan shall not be assignable by operation of law or otherwise (any attempted assignment in contravention of this Section 8.7 being null and void).
8.8
Definition of “subsidiary” and “affiliate”;
Covenants with Respect to Subsidiaries and Affiliates
. (a) When a reference is made in this Plan to a subsidiary of a Person, the term “
subsidiary
” has the meaning ascribed to that term in Rule 1-02 of Registration S-X under the
Exchange Act. When a reference is made in this Plan to an affiliate of a Person, the term “affiliate” (or “
Affiliate
”) means those other Persons that, directly or indirectly, control, are controlled by, or are under common
control with, such Person.
(b) Insofar as any provision of
this Plan shall require a subsidiary or an affiliate of a party to take or omit to take any action, such provision shall be deemed a covenant by PNC or the Company, as the case may be, to cause such action or omission to occur.
8.9
Interpretation; Effect
. When a reference is made in this Plan to
Sections, such reference shall be to a Section of this Plan unless otherwise indicated. The table of contents and headings contained in this Plan are for reference purposes only and are not part of this Plan. Whenever the words “include,”
“includes” or “including” are used in this Plan, they shall be deemed to be followed by the words “without limitation.” No provision of this Agreement shall be construed to require the Company, PNC or any of their
respective subsidiaries or affiliates to take any action that would violate any applicable law, rule or regulation.
8.10
Severability
. The provisions of this Plan shall be deemed severable and the invalidity or unenforceability of any provision shall not affect
the validity or enforceability of the other provisions hereof. If any provision of this Plan, or the application thereof to any Person or entity or any circumstance, is found by a court or other Governmental Entity of competent jurisdiction to be
invalid or unenforceable, (a) a suitable and equitable provision shall be substituted therefor in order to carry out, so far as may be valid and enforceable, the intent and purpose of such invalid or unenforceable provision and (b) the remainder of
this Plan and the application of such provision to other Persons, entities or circumstances shall not be affected by such invalidity or unenforceability, nor shall such invalidity or unenforceability affect the validity or enforceability of such
provision, or the application thereof, in any other jurisdiction.
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8.11
No Third Party Beneficiaries
. Nothing contained in this Plan, expressed or implied, is
intended to confer upon any Person, other than the parties hereto, any benefit, right or remedies except that the provisions of Sections 5.11, 5.12(b) (to the extent of agreements expressly set forth in Section 5.12(b) of the Disclosure Schedule)
and 5.14 shall inure to the benefit of the Persons referred to therein.
8.12
Waiver of Jury Trial
. Each party hereto acknowledges and agrees that any controversy which may arise under this Plan is likely to involve complicated and difficult issues, and therefore each party hereby irrevocably and
unconditionally waives any right such party may have to a trial by jury in respect of any litigation, directly or indirectly, arising out of, or relating to, this Plan, or the transactions contemplated by this Plan. Each party certifies and
acknowledges that (a) no representative, agent or attorney of any other party has represented, expressly or otherwise, that such other party would not, in the event of litigation, seek to enforce the foregoing waiver, (b) each party understands and
has considered the implications of this waiver, (c) each party makes this waiver voluntarily, and (d) each party has been induced to enter into this Plan by, among other things, the mutual waivers and certifications in this Section 8.12.
[next page is a signature page]
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IN WITNESS WHEREOF
, this Plan has been duly executed and delivered by the duly authorized officers
of the parties hereto as of the date first above written.
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THE PNC FINANCIAL SERVICES GROUP, INC.
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By:
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Name:
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Title:
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RIGGS NATIONAL CORPORATION
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By:
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Name:
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Title:
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