PNC Bank 2002 Annual Report Download - page 65

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has been reserved for grants over the next two years to
professionals who exhibit leadership qualities and demonstrate
the potential to make significant contributions to BlackRock
over time. If the performance hurdles are achieved,
Compensation Awards will be funded with up to 4 million
shares of BlackRock common stock to be surrendered by
PNC and distributed to program participants, less income tax
withholding. In addition, distributed shares to program
participants will include an option to put such distributed
shares back to BlackRock at fair market value. BlackRock will
fund the remainder of the Compensation Awards with up to
$40 million in cash.
The Awards will vest at the end of any three-month period
beginning in 2005 or 2006 during which the daily average
closing price of BlackRock’s common stock is at least $65 per
share. If that performance hurdle is not achieved, the
Compensation Committee of the Board of Directors of
BlackRock may, in its sole discretion, vest a portion of the
Compensation Awards if BlackRock realizes compound
annual growth in diluted earnings per share of at least 10%
from January 1, 2002 to December 31, 2006 and BlackRock’s
publicly-traded stock performs in the top half of its peer group
during that time.
There will be no expense recognition associated with the
Compensation Awards unless vesting occurs or a partial
vesting determination by the BlackRock Compensation
Committee is considered probable and estimable. Once this
determination is made, BlackRock will record compensation
expense for the pro rata portion of the Compensation Awards
earned to date. Compensation expense for the remaining
Compensation Awards will be recognized by BlackRock
ratably from the determination date through the vesting date
and could extend through March 31, 2007. In addition, at the
time that the BlackRock common stock portion of the
Compensation Awards is distributed, BlackRock will record an
increase in stockholders’ equity equal to the fair market value
of the BlackRock common stock distributed to employees
from shares surrendered by PNC. There will be no increase in
BlackRock’s fully diluted shares upon vesting of the
Compensation Awards because shares surrendered by PNC to
fund the Compensation Awards are already issued and
outstanding.
The terms of the program are subject to approval by
BlackRock’s stockholders at their next annual meeting in May
2003.
In connection with the adoption of the program,
BlackRock and PNC have amended the BlackRock Initial
Public Offering Agreement, which provides that, subject to
certain notice requirements and evaluation and cure periods,
PNC must deposit its shares of stock of BlackRock into a
voting trust and refrain from soliciting proxies from holders of
outstanding BlackRock capital securities if, within twelve
months following a change of control of PNC or a change of
control of BlackRock (as defined in the amended agreement),
a majority of BlackRock’s independent directors determine
that such change of control has a material adverse effect on
BlackRock and that adverse effect is not cured within a further
three month period. Following the deposit of PNC's shares
into a voting trust, PNC must, subject to the terms and
conditions of the amended agreement, take one of the three
following courses of action: (i) within two years, dispose of its
ownership interest in BlackRock voting stock, such that
neither PNC nor its affiliates is the beneficial owner of more
than 4.9% of any class of voting stock of BlackRock (and any
shares of class B common stock deposited by PNC into the
voting trust will be converted to class A common stock upon
the election of this option (i)); (ii) proceed as expeditiously as
is commercially reasonable to purchase all the outstanding
BlackRock capital securities not held by PNC or its affiliates at
the applicable Change of Control Price (which is defined in
the amended agreement); or (iii) proceed as expeditiously as is
commercially reasonable to sell its ownership interest in
BlackRock capital securities, such that neither PNC nor its
affiliates is the beneficial owner of more than 4.9% of any
class of voting stock of BlackRock, to a third party in a
transaction in which such third party offers to purchase all the
outstanding shares not held by PNC or its affiliates at a price
per share not less than the price per share offered to PNC. If
PNC takes action under (ii) or (iii) above, all awards under the
program will vest and be immediately payable and all stock
options granted under BlackRock’s 1999 Stock Award and
Incentive Plan will vest and be exercisable.
BlackRock and PNC also further amended BlackRock’s
Amended and Restated Stockholders Agreement with PNC.
which provides that nothing contained in the agreement will
be deemed to prohibit PNC or its affiliates from effecting a
distribution (including, but not limited to, a spin-off or a split-
off) of its BlackRock common stock to the public
shareholders of PNC if PNC should decide to do so. The
amendment also provides that the Amended and Restated
Stockholders Agreement will remain in effect in the event
PNC ceases to own shares of class B common stock of
BlackRock as a result of such converting to class A common
stock of BlackRock in accordance with the terms of the Initial
Public Offering Agreement.