PNC Bank 2006 Annual Report Download - page 124

aggregate of PNC’s commitments under these facilities was
$240 million. PNC also enters into certain other liquidity
facilities to support individual pools of receivables acquired
by commercial paper conduits including Market Street. At
December 31, 2006, our total commitments under these
facilities were $5.7 billion, of which $5.6 billion was related
to Market Street.
I NDEMNIFICATIONS
We are a party to numerous acquisition or divestiture
agreements under which we have purchased or sold, or agreed
to purchase or sell, various types of assets. These agreements
can cover the purchase or sale of:
• Entire businesses,
• Loan portfolios,
• Branch banks,
• Partial interests in companies, or
• Other types of assets.
These agreements generally include indemnification
provisions under which we indemnify the third parties to these
agreements against a variety of risks to the indemnified parties
as a result of the transaction in question. When PNC is the
seller, the indemnification provisions will generally also
provide the buyer with protection relating to the quality of the
assets we are selling and the extent of any liabilities being
assumed by the buyer. Due to the nature of these
indemnification provisions, we cannot quantify the total
potential exposure to us resulting from them.
We provide indemnification in connection with securities
offering transactions in which we are involved. When we are
the issuer of the securities, we provide indemnification to the
underwriters or placement agents analogous to the
indemnification provided to the purchasers of businesses from
us, as described above. When we are an underwriter or
placement agent, we provide a limited indemnification to the
issuer related to our actions in connection with the offering
and, if there are other underwriters, indemnification to the
other underwriters intended to result in an appropriate sharing
of the risk of participating in the offering. Due to the nature of
these indemnification provisions, we cannot quantify the total
potential exposure to us resulting from them.
We enter into certain types of agreements that include
provisions for indemnifying third parties, such as:
• Agreements relating to providing various servicing
and processing functions to third parties,
• Agreements relating to the creation of trusts or other
legal entities to facilitate leasing transactions,
commercial mortgage-backed securities transactions
(loan securitizations) and certain other off-balance
sheet transactions,
• Confidentiality agreements,
• Syndicated credit agreements, as a syndicate
member,
• Sales of individual loans and equipment leases,
• Arrangements with brokers to facilitate the hedging
of derivative and convertible arbitrage activities, and
• Litigation settlement agreements.
Due to the nature of these indemnification provisions, we
cannot calculate our aggregate potential exposure under them.
We enter into certain types of agreements, including leases,
assignments of leases, and subleases, in which we agree to
indemnify third parties for acts by our agents, assignees and/or
sublessees, and employees. While we do not believe these
indemnification liabilities are material, either individually or
in total, we cannot calculate our potential exposure.
We enter into contracts for the delivery of technology service
in which we indemnify the other party against claims of patent
and copyright infringement by third parties. Due to the nature
of these indemnification provisions, we cannot calculate our
aggregate potential exposure under this type of
indemnification.
We engage in certain insurance activities which require our
employees to be bonded. We satisfy this bonding requirement
by issuing letters of credit in a total amount of approximately
$5 million.
In the ordinary course of business, we enter into contracts with
third parties under which the third parties provide services on
behalf of PNC. In many of these contracts, we agree to
indemnify the third party service provider under certain
circumstances. The terms of the indemnity vary from contract
to contract and the amount of the indemnification liability, if
any, cannot be determined.
We are a general or limited partner in certain asset
management and investment limited partnerships, many of
which contain indemnification provisions that would require
us to make payments in excess of our remaining funding
commitments. While in certain of these partnerships the
maximum liability to us is limited to the sum of our unfunded
commitments and partnership distributions received by us, in
the others the indemnification liability is unlimited. As a
result, we cannot determine our aggregate potential exposure
for these indemnifications.
Pursuant to their bylaws, PNC and its subsidiaries provide
indemnification to directors, officers and, in some cases,
employees and agents against certain liabilities incurred as a
result of their service on behalf of or at the request of PNC
and its subsidiaries. PNC and its subsidiaries also advance on
behalf of covered individuals costs incurred in connection
with certain claims or proceedings, subject to written
undertakings by each such individual to repay all amounts so
advanced if it is ultimately determined that the individual is
not entitled to indemnification. We generally are responsible
for similar indemnifications and advancement obligations that
companies we acquire, including Riggs, had to their officers,
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