PNC Financial Services (PNC)

the exercise price of the warrants). The terms of the transaction with the Treasury will result in limitations on our ability to pay dividends and repurchase our shares. For three years after issuance or until Treasury no longer holds any preferred shares, we will not be able to increase our dividends above current levels ($.66 per common share on a quarterly basis) nor repurchase any of our shares without Treasury approval with limited exceptions, most significantly purchases in connection with benefit plans. Also, we will not be able to pay any dividends at all unless we are current on our dividend payments on the preferred shares. In addition, we anticipate issuing warrants to purchase approximately 17 million of our shares. These restrictions, as well as the slightly dilutive impact of the warrants, may have an adverse effect on the market price of our common stock.

Unless we are able to redeem the preferred stock during the first five years, the cost of this capital will increase substantially at that point, from 5% (almost $400 million annually) to 9% (almost $700 million annually). Depending on market conditions at the time, this increase in dividends could significantly impact our liquidity.