PNC Bank 2007 Annual Report Download - page 38

dividends payable to subsidiaries of PNC Bank, N.A., to PNC
Bank, N.A. or another wholly-owned subsidiary of PNC Bank,
N.A. or (ii) in the case of dividends payable to persons that are
not subsidiaries of PNC Bank, N.A., to such persons only if,
(A) in the case of a cash dividend, PNC has first irrevocably
committed to contribute amounts at least equal to such cash
dividend or (B) in the case of in-kind dividends payable by
PNC REIT Corp., PNC has committed to purchase such
in-kind dividend from the applicable PNC REIT Corp. holders
in exchange for a cash payment representing the market value
of such in-kind dividend, and PNC has committed to
contribute such in-kind dividend to PNC Bank, N.A.
PNC has contractually committed to each of Trust II and Trust
III that if full dividends are not paid in a dividend period on
the Trust II Securities or the Trust III Securities, as applicable,
or the LLC Preferred Securities held by Trust II or Trust III, as
applicable, PNC will not declare or pay dividends with respect
to, or redeem, purchase or acquire, any of its equity capital
securities during the next succeeding dividend period, other
than: (i) purchases, redemptions or other acquisitions of shares
of capital stock of PNC in connection with any employment
contract, benefit plan or other similar arrangement with or for
the benefit of employees, officers, directors or consultants,
(ii) purchases of shares of common stock of PNC pursuant to a
contractually binding requirement to buy stock existing prior
to the commencement of the extension period, including under
a contractually binding stock repurchase plan, (iii) any
dividend in connection with the implementation of a
shareholders’ rights plan, or the redemption or repurchase of
any rights under any such plan, (iv) as a result of an exchange
or conversion of any class or series of PNC’s capital stock for
any other class or series of PNC’s capital stock, (v) the
purchase of fractional interests in shares of PNC capital stock
pursuant to the conversion or exchange provisions of such
stock or the security being converted or exchanged or (vi) any
stock dividends paid by PNC where the dividend stock is the
same stock as that on which the dividend is being paid. We
filed a copy of the Exchange Agreements containing those
dividend restrictions with the SEC as Exhibit 4.16 to PNC’s
Form 8-K filed on March 30, 2007 and as Exhibit 99.1 to
PNC’s Form 8-K filed on February 19, 2008, respectively.
PNC Capital Trust E Trust Preferred Securities
In February 2008, PNC Capital Trust E issued $450 million of
7
3
⁄ 4 % Trust Preferred Securities due March 15, 2068 (the
“Trust E Securities”). PNC Capital Trust E’s only assets are
$450 million of 7
3
⁄ 4 % Junior Subordinated Notes due
March 15, 2068 and issued by PNC (the “JSNs”). The Trust E
Securities are fully and unconditionally guaranteed by PNC.
We may, at our option, redeem the JSNs at 100% of their
principal amount on or after March 15, 2013. We have agreed
to redeem the JSNs on March 15, 2038, but only out of net
proceeds from the sale of certain replacement capital
securities described in the JSN indenture. The Trust E
Securities will be redeemed at the time of the JSN redemption.
If we defer interest on the JSNs and either pay current interest
or the fifth anniversary of the deferral passes, we are obligated
to issue certain qualifying securities defined in the JSN
indenture to raise proceeds to fund the payment of accrued
and unpaid interest.
In addition, we have entered into a replacement capital
covenant (the “Trust E Covenant”) for the benefit of holders
of a specified series of our long-term indebtedness (the “Trust
E Covered Debt”). As of February 13, 2008, the Trust E
Covered Debt consists of our $300 million 6.125% Junior
Subordinated Notes issued in December 2003. We agreed in
the Trust E Covenant that neither PNC nor its subsidiaries will
repay, redeem or purchase the JSNs or the Trust E Securities
on or after March 15, 2038 unless: (i) we have obtained the
prior approval of the Federal Reserve Board, if such approval
is then required by the Federal Reserve Board; and (ii) subject
to certain limitations, during the 180-day period prior to the
date of repayment, redemption or purchase, we have received
proceeds from the sale of Trust E Qualifying Securities in the
amounts specified in the Trust E Covenant (which amounts
will vary based on the redemption date and the type of
securities sold). “Trust E Qualifying Securities” means debt
and equity securities having terms and provisions that are
specified in the Trust E Covenant and that, generally
described, are intended to contribute to our capital base in a
manner that is similar to the contribution to our capital base
made by the Trust E Covered Securities.
The Trust E Covenant will terminate upon the earlier to occur
of (i) March 15, 2048, (ii) the date on which the JSNs are
otherwise redeemed in full, (iii) the date on which the holders of
a majority of the principal amount of the Trust E Covered Debt
agree to terminate the Trust E Covenant, (iv) the date on which
we no longer have outstanding any indebtedness eligible to
qualify as covered debt or (v) the occurrence of an event of
default and acceleration of the JSNs under the related indenture.
We filed a copy of the Trust E Covenant with the SEC as
Exhibit 99.1 to PNC’s Form 8-K filed February 13, 2008.
In connection with the closing of the Trust E Securities sale, we
agreed that, if we have given notice of our election to defer
interest payments on the JSNs or a related deferral period is
continuing, then PNC would be subject during such period to
restrictions on dividends and other provisions protecting the status
of the JSN debenture holder similar to or in some ways more
restrictive than those potentially imposed under the Exchange
Agreements with Trust II and Trust III, as described above.
Acquired Entity Trust Preferred Securities
As a result of the Mercantile and Yardville acquisitions, we
assumed obligations with respect to $73 million in principal
amount of junior subordinated debentures issued by the
acquired entities. Under the terms of these debentures, if there
is an event of default under the debentures or PNC exercises
its right to defer payments on the related trust preferred
securities issued by the statutory trusts or there is a default
under PNC’s guarantee of such payment obligations, PNC
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