<PAGE> 1
PRICING SUPPLEMENT NO. 3 DATED APRIL 29, 1998 Rule 424(b)(5)
(To Prospectus dated December 10, 1991 and File No. 33-42803
Prospectus Supplement dated June 22, 1992) CUSIP No. 69347U AA 8
$400,000,000
PNC FUNDING CORP
Subordinated Medium-Term Notes--Fixed Rate
Due Nine Months or More from Date of Issue
Unconditionally Guaranteed as to Payment
of Principal, Premium, if any,
and Interest by
PNC BANK CORP.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Trade Date: 4-29-98 Original Issue Date: 5-1-98
---------------- ----------------
Principal Amount: $140,000,000 Net Proceeds to PNC Funding: 99.075%
---------------- ----------------
Price to Public: 99.725% Type of Sale:
----------------
Selling Agent's Discount
or Commission: .650% [ ] As Agent
----------------
Interest Rate: 6.50% [ X ] As Principal
----------------
Stated Maturity: 5-1-08
----------------
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
If principal transaction, reoffering at:
[ ] varying prices related to prevailing market prices at the time
of resale
[ X ] fixed public offering price of 99.725% of Principal Amount
Form: [ X ] Book-Entry
[ ] Certificated
Interest Payment Dates: May 1 and November 1
-------------------------------
Redemption: [ X ] The Notes cannot be redeemed prior to maturity.
[ ] The Notes may be redeemed prior to maturity.
Initial Redemption Date: -----------------
Initial Redemption Percentage: -----------------
Annual Redemption Reduction Percentage: -----------------
Repayment: [ X ] The Notes cannot be repaid prior to maturity.
[ ] The Notes can be repaid prior to maturity at
the option of the holder of the Notes.
Repayment Date: -------------------
Repayment Price: -------------------
Discount Note: [ X ] No [ ] Yes If Yes, see attached description of
the U.S. Federal income tax
consequences thereof.
MERRILL LYNCH & CO.
- ---------- GOLDMAN, SACHS & CO.
---------- LEHMAN BROTHERS
---------- J.P. MORGAN SECURITIES INC.
---------- x SALOMON SMITH BARNEY
----------
<PAGE> 2
Page 2 of Pricing Supplement No. 3 dated April 29, 1998
(To Prospectus dated December 10, 1991 and
Prospectus Supplement dated June 22, 1992)
CERTAIN UPDATING INFORMATION
PNC Bank Corp. (formerly known as PNC Financial Corp) ("PNC") is now
the name of the Guarantor. The principal executive offices of PNC are now
located at One PNC Plaza, 249 Fifth Avenue, Pittsburgh, Pennsylvania 15222-2702
and its telephone number is (412) 762-1553. The principal executive offices of
PNC Funding are now located at 1600 Market Street, Philadelphia, Pennsylvania
19101, and its telephone number is (215) 585-5000. The information in the
Prospectus dated December 10, 1991 ("Prospectus") and the Prospectus Supplement
dated June 22, 1992 (the "MTN Prospectus Supplement") should be read
accordingly.
The Chase Manhattan Bank, formerly known as Chemical Bank and successor
by merger to Manufacturers Hanover Trust Company, is the Trustee. References to
the Trustee in the Prospectus and the MTN Prospectus Supplement should be read
accordingly.
The address of the New York Regional Office of the Securities and
Exchange Commission (the "Commission") is 7 World Trade Center, Suite 1300, New
York, New York 10048, and the address of the Chicago Regional Office of the SEC
is Suite 1400, Citicorp Center, 500 West Madison Street, Chicago, Illinois
60661. Copies of documents filed by PNC with the Commission now may also be
accessed electronically by means of the Commission's home page on the Internet
at "http://www.gov.sec." The information under "Statement of Available
Information" in the Prospectus should be read accordingly.
Written requests for copies of documents incorporated herein by
reference should be directed to Michelle Sentner, Assistant Vice President -
Financial Reporting, PNC Bank Corp., One PNC Plaza, 249 Fifth Avenue,
Pittsburgh, Pennsylvania 15222-2702 or "[email protected]" on the
Internet. Telephone requests may be directed to (412) 762-1553. PNC's filings
under the Securities Exchange Act of 1934 are also electronically available to
the public at its World Wide Web site at "http://www.pncbank.com." The
information under "Incorporation of Certain Documents by Reference" in the
Prospectus should be read accordingly.
The validity of the Notes and related Guarantees will be passed upon
for PNC Funding and PNC by John F. Fulgoney, Senior Counsel, PNC Bank Corp., One
PNC Plaza, 249 Fifth Avenue, Pittsburgh, Pennsylvania 15222-2702. The
information under "Legal Opinions" in the MTN Prospectus Supplement should be
read accordingly.
DESCRIPTION OF DEBT SECURITIES AND GUARANTEES
The following description of the general terms of Debt Securities and
Guarantees replaces in its entirety the description set forth under the heading
"Description of Debt Securities and Guarantees" in the Prospectus. The
description of the particular terms of
<PAGE> 3
Page 3 of Pricing Supplement No. 3 dated April 29, 1998
the Notes and Guarantees under the heading "Description of Notes and Guarantees"
in the MTN Prospectus Supplement supplements, and to the extent inconsistent
with, replaces the general terms of Debt Securities set forth below.
The Debt Securities will constitute either Senior Debt Securities of
PNC Funding or Subordinated Debt Securities of PNC Funding. The following
description of the terms of the Debt Securities sets forth certain general terms
and provisions of the Debt Securities to which any Prospectus Supplement may
relate. The particular terms of the Notes and Guarantees offered by any
Prospectus Supplement ("Offered Debt Securities") and the extent, if any, to
which such general provisions may apply to the Debt Securities and Guarantees so
offered will be described in the Prospectus Supplement relating to such Offered
Debt Securities.
The Offered Debt Securities are to be issued under an Indenture, dated
as of December 1, 1991, as amended by a Supplemental Indenture dated as of
February 15, 1993 (as amended, the "Indenture"), a copy of which has been filed
with the Commission. The Chase Manhattan Bank, formerly known as Chemical Bank
and as successor by merger to Manufacturers Hanover Trust Company, shall be the
Trustee under the Indenture ("Trustee"), unless a different Trustee for a series
of Debt Securities is named in a Prospectus Supplement. For each series of Debt
Securities, a supplemental indenture may be entered into among PNC Funding, PNC
and The Chase Manhattan Bank or such other Trustee as may be named in a
Prospectus Supplement relating to such series of Debt Securities. The following
summaries of certain provisions of the Indenture do not purport to be complete
and are subject to, and are qualified in their entirety by reference to, all the
provisions of the Indenture, including the definitions therein of certain terms.
Wherever particular sections or defined terms of the Indenture are referred to,
it is intended that such sections or defined terms shall be incorporated herein
by reference.
GENERAL
The Debt Securities will be unsecured obligations of PNC Funding.
Although the amount of Offered Debt Securities will be limited to the
amount that will result in net proceeds to PNC Funding as described on the cover
page of the Prospectus, the Indenture does not limit the aggregate principal
amount of debt securities that may be issued thereunder from time to time in one
or more series.
The Prospectus Supplement relating to a particular series of the Debt
Securities offered thereby will include the terms of the Offered Debt
Securities, including, where applicable; (1) the form, title and denomination of
the Debt Securities; (2) the aggregate principal amount of the Debt Securities;
(3) the date or dates on which the Debt Securities may be issued; (4) the date
or dates on which the principal of, and premium, if any, on the Debt Securities
shall be payable; (5) the rate or rates, or the method of determination thereof,
at which the Debt Securities shall bear interest, if any, the date or dates from
which such interest shall accrue, and the Interest Payment Dates on which such
interest shall be payable; (6) the priority of payment of such Debt Securities
and
<PAGE> 4
Page 4 of Pricing Supplement No. 3 dated April 29, 1998
thus whether they shall be designated as Senior Debt Securities or Subordinated
Debt Securities; (7) the place or places where the principal of, and premium, if
any, and interest on the Debt Securities of the series shall be payable; (8) the
provisions, if any, for optional or mandatory redemption of the Debt Securities,
including any sinking fund provisions, (9) if other than the principal amount
thereof, the portion of the principal amount of the Debt Securities which shall
be payable upon declaration of acceleration of the Maturity thereof in
accordance with the provisions of the Indenture; (10) whether payment of the
principal of, premium, if any, and interest, if any, on the Debt Securities
shall be with or without deduction for taxes, assessments or governmental
charges, and with or without reimbursement of taxes, assessments or governmental
charges paid by Holders; (11) any Events of Default or Defaults with respect to
the Debt Securities that differ from those set forth in the Indenture; (12)
whether the securities of such series are to be issued in a form registered as
to principal ("Registered Securities") (with or without interest coupons
("Coupons")) or in a form registered with regard to principal and interest
("Fully Registered Securities") or in bearer form ("Unregistered Securities"),
or as both Registered Securities and Unregistered Securities; (13) the currency
or currencies, or currency unit or currency units in which the principal of, and
premium, if any, and interest, if any, on the Debt Securities are to be
denominated, payable, redeemable or repurchaseable, as the case may be; (14) if
other than as set forth in the Indenture, provisions for the satisfaction and
discharge of the indebtedness represented by the Debt Securities; (15) whether
the Debt Securities of such series are issuable as a global security and, in
such case, the identity of the depositary for such series; (16) any trustees,
paying agents, transfer agents or registrars for the Debt Securities; (17) with
regard to the Debt Securities that do not bear interest, the dates for certain
required reports to the Trustee; (18) any special federal income tax
considerations applicable to any Offered Debt Securities; and (19) any other
terms of such Debt Securities. (Section 3.01)
Any Subordinated Debt Securities offered are intended to be included as
regulatory capital under interpretations of the Federal Reserve Board and, as a
result, contain subordination and acceleration provisions different from, and
covenants more limited than in, prior issuances of PNC Funding's Subordinated
Securities.
If any of the Debt Securities are sold for foreign currencies or
foreign currency units or if the principal of or any interest on any series of
Debt Securities is payable in foreign currencies or foreign currency units, the
restrictions, elections, tax consequences, specific terms and other information
with respect to such issue of Debt Securities and such currencies or currency
units will be set forth in the Prospectus Supplement relating thereto.
Although the Indenture provides that Debt Securities may be issued as
Registered Securities, with or without Coupons, or Unregistered Securities, each
series of Debt Securities will be issued as Fully Registered Securities unless
the Prospectus Supplement provides otherwise. Debt Securities that are not
registered as to interest shall have Coupons attached, unless issued as Original
Issue Discount Securities. All references to the Debt Securities shall, where
applicable, include the Coupons, if any, appertaining thereto.
<PAGE> 5
Page 5 of Pricing Supplement No. 3 dated April 29, 1998
Principal of, and premium, if any, and interest on Fully Registered
Securities will be payable at the Place of Payment designated for such Debt
Securities; provided that payment of interest may, at the option of PNC Funding,
be made by check mailed to the address of the person entitled thereto as it
appears in the Security Register at the close of business on the day or days
specified in the Prospectus Supplement relating to such Debt Securities. The
principal of, and premium, if any, and interest on any Debt Securities in other
forms will be payable in such manner and at such place or places as may be
designated by PNC Funding and specified in the Prospectus Supplement relating to
such Debt Securities. (Sections 3.01 and 5.01)
The Debt Securities may be exchanged, and Registered Securities may be
transferred, at the Corporate Trust Office of the Trustee for such series of
Debt Securities or at any other office or agency maintained by PNC Funding or
PNC for such purposes. Unregistered Securities and Coupons shall be transferred
by delivery. No service charge will be made for any transfer or exchange of the
Debt Securities, but PNC Funding may require payment of a sum sufficient to
cover any tax or other governmental charge payable in connection therewith.
(Section 3.05)
Unless the Prospectus Supplement provides otherwise, each series of the
Debt Securities will be issued only in denominations of $1,000 or any integral
multiple thereof and payable in Dollars. (Section 3.02) Under the Indenture,
however, Debt Securities may be issued in any denomination and payable in a
foreign currency or currency unit. (Section 3.01)
Debt Securities may be issued with "original issue discount" (within
the meaning of the Internal Revenue Code). Federal income tax consequences and
other special considerations applicable to any such securities issued with
original issue discount will be described in the Prospectus Supplement relating
thereto.
SENIOR DEBT SECURITIES
The Senior Debt Securities will rank equally with all Senior
Indebtedness of PNC Funding. At December 31, 1997, such outstanding Senior
Indebtedness of PNC Funding was approximately $163.6 million.
Senior Indebtedness of PNC Funding, defined in the Indenture as "Senior
Company Indebtedness," means the principal of, and premium, if any, and interest
on (i) all indebtedness for money borrowed, whether outstanding on the date of
execution of the Indenture or thereafter created, assumed or incurred, except
(A) such indebtedness as is by its terms expressly stated not to be superior in
right of payment to the Subordinated Debt Securities or to rank pari passu with
the Subordinated Debt Securities, and (B) PNC Funding's 9-7/8% Subordinated
Notes Due 2001, 6-7/8% Subordinated Notes Due 2003, 6-1/8% Subordinated Notes
Due 2003, 7-3/4% Subordinated Notes Due 2004 and 6-7/8% Subordinated Notes Due
2007 and CCNB Corporation's 10.55% Equity Commitment Notes Due 1998 assumed by
PNC Funding and PNC in connection with the acquisition of CCNB Corporation on
October 23, 1992 and (ii) any deferrals, renewals or extensions of any such
Senior Indebtedness of PNC Funding. The term "indebtedness for money
<PAGE> 6
Page 6 of Pricing Supplement No. 3 dated April 29, 1998
borrowed" as used in the prior sentence means any obligation of, or any
obligation guaranteed by, PNC Funding for the repayment of money borrowed,
whether or not evidenced by bonds, debentures, notes or other written
instruments, any capitalized lease obligation and any deferred obligation for
payment of the purchase price of any property or assets. Senior Indebtedness of
PNC Funding includes PNC Funding's commercial paper and its 4.93% Senior Notes
Due 1998, 5.43% Senior Notes Due 2000 and 5.18% Senior Notes Due 1999, and would
include any borrowings under the $500 million credit facility under an Amended
and Restated Credit Agreement dated as of March 18, 1996 (the "$500 Million
Credit Facility"), under which no amounts are outstanding as of the date of this
Pricing Supplement. There is no limitation under the Indenture on the issuance
of additional Senior Indebtedness of PNC Funding.
SUBORDINATED DEBT SECURITIES
The payment of the principal of and interest on the Subordinated Debt
Securities will, to the extent set forth in the Indenture, be subordinated in
right of payment to the prior payment in full of all Senior Indebtedness of PNC
Funding. (Section 12.01) In certain events of insolvency, the payment of the
principal of and interest on the Subordinated Debt Securities will, to the
extent set forth in the Indenture, also be effectively subordinated in right of
payment to the prior payment in full of all Other Company Obligations (as
defined in the Indenture). (Section 12.13) Other Company Obligations means
obligations of PNC Funding associated with derivative products such as interest
rate and currency exchange contracts, foreign exchange contracts, commodity
contracts or any similar arrangements, unless the instrument by which PNC
Funding incurred, assumed or guaranteed the obligation expressly provides that
it is subordinate or junior in right of payment to any other indebtedness or
obligations of PNC Funding. At December 31, 1997, there were no Other Company
Obligations of PNC Funding. (Section 1.01)
Upon any payment or distribution of assets to creditors upon any
liquidation, dissolution, winding up, reorganization, assignment for the benefit
of creditors, marshaling of assets or any bankruptcy, insolvency or similar
proceedings of PNC Funding, the holders of all Senior Indebtedness of PNC
Funding will first be entitled to receive payment in full of all amounts due or
to become due thereon before the Holders of the Subordinated Debt Securities
will be entitled to receive any payment in respect of the principal of or
interest on the Subordinated Debt Securities. If upon any such payment or
distribution of assets to creditors there remain, after giving effect to such
subordination provisions in favor of the holders of Senior Indebtedness of PNC
Funding, any amounts of cash, property or securities available for payment or
distribution in respect of Subordinated Debt Securities (as defined in the
Indenture, "Excess Proceeds"), and if, at such time, any creditors in respect of
Other Company Obligations have not received payment in full of all amounts due
or to become due on or in respect of such Other Company Obligations, then such
Excess Proceeds shall first be applied to pay or provide for the payment in full
of such Other Company Obligations before any payment or distribution may be made
in respect of the Subordinated Debt Securities. In addition, no payment may be
made of the principal of or interest on the Subordinated Debt Securities, or in
respect of any retirement, purchase or other acquisition of any of the
Subordinated Debt Securities at any time when (i) there is a default in the
payment of the principal of, or premium, if any, or interest on or otherwise in
respect of, any Senior Indebtedness of PNC Funding or (ii) any event of default
with respect to any Senior Indebtedness of PNC Funding has occurred and is
continuing, or would occur as a result of such payment on the Subordinated Debt
Securities or any retirement, purchase or other acquisition of any of the
<PAGE> 7
Page 7 of Pricing Supplement No. 3 dated April 29, 1998
Subordinated Debt Securities permitting the holders of such Senior Indebtedness
of PNC Funding to accelerate the maturity thereof. Except as described above,
the obligation of PNC Funding to make payment of the principal of or interest on
the Subordinated Debt Securities will not be affected. By reason of such
subordination, in the event of insolvency, holders of the Subordinated Debt
Securities may recover less, ratably, than holders of Senior Indebtedness of PNC
Funding and Other Company Obligations and may also recover less, ratably, than
holders of Existing Company Subordinated Indebtedness and other creditors of PNC
Funding. (Sections 12.01, 12.02, 12.03, and 12.13)
Existing Company Subordinated Indebtedness means PNC Funding's 9-7/8%
Subordinated Notes Due 2001 and CCNB Corporation's 10.55% Equity Commitment
Notes Due 1998 assumed by PNC Funding and PNC in connection with the acquisition
of CCNB Corporation on October 23, 1992. (Section 1.01) At December 31, 1997,
the Existing Company Subordinated Indebtedness was approximately $101.3 million.
PNC Funding's obligations under the Subordinated Debt Securities shall
rank pari passu in right of payment with each other and with the Existing
Company Subordinated Indebtedness, subject to the obligations of the Holders of
Subordinated Debt Securities to pay over any Excess Proceeds to creditors in
respect of Other Company Obligations as provided in the Indenture. (Section
12.13)
GUARANTEES
PNC will unconditionally guarantee the due and punctual payment of the
principal of, premium, if any, and interest on the Debt Securities when and as
the same shall become due and payable, whether at maturity, upon redemption or
otherwise. (Section 3.12)
GUARANTEES OF SENIOR DEBT SECURITIES
The Guarantees of Senior Debt Securities will rank equally with all
Senior Indebtedness of PNC. At December 31, 1997, the outstanding Senior
Indebtedness of PNC was approximately $518.3 million, which is inclusive of the
guarantee of Senior Indebtedness of PNC Funding.
Senior Indebtedness of PNC, defined in the Indenture as "Senior
Guarantor Indebtedness," means the principal of, and premium, if any, and
interest on (i) all indebtedness of PNC for money borrowed, whether outstanding
on the date of execution of the Indenture or thereafter created, assumed or
incurred, except (A) such indebtedness as is by its terms expressly stated not
to be superior in right of payment to the Subordinated Guarantees or to rank
pari passu with the Subordinated Guarantees,
<PAGE> 8
Page 8 of Pricing Supplement No. 3 dated April 29, 1998
(B) PNC's 8-1/4% Convertible Subordinated Debentures Due 2008, and (C) PNC's
Guarantee of PNC Funding's 9-7/8% Subordinated Notes Due 2001, 6-7/8%
Subordinated Notes Due 2003, 6-1/8% Subordinated Notes Due 2003, 7-3/4%
Subordinated Notes Due 2004 and 6-7/8% Subordinated Notes Due 2007 and CCNB
Corporation's 10.55% Equity Commitment Notes Due 1998 assumed by PNC Funding and
PNC in connection with the acquisition of CCNB Corporation on October 23, 1992,
and (ii) any deferrals, renewals or extensions of any such Senior Indebtedness
of PNC. The term "indebtedness for money borrowed" as used in the prior sentence
means any obligation of, or any obligation guaranteed by, PNC for the repayment
of money borrowed, whether or not evidenced by bonds, debentures, notes or other
written instruments, any capitalized lease obligation and any deferred
obligation for payment of the purchase price of any property or assets. Senior
Indebtedness of PNC includes PNC's Guarantee of PNC Funding's 4.93% Senior Notes
Due 1998, 5.43% Senior Notes Due 2000 and 5.18% Senior Notes Due 1999 and the
following joint and several obligations of PNC and PNC Bancorp, Inc. assumed in
connection with the merger of Midlantic Corporation with PNC Bancorp, Inc. at
December 31, 1995: 8-1/4% Convertible Subordinated Debentures Due 2010, 9.875%
Subordinated Capital Notes Due 1999, 9.20% Subordinated Capital Notes Due 2001
and 9.25% Senior Notes Due 1999. Senior Indebtedness of PNC would also include
PNC's Guarantee of any borrowings under the $500 Million Credit Facility. There
is no limitation under the Indenture on the issuance of additional Senior
Indebtedness of PNC.
GUARANTEES OF SUBORDINATED DEBT SECURITIES
The payment of the principal of and interest on the Subordinated Debt
Securities pursuant to the Guarantees of the Subordinated Debt Securities
("Subordinated Guarantees"), will, to the extent set forth in the Indenture, be
subordinated in right of payment to the prior payment in full of all Senior
Indebtedness of PNC. (Section 12.04) In certain events of insolvency, the
payment of the principal of and interest on the Subordinated Guarantees will, to
the extent set forth in the Indenture, also be effectively subordinated in right
of payment to the prior payment in full of all Other Guarantor Obligations (as
defined in the Indenture). (Section 12.05) Other Guarantor Obligations means
obligations of PNC associated with derivative products such as interest rate and
currency exchange contracts, foreign exchange contracts, commodity contracts or
any similar arrangements, unless the instrument by which PNC incurred, assumed
or guaranteed the obligation expressly provides that it is subordinate or junior
in right of payment to any other indebtedness or obligations of PNC. (Section
1.01) At December 31, 1997, there were no Other Guarantor Obligations of PNC.
Upon any payment or distribution of assets to creditors upon any
liquidation, dissolution, winding up, reorganization, assignment for the benefit
of creditors, marshalling of assets or any bankruptcy, insolvency or similar
proceedings of PNC, the holders of all Senior Indebtedness of PNC will first be
entitled to receive payment in full of all amounts due or to become due thereon
before the Holders of the Subordinated Guarantees will be entitled to receive
any payment in respect of the principal of or interest on the Subordinated Debt
Securities pursuant to the Subordinated Guarantees. If upon any such payment or
distribution of assets to creditors there remain, after giving effect to such
subordination provisions in favor of the holders of Senior Indebtedness of
<PAGE> 9
Page 9 of Pricing Supplement No. 3 dated April 29, 1998
PNC, any amounts of cash, property or securities available for payment or
distribution in respect of Subordinated Guarantees (as defined in the Indenture,
"Excess Proceeds"), and if, at such time, any creditors in respect of Other
Guarantor Obligations have not received payment in full of all amounts due or to
become due on or in respect of such Other Guarantor Obligations, then such
Excess Proceeds shall first be applied to pay or provide for the payment in full
of such Other Guarantor Obligations before any payment or distribution may be
made in respect of the Subordinated Guarantees. In addition, no payment may be
made of the principal of or interest on the Subordinated Debt Securities
pursuant to the Subordinated Guarantees or in respect of any retirement,
purchase or other acquisition of any of the Subordinated Debt Securities
pursuant to the Subordinated Guarantees, at any time when (i) there is a default
in the payment of the principal of, premium, if any, or interest on or otherwise
in respect of any Senior Indebtedness of PNC or (ii) any event of default with
respect to any Senior Indebtedness of PNC has occurred and is continuing, or
would occur as a result of such payment on the Subordinated Debt Securities
pursuant to the Subordinated Guarantees or any retirement, purchase or other
acquisition of any of the Subordinated Debt Securities pursuant to the
Subordinated Guarantees, permitting the holders of such Senior Indebtedness of
PNC to accelerate the maturity thereof. Except as described above, the
obligation of PNC to make payment under the Subordinated Guarantees will not be
affected. By reason of such subordination, in the event of insolvency, holders
of Subordinated Guarantees of PNC may recover less, ratably, than holders of
Existing Guarantor Subordinated Indebtedness (as defined in the Indenture) and
other creditors of PNC. (Section 3.12, 12.04, 12.05, 12.06 and 12.14)
Existing Guarantor Subordinated Indebtedness means the Guarantor's
8-1/4% Convertible Subordinated Debentures Due 2008, PNC's Guarantee of PNC
Funding's 9-7/8% Subordinated Notes Due 2001, and CCNB Corporation's 10.55%
Equity Commitment Notes Due 1998 assumed by PNC Funding and PNC in connection
with the acquisition of CCNB on October 23, 1992. (Section 1.01) At December 31,
1997, the Existing Guarantor Subordinated Indebtedness was approximately $101.6
million. PNC's 8.315% Junior Subordinated Debentures Due 2027, in the aggregate
principal amount of $300 million, issued on May 12, 1997 would be subordinated
to the Subordinated Guarantees and the Existing Guarantor Subordinated
Indebtedness.
PNC's obligations under the Subordinated Guarantees shall rank pari
passu in right of payment with each other and with the Existing Guarantor
Subordinated Indebtedness, subject to the obligations of the Holders of
Subordinated Guarantees to pay over any Excess Proceeds to creditors in respect
of Other Guarantor Obligations as provided in the Indenture. (Section 12.14)
Since PNC is a holding company separate from its subsidiaries, the
rights of PNC to share in the distribution of the assets of any subsidiary upon
the subsidiary's liquidation, reorganization or otherwise will be subject to the
prior claims of the subsidiary's creditors (including in the case of any bank
subsidiary, its depositors), except to the extent that PNC may itself be a
creditor with recognized claims against the subsidiary. In addition, there are
certain regulatory and other limitations on the payment
<PAGE> 10
Page 10 of Pricing Supplement No. 3 dated April 29, 1998
of dividends and on loans and other transfers of funds to PNC by its bank
subsidiaries. See "Certain Regulatory Considerations" in the Prospectus.
CERTAIN COVENANTS
The Indenture contains certain covenants that impose various
restrictions on PNC Funding and PNC and, as a result, afford the holders of Debt
Securities certain protections. Although statements have been included as to the
general purpose and effect of the covenants, investors must review the full text
of the covenants to be able to meaningfully evaluate the covenants.
Restriction on Sale or Issuance of Voting Stock of a Principal Subsidiary Bank
The covenant described below is designed to ensure that, for so long as
any Senior Debt Securities are issued and outstanding, PNC will continue
directly or indirectly to own and thus serve as the holding company for its
Principal Subsidiary Banks (defined as each of (i) PNC Bank, (ii) any other
Subsidiary Bank the consolidated assets of which constitute 20% or more of the
consolidated assets of PNC and its subsidiaries, (iii) any other Subsidiary Bank
designated as a Principal Subsidiary Bank by the board of directors of PNC, or
(iv) any Subsidiary that owns any Voting Shares or certain rights to acquire
Voting Shares of any Principal Subsidiary Bank, and their respective successors,
provided any such successor is a Subsidiary Bank or a Subsidiary, as
appropriate). Principal Subsidiary Banks, in the past, have provided PNC income
in the form of dividends. The Indenture prohibits PNC, unless debtholder consent
is obtained from the holders of Senior Debt Securities, from (i) selling or
otherwise disposing of, and permitting a Principal Subsidiary Bank to issue,
Voting Shares or certain rights to acquire Voting Shares of a Principal
Subsidiary Bank, (ii) permitting the merger or consolidation of a Principal
Subsidiary Bank with or into any other corporation, or (iii) permitting the sale
or other disposition of all or substantially all the assets of any Principal
Subsidiary Bank, if after giving effect to any one of such transactions and the
issuance of the maximum number of Voting Shares issuable upon the exercise of
all such rights to acquire Voting Shares of a Principal Subsidiary Bank, PNC
would own directly or indirectly less than 80% of the Voting Shares of such
Principal Subsidiary Bank, with the following exceptions: (i) transactions
required by any law, or any regulation or order of any governmental authority;
(ii) transactions required as a condition imposed by any governmental authority
to the acquisition by PNC, directly or indirectly, or any other corporation or
entity if thereafter, (a) PNC would own at least 80% of the Voting Shares of
such other corporation or entity, (b) the Consolidated Banking Assets of PNC
would be at least equal to those prior thereto, and (c) the board of directors
of PNC shall have designated such other corporation or entity a Principal
Subsidiary Bank; (iii) transactions that do not reduce the percentage of Voting
Shares of such Principal Subsidiary Bank owned directly or indirectly by PNC;
and (iv) transactions where the proceeds are invested within 180 days after such
transaction in any one or more Subsidiary Banks. However, the Indenture permits
the merger of a Principal Subsidiary Bank with and into a Principal Subsidiary
Bank or PNC, the consolidation of Principal Subsidiary Banks into a Principal
Subsidiary Bank or PNC, or the sale or other disposition of all or substantially
all of the assets of any Principal
<PAGE> 11
Page 11 of Pricing Supplement No. 3 dated April 29, 1998
Subsidiary Bank to another Principal Subsidiary Bank or PNC, if, in any such
case in which the surviving, resulting or acquiring entity is not PNC, PNC would
own, directly or indirectly, at least 80% of the Voting Shares of the Principal
Subsidiary Bank surviving such merger, resulting from such consolidation or
acquiring such assets. (Section 5.06)
Ownership of PNC Funding
The Indenture contains a covenant that, so long as any of the Debt
Securities are outstanding and subject to certain rights described below under
"Consolidation or Merger," PNC will continue to own, directly or indirectly, all
of the outstanding voting shares of PNC Funding. (Section 5.07)
Restriction on Liens
The purpose of the restriction on liens covenant is to preserve PNC's
direct or indirect interest in voting Shares of Principal Subsidiary Banks free
of security interests of other creditors. The covenant permits certain specified
liens and liens where the Senior Debt Securities are equally secured. The
Indenture prohibits PNC and its subsidiaries from creating or permitting any
liens (other than certain tax and judgment liens) upon Voting Shares of any
Principal Subsidiary Bank to secure indebtedness for borrowed money without
making effective provision whereby the Senior Debt Securities shall be equally
and ratably secured, except that PNC may create or permit (i) purchase money
liens and liens on Voting Shares of any Principal Subsidiary Bank existing at
the time such Voting Shares are acquired or created within 120 days thereafter;
(ii) the acquisition of any Voting Shares of any Principal Subsidiary Bank
subject to liens at the time of acquisition or the assumption of obligations
secured by a lien on such Voting Shares; (iii) under certain circumstances,
renewals, extensions or refunding of the liens described in (i) and (ii) above;
and (iv) liens to secure loans or other extensions of credit under Section 23A
of the Federal Reserve Act or any successor or similar federal law or
regulation. (Section 5.08)
Consolidation or Merger
The covenant described below protects the holders of Debt Securities
upon certain transactions involving PNC Funding or PNC by requiring any
successor to PNC Funding or PNC to assume the predecessor's obligations under
the Indenture, and prohibits transactions that would result in an Event of
Default, a Default or an event which could become an Event of Default or Default
under the Indenture. PNC Funding or PNC may consolidate with, merge into, or
transfer substantially all of its properties to, any other corporation organized
under the laws of any domestic jurisdiction, provided that the successor
corporation assumes all obligations of PNC Funding or PNC, as the case may be,
under the Debt Securities and the Guarantees and under the Indenture, that after
giving effect to the transaction no Event of Default or Default, and no event
which, after notice or lapse of time, would become an Event of Default or
Default, shall have occurred and be continuing, and that certain other
conditions are met. (Sections 10.01 and 10.03)
<PAGE> 12
Page 12 of Pricing Supplement No. 3 dated April 29, 1998
Except as may be disclosed in a Prospectus Supplement and other than
the restrictions on liens on Voting Shares of Principal Subsidiary Banks and on
certain dispositions of Principal Subsidiary Banks described above, the
Indenture and the Debt Securities do not contain any covenants or other
provisions designed to afford holders of the Debt Securities protection in the
event of a highly leveraged transaction involving PNC.
MODIFICATION AND WAIVER
Modifications of the Indenture may be made by PNC Funding, PNC and the
Trustee with the consent of the Holders of the majority in aggregate principal
amount of Outstanding Debt Securities of each series affected thereby; provided,
however, that no such modification may, without the consent of the Holder of
each Outstanding Debt Security affected thereby: (i) change the Maturity of the
principal of, or the stated Maturity of any installment of interest on, any such
Debt Security; (ii) reduce the principal amount of, or the premium, if any, or
the interest on such Debt Security (including, in the case of an Original Issue
Discount Security, the amount payable upon acceleration of the maturity
thereof); (iii) change the place or currency of payment of principal of or
premium, if any, or interest on any such Debt Security; (iv) impair the right to
institute suit for the enforcement of any payment on or with respect to any such
Debt Security; (v) reduce the aforesaid percentage in principal amount of
Outstanding Debt Securities of any series necessary to modify the Indenture or
the percentage in principal amount of Outstanding Debt Securities necessary for
any waiver of compliance with conditions and defaults thereunder; or (vi) modify
or affect in any manner adverse to a Holder the terms and conditions of the
Guarantees. (Section 9.02)
Modification and amendment of the Indenture may be made by PNC Funding,
PNC, and the Trustee without the consent of any Holder of Debt Securities for
any of the following purposes: (i) to evidence the succession of another
corporation to PNC Funding or PNC; (ii) to provide for the acceptance of
appointment of a successor Trustee; (iii) to add to the covenants of PNC Funding
or PNC for the benefit of the Holders of Debt Securities; (iv) to cure any
ambiguity, defect or inconsistency in the Indenture, provided such action does
not adversely affect the Holders of Debt Securities in any material respect; (v)
to secure the Debt Securities under applicable provisions of the Indenture; (vi)
to establish the form or terms of Debt Securities; (vii) to permit the payment
in the United States of principal, premium or interest on Unregistered
Securities; or (viii) to provide for the issuance of uncertificated Debt
Securities in place of certificated Debt Securities. (Section 9.01)
The Holders of a majority in principal amount of Outstanding Debt
Securities of any series may waive, insofar as that series is concerned,
compliance with certain covenants, including those described under the captions
above entitled "Restriction on Sale or Issuance of Capital Stock of a Principal
Subsidiary Bank," "Ownership of PNC Funding" and "Restriction on Liens."
(Section 5.09) No waiver by the Holders of any series of Subordinated Debt
Securities is required with respect to the covenant described under the caption
above entitled "Restriction on Sale or Issuance of Voting Stock of a Principal
Subsidiary Bank." (Section 5.10) Covenants concerning the payment of
<PAGE> 13
Page 13 of Pricing Supplement No. 3 dated April 29, 1998
principal, premium, if any, and interest on the Debt Securities, compliance with
the terms of the Indenture, maintenance of an agency and certain monies held in
trust, may only be waived pursuant to a supplemental indenture executed with the
consent of each Holder of Debt Securities affected by such waiver. The covenant
concerning certain reports required by federal law may not be waived.
EVENTS OF DEFAULT, DEFAULTS, WAIVERS
The Indenture defines an Event of Default with respect to any series of
Senior Debt Securities as being any one of the following events and such other
event as may be established for the Debt Securities of a particular series: (i)
default for 30 days in the payment of interest on such series; (ii) default in
any payment of principal of or premium, if any, on such series; (iii) default in
the payment of any sinking fund installment with respect to such series; (iv)
default for 90 days after appropriate notice in performance of any other
covenant or warranty in the Indenture (other than a covenant or warranty
included in the Indenture solely for the benefit of a series of Debt Securities
other than that series); (v) the occurrence of certain events relating to
bankruptcy, insolvency or reorganization of PNC, PNC Funding or any Principal
Subsidiary Bank; or (vi) any other Event of Default provided in the supplemental
indenture under which such Senior Debt Securities are issued. (Section 7.01(a))
The Indenture defines an Event of Default with respect to any series of
Subordinated Debt Securities as certain events involving the bankruptcy or
reorganization of PNC or any Principal Subsidiary Bank. There is no right of
acceleration in the case of events involving the bankruptcy, insolvency or
reorganization of PNC Funding or of a default in the payment of principal,
interest, premium, if any, or any sinking fund payment with respect to a series
of Subordinated Debt Securities or in the case of a default in the performance
of any other covenant of PNC Funding or PNC in the Indenture. The Indenture
defines a Default with respect to any series of Subordinated Debt Securities as
any of the items listed in (i) through (iv) of the above paragraph, events
involving the bankruptcy, insolvency or reorganization of PNC Funding and such
other Default as may be established for the Subordinated Debt Securities of a
particular series. A breach of the covenant described under the caption above
entitled "Restriction on Sale or Issuance of Voting Stock of a Principal
Subsidiary Bank" will not result in a default with respect to any Series of
Subordinated Debt Securities. (Sections 7.01(b) and (c))
In case an Event of Default shall occur and be continuing with respect
to any series of Debt Securities, either the Trustee or the Holders of not less
than 25% in principal amount of Outstanding Debt Securities of that series may
declare the principal of such series (or if Debt Securities of that series are
Original Issue Discount Securities, such portion of the principal as may be
specified in the terms of that series) to be due and payable immediately. At any
time after a declaration of acceleration has been made but before a judgment or
decree for payment of money due has been obtained by the Trustee, the Holders of
a majority in principal amount of the Outstanding Debt Securities of such series
may rescind any declaration of acceleration and its consequences, if all
payments due (other than those due as a result of acceleration) have been made
and all Events of
<PAGE> 14
Page 14 of Pricing Supplement No. 3 dated April 29, 1998
Default and Defaults have been remedied or waived. Any Event of Default or
Default with respect to a particular series of Debt Securities may be waived by
the Holders of a majority in principal amount of the Outstanding Debt Securities
of such series, except in each case of a failure to pay principal of, or
premium, if any, or interest on, or any sinking fund installment in respect of,
such Debt Securities or in respect of a covenant or provision of the Indenture
which cannot be modified without the consent of the Holder of each Outstanding
Debt Security affected. (Sections 7.02, 7.08 and 7.13)
Subject to the provisions of the Indenture relating to the duties of
the Trustee in case an Event of Default or a Default shall occur and be
continuing, the Trustee will be under no obligation to exercise any of the
rights or powers in the Indenture at the request or direction of Holders of Debt
Securities, unless such Holders shall have offered to the Trustee reasonable
security or indemnity. Subject to such provisions for indemnification and
certain limitations contained in the Indenture, the Holders of a majority in
principal amount of the Outstanding Debt Securities of any series shall have the
right to direct the time, method and place of conducting any proceeding for any
remedy available to the Trustee with respect to Debt Securities of such series.
(Sections 8.03 and 7.12)
The Indenture provides that in the event of a default of 30 days in the
payment of interest upon any Debt Security of any series, or defaults in the
payment of any principal of or premium, if any, or any sinking fund installment
with respect to any Debt Securities of any series, PNC Funding will, upon demand
of the Trustee, pay to it, for the benefit of the Holder of any such Debt
Security the whole amount then due and payable on such Debt Security for
principal and interest. The Indenture, as amended, further provides that if PNC
Funding fails to pay such amount forthwith upon such demand, the Trustee may,
among other things, institute a judicial proceeding for the collection thereof.
(Section 7.03)
The Indenture requires PNC Funding and PNC to file with the Trustee, on
an annual basis, certificates as to the absence of any default and as to
compliance with the terms of the Indenture. The Indenture provides that the
Trustee may withhold notice to the Holders of Debt Securities of any default
(except in payment of principal, premium, if any, interest or sinking fund
installment) if the Trustee considers it in the interest of the Holders of Debt
Securities to do so. (Sections 5.04 and 8.02)
No Holder of any Debt Security of any series will have any right to
institute any proceeding with respect to the Indenture or for any remedy
thereunder, unless such Holder shall have previously given to the Trustee
written notice of a continuing Event of Default or Default with respect to Debt
Securities of that series and unless the Holders of at least 25% in principal
amount of the Outstanding Debt Securities of that series shall have made written
request, and offered reasonable indemnity, to the Trustee to institute such
proceeding as trustee, and the Trustee shall not have received from the Holders
of a majority in principal amount of the Outstanding Debt Securities of that
series a direction inconsistent with such request and shall have failed to
institute such proceeding within 60 days. However, the Holder of any Debt
Security will have an absolute right to receive payment of the principal of, and
premium, if any, and interest on such Debt Security on
<PAGE> 15
Page 15 of Pricing Supplement No. 3 dated April 29, 1998
the due dates expressed in such Debt Security and to institute suit for the
enforcement of any such payment. (Sections 7.07 and 7.08)
DEFEASANCE
Except as may otherwise be provided in the applicable Prospectus
Supplement with respect to the Debt Securities of any series, the Indenture
provides that PNC Funding and PNC shall be discharged from their obligations
under the Debt Securities of a series at any time prior to the Stated Maturity
or redemption thereof when (a) PNC Funding or PNC has irrevocably deposited with
the Trustee, in trust, (i) sufficient funds to pay the principal of (and
premium, if any), and interest to Stated Maturity (or redemption) on, the Debt
Securities of such series, or (ii) such amount of government securities as will,
together with the predetermined and certain income to accrue thereon without
consideration of any reinvestment thereof, be sufficient to pay when due the
principal of, and premium, if any, and interest to Stated Maturity (or
redemption) on, the Debt Securities of such series, and (b) PNC Funding or PNC
has paid all other sums payable with respect to the Debt Securities of such
series. Deposited funds shall be in the currency or currency unit in which the
Debt Securities are denominated. Deposited government securities shall be direct
obligations of, or obligations the principal of and interest on which are fully
guaranteed by, the government which issued the currency in which the Debt
Securities are denominated, and which are not subject to prepayment, redemption
or call. Upon such discharge, the Holders of the Debt Securities of such series
shall no longer be entitled to the benefits of the Indenture, except for the
purposes of registration of transfer and exchange of the Debt Securities of such
series, and replacement of lost, stolen or mutilated Debt Securities, and shall
look only to such deposited funds or obligations for payment. (Sections 11.01
and 11.02)
For federal income tax purposes, the deposit and discharge may,
depending on a variety of factors, result in a taxable gain or loss being
recognized by the Holders of the affected Debt Securities. Prospective investors
are urged to consult their own tax advisers as to the specific consequences of
such a deposit and discharge, including the applicability and effect of tax laws
other than federal income tax laws.
GLOBAL SECURITIES
The Debt Securities of a series may be issued in whole or in part in
the form of a global security ("Global Security") that will be deposited with,
or on behalf of, a depositary (the "Depositary"). Such Depositary will be The
Depository Trust Company ("DTC"), unless otherwise identified in the Prospectus
Supplement relating to such series. A Global Security may be issued as either a
Registered or Unregistered Security and in either temporary or permanent form.
Unless and until it is exchanged in whole or in part for individual certificates
evidencing Debt Securities in definitive form represented thereby, a Global
Security may not be transferred except as a whole by the Depositary for such
Global Security or any nominee thereof to a successor of such Depositary or a
nominee of such successor. (Section 2.05)
<PAGE> 16
Page 16 of Pricing Supplement No. 3 dated April 29, 1998
If DTC is the Depositary for a series of Debt Securities, such series
will be issued as fully-registered securities registered in the name of Cede &
Co. (DTC's partnership nominee). One fully-registered Global Security will be
issued for such series of Debt Securities, in the aggregate principal amount of
such series, and will be deposited with DTC. If, however, the aggregate
principal amount of such series of Debt Securities exceeds $200 million, one
Global Security will be issued with respect to each $200 million of principal
amount and an additional Global Security will be issued with respect to any
remaining principal amount of such series.
DTC is a limited-purpose trust company organized under the New York
Banking Law, a "banking organization" within the meaning of the New York Banking
Law, a member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Securities Exchange
Act of 1934. DTC holds securities that its participants ("Participants") deposit
with DTC. DTC also facilitates the settlement among Participants of securities
transactions, such as transfers and pledges, in deposited securities through
electronic computerized book-entry changes in Participants' accounts, thereby
eliminating the need for physical movement of securities certificates. Direct
Participants include securities brokers and dealers, banks, trust companies,
clearing corporations, and certain other organizations. DTC is owned by a number
of its Direct Participants and by the New York Stock Exchange, Inc., the
American Stock Exchange, Inc. and the National Association of Securities
Dealers, Inc. Access to the DTC system is also available to others such as
securities brokers and dealers, banks and trust companies that clear through or
maintain a custodial relationship with a Direct Participant, either directly or
indirectly ("Indirect Participants"). The rules applicable to DTC and its
Participants are on file with the Commission.
Purchases of a series of Debt Securities under the DTC system will need
to be made by or through Direct Participants, which will receive a credit for
the Debt Securities on DTC's records. The ownership interest of each actual
purchaser of each Debt Security ("Beneficial Owner") is in turn to be recorded
on the Direct Participants' and Indirect Participants' records. Beneficial
Owners will not receive written confirmation from DTC of their purchase, but
Beneficial Owners are expected to receive written confirmations providing
details of the transaction, as well as provide periodic statements of their
holdings, from the Direct Participants or Indirect Participants through which
the Beneficial Owner entered into the transaction. Transfers of ownership
interests in the Debt Securities are to be accomplished by entries made on the
books of the Participants acting on behalf of Beneficial Owners. Beneficial
Owners will not receive certificates representing their ownership interest in
the Global Security or Global Securities, except in the event that use of the
book-entry system for such Debt Securities is discontinued.
To facilitate subsequent transfers, all Global Securities deposited by
Participants with DTC are registered in the name of DTC's partnership nominee,
Cede & Co. The deposit of Global Securities with DTC and their registration in
the name of Cede & Co. effect no change in beneficial ownership. DTC has advised
PNC and PNC Funding that DTC will have no knowledge of the actual Beneficial
Owners of the Global Securities, and that DTC's records reflect only the
identity of the Direct Participants to whose
<PAGE> 17
Page 17 of Pricing Supplement No. 3 dated April 29, 1998
accounts Global Securities are credited, which may or may not be the Beneficial
Owners. Participants will remain responsible for keeping account of their
holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants and by Direct
Participants and Indirect Participants to Beneficial Owners will be governed by
arrangements among them, subject to any statutory or regulatory requirements as
may be in effect from time to time.
To the extent any series of Debt Securities is redeemable, redemption
notices will be sent to DTC. If less than all of the Debt Securities within an
issue are being redeemed, DTC's practice is to determine by lot the amount of
the interest of each Direct Participant in such issue to be redeemed. The
applicable Prospectus Supplement for a series of Debt Securities will indicate
whether such series is redeemable.
To the extent applicable, neither DTC nor Cede & Co. will consent or
vote with respect to any Global Securities deposited with it. Under its usual
procedure, DTC will mail an Omnibus Proxy to the issuer as soon as possible
after the record date. The Omnibus Proxy assigns Cede & Co.'s consenting and
voting rights to those Direct Participants to whose accounts the Debt Securities
are credited on the record date (identified in a listing attached to the Omnibus
Proxy).
Principal and interest payments on the Global Securities deposited with
DTC will be made to Cede & Co., as nominee of DTC. DTC's practice is to credit
Direct Participants' accounts, upon DTC's receipt of funds and corresponding
detail information from the issuer, on the payable date in accordance with their
respective holdings shown on DTC's records. Payments by Participants to
Beneficial Owners will be governed by standing instructions and customary
practices, as in the case with securities held for the accounts of customers
registered in "street name," and will be the responsibility of such Participant
and not DTC or PNC Funding, subject to any statutory or regulatory requirements
as may be in effect from time to time. Payment of principal and interest to Cede
& Co. will be the responsibility of the Trustee, who unless otherwise indicated
in the applicable Pricing Supplement, will be PNC Funding's paying agent,
disbursements of such payments to Direct Participants will be the responsibility
of DTC, and disbursements of such payments to Beneficial Owners will be the
responsibility of Direct Participants and Indirect Participants. None of PNC
Funding, PNC, the Trustee, any paying agent, or the registrar for the Debt
Securities will have any responsibility or liability for any aspect of the
records relating to or payments made on account of beneficial ownership
interests of the Global Security or Global Securities for any series of Debt
Securities or for maintaining, supervising or reviewing any records relating to
such beneficial interests.
If DTC is at any time unwilling, unable or ineligible to continue as
the Depositary and a successor depositary is not appointed by PNC Funding within
90 days, PNC Funding will issue certificated Debt Securities for each series in
definitive form in exchange for each Global Security. If PNC Funding determines
not to have a series of Debt Securities represented by a Global Security, which
it may do, it will issue
<PAGE> 18
Page 18 of Pricing Supplement No. 3 dated April 29, 1998
certificated Debt Securities for such series in definitive form in exchange for
the Global Security. In either instance, a Beneficial Owner will be entitled to
physical delivery of certificated Debt Securities for such series in definitive
form equal in principal amount to such Beneficial Owner's beneficial interest in
the Global Security and to have such certificated Debt Securities for such
series registered in such Beneficial Owner's name. Certificated Debt Securities
so issued in definitive form will be issued in denominations of $1,000 and
integral multiples thereof and will be issued in registered form only, without
coupons.
Any other or differing terms of the depositary arrangement will be
described in the Prospectus Supplement relating to a series of Debt Securities.
REGARDING THE TRUSTEE
In the ordinary course of business, PNC Funding and PNC may maintain
lines of credit with one or more Trustees for a series of Debt Securities and
the Banks may maintain deposit accounts and conduct other banking transactions
with one or more Trustees for a series of Debt Securities.
TRUSTEE'S DUTY TO RESIGN UNDER CERTAIN CIRCUMSTANCES
PNC Funding may issue both Senior and Subordinated Debt Securities
under the Indenture. Because the Subordinated Debt Securities will rank junior
in right of payment to the Senior Debt Securities, the occurrence of a default
under the Indenture with respect to the Subordinated Debt Securities or any
Senior Debt Securities could create a conflicting interest under the Trust
Indenture Act of 1939, as amended ("1939 Act"), with respect to any Trustee who
serves as trustee for both Senior and Subordinated Debt Securities. In addition,
upon the occurrence of a default under the Indenture with respect to any series
of Debt Securities the Trustee of which maintains banking relationships with PNC
Funding or PNC, such Trustee would have a conflicting interest under the 1939
Act as a result of such business relationships. If a default has not been cured
or waived within 90 days after the Trustee has or acquires a conflicting
interest, the Trustee generally is required by the 1939 Act to eliminate such
conflicting interest or resign as Trustee with respect to the Subordinated Debt
Securities or the Senior Debt Securities. In the event of the Trustee's
resignation, PNC Funding and/or PNC shall promptly appoint a successor trustee
with respect to the affected securities.
CERTAIN TAX CONSIDERATIONS
The following paragraphs, when read in conjunction with the discussion
under "United States Taxation" in the MTN Prospectus Supplement describe certain
material aspects of the current United States federal tax treatment of investors
who purchase the Notes. The discussion does not purport to deal with all tax
consequences applicable to all categories of investors, some of which may be
subject to special rules.
<PAGE> 19
Page 19 of Pricing Supplement No. 3 dated April 29, 1998
TAXATION OF CAPITAL GAINS
Recent tax legislation has modified the federal income taxation of
capital gains. The maximum tax rate on capital gains received by individuals
from the sale or disposition of investments (other than collectibles) held for
more than 18 months is 20 percent. If an individual holds an investment for more
than one year, but not for more than 18 months, the maximum rate is 28 percent.
Finally, the top capital gains tax rate for individuals will drop to 18 percent
for assets purchased after December 31, 2000, and held for more than five years.
Investors should consult their own tax advisors for more information or for the
capital gains rate applicable to a specific Note they own. See "United States
Federal Income Taxation - Sale, Exchange and Retirement of Notes" in the MTN
Prospectus Supplement.
MODIFIED RATE OF BACKUP WITHHOLDING
The MTN Prospectus Supplement describes the potential application of
backup withholding to certain U.S. holders who fail to furnish a correct
taxpayer identification number or certification of foreign or other exempt
status. The current rate of backup withholding is 31 percent. See "United States
Federal Income Taxation - Backup Withholding and Information Reporting" in the
MTN Prospectus Supplement.
NEW REGULATIONS RELATING TO WITHHOLDING AND INFORMATION REPORTING
The IRS recently issued regulations relating to withholding, backup
withholding and information reporting with respect to payments made to Non-U.S.
Holders. Those regulations generally are effective for payments made after
December 31, 1999. However, withholding certificates that are valid under the
present rules and that are held by a Withholding Agent on December 31, 1999,
remain valid until the earlier of December 31, 2000 or the expiration date of
the certificate under the present rules (unless otherwise invalidated due to
changes in the circumstances of the person whose name is on the certificate).
When effective, the new regulations will streamline and, in some cases,
alter the types of statements and information that must be furnished to claim a
reduced rate of withholding. While various IRS forms (such as IRS Forms 1001 and
4224) currently are used to claim exemption from withholding or a reduced
withholding rate, the preamble to the regulations states that the IRS intends
most certifications to be made on revised Forms W-8. The regulations also
clarify the duties of Withholding Agents and modify the rules concerning
withholding on payments made to Non-U.S. Holders through foreign intermediaries.
With some exceptions, the new regulations treat a payment to a foreign
partnership as a payment directly to the partners.
UNDERWRITING
Subject to the terms and conditions set forth in the Agency Agreement, dated as
of June 22, 1992, and as supplemented by the Terms Agreement, dated April 29,
1998, PNC
<PAGE> 20
Page 20 of Pricing Supplement No. 3 dated April 29, 1998
Funding has agreed to sell to Salomon Smith Barney (the "Underwriter"), and the
Underwriter has agreed to purchase, $140,000,000 principal amount of Notes.
In the Agency Agreement, the Underwriter has agreed, subject to the
terms and conditions set forth therein, to purchase all the Notes offered hereby
if any of the Notes are purchased. In the event of default by the Underwriter,
the Agency Agreement provides that, in certain circumstances, the Agency
Agreement may be terminated.
PNC Funding has been advised by the Underwriter that it proposes
initially to offer the Notes to the public at the public offering price set
forth on the cover page of this Pricing Supplement, and to certain dealers at
such price less a concession not in excess of .40% of the principal amount of
the Notes. The Underwriter may allow and such dealers may reallow a concession
not in excess of .25% of the principal amount of the Notes to certain other
dealers. After the initial public offering, the public offering price and such
concessions may be changed.
The Agency Agreement provides that PNC Funding and PNC will jointly and
severally indemnify the Underwriter against certain liabilities, including
liabilities under the Securities Act of 1933, as amended, or contribute payments
the Underwriter may be required to make in respect thereof.
The notes are a new issue of securities with no established trading
market. The Underwriter may from time to time purchase and sell Notes in the
secondary market but it is not obligated to do so and there can be no assurance
that there will be a secondary market for the Notes or liquidity in the
secondary market if one develops. The Notes will not be listed on any securities
exchange.
