<PAGE>
As filed with the Securities and Exchange Commission on November 20, 2000
Registration No. 333-
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------
MBNA AMERICA BANK, NATIONAL ASSOCIATION
(Originator of the Issuers described herein)
MBNA MASTER CREDIT CARD TRUST II
(Issuer of the Collateral Certificate)
MBNA CREDIT CARD MASTER NOTE TRUST
(Issuer of the Notes)
(Exact name of registrants as specified in their charters)
<TABLE>
<S> <C>
United States 51-0331454
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
</TABLE>
Wilmington, Delaware 19884
(800) 362-6255
(Address, including zip code, and telephone number, including area
code, of registrant's principal executive offices)
M. Scot Kaufman
Executive Vice Chairman
MBNA AMERICA BANK, NATIONAL ASSOCIATION
Wilmington, Delaware 19884-0144
(800) 362-6255
(Name, address including zip code, and telephone number,
including area code, of agent for service)
Copies to:
<TABLE>
<S> <C>
Cameron L. Cowan, Esq. James S. Stringfellow, Esq.
ORRICK, HERRINGTON & SUTCLIFFE LLP SKADDEN, ARPS, SLATE, MEAGHER
Washington Harbour & FLOM LLP
3050 K Street, N.W. 4 Times Square
Washington, D.C. 20007 New York, New York 10036
(202) 339-8400 (212) 735-3000
</TABLE>
Approximate date of commencement of proposed sale to the public:
From time to time after this registration statement becomes effective as
determined by market conditions.
If the only securities registered on this form are to be offered pursuant to
dividend or interest reinvestment plans, please check the following box. [_]
If any of the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [X]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
CALCULATION OF REGISTRATION FEE
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Title of each class of Proposed maximum Proposed maximum
securities to be Amount to be offering price aggregate Amount of
registered registered(a)(b) per certificate(c) offering price(c) registration fee
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Notes................... $10,000,000,000 100% $10,000,000,000 $2,640,000
-----------------------------------------------------------------------------------------------
Collateral
Certificate(d)......... $10,000,000,000 -- -- --
</TABLE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
(a) With respect to any securities with original issue discount, the amount to
be registered is calculated based on the initial public offering price
thereof.
(b) With respect to any securities denominated in any foreign currency, the
amount to be registered shall be the U.S. dollar equivalent thereof based
on the prevailing exchange rate at the time such security is first offered.
(c) Estimated solely for the purpose of calculating the registration fee.
(d) No additional consideration will be paid by the purchasers of the Notes for
the Collateral Certificate, which is pledged as security for the Notes.
--------------
The registrants hereby amend this Registration Statement on such date or
dates as may be necessary to delay its effective date until the registrants
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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--------------------------------------------------------------------------------
<PAGE>
INTRODUCTORY NOTE
This Registration Statement includes:
. a representative form of prospectus supplement to the base prospectus
relating to the offering by the MBNA Credit Card Master Note Trust of a
series of asset-backed notes; and
. a form of base prospectus relating to asset-backed notes of the MBNA
Credit Card Master Note Trust.
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this prospectus supplement and the accompanying prospectus +
+is not complete and may be changed. We may not sell these securities until +
+the registration statement filed with the Securities and Exchange Commission +
+is effective. This prospectus supplement and the accompanying prospectus are +
+not an offer to sell these securities and is not seeking an offer to buy +
+these securities in any state where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
Representative Form of Prospectus Supplement
SUBJECT TO COMPLETION DATED NOVEMBER 20, 2000
Prospectus Supplement dated [.][.], 2000
(to Prospectus dated [.][.], 2000)
MBNA Credit Card Master Note Trust
Issuer
MBNA America Bank, National Association
Originator of the Issuer
MBNAseries
$[.] [Floating Rate] Class [.] Notes of [.] [.]
<TABLE>
<S> <C> <C>
------------------- The issuer will issue and sell:
You should
consider the Class [.] Notes
discussion -------------------
under "Risk Principal amount $[.]
Factors"
beginning on Interest rate [one-month] LIBOR
page S-10 in plus [.]% per annum
this prospectus
supplement and Interest payment dates 15th day of each
on page 11 of [calendar month],
the accompanying beginning in [.][.]
prospectus
before you Expected principal payment date [.][.],[.]
purchase any
notes. Legal maturity date [.][.],[.]
The notes are Expected issuance date [.][.],[.]
obligations
of the issuer Price to public $[.] (or [.]%)
only and are
not obligations Underwriting discount $[.] (or [.]%)
of any other
person. Each Proceeds to the issuer $[.] (or [.]%)
tranche of notes
is secured by
only some of These Class [.] notes are a tranche of notes of the
the assets of MBNAseries. Principal payments on Class B notes of the
the issuer. MBNAseries are subordinated to payments on Class A notes.
Noteholders Principal payments on Class C notes of the MBNAseries are
will have no subordinated to payments on Class A and Class B notes.
recourse to
any other assets These Class [.] notes are offered subject to receipt and
of the issuer for acceptance by the underwriters and to their right to
the payment of reject any order in whole or in part and to withdraw,
the notes.
The notes are
not insured
or guaranteed
by the Federal
Deposit Insurance
Corporation
or any other
governmental
agency or
instrumentality.
-------------------
</TABLE>
Neither the SEC nor any state securities commission has approved these notes or
determined that this prospectus supplement or the prospectus is truthful,
accurate or complete. Any representation to the contrary is a criminal offense.
Underwriters
[Co. A]
[Co. B]
[Co. C]
[Co. D]
[.] [.], 2000
<PAGE>
Important Notice about Information Presented in this
Prospectus Supplement and the Accompanying Prospectus
We provide information to you about the notes in two separate documents that
progressively provide more detail: (a) the accompanying prospectus, which
provides general information about each series of notes which may be issued by
MBNA Credit Card Master Note Trust, some of which may not apply to the
MBNAseries or the Class [.] notes, and (b) this prospectus supplement, which
will describe the specific terms of the MBNAseries and the Class [.] notes.
This prospectus supplement may be used to offer and sell the Class [.] notes
only if accompanied by the prospectus.
This prospectus supplement may supplement disclosure in the accompanying
prospectus. If the terms of the MBNAseries or the Class [.] notes vary between
this prospectus supplement and the prospectus, you should rely on the
information in this prospectus supplement.
You should rely only on the information provided in this prospectus
supplement and the accompanying prospectus including the information
incorporated by reference. We have not authorized anyone to provide you with
different information. We are not offering the Class [.] notes in any state
where the offer is not permitted. We do not claim the accuracy of the
information in this prospectus supplement or the accompanying prospectus as of
any date other than the dates stated on their respective covers.
We include cross-references in this prospectus supplement and in the
accompanying prospectus to captions in these materials where you can find
further related discussions. The Table of Contents in this prospectus
supplement and in the accompanying prospectus provide the pages on which these
captions are located.
----------------
S-2
<PAGE>
Table of Contents
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Supplement Summary............................................. S-4
Securities Offered....................................................... S-4
Risk Factors............................................................. S-4
Interest................................................................. S-4
Principal................................................................ S-5
Nominal Liquidation Amount............................................... S-5
Subordination; Credit Enhancement........................................ S-5
Required Subordinated Amount............................................. S-6
[Class C Reserve Account]................................................ S-6
Early Redemption of Notes................................................ S-7
Optional Redemption by the Issuer........................................ S-7
Security for the Notes................................................... S-7
Limited Recourse to the Issuer........................................... S-7
Sources of Funds to Pay the Notes........................................ S-8
Master Trust II Assets and Receivables................................... S-8
The MBNAseries........................................................... S-9
Shared Excess Available Funds............................................ S-9
Stock Exchange Listing................................................... S-9
Ratings.................................................................. S-9
Risk Factors.............................................................. S-10
Glossary.................................................................. S-14
The Notes................................................................. S-14
Subordination of Principal............................................... S-14
Issuances of New Series, Classes and Tranches of Notes................... S-15
Required Subordinated Amount............................................. S-16
Sources of Funds to Pay the Notes........................................ S-16
The Collateral Certificate.............................................. S-16
The Issuer Accounts..................................................... S-16
Limited Recourse to the Issuer; Security for the Notes.................. S-17
Deposit and Application of Funds.......................................... S-18
Allocation of Available Funds............................................ S-18
Allocation of Available Principal Amounts................................ S-18
Targeted Deposits of Available Funds to the Interest Funding Account..... S-19
Payments Received from Derivative Counterparties for Interest............ S-20
Principal Funding Subaccount Earnings Treated as Available Funds;
Principal Funding Subaccount Earnings Shortfall......................... S-20
Deposits of Withdrawals from the Class C Reserve Account to the Interest
Funding Account......................................................... S-21
</TABLE>
<TABLE>
<CAPTION>
Page
-----
<S> <C>
Allocation to Interest Funding Subaccounts.............................. S-21
Withdrawals from Interest Funding Subaccounts........................... S-21
Targeted Deposits of Available Principal Amounts to the Principal
Funding Account........................................................ S-22
Payments Received from Derivative Counterparties for Principal.......... S-23
Deposits of Withdrawals from the Class C Reserve Account to the
Principal Funding Account.............................................. S-23
Allocation to Principal Funding Subaccounts............................. S-23
Withdrawals from Principal Funding Account.............................. S-24
Limit on Reallocations of Available Principal Amounts from Subordinated
Classes Taken to Benefit Senior Classes................................ S-25
Limit on Allocations of Available Principal Amounts of Tranches of
Notes.................................................................. S-29
Targeted Deposits to the Class C Reserve Account........................ S-29
Withdrawals from the Class C Reserve Account............................ S-29
Sale of Credit Card Receivables......................................... S-30
Final Payment of the Notes.............................................. S-31
Pro Rata Payments Within a Tranche...................................... S-31
Shared Excess Available Funds........................................... S-31
Underwriting............................................................. S-32
Glossary of Defined Terms................................................ S-34
Annex I:
MBNA and MBNA Corporation............................................... A-1-1
MBNA's Credit Card Portfolio............................................ A-1-1
Billing and Payments................................................... A-1-1
Delinquencies and Collection Efforts................................... A-1-2
The Master Trust II Portfolio........................................... A-1-2
Delinquency and Gross Charge-Off Experience............................ A-1-3
Revenue Experience..................................................... A-1-3
Interchange............................................................ A-1-4
Payment Rates.......................................................... A-1-5
</TABLE>
S-3
<PAGE>
Prospectus Supplement Summary
This summary does not contain all the information you may need to make an
informed investment decision. You should read the entire prospectus supplement
and the accompanying prospectus before you purchase any notes.
There is a glossary beginning on page S-34 in this prospectus supplement and
on page 70 in the accompanying prospectus where you will find the definitions
of some terms used in this prospectus supplement.
Securities Offered
$ [.] [Floating Rate] Class [.] notes of [.] [.].
These Class [.] notes are part of a series of notes called the MBNAseries. The
MBNAseries consists of Class A notes, Class B notes and Class C notes. These
Class [.] notes are a tranche of Class [.] notes of the MBNAseries.
These Class [.] notes are issued by, and are obligations of, the MBNA Credit
Card Master Note Trust. The issuer expects to issue other classes and tranches
of notes of the MBNAseries with different interest rates, payment dates, legal
maturity dates and other characteristics. In addition, the issuer may issue
other series of notes with different interest rates, payment dates, legal
maturity dates and other characteristics. See "The Notes--Issuances of New
Series, Classes and Tranches of Notes" in the prospectus.
The MBNAseries is a series of notes consisting of three classes: Class A, Class
B and Class C. Each class may consist of multiple tranches. Notes of any
tranche can be issued on any date so long as there is sufficient credit
enhancement, either in the form of outstanding subordinated notes or other
forms of credit enhancement. See "The Notes--Issuances of New Series, Classes
and Tranches of Notes" in the prospectus. The expected principal payment dates
and legal maturity dates of tranches of senior and subordinated classes of the
MBNAseries may be different. Therefore, subordinated notes may have expected
principal payment dates and legal maturity dates earlier than some or all
senior notes of the MBNAseries. Subordinated notes will generally not be paid
before their legal maturity date unless, after payment, the remaining
subordinated notes provide the required amount of subordination for the senior
notes.
In general, the subordinated notes of the MBNAseries serve as credit
enhancement for all of the senior notes of the MBNAseries, regardless of
whether the subordinated notes are issued before, at the same time as, or after
the senior notes of the the MBNAseries. However, certain tranches of senior
notes may not require subordination from each class of notes subordinated to
it. For example, if a tranche of Class A notes requires credit enhancement
solely from Class C notes, the Class B notes will not, in that case, provide
subordination protection to that tranche of Class A notes. The amount of credit
exposure of any particular tranche of notes is a function of, among other
things, the total amount of notes issued, the required subordinated amount and
the amount of usage of the subordination protection.
Only the Class [.] notes are being offered through this prospectus supplement
and the accompanying prospectus. Other series, classes and tranches of notes
(including tranches of notes that are included in the MBNAseries as a part of
Class [.]) may be issued by the MBNA Credit Card Master Note Trust in the
future.
Risk Factors
Investment in the Class [.] notes involves risks. You should consider carefully
the risk factors beginning on page S-10 in this prospectus supplement and
beginning on page 11 in the accompanying prospectus.
Interest
These Class [.] notes will accrue interest at an annual rate equal to [LIBOR
plus [.]%, as determined on the related LIBOR determination date].
Interest on these Class [.] notes will begin to accrue on [.] [.], [.] and will
be calculated on the basis of
S-4
<PAGE>
a 360-day year and the actual number of days in the related interest period.
Each interest period will begin on and include an interest payment date and end
on but exclude the next interest payment date. However, the first interest
period will begin on and include [.] [.], 2001, which is the closing date, and
end on but exclude [.] [.], 2001, which is the first interest payment date.
Interest on the Class [.] notes for any interest payment date will equal the
product of:
. the Class [.] note interest rate for the applicable interest period; times
. the actual number of days in the related interest period divided by 360;
times
. the outstanding dollar principal amount of the Class [.] notes as of the
related record date.
However, for the first interest payment date, interest on the Class [.] notes
will equal the interest accrued on the initial outstanding dollar principal
amount of the Class [.] notes at the Class [.] note interest rate for the
period from and including the closing date through but excluding [.] [.], 2001.
The issuer will make interest payments on these Class [.] notes on the 15th day
of each [month] beginning in [.] [.]. Interest payments due on a day that is
not a business day in New York, New York and Newark, Delaware will be made on
the following business day.
The payment of accrued interest on a class of notes of the MBNAseries is not
senior to or subordinated to payment of interest on any other class of notes of
the MBNAseries.
Principal
The issuer expects to pay the stated principal amount of these Class [.] notes
in one payment on [.] [.], [.], which is the expected principal payment date,
and is obligated to do so if funds are available for that purpose and not
required for subordination. However, if the stated principal amount of these
Class [.] notes is not paid in full on its expected principal payment date,
noteholders will generally not have any remedies against the issuer until [.]
[.], [.], the legal maturity date of these Class [.] notes.
If the stated principal amount of these Class [.] notes is not paid in full on
the expected principal payment date, then, subject to the principal payment
rules described below under "Subordination; Credit Enhancement," principal and
interest payments on these Class [.] notes will be made monthly until they are
paid in full or the legal maturity date occurs, whichever is earlier.
Principal of these Class [.] notes may be paid earlier than its expected
principal payment date if an early redemption event or an event of default
occurs with respect to these Class [.] notes. See "Indenture--Early Redemption
Events" and "--Events of Default" in the prospectus.
Nominal Liquidation Amount
The initial nominal liquidation amount of these Class [.] notes is $ [.]. The
nominal liquidation amount of a tranche of notes corresponds to the portion of
the investor interest of the collateral certificate that is allocable to
support that tranche of notes. If the nominal liquidation amount of these Class
[.] notes has been reduced, available principal amounts and available funds
allocated to pay principal of and interest on these Class [.] notes will be
reduced. If the nominal liquidation amount is reduced by:
. reallocations of available principal amounts from these Class [.] notes to
pay interest on a senior class or the servicing fee to the master trust II
servicer; or
. charge-offs resulting from uncovered defaults on the principal receivables in
master trust II allocated to the collateral certificate,
the principal of and interest on these Class [.] notes may not be paid. For a
more detailed discussion of nominal liquidation amount, see "The Notes--Stated
Principal Amount, Outstanding Dollar Principal Amount and Nominal Liquidation
Amount" in the prospectus.
Subordination; Credit Enhancement
[The principal of these Class [.] notes may be applied to make interest
payments on the Class A notes [and Class B notes] of the MBNAseries and to pay
the servicing fee allocable to the MBNAseries.]
S-5
<PAGE>
No payment of principal will be made on any Class B note in the MBNAseries
unless, following the payment, the remaining available subordinated amount of
Class B notes in the MBNAseries is at least equal to the required subordinated
amount for the outstanding Class A notes in the MBNAseries. Similarly, no
payment of principal will be made on any Class C note in the MBNAseries unless,
following the payment, the remaining available subordinated amount of Class C
notes in the MBNAseries is at least equal to the required subordinated amounts
for the outstanding Class A notes and Class B notes in the MBNAseries. However,
there are some exceptions to this rule. See "The Notes--Subordination of
Principal" in the prospectus.
Required Subordinated Amount
In order to issue a senior class of notes, the required subordinated amount of
subordinated notes must be outstanding and available on that date.
<TABLE>
<CAPTION>
Percentage of
adjusted
outstanding
amount of
senior notes
-------------
<S> <C>
Class A required subordinated amount of Class C notes............. [.]%
Class A required subordinated amount of Class B notes............. [.]%
Class B required subordinated amount of Class C notes............. [.]%
</TABLE>
These percentages may change if the rating agencies consent.
In addition, if the rating agencies consent, the issuer may utilize forms of
credit enhancement other than subordination in order to provide senior classes
of notes with the required credit enhancement.
[Class C Reserve Account]
[The issuer will establish a Class C reserve subaccount to provide credit
enhancement solely for the holders of these Class C notes. The Class C reserve
account will initially not be funded. The Class C reserve subaccount will not
be funded unless and until excess available funds fall below the levels
described in the following table or an early redemption event or event of
default occurs. For a discussion of excess available funds, see the definition
of "excess available funds" in the glossary to the prospectus.]
[Funds on deposit in the Class C reserve account will be available to holders
of Class C notes to cover shortfalls of interest payable on interest payment
dates. Funds on deposit in the Class C reserve account will also be available
to holders of Class C notes to cover shortfalls in principal on any day when
principal is payable. Only the holders of Class C notes will have the benefit
of the Class C reserve account. See "Deposit and Application of Funds--
Withdrawals from the Class C Reserve Account."]
[The Class C reserve subaccount will be funded each month, as necessary, from
available funds allocated to the MBNAseries that month less targeted deposits
to the interest funding account, payment of the master trust II servicing fee
allocable to the MBNAseries, application to cover defaults on receivables in
master trust II allocable to the MBNAseries and reimbursement of any deficits
in the nominal liquidation amounts of the notes.]
[The Class C reserve subaccount will be funded if excess available funds fall
below the levels described below. The left column of the table below gives the
level of excess available funds, expressed as a percentage of the adjusted
outstanding dollar principal amount of the MBNAseries notes as of the beginning
of the related month. The right column gives the percentage of the investor
interest of the adjusted outstanding dollar principal amount of the MBNAseries
notes that, when multiplied by the ratio which the outstanding dollar principal
amount of these Class C notes bears to the aggregate outstanding dollar
principal amount of all Class C notes in the MBNAseries, will be required to be
deposited in the Class C reserve subaccount.]
<TABLE>
<CAPTION>
Percentage of
excess available Percentage of
funds, averaged adjusted
over outstanding
the three most dollar
recent months principal
---------------- -------------
<S> <C>
[.]% to [.]% [.]%
[.]% to [.]% [.]%
[.]% to [.]% [.]%
[.]% to [.]% [.]%
[.]% to [.]% [.]%
0.00% or less [.]%
</TABLE>
S-6
<PAGE>
[The amount targeted to be in the Class C reserve subaccount will be adjusted
monthly to the percentages specified in the table as excess available funds
rise or fall. If an early redemption event or event of default occurs with
respect to these Class C notes, the targeted Class C reserve subaccount amount
will be the aggregate outstanding dollar principal amount of the affected Class
C Notes.]
[See "Deposit and Application of Funds--Targeted Deposits to the Class C
Reserve Account."]
Early Redemption of Notes
In addition to the early redemption events described in the accompanying
prospectus, if at any time the average of the portfolio yields for any three
consecutive monthly periods is less than the average of the base rates for such
three monthly periods, an early redemption event for the Class [.] notes will
occur. For a discussion of base rate and portfolio yield, see the definitions
of "base rate" and "portfolio yield" in the glossary. See "The Notes--
Redemption and Early Redemption of Notes" in the prospectus.
Optional Redemption by the Issuer
The issuer has the right, but not the obligation, to redeem these Class [.]
notes in whole but not in part on any day on or after the day on which the
aggregate nominal liquidation amount of these Class [.] notes is reduced to
less than [.]% of its initial outstanding dollar principal amount. This
repurchase option is referred to as a clean-up call. However, the issuer will
not redeem subordinated notes if those notes are required to provide
subordination for senior classes of notes of the MBNAseries.
If the issuer elects to redeem these Class [.] notes, it will notify the
registered holders of the redemption at least thirty days prior to the
redemption date. The redemption price of a note so redeemed will equal 100% of
the outstanding dollar principal amount of that note, plus accrued but unpaid
interest on the note to but excluding the date of redemption.
If the issuer is unable to pay the redemption price in full on the redemption
date, monthly payments on these Class [.] notes will thereafter be made,
subject to the principal payment rules described above under "Subordination;
Credit Enhancement," until the principal amount of those notes, plus all
accrued and unpaid interest, is paid in full or the legal maturity date occurs,
whichever is earlier. Any funds in the principal funding subaccount, interest
funding subaccount and [Class C reserve subaccount] for these Class [.] notes
will be applied to make the principal and interest payments on these notes on
the redemption date.
Security for the Notes
The Class [.] notes are secured by a shared security interest in the collateral
certificate and the collection account, but the Class [.] notes are entitled to
the benefits of only that portion of those assets allocated to it under the
indenture and the related indenture supplement.
The Class [.] notes are also secured by a security interest in:
. the applicable principal funding subaccount;
. the applicable interest funding subaccount;
. [the applicable Class C reserve subaccount;]
. any other applicable supplemental account; and
. by a security interest in any derivative agreement for that tranche.
See "The Notes--Sources of Funds to Pay the Notes--The Collateral Certificate"
and "--The Issuer Accounts" in this prospectus supplement and "Sources of Funds
to Pay the Notes--The Collateral Certificate" in the prospectus.
Limited Recourse to the Issuer
The sole source of payment for principal of or interest on these Class [.]
notes is provided by:
. the portion of the available principal amounts and available funds allocated
to the MBNAseries and available to these Class [.] notes after giving effect
to any reallocations;
. funds in the applicable issuer accounts for these Class [.] notes; and
. payments on any derivative agreements for these Class [.] notes, if not
already included in available funds.
Class [.] noteholders will have no recourse to any other assets of the issuer
or any other person or entity for the payment of principal of or interest on
these Class [.] notes.
S-7
<PAGE>
However, if the Class [.] noteholders direct master trust II to sell credit
card receivables following an event of default and acceleration, or on the
applicable legal maturity date, as described in "Deposit and Application of
Funds--Sale of Credit Card Receivables," the Class [.] noteholders have
recourse only to the proceeds of that sale.
Sources of Funds to Pay the Notes
In addition to the collateral certificate, the issuer will have the following
sources of funds to pay principal and interest on applicable tranches of the
MBNAseries notes:
. Derivative Agreements. The Class [.] notes will have the benefit of any
applicable derivative agreement with a counterparty.
. The Issuer Accounts. The issuer has established a principal funding account,
an interest funding account and [a Class C reserve account]. Each one of
those accounts will have subaccounts for the Class [.] notes.
Each month, distributions on the collateral certificate will be deposited into
the collection account. Those deposits will then be allocated to each series of
notes, including the MBNAseries. The amounts allocated to the MBNAseries plus
any other amounts to be treated as available funds and available principal
amounts for the MBNAseries will then be allocated to:
--the principal funding account;
--the interest funding account;
--the Class C reserve account;
--[any supplemental account;]
--payments under any applicable derivative agreements; and
--the other purposes as specified in "Deposit and Application of Funds."
Funds on deposit in the principal funding account and the interest funding
account will be used to make payments of principal of and interest on the
MBNAseries notes, including the Class [.] notes.
Master Trust II Assets and Receivables
The collateral certificate, which is the issuer's primary source of funds for
the payment of principal of and interest on these Class [.] notes, is an
investor certificate issued by master trust II. The collateral certificate
represents an undivided interest in the assets of master trust II. Master trust
II's assets include credit card receivables from selected MasterCard(R) and
VISA(R)* revolving credit card accounts that meet the eligibility criteria for
inclusion in master trust II. These eligibility criteria are discussed in the
prospectus under "Master Trust II--Master Trust II Assets."
The credit card receivables in master trust II consist of principal receivables
and finance charge receivables. Principal receivables include amounts charged
by cardholders for merchandise and services and amounts advanced to cardholders
as cash advances. Finance charge receivables include periodic finance charges,
annual membership fees, cash advance fees, late charges and certain other fees
billed to cardholders.
The following information is as of [.][.], 2000:
<TABLE>
<S> <C>
Receivables in master trust II: $[.]
Accounts designated to master trust II: [.]
Series issued by master trust II: [.]
Outstanding investor interest of all
master trust II series: $[.]
</TABLE>
See "The Master Trust II Portfolio" in Annex I of this prospectus supplement
for detailed financial information on the receivables and the accounts.
The MBNAseries
These Class [.] notes will be the [.] tranche of notes issued by the issuer in
the MBNAseries.
As of the issuance date of these Class [.] notes, the aggregate outstanding
dollar principal amount of notes in the MBNAseries will be $[.], including
these Class [.] notes and other tranches of notes of the MBNAseries issued on
that day, consisting of:
Class [.] notes $[.]
Class [.] notes $[.]
Class [.] notes $[.]
--------
* MasterCard(R) and VISA(R) are federally registered servicemarks of
MasterCard International Inc. and VISA U.S.A., Inc., respectively.
S-8
<PAGE>
Shared Excess Available Funds
The MBNAseries will be included in "group A." In addition to the MBNAseries,
the issuer may issue other series of notes that are included in group A. As of
the date of this prospectus supplement, the MBNAseries is the only series of
notes issued by the issuer.
To the extent that excess available funds allocated to the MBNAseries are not
needed to make targeted deposits to the Class C reserve account, as described
in "Deposit and Application of Funds--Allocation of Available Funds," these
excess available funds, called shared excess available funds, will be applied
to cover shortfalls in available funds for other series of notes within group
A. In addition, notes in the MBNAseries may receive the benefits of shared
excess available funds available from other series in group A, to the extent
those excess available funds are not needed for those other series of notes.
See "Deposit and Application of Funds-- Shared Excess Available Funds" herein
and "Sources of Funds to Pay the Notes--Deposit and Application of Funds" in
the prospectus.
Stock Exchange Listing
[The issuer will apply to list these Class [.] notes on the Luxembourg Stock
Exchange. The issuer cannot guarantee that the application for the listing will
be accepted. You should consult with [NAME OF LISTING AGENT], the Luxembourg
listing agent for these Class [.] notes, [ADDRESS], phone number [PHONE], to
determine whether these Class [.] notes have been listed on the Luxembourg
Stock Exchange.]
Ratings
The issuer will issue these Class [.] notes only if they are rated at least
"[.]" or its equivalent by at least one nationally recognized rating agency.
Each tranche of Class [.] notes may have different rating requirements from the
Class [.] notes.
See "Risk Factors--If the ratings of the notes are lowered or withdrawn, their
market value could decrease."
S-9
<PAGE>
Risk Factors
The risk factors disclosed in this section of the prospectus supplement and
in the accompanying prospectus describe the principal risk factors of an
investment in the notes.
Only some of the assets of the issuer are available
for payments on any tranche of notes
The sole source of payment of principal of or
interest on a tranche of notes is provided by:
. the portion of the available principal amounts and
available funds allocated to the MBNAseries and
available to that tranche of notes after giving
effect to any reallocations;
. the applicable issuer accounts for that tranche of notes; and
. payments received under any applicable derivative
agreement for that tranche of notes.
As a result, you must rely only on the particular
allocated assets as security for your tranche of
notes for repayment of the principal of and interest
on your notes. You will not have recourse to any
other assets of the issuer or any other person for
payment of your notes. See "Sources of Funds to Pay
the Notes" in this prospectus supplement and "Sources
of Funds to Pay the Notes" in the accompanying
prospectus.
In addition, if a tranche of notes directs master
trust II to sell credit card receivables following an
event of default and acceleration, or on the
applicable legal maturity date, as described in
"Deposit and Application of Funds--Sale of Credit
Card Receivables" in this prospectus supplement and
"Sources of Funds to Pay the Notes--Sale of Credit
Card Receivables" in the accompanying prospectus,
that tranche of notes has recourse only to the
proceeds of that sale.
Class A and Class B notes of the MBNAseries can lose
their subordination protection under some
circumstances
Class B notes and Class C notes of the MBNAseries may
have expected principal payment dates and legal
maturity dates earlier than some or all of the notes
of the senior classes.
If notes of a subordinated class reach their expected
principal payment date at a time when they are needed
to provide the required subordination for the senior
classes of the MBNAseries, and the issuer is unable
to issue additional notes of that subordinated class
or obtain acceptable alternative forms of credit
enhancement, prefunding of the senior classes will
begin. The principal funding subaccounts for the
senior classes will be prefunded with available
principal amounts allocable to the MBNAseries and
available for that purpose in an amount necessary to
permit the payment of that subordinated class while
maintaining the required subordination for the senior
classes. See "Deposit and Application of Funds--
Targeted Deposits of Available Principal Amounts to
the Principal Funding Account."
There will be a [.] month period between the expected
principal payment date and the legal maturity date of
the subordinated notes to prefund the principal
funding subaccounts of the senior classes, if
necessary. Notes of a subordinated class which have
reached their expected principal payment
S-10
<PAGE>
date will not be repaid until the remaining
subordinated notes provide the required amount of
subordination for the senior notes. The subordinated
notes will be paid on their legal maturity date, to
the extent that any funds are available [from the
applicable Class C reserve subaccount or] from
proceeds of the sale of receivables or otherwise,
whether or not the senior classes of notes have been
fully prefunded.
If the rate of repayment of principal receivables in
master trust II were to decline during this [.] month
prefunding period, then the principal funding
subaccounts for the senior classes of notes may not
be fully prefunded before the legal maturity date of
the subordinated notes. In that event and only to the
extent not fully prefunded, the senior classes would
lose their subordination protection on the legal
maturity date of those subordinated notes unless
additional subordinated notes of that class were
issued or a sufficient amount of senior notes have
matured so that the remaining outstanding
subordinated notes provide the necessary
subordination.
Since [.] [.], the monthly rate of repayment of
principal receivables in master trust II has ranged
from a low of [.]% to a high of more than [.]%.
Principal payment rates may change due to a variety
of factors including economic, social and legal
factors, changes in the terms of credit card accounts
by MBNA or the addition of credit card accounts with
different characteristics to master trust II. There
can be no assurance that the rate of principal
repayment will remain in this range in the future.
You may receive principal payments earlier or later
than the expected principal payment date
There is no assurance that the stated principal
amount of your notes will be paid on its expected
principal date.
The effective yield on the credit card receivables
owned by master trust II could decrease due to, among
other things, a change in periodic finance charges on
the accounts, an increase in the level of
delinquencies or increased convenience use of the
card whereby cardholders pay their credit card
balance in full each month and incur no finance
charges. A significant decrease in the amount of
credit card receivables in master trust II for any
reason could result in an early redemption event and
in early payment of your notes, as well as decreased
protection to you against defaults on the accounts.
If portfolio yield calculated using a three-month
moving average decreases below the three-month moving
average base rate, an early redemption event will
occur and could result in an early payment of your
notes. See "Prospectus Supplement Summary--Early
Redemption Events." For a discussion of portfolio
yield and base rate, see "portfolio yield" and "base
rate" in the glossary.
See "Risk Factors" in the prospectus for a discussion
of other circumstances under which you may receive
principal payments earlier or later than the expected
principal payment date.
Class B notes and Class C notes bear losses before
Class A notes
Interest payments on a class of notes are not
subordinated in right of payment to interest payments
on any other class of notes. However, Class B
S-11
<PAGE>
notes of the MBNAseries are subordinated in right of
payment of principal to Class A notes, and Class C
notes of the MBNAseries are subordinated in right of
payment of principal to Class A notes and Class B
notes.
In the MBNAseries, available principal amounts that
are allocable to subordinated classes of notes may be
reallocated to pay interest on senior classes of
notes of the MBNAseries and to pay the servicing fee
to the master trust II servicer to the extent that
available funds are insufficient to make such
payments. In addition, losses on defaulted
receivables in master trust II allocated to the
MBNAseries are generally allocated first to the
subordinated classes of the MBNAseries. If these
reallocations and losses are not reimbursed from
excess available funds, the full stated principal
amount of the subordinated classes of notes may not
be repaid. See "The Notes--Stated Principal Amount,
Outstanding Dollar Principal Amount and Nominal
Liquidation Amount--Nominal Liquidation Amount" in
the prospectus and "Deposit and Application of
Funds--Allocation of Available Principal Amounts."
If there is a sale of the credit card receivables
owned by master trust II due to an insolvency of MBNA
or an event of default with respect to the MBNAseries
or a sale or repurchase of the interest represented
by the collateral certificate after a default by the
master trust II servicer, the net proceeds of the
sale allocable to principal payments with respect to
the collateral certificate will generally be used
first to pay amounts due to Class A noteholders, next
to pay amounts due to Class B noteholders, and
lastly, for amounts due to Class C noteholders. This
could cause a loss to Class C noteholders, if the
amount available to them plus the amount, if any,
available in the applicable Class C reserve account
is not enough to pay the Class C notes in full. It
could also cause a loss to Class B noteholders if the
amount available to them is not enough to pay the
Class B notes in full.
Payment of Class B notes and Class C notes may be
delayed due to the subordination provisions
For the MBNAseries, subordinated notes, except as
noted in the following paragraph, will be paid only
to the extent that they are not necessary to provide
the required subordinated amount to senior classes of
notes of the MBNAseries. In addition, if a tranche of
a senior class of notes has reached its expected
principal payment date, or has had an early
redemption event, event of default or other optional
or mandatory redemption, any available principal
amounts allocated to the MBNAseries will be applied
first to the senior class of notes.
If subordinated notes reach their expected principal
payment date, or an early redemption event, event of
default or other optional or mandatory redemption
occurs with respect to such subordinated notes, and
your notes cannot be paid because of the
subordination provisions of the indenture or the
applicable indenture supplement, prefunding of the
principal funding subaccounts for the senior notes of
the MBNAseries will begin, as described in "Deposit
and Application of Funds--Targeted Deposits of
Available Principal Amounts to the Principal Funding
Account," and no available principal amounts will be
used to make principal payments on the subordinated
classes. After that time, your notes will be paid
only if, and to the extent that:
S-12
<PAGE>
. enough notes of senior classes are repaid so that
your notes are no longer necessary to provide the
required subordination;
. new classes of subordinated notes are issued so
that your notes are no longer necessary to provide
the required subordination;
. the principal funding subaccounts for the senior
classes of notes are prefunded so that your notes
are no longer necessary to provide the required
subordination; or
. your notes reach their legal maturity date.
This may result in a delay or loss of principal
payments to holders of subordinated notes. See
"Deposit and Application of Funds--Targeted Deposits
of Available Principal Amounts to the Principal
Funding Account--Prefunding of the Principal Funding
Account for Senior Classes."
S-13
<PAGE>
Glossary
This prospectus supplement and the accompanying prospectus use defined terms.
You can find a listing of defined terms in the "Glossary of Defined Terms"
beginning on page S-34 in this prospectus supplement and beginning on page 70
in the accompanying prospectus. To assist you in understanding this prospectus
supplement, the terms that are defined in the "Glossary of Defined Terms" in
this prospectus supplement and the accompanying prospectus appear in bold
typeface the first time they appear in each of the following sections and
subsections.
The Notes
The MBNAseries notes will be issued pursuant to the indenture and an
indenture supplement. Neither the indenture nor the indenture supplement limits
the aggregate principal amount of notes that may be issued.
The MBNAseries notes will be issued in classes. Each class of notes may have
multiple tranches which may be issued at different times and have different
terms. Whenever a "class" of notes is referred to in this prospectus supplement
or the accompanying prospectus, it includes all tranches of that class of
notes, unless the context otherwise requires.
No senior class of the MBNAseries may be issued unless a sufficient amount of
subordinated notes or other acceptable credit enhancement have previously been
issued and are outstanding. See "--Required Subordinated Amount." The notes of
the MBNAseries will be included in excess available funds group A for the
purpose of sharing excess available funds.
The issuer will pay principal of and interest on the Class [.] notes solely
from the portion of available funds and available principal amounts and from
other amounts which are available to the Class [.] notes under the indenture
and the indenture supplement after giving effect to all allocations and
reallocations. If those sources are not sufficient to pay the Class [.] notes,
those noteholders will have no recourse to any other assets of the issuer or
any other person or entity for the payment of principal of or interest on those
notes.
Subordination of Principal
Principal payments on Class B notes and Class C notes of the MBNAseries are
subordinated to payments on Class A notes of the MBNAseries. Subordination of
Class B notes and Class C notes of the MBNAseries provides credit enhancement
for Class A notes of the MBNAseries.
Principal payments on Class C notes of the MBNAseries are subordinated to
payments on Class A notes and Class B notes of the MBNAseries. Subordination of
Class C notes of the MBNAseries provides credit enhancement for the Class A
notes and Class B notes of the MBNAseries.
In the MBNAseries, principal collections that are allocable to subordinated
classes of notes may be reallocated to pay interest on senior classes of notes.
In addition, charge-offs due to uncovered defaults on the receivables in master
trust II are allocated first to the subordinated classes of a series. See "The
Notes--Stated Principal Amount, Outstanding Dollar Principal Amount and Nominal
Liquidation Amount--Nominal Liquidation Amount" and "Master Trust II--Defaulted
Receivables; Rebates and Fraudulent Charges" in the prospectus.
In the MBNAseries, payment of principal may be made on a subordinated class
of notes before payment in full of each senior class of notes but only under
the following circumstances:
. If after giving effect to the proposed principal payment there is still a
sufficient principal amount of subordinated notes to support the
outstanding senior notes of that series. See "Deposit and Application
S-14
<PAGE>
of Funds--Limit on Repayment of Notes." For example, if a tranche of Class
A notes has matured and been repaid, this generally means that at least
some Class B notes and Class C notes may be repaid, even if other tranches
of Class A notes are outstanding and require reallocation of available
principal amounts from subordinated classes.
. Subordinated tranches of notes may be paid before senior classes of notes
if the principal funding subaccounts for the senior classes of notes have
been prefunded as described in "Deposit and Application of Funds--
Targeted Deposits of Principal Collections to the Principal Funding
Account--Prefunding of the Principal Funding Account for Senior Classes,"
and Class C notes may be paid with funds available from the applicable
Class C reserve subaccount. See "Deposit and Application of Funds--
Withdrawals from the Class C Reserve Account."
The payment of accrued interest on a tranche or class of notes from
available funds is not senior to or subordinated to payment of interest on any
other tranche or class of notes. However, in the case of a discount note, the
accreted principal of that note corresponding to capitalized interest will be
senior or subordinated to the same extent that principal is senior or
subordinated.
Issuances of New Series, Classes and Tranches of Notes
Conditions to Issuance
The issuer may issue new series, classes and tranches of notes, so long as
the conditions of issuance listed in "The Notes--Issuances of New Series,
Classes or Tranches of Notes" in the prospectus are satisfied.
Required Subordination Protection
No Class A notes or Class B notes may be issued unless the required
subordinated amount of subordinated classes for that class of notes is
available at the time of its issuance, as described in the following two
paragraphs.
In order to issue Class A notes, the issuer must calculate the available
amount of Class B notes and Class C notes. The issuer will first calculate the
subordinated amount of Class B notes required for Class A notes. This is done
by computing the following:
. the aggregate nominal liquidation amount of all outstanding Class B notes
on that date, after giving effect to issuances, deposits, allocations or
payments with respect to Class B notes to be made on that date;
. minus, the aggregate amount of the Class A required subordinated amount
of Class B notes for all other Class A notes which are outstanding on
that date after giving effect to any issuances or repayments in full of
any Class A notes to be made on that date; and
. plus, the amount of usage by outstanding Class A notes of Class B
required subordinated amount, as described in "Deposit and Application of
Funds--Limit on Allocation of Available Principal Amounts of Tranches of
Notes."
The calculation in the prior paragraph will also be made in the same manner
for calculating the subordinated amount of Class C notes required for Class A
notes and the subordinated amount of Class C notes required for Class B notes.
Waiver of Conditions
If the issuer obtains confirmation from each rating agency that has rated
any outstanding notes that the new series, class or tranche of notes to be
issued will not cause a reduction or withdrawal of the ratings of any
outstanding notes rated by that rating agency then the following condition to
issuance may be waived:
S-15
<PAGE>
. at the time of the new issuance, the specific ratings requirement
described in the "Prospectus Supplement Summary--Ratings" is satisfied.
The issuer and the indenture trustee are not required to obtain the consent
of any noteholder of any outstanding series, class or tranche to issue any
additional notes.
Required Subordinated Amount
The required subordinated amount of a tranche of a senior class of notes of
the MBNAseries means the amount of a subordinated class that is required to be
outstanding and available on the date when a tranche of a senior class of notes
is issued. It is also used to determine whether a subordinated tranche of notes
of the MBNAseries may be repaid before the legal maturity date while senior
classes of notes are outstanding.
[Currently for tranches of Class A notes rated [AAA or Aaa] by the rating
agencies, the required subordinated amount expressed as a percentage of the
adjusted outstanding dollar principal amount of such tranche of Class A notes
is [.]%. This required subordinated amount will consist of a separate required
subordinated amount of Class B notes, which is [.]%, and a required
subordinated amount of Class C notes, which is [.]%, each expressed as a
percentage of the adjusted outstanding dollar principal amount of such tranche
of Class A notes. However, there may be certain tranches of Class A notes which
have a different total required subordinated amount or which attain their total
required subordinated amount only through the Class C notes.]
[Currently for tranches of Class B notes rated [A or A2 or higher] by the
rating agencies, the required subordinated amount of Class C notes expressed as
a percentage of the adjusted outstanding dollar principal amount of such
tranche of Class B notes is [.]%. However, there may be certain tranches of
Class B notes which have a different required subordinated amount.]
Different tranches of senior notes may have different total required
subordinated amounts and different class-specific required subordinated
amounts.
The issuer may change the required subordinated amount for any tranche of
notes of the MBNAseries, or the method of computing the required subordinated
amount, at any time without the consent of any noteholders so long as the
issuer has received:
. confirmation from the rating agencies that have rated any outstanding
notes that the change will not result in the reduction, qualification or
withdrawal of the then current rating of any outstanding notes in the
MBNAseries; and
. an opinion of counsel that for federal income tax purposes (1) the change
will not adversely affect the characterization of any outstanding series,
class or tranche of notes of the issuer as debt, (2) the change will not
cause a taxable event to holders of any outstanding notes of the issuer,
and (3) following the change, the issuer will not be an association, or
publicly traded partnership, taxable as a corporation.
Sources of Funds to Pay the Notes
The Collateral Certificate
The primary source of funds for the payment of principal of and interest on
the notes is the collateral certificate issued by master trust II to the
issuer. For a description of the collateral certificate, master trust II and
its assets, see "Master Trust II" and "Sources of Funds to Pay the Notes--The
Collateral Certificate" in the prospectus.
The Issuer Accounts
The issuer has established a principal funding account and interest funding
account for the benefit of the MBNAseries, which will have subaccounts for each
tranche of notes of the MBNAseries, and a Class C reserve account, which will
have subaccounts for each tranche of Class C notes of the MBNAseries.
S-16
<PAGE>
Each month, distributions on the collateral certificate will be deposited
into the collection account, and then allocated to each series of notes
(including the MBNAseries) as described in the accompanying prospectus, and
then allocated to the principal funding account, the interest funding account,
the Class C reserve account, any supplemental account, payments under any
applicable derivative agreements and the other purposes as specified in
"Deposit and Application of Funds."
Funds on deposit in the principal funding account and the interest funding
account will be used to make payments of principal of and interest on the
MBNAseries notes when such payments are due. Payments of interest and principal
will be due either in the month when the funds are deposited into the accounts,
or in later months--for example, if principal must be accumulated for payment
at a later date, or if interest is payable quarterly, semiannually or at
another interval less frequently than monthly.
If the issuer anticipates that available principal amounts for a particular
month will not be enough to pay the stated principal amount of a note that has
an expected principal payment date in the following month, the issuer may begin
to apply available principal amounts in months before the expected principal
payment date and deposit those funds into the principal funding subaccount
established for that tranche to be held until the expected principal payment
date of that note. However, since funds in the principal funding subaccount for
tranches of subordinated notes will not be available for credit enhancement for
any senior classes of notes, available principal amounts will not be deposited
into the principal funding subaccount for a tranche of subordinated notes if
such deposit would reduce the available subordination below the required
subordinated amount. If the earnings on funds in the principal funding
subaccount are less than the interest payable on the portion of principal in
the principal funding subaccount for the applicable tranche of notes--after
giving effect to the application of available funds--additional funds will be
deposited in the interest funding subaccount as described under "Deposit and
Application of Funds--Principal Funding Subaccount Earnings Treated as
Available Funds; Principal Funding Subaccount Earnings Shortfall" in this
prospectus supplement and "Master Trust II--Application of Collections" in the
prospectus.
If interest on a MBNAseries note is not scheduled to be paid every month--for
example, if interest on that note is payable quarterly, semiannually or at
another interval less frequently than monthly--the issuer will deposit
available funds into the interest funding subaccount for that note to be held
until the interest is due. See "Deposit and Application of Funds--Targeted
Deposits of Available Funds to the Interest Funding Account."
Limited Recourse to the Issuer; Security for the Notes
The MBNAseries and the other series of notes are secured by a shared security
interest in the collateral certificate and the collection account of the
issuer, but each series of notes (including the MBNAseries) is entitled to the
benefits of only that portion of those assets allocable to it under the
indenture and the related indenture supplement. The collateral certificate is
allocated collections of finance charge receivables, collections of principal
receivables and its share of losses on receivables in master trust II based on
the investor percentage. Only a portion of the collections allocated to the
collateral certificate are available to the MBNAseries. Similarly, the
MBNAseries is entitled only to its allocable share of available funds
(including investment earnings on funds held in the applicable issuer
accounts), available principal amounts, amounts on deposit in the applicable
issuer accounts, any payments received from derivative counterparties (to the
extent not included in available funds) and proceeds of the sale of credit card
receivables by master trust II, which provide the source for payment of
interest on and principal of the notes. Noteholders will have no recourse to
any other assets of the issuer or any other person or entity for the payment of
principal of or interest on the notes.
Each tranche of notes of the MBNAseries is entitled to the benefits of only
that portion of the issuer's assets allocated to that tranche under the related
indenture supplement. Each tranche of notes is also secured by a security
interest in the applicable principal funding subaccount, the applicable
interest funding subaccount, in the case of a tranche of Class C notes, the
applicable Class C reserve subaccount and any applicable supplemental account,
and by a security interest in any applicable derivative agreement.
S-17
<PAGE>
Deposit and Application of Funds
The indenture specifies how available funds (primarily consisting of
collections of finance charge receivables allocated and paid to the collateral
certificateholder) and available principal amounts (primarily consisting of
collections of principal receivables allocated and paid to the collateral
certificateholder) will be allocated among the multiple series of notes secured
by the collateral certificate. The related indenture supplement specifies how
available funds (including any amounts to be treated as available funds for the
MBNAseries), available principal amounts (including any amounts to be treated
as available principal amounts for the MBNAseries), collections of receivables
in defaulted accounts and the master trust II servicing fee, in each case
allocated to the MBNAseries, will be deposited into the issuer accounts
established for each class or tranche of notes of the MBNAseries to provide for
the payment of principal and interest on those notes as the payments become
due. Following are summaries of those provisions.
Allocation of Available Funds
On each transfer date, the indenture trustee will apply available funds
allocated to the MBNAseries as follows:
. first, to make the targeted deposits to the interest funding account to
fund the payment of interest on the notes;
. second, to pay the MBNAseries's share of the servicing fee, plus any
previously due and unpaid servicing fee allocable to the MBNAseries, to
the master trust II servicer;
. third, to be treated as available principal amounts for the MBNAseries in
an amount equal to the investor default amount, if any, allocable to the
MBNAseries for the preceding monthly period;
. fourth, to be treated as available principal amounts for the MBNAseries
in an amount equal to the nominal liquidation amount deficits, if any, of
the notes in the MBNAseries;
. fifth, to make the targeted deposit to the Class C reserve account, if
any;
. sixth, to be treated as shared excess available funds; and
. seventh, to the issuer.
Allocation of Available Principal Amounts
Each month, the indenture trustee will apply available principal amounts
allocated to the MBNAseries as follows:
. first, if available funds are not enough to make the full targeted
deposit into the interest funding subaccount for any Class A notes or
Class B notes, or enough to pay the servicing fee allocable to the
MBNAseries, plus any previously due and unpaid servicing fee allocable to
the MBNAseries, to the master trust II servicer, available principal
amounts allocable to the MBNAseries will be applied, to the extent
available, in the following amounts and order, subject to the limitations
described under "--Limit on Reallocations of Available Principal Amounts
from Subordinated Classes Taken to Benefit Senior Classes" below:
--first, an amount equal to the deficiency in the targeted amount to be
deposited into the interest funding subaccount of each tranche of Class
A notes, will be allocated to the interest funding subaccounts of Class
A notes pro rata based on the amount of such deficiencies;
--second, after the allocation described in item (1) above, an amount
equal to the deficiency in the targeted amount to be deposited into the
interest funding subaccount of each tranche of Class B notes, will be
allocated to the interest funding subaccounts of Class B notes pro rata
based on the amount of such deficiencies; and
--third, after the allocation described in items (1) and (2) above, an
amount equal to the deficiency in the servicing fee allocable to the
MBNAseries will be allocated and paid to the master trust II servicer;
S-18
<PAGE>
. second, if available funds plus the amount described above are not enough
to make the full targeted deposit into the interest funding subaccount
for any Class A notes or enough to pay the servicing fee allocable to the
MBNAseries, plus any previously due and unpaid servicing fee allocable to
the MBNAseries, to the master trust II servicer, available principal
amounts allocable to the MBNAseries will be applied, to the extent
available, in the following amounts and order, subject to the limitations
described under "--Limit on Reallocations of Available Principal Amounts
from Subordinated Classes Taken to Benefit Senior Classes" below:
--first, an amount equal to the remaining deficiency in the targeted
amount to be deposited into the interest funding subaccount of each
tranche of Class A notes will be allocated to the interest funding
subaccounts of Class A notes pro rata based on the amount of such
deficiencies; and
--second, after the allocation described in item (1) above, an amount
equal to the remaining deficiency in the servicing fee allocable to the
MBNAseries will be allocated and paid to the master trust II servicer;
. third, to make the targeted deposits to the principal funding account as
described below under "--Targeted Deposits of Available Principal Amounts
to the Principal Funding Account;" and
. fourth, to the issuer, to be reinvested in the investor interest of the
collateral certificate.
If a tranche of notes directs master trust II to sell credit card receivables
as described in "--Sale of Credit Card Receivables," the proceeds of that sale
will be paid to the noteholders of that tranche and such noteholders will no
longer receive any available funds or available principal amounts.
The amount of available principal amounts that may be allocated to pay
interest and the servicing fee is limited as described below under "--Limit on
Reallocations of Available Principal Amounts from Subordinated Classes Taken to
Benefit Senior Classes."
The investor interest of the collateral certificate is the sum of the nominal
liquidation amounts of the notes and, therefore, will be reduced by the amount
of available principal amounts used to make deposits into the interest funding
account, payments to the master trust II servicer and deposits into the
principal funding account. If the investor interest of the collateral
certificate is reduced because available principal amounts have been used to
make deposits into the interest funding account or payments to the master trust
II servicer, the amount of available funds and available principal amounts
allocated to the collateral certificate will be reduced in later months unless
the reduction in the investor interest is reimbursed from amounts described in
the fourth item in "--Allocation of Available Funds."
Targeted Deposits of Available Funds to the Interest Funding Account
The aggregate deposit targeted to be made each month to the interest funding
account will be equal to the sum of the interest funding account deposits
targeted to be made for each tranche of notes set forth below. The deposit
targeted for any month will also include any shortfall in the targeted deposit
from any prior month.
. Interest Payments. The deposit targeted for any tranche of notes (other
than any tranche of foreign currency notes that has a performing
derivative agreement) for any month will be equal to the amount of
interest accrued on the outstanding dollar principal amount of that
tranche during the period from the prior monthly interest accrual date--
or the date of issuance of that tranche for the determination of the
first monthly interest accrual date--to the first monthly interest
accrual date after the end of the month.
. Amounts Owed to Derivative Counterparties. If a tranche of notes has a
performing derivative agreement for interest that provides for monthly
payments to the applicable derivative counterparty, in addition to any
applicable stated interest as determined under the item above, the
deposit targeted for that tranche of notes is equal to the amount
required to be paid to the applicable derivative counterparty on the
payment date following the end of that month.
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If a tranche of notes has a performing derivative agreement for interest
that provides for payments less frequently than monthly to the applicable
derivative counterparty, in addition to any applicable stated interest as
determined under the item above, the deposit targeted for that tranche of
notes for each month is equal to the amount required to be paid to the
applicable derivative counterparty on the next payment date following the
end of that month taking into account the applicable interest rate and
day count convention, but allocated pro rata to that month as provided in
the derivative agreement.
. Discount Notes. In the case of a tranche of discount notes, the deposit
targeted for that tranche of notes for any month, in addition to any
applicable stated interest as determined under the two items above, is
the amount of accretion of principal of that tranche of notes from the
prior monthly principal accrual date--or in the case of the first monthly
principal accrual date, from the date of issuance of that tranche--to the
first monthly principal accrual date after the end of that month.
. Specified Deposits. If any tranche of notes provides for deposits in
addition to or different from the deposits described above to be made to
the interest funding subaccount for that tranche, the deposits targeted
for that tranche each month are the specified amounts.
. Additional Interest. The deposit targeted for any tranche of notes that
has accrued and overdue interest for any month will include the interest
accrued on that overdue interest. Interest on overdue interest will be
computed from and including the interest payment date in that month to
but excluding the interest payment date next following that month, at the
rate of interest applicable to principal of that tranche.
Each deposit to the interest funding account will be made on the applicable
transfer date.
A tranche of notes may be entitled to more than one of the preceding
deposits, plus deposits from other sources, described under "--Principal
Funding Subaccount Earnings Treated as Available Funds; Principal Funding
Subaccount Earnings Shortfall."
A class or tranche of notes that has directed master trust II to sell credit
card receivables as described in "--Sale of Credit Card Receivables" will not
be entitled to receive any of the preceding deposits to be made to the interest
funding subaccount from available funds.
Payments Received from Derivative Counterparties for Interest
Payments received under derivative agreements for interest on notes payable
in U.S. dollars will be treated as available funds. Payments received under
derivative agreements for interest on foreign currency notes will be made
directly to the applicable paying agent for payment to the holders of those
notes.
Principal Funding Subaccount Earnings Treated as Available Funds; Principal
Funding Subaccount Earnings Shortfall
Investment earnings on amounts on deposit in the principal funding subaccount
for tranches in the MBNAseries will be treated as available funds for the
MBNAseries.
The issuer will notify master trust II from time to time of the aggregate
amount on deposit in the principal funding account. Whenever there is any
amount on deposit in any principal funding subaccount, master trust II will
designate an equal amount of the seller interest, and the collections of
finance charge receivables allocable to the designated portion of the seller
interest will be applied as follows: On each transfer date, the issuer will
calculate the targeted amount of principal funding subaccount earnings for each
tranche of notes, which will be equal to the amount that the funds on deposit
in each principal funding subaccount would earn at the interest rate payable by
the issuer--taking into account payments and receipts under applicable
derivative agreements--on the related tranche of notes. As a general rule, if
the amount actually earned on the funds on deposit is less than the targeted
amount of earnings, then the shortfall will be made up from the collections of
finance charge receivables allocated to the corresponding designated portion of
the seller interest. After a sale of credit card receivables as described in
"--Sale of Credit Card Receivables," the related tranche of notes
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will not be entitled to any collections of finance charge receivables from the
designated portion of the seller interest if there is an earnings shortfall in
its principal funding subaccount. See "Master Trust II--Application of
Collections" in the prospectus.
[Deposits of Withdrawals from the Class C Reserve Account to the Interest
Funding Account
Withdrawals made from any Class C reserve subaccount will be deposited into
the applicable interest funding subaccount to the extent described under "--
Withdrawals from the Class C Reserve Account."]
Allocation to Interest Funding Subaccounts
The aggregate amount on deposit in the interest funding account will be
allocated, and a portion deposited in the interest funding subaccount
established for each tranche of notes, as follows:
. Available amounts are at least equal to targeted amounts. If the
aggregate amount of available funds allocable to the MBNAseries is at
least equal to the sum of the deposits of available funds targeted by
each tranche of notes, then that targeted amount will be deposited in the
interest funding subaccount established for each tranche.
. Available amounts are less than targeted amounts. If the aggregate amount
of available funds allocable to the MBNAseries is less than the sum of
the deposits of available funds targeted by each tranche of notes, then
the amount available to be deposited in the interest funding account will
be allocated to each tranche of notes pro rata based on the ratio of:
--the aggregate deposit of available funds targeted with respect to
that tranche of notes, to
--the aggregate deposit of available funds targeted with respect to all
tranches of notes in the MBNAseries.
The available principal amounts deposited into the interest funding account
will be allocated to each tranche of Class A notes and then to each tranche of
Class B notes based on the amount targeted for deposit for that tranche.
However, these deposits are limited to the extent described under "--Limit on
Reallocations of Available Principal Amounts from Subordinated Classes Taken to
Benefit Senior Classes."
Withdrawals from Interest Funding Subaccounts
After giving effect to all deposits of funds to the interest funding account
in a month, the following withdrawals from the applicable interest funding
subaccount may be made, to the extent funds are available, in the applicable
interest funding subaccount. A tranche of notes may be entitled to more than
one of the following withdrawals in a particular month:
. Withdrawals for U.S. Dollar Notes. On each applicable interest payment
date for each tranche of U.S. dollar notes, an amount equal to interest
due on the applicable tranche of notes on the applicable interest payment
date (including any overdue interest payments and additional interest on
overdue interest payments) will be withdrawn from that interest funding
subaccount and paid to the applicable paying agent.
. Withdrawal for Foreign Currency Notes with a Non-Performing Derivative
Agreement. On each applicable interest payment date with respect to a
tranche of foreign currency notes that has a non-performing derivative
agreement for interest, an amount equal to the lesser of (i) the amount
of U.S. dollars necessary to be converted at the applicable spot exchange
rate to pay the foreign currency interest due (including any overdue and
additional interest with respect to prior interest payment dates) on that
tranche of notes on such interest payment date and (ii) the amount that
would have been payable to the applicable derivative counterparty with
respect to that interest payment date if the applicable derivative
agreement had been performing (including any overdue payments and any
additional interest on overdue payments) will be withdrawn from that
interest funding subaccount and converted to the applicable foreign
currency at the spot exchange rate and remitted to the applicable paying
agent.
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. Withdrawals for Discount Notes. On each applicable principal payment
date, with respect to each tranche of discount notes, an amount equal to
the amount of the accretion of principal of that tranche of notes from
the prior principal payment date, or in the case of the first principal
payment date, the date of issuance of that tranche, to the applicable
principal payment date will be withdrawn from that interest funding
subaccount and invested in the collateral certificate.
. Withdrawals for Payments to Derivative Counterparties. On each date on
which a payment is required under the applicable derivative agreement,
with respect to any tranche of notes that has a performing derivative
agreement for interest, an amount equal to the amount of the payment to
be made under the applicable derivative agreement (including, if
applicable, any overdue payment and any additional interest on overdue
payments) will be withdrawn from that interest funding subaccount and
paid to the applicable derivative counterparty.
If the aggregate amount available for withdrawal from an interest funding
subaccount is less than all withdrawals required to be made from that
subaccount in a month after giving effect to all deposits, then the amounts on
deposit in that interest funding subaccount will be withdrawn and, if payable
to more than one person, applied pro rata based on the amounts of the
withdrawals required to be made. After payment in full of any tranche of notes,
any amount remaining on deposit in the applicable interest funding subaccount
will be paid to the issuer.
Targeted Deposits of Available Principal Amounts to the Principal Funding
Account
The aggregate amount targeted to be deposited into the principal funding
account in any month will be the sum of the following amounts. A tranche of
notes may be entitled to more than one of the following deposits in a
particular month:
. Principal Payment Date. With respect to the month before any principal
payment date of a tranche of notes, the deposit targeted for that tranche
of notes with respect to that month is equal to the aggregate nominal
liquidation amount of that tranche of notes.
. Budgeted Deposits. Each month beginning with the twelfth month before the
expected principal payment date of a tranche of notes, the deposit
targeted to be made into the principal funding subaccount for a tranche
of notes will be one-twelfth of the projected outstanding dollar
principal amount of a tranche of notes as of its expected principal
payment date, after deducting any amounts already on deposit in the
applicable principal funding subaccount.
The issuer may postpone the date of the targeted deposits under the
previous sentence. If the issuer and the master trust II servicer
determine that less than twelve months would be required to accumulate
available principal amounts necessary to pay a tranche of notes on its
expected principal payment date, using conservative historical
information about payment rates of principal receivables under master
trust II, and after taking into account all of the other expected
payments of principal of master trust II investor certificates and notes
to be made in the next twelve months, then the start of the targeted
deposits may be postponed each month by one month, with proportionately
larger targeted deposits for each month of postponement.
. Prefunding of the Principal Funding Account for Senior Classes. If the
issuer determines that any expected principal payment date, early
redemption event, event of default or other date on which principal is
payable because of a mandatory or optional redemption with respect to any
tranche of Class C notes will occur at a time when the payment of all or
part of that tranche of Class C notes would be prohibited because it
would cause a deficiency in the required subordinated amount of the Class
A notes or Class B notes, the targeted deposit amount for the Class A
notes and Class B notes will be an amount equal to the portion of the
outstanding dollar principal amount of the Class A notes and Class B
notes that would have to cease to be outstanding in order to permit the
payment of that tranche of Class C notes.
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If the issuer determines that any expected principal payment date, early
redemption event, event of default or other date on which principal is
payable because of a mandatory or optional redemption with respect to any
Class B notes will occur at a time when the payment of all or part of
that tranche of Class B notes would be prohibited because it would cause
a deficiency in the required subordinated amount of the Class A notes,
the targeted deposit amount for the Class A notes will be an amount equal
to the portion of the outstanding dollar principal amount of the Class A
notes that would have to cease to be outstanding in order to permit the
payment of that tranche of Class B notes.
Prefunding of the principal funding subaccount for the senior tranches of
the MBNAseries will continue until:
--enough notes of senior tranches are repaid so that the subordinated
notes that are payable are no longer necessary to provide the
required subordinated amount of the outstanding senior notes;
--new tranches of subordinated notes are issued so that the
subordinated notes that are payable are no longer necessary to
provide the required subordinated amount of the outstanding senior
notes; or
--the principal funding subaccounts for the senior tranches of notes
are prefunded so that the subordinated notes that are payable are no
longer necessary to provide the required subordinated amount of the
outstanding senior notes.
If any tranche of senior notes becomes payable as a result of an early
redemption event, event of default or other optional or mandatory
redemption, or upon reaching its expected principal payment date, any
prefunded amounts on deposit in its principal funding subaccount will be
paid to noteholders of that tranche and deposits to pay the notes will
continue as necessary to pay that tranche.
When the prefunded amounts are no longer necessary, they will be
withdrawn from the principal funding account and paid to master trust II
and the nominal liquidation amount of the prefunded tranches will be
increased by such amounts.
. Event of Default, Early Redemption Event or Other Optional or Mandatory
Redemption. If any tranche of notes has been accelerated after the
occurrence of an event of default during that month, or if any tranche of
notes redeemed following an early redemption event or other optional or
mandatory redemption, the deposit targeted for that tranche of notes with
respect to that month is equal to the nominal liquidation amount of that
tranche of notes.
Payments Received from Derivative Counterparties for Principal
Payments received under derivative agreements for principal of foreign
currency notes will be made directly to the applicable paying agent for payment
to the holders of the applicable tranche of notes.
[Deposits of Withdrawals from the Class C Reserve Account to the Principal
Funding Account
Withdrawals from any Class C reserve subaccount will be deposited into the
applicable principal funding subaccount to the extent described under "--
Withdrawals from the Class C Reserve Account."]
Allocation to Principal Funding Subaccounts
Available principal amounts allocated to the MBNAseries each month, after any
reallocation to cover available funds shortfalls, if any, will be allocated,
and a portion deposited in the principal funding subaccount established for
each tranche of notes, as follows:
. Available Principal Amounts Equal Targeted Amounts. If remaining
available principal amounts are equal to the sum of the deposits targeted
by each tranche of notes, then the applicable targeted amount is
deposited in the principal funding subaccount established for each
tranche.
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<PAGE>
. Available Principal Amounts Are Less Than Targeted Amounts. If remaining
available principal amounts are less than the sum of the deposits
targeted by each tranche of notes, then available principal amounts will
be deposited in the principal funding subaccounts for each tranche in the
following priority:
--first, the amount available will be allocated to the Class A notes pro
rata based on the ratio of the amount targeted to be deposited into the
principal funding subaccount for the applicable tranche of Class A
notes to the aggregate amount targeted to be deposited into the
principal funding subaccount for all tranches of Class A notes;
--second, the amount available after the application above will be
allocated to the Class B notes, pro rata based on the ratio of the
amount targeted to be deposited into the principal funding subaccount
for the applicable tranche of Class B notes to the aggregate amount
targeted to be deposited into the principal funding subaccount for all
tranches of Class B notes; and
--third, the amount available after the application above will be
allocated to the Class C notes, pro rata based on the ratio of the
amount targeted to be deposited into the principal funding subaccount
for the applicable tranche of Class C notes to the aggregate amount
targeted to be deposited into the principal funding subaccount for all
tranches of Class C notes.
Withdrawals from Principal Funding Account
After giving effect to all deposits of funds to the principal funding account
in a month, the following withdrawals from the applicable principal funding
subaccount will be made to the extent funds are available in the applicable
principal funding subaccount. A tranche of notes may be entitled to more than
one of the following withdrawals in a particular month:
. Withdrawals for Dollar Notes with no Derivative Agreement for
Principal. On each applicable principal payment date, with respect to
each tranche of U.S. dollar notes that has no derivative agreement for
principal, an amount equal to the principal due on the applicable tranche
of notes on the applicable principal payment date will be withdrawn from
the applicable principal funding subaccount and paid to the applicable
paying agent.
. Withdrawals for Notes with a Performing Derivative Agreement for
Principal. On each date on which a payment is required under the
applicable derivative agreement, with respect to any tranche of notes
that has a performing derivative agreement for principal, an amount equal
to the amount of the payment to be made under the applicable derivative
agreement will be withdrawn from the applicable principal funding
subaccount and paid to the applicable derivative counterparty. The issuer
will direct the applicable derivative counterparty to remit its payments
under the applicable derivative agreement to the applicable paying agent.
. Withdrawals for Foreign Currency Notes with Non-Performing Derivative
Agreements for Principal. On each principal payment date with respect to
a tranche of foreign currency notes that has a non-performing derivative
agreement for principal, an amount equal to the lesser of (i) the amount
of U.S. dollars necessary to be converted at the applicable exchange rate
to pay the foreign currency principal due on that tranche of notes on the
applicable principal payment date and (ii) the amount that would have
been payable to the applicable derivative counterparty with respect to
that principal payment date if the applicable derivative agreement had
been performing (including any overdue payments) will be withdrawn from
the applicable principal funding subaccount and converted to the
applicable foreign currency at the prevailing spot exchange rate and paid
to the applicable paying agent. Any excess dollar amount will be retained
on deposit in the applicable principal funding subaccount to be applied
to make principal payments on later principal payment dates.
. Withdrawal of Prefunded Amount. If prefunding of the principal funding
subaccounts for senior classes of notes is no longer necessary as a
result of payment of senior notes or issuance of additional subordinated
notes, as described under "--Targeted Deposits of Principal Allocations
to the Principal
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Funding Account--Prefunding of the Principal Funding Account for Senior
Classes," the prefunded amounts will be withdrawn from the principal
funding account and paid to master trust II to increase the investor
interest of the collateral certificate. Such withdrawals will be allocated
among the principal funding subaccounts of the tranches of notes of that
class so that all of those principal funding subaccounts will have an
amount on deposit equal to the amount then targeted to be on deposit in
those principal funding subaccounts.
Upon payment in full of any tranche of notes, any remaining amount on deposit
in the applicable principal funding subaccount will be paid to the issuer. If
the aggregate amount available for withdrawal from a principal funding
subaccount for any tranche of notes is less than all withdrawals required to be
made from that principal funding subaccount for that tranche in a month, then
the amounts on deposit will be withdrawn and applied pro rata based on the
amounts of the withdrawals required to be made.
Limit on Reallocations of Available Principal Amounts from Subordinated Classes
Taken to Benefit Senior Classes
The amount of available principal amounts allocable to the MBNAseries that
may be reallocated from subordinated classes of notes to senior classes or to
pay the portion of the master trust II servicing fee allocable to the
MBNAseries is limited as follows:
Limit on Reallocations to a Tranche of Class A Notes from Class C Notes.
When reallocation of available principal amounts reduces the nominal
liquidation amount of Class C notes, such a reallocation from Class C notes may
be used to make deposits into the interest funding subaccount for a tranche of
Class A notes or to fund deficiencies in payments to the master trust II
servicer allocable to the MBNAseries only to the extent that the Class A usage
of the Class C required subordinated amount (determined after giving effect to
any charge-offs for uncovered defaults and any reallocations of available
principal amounts on such date) is not greater than the required subordinated
amount of Class C notes for that tranche of Class A notes. For this purpose,
Class A usage of the Class C required subordinate amount is equal to the sum of
the following amounts:
(1) the cumulative sum of all charge-offs for uncovered defaults
initially allocated to that tranche of Class A Notes and then reallocated
to Class C Notes; plus
(2) the cumulative sum, computed on each date while that tranche of Class
A notes is outstanding and there are investor charge-offs allocated to
Class C notes which results in a reduction of the nominal liquidation
amount of Class C notes on that date, of an amount equal to the product of:
. a fraction, the numerator of which is the Class A required
subordinated amount of Class C notes for that tranche of Class A
Notes and the denominator of which is the aggregate outstanding
dollar principal amount of all Class C notes, times
. the aggregate amount of investor charge-offs allocated to Class C
notes which results in a reduction of the nominal liquidation amount
of Class C notes on that date; plus
(3) the cumulative sum, computed on each date while that tranche of Class
A notes is outstanding and there are investor charge-offs allocated to
Class B notes which is then reallocated to Class C notes and which results
in a reduction of the nominal liquidation amount of Class C notes on that
date, of an amount equal to the product of:
. a fraction, the numerator of which is the Class A required
subordinated amount of Class C notes for that tranche of Class A
notes and the denominator of which is the aggregate outstanding
dollar principal amount of all Class C notes, times
. the aggregate amount of investor charge-offs initially allocated to
Class B notes which are reallocated to Class C notes and results in a
reduction of the nominal liquidation amount of Class C notes on that
date; plus
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<PAGE>
(4) the cumulative sum of all available principal amounts reallocated to
the interest funding subaccount for that tranche of Class A notes that
resulted in a reduction of the nominal liquidation amount of Class C notes;
plus
(5) the cumulative sum, computed on each date while that tranche of Class
A notes is outstanding and available principal amounts are reallocated to
the interest funding subaccount for Class B notes, and that reallocation
reduces the nominal liquidation amount of Class C notes, of an amount equal
to the product of:
. a fraction, the numerator of which is the Class A required
subordinated amount of Class B notes for that tranche of Class A
notes and the denominator of which is the aggregate outstanding
dollar principal amount of all Class B notes, times
. the amount of available principal amounts reallocated to the interest
funding subaccount for any tranche of Class B notes that reduces the
nominal liquidation amount of Class C notes; plus
(6) the cumulative sum, computed on each date while that tranche of Class
A notes is outstanding and available principal amounts are reallocated to
pay any amount to the master trust II servicer which resulted in a
reduction of the nominal liquidation amount of Class C notes on that date,
of an amount equal to the product of:
. a fraction, the numerator of which is the Class A required
subordinated amount of Class C Notes for that tranche of Class A
notes and the denominator of which is the aggregate outstanding
dollar principal amount of all Class C notes; times
. the aggregate amount of available principal amounts reallocated to
pay any amount to the servicer which resulted in a reduction of the
nominal liquidation amount of Class C notes on that date; minus
(7) the cumulative sum (which will not exceed the sum of items (1)
through (6) above), computed on each transfer date while that tranche of
Class A notes is outstanding, of an amount equal to the product of:
. a fraction, the numerator of which is the Class A usage of Class C
required subordinated amount (prior to giving effect to any
reimbursement on that day) for that tranche of Class A notes and the
denominator of which is the aggregate Class A usage of Class C
required subordinated amount (prior to giving effect to any
reimbursement on that day) of all Class A notes, times
. the aggregate amount of all available funds remaining after making
the targeted deposits to the interest funding account to fund
payments for interest on the notes, payments to the master trust II
servicer and applications to cover defaults of receivables in master
trust II.
Limit on Reallocations to a Tranche of Class A Notes from Class B Notes.
When reallocation of available principal amounts reduces the nominal
liquidation amount of Class B notes, such a reallocation from Class B notes may
be used to make deposits into the interest funding subaccount for a tranche of
Class A notes or to fund deficiencies in payments to the master trust II
servicer only to the extent that the Class A usage of the Class B required
subordinated amount (determined after giving effect to any charge-offs of
uncovered defaults in master trust II and reallocations of available principal
amounts on such date) is not greater than the Class A required subordinated
amount of Class B notes for that tranche of Class A notes. For this purpose,
Class A usage of the Class B required subordinated amount is equal to the sum
of:
(1) the cumulative sum of all charge-offs for uncovered defaults
initially allocated to that tranche of Class A notes and then reallocated
to Class B notes; plus
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(2) the cumulative sum, computed on each date while that tranche of Class
A Notes is outstanding and there is an investor charge-off allocated to any
tranche of Class B notes which is not reallocated to Class C notes and
which resulted in a reduction of the nominal liquidation amount of a
tranche of Class B notes on that date, of an amount equal to the product
of:
. a fraction, the numerator of which is the Class A required
subordinated amount of Class B Notes for that tranche of Class A
notes and the denominator of which is the aggregate outstanding
dollar principal amount of all Class B notes, times
. the aggregate amount of investor charge-offs allocated to Class B
notes which are not reallocated to Class C notes and which resulted
in a reduction of the nominal liquidation amount of Class B notes on
that date; plus
(3) the cumulative sum of all available principal amounts reallocated to
the interest funding subaccount for that tranche of Class A notes that
resulted in a reduction of the nominal liquidation amount of Class B notes;
plus
(4) the cumulative sum, computed on each date while that tranche of Class
A notes is outstanding and available principal amounts are reallocated to
pay any amount to the master trust II servicer which resulted in a
reduction of the nominal liquidation amount of Class B notes on that date,
of an amount equal to the product of:
. a fraction, the numerator of which is the Class A required
subordinated amount of Class B notes for that tranche of Class A
notes and the denominator of which is the aggregate outstanding
dollar principal amount of all Class B notes, times
. the aggregate amount of available principal amounts reallocated to
pay any amount to the master trust II servicer which resulted in a
reduction of the nominal liquidation amount of Class B notes on that
date; minus
(5) the cumulative sum (which will not exceed the sum of items (1)
through (4) above), computed on each transfer date while that tranche of
Class A notes is outstanding, of an amount equal to the product of:
. a fraction, the numerator of which is the Class A usage of Class B
required subordinated amount (prior to giving effect to any
reimbursement on that day) for that tranche of Class A notes and the
denominator of which is the aggregate Class A usage of Class B
required subordinated amount (prior to giving effect to any
reimbursement on that day) of all Class A notes, times
. the aggregate amount of all available funds remaining after making
the targeted deposits to the interest funding account to fund
payments for interest on the notes and payments to the master trust
II servicer and applications to cover defaults of receivables in
master trust II.
Limit on Reallocations to a Tranche of Class B Notes from Class C Notes.
When reallocation of available principal amounts reduces the nominal
liquidation amount of Class C notes, such a reallocation from Class C notes may
be used to make deposits into the interest funding subaccount for a tranche of
Class B notes or to fund deficiencies in payments to the master trust II
servicer only to the extent that the Class B usage of the Class C required
subordinated amount (determined after giving effect to any charge-offs of
uncovered defaults in master trust II and any reallocations of available
principal amounts on such date) is not greater than the Class B required
subordinated amount of Class C notes for that tranche of Class B notes. For
this purpose, Class B usage of the Class C required subordinated amount is
equal to the sum of:
(1) the cumulative sum of all charge-offs for uncovered defaults
initially allocated to that tranche of Class B notes, and then reallocated
to Class C Notes; plus
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(2) the cumulative sum, computed on each date while that tranche of Class
B notes is outstanding and there are investor charge-offs allocated to any
tranche of Class C notes which results in a reduction of the nominal
liquidation amount of Class C notes on that date, of an amount equal to the
product of:
. a fraction, the numerator of which is the Class B required
subordinated amount of Class C notes for that tranche of Class B
notes and the denominator of which is the aggregate outstanding
dollar principal amount of all Class C notes, times
. the aggregate amount of investor charge-offs allocated to Class C
notes which results in a reduction of the nominal liquidation amount
of Class C notes on that date; plus
(3) the cumulative sum, computed on each date while that tranche of Class
B notes is outstanding and there are investor charge-offs allocated to any
tranche of Class A notes which is then reallocated to Class C notes and
which results in a reduction of the nominal liquidation amount of Class C
notes on that date, of an amount equal to the product of:
. a fraction, the numerator of which is the Class B required
subordinated amount of Class C notes for that tranche of Class B
notes and the denominator of which is the aggregate outstanding
dollar principal amount of all Class C notes, times
. the aggregate amount of investor charge-offs initially allocated to
Class B notes which are reallocated to Class C notes and results in a
reduction of the nominal liquidation amount of Class C notes on that
date; plus
(4) the cumulative sum of all available principal amounts reallocated to
the interest funding subaccount for that tranche of Class B notes that
resulted in a reduction of the nominal liquidation amount of Class C notes;
plus
(5) the cumulative sum, computed on each date while that tranche of Class
B notes is outstanding and available principal amounts are reallocated to
the interest funding subaccount for any tranche of Class A notes, and that
reallocation reduces the nominal liquidation amount of Class C notes, of an
amount equal to the product of:
. a fraction, the numerator of which is the Class B required
subordinated amount of Class C notes for that tranche of Class B
notes and the denominator of which is the aggregate outstanding
dollar principal amount of all Class C notes, times
. the amount of available principal amounts reallocated to the interest
funding subaccount for any tranche of Class A notes that reduces the
nominal liquidation amount of Class C notes; plus
(6) the cumulative sum, computed on each date while that tranche of Class
B notes is outstanding and available principal amounts are reallocated to
pay any amount to the servicer which resulted in a reduction of the nominal
liquidation amount of Class C notes on that date, of an amount equal to the
product of:
. a fraction, the numerator of which is the Class B required
subordinated amount of Class C notes for that tranche of Class B
notes and the denominator of which is the aggregate outstanding
dollar principal amount of all Class C notes, times
. the aggregate amount of available principal amounts reallocated to
pay any amount to the servicer which resulted in a reduction of the
nominal liquidation amount of Class C notes on that date; minus
(7) the cumulative sum (which will not exceed the sum of items (1)
through (6) above), computed on each transfer date while that tranche of
Class B notes is outstanding, of an amount equal to the product of:
. a fraction, the numerator of which is the Class B usage of Class C
required subordinated amount (prior to giving effect to that
reimbursement) for that tranche of Class B notes and the denominator
of which is the aggregate Class B usage of Class C required
subordinated amount (prior to giving effect to that reimbursement) of
all Class B notes, times
S-28
<PAGE>
. the aggregate amount of all available funds remaining after making
the targeted deposits to the interest funding account to fund
payments for interest on the notes and payments to the master trust
II servicer and applications to cover defaults of receivables in
master trust II.
Limit on Allocations of Available Principal Amounts of Tranches of Notes
No available principal amounts will be allocated to a tranche of notes with a
nominal liquidation amount of zero, even if the stated principal amount of that
tranche of notes has not been paid in full. However, any funds in the
applicable principal funding subaccount, any funds in the applicable interest
funding subaccount, and in the case of Class C notes, [any funds in the
applicable Class C reserve account,] will still be available to pay principal
of and interest on that tranche of notes. If the nominal liquidation amount of
a tranche of notes has been reduced due to reallocation of available principal
amounts to pay interest on senior classes of notes or servicing fees to the
master trust II servicer, or due to charge-offs for uncovered defaults, it is
possible for that tranche's nominal liquidation amount to be increased by
allocations of excess available funds.
[Targeted Deposits to the Class C Reserve Account
The Class C reserve account will initially not be funded. The Class C reserve
account will not be funded unless and until excess available funds fall below a
level set forth in "Prospectus Supplement Summary-- Class C Reserve Account."
The Class C reserve account will be funded each month, as necessary, from
available funds allocated to the MBNAseries that month after targeted deposits
to the interest funding account, payment of the master trust II servicing fee
allocable to the MBNAseries, application to cover defaults of receivables in
master trust II and reimbursement of any deficits in the nominal liquidation
amounts of the notes.
The aggregate deposit targeted to be made to the Class C reserve account in
each month from available funds will be the sum of the Class C reserve account
deposits targeted to be made for each tranche of Class C notes.
If the aggregate deposit made to the Class C reserve account is less than the
sum of the targeted deposits for each class of Class C notes, then the amount
available will first be allocated to each tranche of Class C notes pro rata
based on the ratio of the amount targeted to be deposited into the Class C
reserve account with respect to that tranche to the aggregate amount targeted
to be deposited into the Class C reserve account with respect to all tranches
of Class C notes for that month.]
[Withdrawals from the Class C Reserve Account
Withdrawals will be made from the Class C reserve subaccounts, but in no
event more than the amount on deposit in the applicable Class C reserve
subaccount, in the following order:
. Interest, Payments with Respect to Derivative Agreements for Interest and
Accretion on Discount Notes. If the amount on deposit in the interest
funding subaccount for any tranche of Class C notes is insufficient to
pay in full the amounts for which withdrawals are required, the amount of
the deficiency will be withdrawn from the applicable Class C reserve
subaccount and deposited into the applicable interest funding subaccount.
. Payments of Principal and Payments with Respect to Derivative Agreements
for Principal. If the amount on deposit in the principal funding
subaccount for any tranche of Class C notes is insufficient to pay in
full the amounts for which withdrawals are required, an amount equal to
the lesser of (i) the amount of the deficiency and (ii) the amount by
which the nominal liquidation amount of that tranche of Class C notes is
less than the adjusted outstanding dollar principal amount of that
tranche of Class C notes will be withdrawn from the applicable Class C
reserve subaccount and deposited into the applicable principal funding
subaccount.
S-29
<PAGE>
. Payment to the Issuer. If on any transfer date the aggregate amount on
deposit in the Class C reserve account is greater than the required
amount and such Class C notes have not been accelerated, the excess will
be withdrawn and paid to the issuer. In addition, after payment in full
of any tranche of Class C notes, any amount remaining on deposit in the
applicable Class C reserve subaccount will be paid to the issuer.]
Sale of Credit Card Receivables
If a tranche of notes has an event of default and is accelerated before its
legal maturity date, master trust II may sell credit card receivables if the
conditions described in "Indenture--Events of Default" in the prospectus are
satisfied. This sale will take place at the option of the indenture trustee or
at the direction of the holders of a majority of aggregate outstanding dollar
principal amount of notes of that tranche. However, a sale will only be
permitted if at least one of the following conditions is met:
. the noteholders of 90% of the aggregate outstanding dollar principal
amount of the accelerated tranche of notes consent;
. the net proceeds of such sale (plus amounts on deposit in the applicable
subaccounts and payments to be received from any applicable derivative
agreement) would be sufficient to pay all amounts due on the accelerated
tranche of notes; or
. the indenture trustee determines that the funds to be allocated to the
accelerated tranche of notes, including available funds and available
principal amounts allocable to the accelerated tranche of notes, payments
to be received from any applicable derivative agreement and amounts on
deposit in the applicable subaccounts is likely to be insufficient to
make payments on the accelerated tranche of notes when due and 66 2/3% of
the noteholders of the accelerated tranche of notes consent to the sale.
Those majority holders of that tranche will also have the power to determine
the time of the sale, except that any sale of receivables for a subordinated
tranche of notes will be delayed until the senior classes of notes are
prefunded, or enough notes of senior classes have been repaid, to the extent
that the subordinated tranche of notes is no longer needed to provide
subordination protection for the senior classes.
If principal of or interest on a tranche of notes has not been paid in full
on its legal maturity date, the sale will automatically take place on that date
regardless of the subordination requirements of any senior classes of notes.
Proceeds from such a sale will be immediately paid to the noteholders of the
related tranche.
The amount of credit card receivables sold will be up to the nominal
liquidation amount of the tranches of notes that directed the sale to be made.
The nominal liquidation amount of any tranche of notes that directed the sale
to be made will be automatically reduced to zero upon such sale. No more
available principal amounts or available funds will be allocated to that
tranche.
If a class of notes cannot be liquidated and paid because of the
subordination provisions of the indenture or the applicable indenture
supplement, prefunding of the principal funding subaccounts for the senior
notes of the MBNAseries--which will have begun when the subordinated class had
its event of default--will continue as described in "--Targeted Deposits of
Available Principal Amounts to the Principal Funding Account." On the legal
maturity date of a subordinated tranche of notes, a sale of receivables for the
subordinated tranche of notes will take place, even if liquidation and payment
would reduce the amount of subordination protection below the required
subordinated amount for the senior classes of notes.
If a tranche of notes directs a sale of credit card receivables, then that
tranche will no longer be entitled to subordination protection from
subordinated classes of notes of the same series.
Tranches of notes that have directed sales of credit card receivables are not
outstanding under the indenture.
S-30
<PAGE>
After giving effect to a sale of receivables for a tranche of notes, the
amount of proceeds may be less than the outstanding dollar principal amount of
that class. This deficiency can arise because the nominal liquidation amount of
that tranche was reduced before the sale of receivables or if the sale price
for the receivables was less than the outstanding dollar principal amount.
These types of deficiencies will not be reimbursed.
Any amount remaining on deposit in the interest funding subaccount for a
tranche of notes that has received final payment as described in "--Final
Payment of the Notes" and that has caused a sale of receivables will be treated
as available funds and be allocated as described "--Allocation of Available
Funds."
Final Payment of the Notes
Noteholders will not be entitled to payment of principal, or in the case of
foreign currency notes, to have any payment made by the issuer under a
derivative agreement with respect to principal, in excess of the highest
outstanding dollar principal amount of that tranche:
. minus, any unreimbursed reductions in the nominal liquidation amount of
that class from charge-offs for uncovered defaults or reallocations of
available principal amounts to pay interest on senior classes of notes or
servicing fees to the master trust II servicer;
. plus, in the case of tranches of Class C notes, funds in the applicable
Class C reserve account.
However, the proceeds of a sale of receivables following acceleration or on
the legal maturity date of a tranche of notes will be available to the extent
necessary to pay the outstanding dollar principal amount of that tranche on the
date of the sale.
A tranche of notes will be considered to be paid in full, the holders of
those notes will have no further right or claim, and the issuer will have no
further obligation or liability for principal or interest, on the earliest to
occur of:
. the date of the payment in full of the stated principal amount of and all
accrued interest on that tranche of notes;
. the date on which the outstanding dollar principal amount of that tranche
of notes is reduced to zero, and all accrued interest on that tranche of
notes is paid in full;
. on the legal maturity date of that tranche of notes, after giving effect
to all deposits, allocations, reallocations, sales of credit card
receivables and payments to be made on that date; or
. the date on which a sale of receivables has taken place with respect to
such tranche, as described in "--Sale of Credit Card Receivables."
Pro Rata Payments Within a Tranche
All notes of a tranche will receive payments of principal and interest pro
rata based on the stated dollar amount of each note in that tranche.
Shared Excess Available Funds
Excess available funds for any monthly period allocated to the MBNAseries
that are not needed to make targeted deposits to the Class C reserve account as
described in "--Allocation of Available Funds" will be available for allocation
to other series of notes in group A. Such excess, called shared excess
available funds, will be allocated to cover shortfalls in available funds for
other series in group A, if any, which have not been covered out of available
funds allocable to such series. If these shortfalls exceed shared excess
available funds for any monthly period, shared excess available funds will be
allocated pro rata among the applicable series in group A based on the relative
amounts of those shortfalls in available funds. To the extent that shared
excess available funds exceed those shortfalls, the balance will be paid to the
issuer.
S-31
<PAGE>
Underwriting
Subject to the terms and conditions of the underwriting agreement for these
Class [.] notes, the issuer has agreed to sell to each of the underwriters
named below, and each of those underwriters has severally agreed to purchase,
the principal amount of these Class [.] notes set forth opposite its name:
<TABLE>
<CAPTION>
Principal
Underwriters Amount
------------ ---------
<S> <C>
[Co. A]....................................................... $[.]
[Co. B]....................................................... $[.]
[Co. C]....................................................... $[.]
[Co. D]....................................................... $[.]
----
Total....................................................... $[.]
====
</TABLE>
The several underwriters have agreed, subject to the terms and conditions of
the underwriting agreement, to purchase all $[.] aggregate principal amount of
these Class [.] notes if any of these Class [.] notes are purchased.
The underwriters have advised the issuer that the several underwriters
propose initially to offer these Class [.] notes to the public at the public
offering price set forth on the cover page of this prospectus supplement, and
to certain dealers at that public offering price less a concession not in
excess of [.]% of the principal amount of these Class [.] notes. The
underwriters may allow, and those dealers may reallow to other dealers, a
concession not in excess of [.]% of the principal amount.
After the public offering, the public offering price and other selling terms
may be changed by the underwriters.
Each underwriter of these Class [.] notes has agreed that:
. it has complied and will comply with all applicable provisions of the
Financial Services Act 1986 with respect to anything done by it in
relation to these Class [.] notes in, from or otherwise involving the
United Kingdom;
. it has only issued, distributed or passed on and will only issue,
distribute or pass on in the United Kingdom any document received by it
in connection with the issue of these Class [.] notes to a person who is
of a kind described in Article 11(3) of the Financial Services Act 1986
(Investment Advertisements) (Exemptions) Order 1996 or is a person to
whom such document may otherwise lawfully be issued, distributed or
passed on;
. if it is an authorized person under Chapter III of Part I of the
Financial Services Act 1986, it has only promoted and will only promote
(as that term is defined in Regulation 1.02(2) of the Financial Services
(Promotion of Unregulated Schemes) Regulations 1991) to any person in the
United Kingdom the scheme described in this prospectus supplement and the
prospectus if that person is a kind described either in Section 76(2) of
the Financial Services Act 1986 or in Regulation 1.04 of the Financial
Services (Promotion of Unregulated Schemes) Regulations 1991; and
. it is a person of a kind described in Article 11(3) of the Financial
Services Act 1986 (Investment Advertisements) (Exemptions) Order 1986.
In connection with the sale of these Class [.] notes, the underwriters may
engage in:
. over-allotments, in which members of the syndicate selling these Class
[.] notes sell more notes than the issuer actually sold to the syndicate,
creating a syndicate short position;
. stabilizing transactions, in which purchases and sales of these Class [.]
notes may be made by the members of the selling syndicate at prices that
do not exceed a specified maximum;
S-32
<PAGE>
. syndicate covering transactions, in which members of the selling
syndicate purchase these Class [.] notes in the open market after the
distribution has been completed in order to cover syndicate short
positions; and
. penalty bids, by which underwriters reclaim a selling concession from a
syndicate member when any of these Class [.] notes originally sold by
that syndicate member are purchased in a syndicate covering transaction
to cover syndicate short positions.
These stabilizing transactions, syndicate covering transactions and penalty
bids may cause the price of these Class [.] notes to be higher than it would
otherwise be. These transactions, if commenced, may be discontinued at any
time.
The issuer and MBNA will, jointly and severally, indemnify the underwriters
against certain liabilities, including liabilities under applicable securities
laws, or contribute to payments the underwriters may be required to make in
respect of those liabilities. The issuer's obligation to indemnify the
underwriters will be limited to available funds from the collateral certificate
received by the issuer after making all required payments and required deposits
under the indenture.
The issuer will receive proceeds of approximately $[.] from the sale of these
Class [.] notes. This amount represents [.]% of the principal amount of those
notes. The issuer will receive this amount net of the underwriting discount of
$[.]. The underwriting discount represents [.]% of the principal amount of
those notes. Additional offering expenses are estimated to be $[.].
S-33
<PAGE>
Glossary of Defined Terms
"base rate" means, for any month, the annualized percentage equivalent of a
fraction:
. the numerator of which is equal to the sum of:
--the targeted deposits to the interest funding account on the related
transfer date, and the servicing fee and the pro rata portion of the
servicer interchange allocable to the MBNAseries, minus
--payments received with respect to such month from a derivative
counterparty pursuant to a derivative agreement for any tranche of
notes for interest in dollars, and
. the denominator of which is the weighted average outstanding dollar
principal amount of all notes issued by the issuer backed by the
collateral certificate for such month.
"business day" means, unless otherwise indicated, any day other than a
Saturday, a Sunday or a day on which banking institutions in New York, New York
or Newark, Delaware are authorized or obligated by law or executive order to be
closed.
"excess available funds" means, for the MBNAseries for any monthly period,
the available funds allocable to the MBNAseries remaining after application to
cover targeted deposits to the interest funding account, payment of the portion
of the master trust II servicing fee allocable to the MBNAseries and
application to cover defaults of receivables in master trust II allocable to
the MBNAseries and any deficits in the nominal liquidation amount of the
MBNAseries notes.
"LIBOR" means, as of any LIBOR determination date, the rate for deposits in
United States dollars for a [one-month] period which appears on telerate page
3750 as of 11:00 a.m., London time, on such date. If such rate does not appear
on telerate page 3750, the rate for that LIBOR determination date will be
determined on the basis of the rates at which deposits in United States dollars
are offered by four major banks selected by the beneficiary of the issuer at
approximately 11:00 a.m., London time, on that day to prime banks in the London
interbank market for a [one-month] period. The indenture trustee will request
the principal London office of each of such banks to provide a quotation of its
rate. If at least two such quotations are provided, the rate for that LIBOR
determination date will be the arithmetic mean of such quotations. If fewer
than two quotations are provided, the rate for that LIBOR determination date
will be the arithmetic mean of the rates quoted by major banks in New York
City, selected by the beneficiary of the issuer, at approximately 11:00 a.m.,
New York City time, on that day for loans in United States dollars to leading
European banks for a [one-month] period.
"LIBOR determination date" means (i) [.][.],[.] for the period from and
including the closing date through but excluding [.][.],[.], (ii) [.][.],[.]
for the period from and including [.][.],[.] through but excluding [.][.],[.]
and (iii) for each interest period thereafter, the second London business day
prior to each interest payment date on which such interest period commences.
"London business day" means any business day (as defined above) on which
dealings in deposits in United States dollars are transacted in the London
interbank market.
"monthly interest accrual date" means, with respect to any class or tranche
of notes:
. for any month in which interest is to be paid, the interest payment date,
and
. for any month in which no interest payment date occurs, the date in that
month corresponding numerically to the next interest payment date for
that class or tranche of notes, or in the case of a class of zero-coupon
discount notes, the expected principal payment date for that class; but
--if there is no numerically corresponding day in that month, then the
monthly interest accrual date will be the last business day of the
month, and
--if the numerically corresponding day is not a business day with respect
to that class or tranche, the monthly interest accrual date will be the
next following business day, unless that business day would fall in the
following month, in which case the monthly interest date will be the
last business day of the earlier month.
S-34
<PAGE>
"monthly principal accrual date" means with respect to any tranche of notes:
. for any month in which the expected principal payment date occurs, the
expected principal payment date, or if that day is not a business day,
the next following business day, and for any month in which no expected
principal payment date occurs, the date in that month corresponding
numerically to the expected principal payment date for that class or
tranche of notes; but
--if there is no numerically corresponding day in that month, then the
monthly principal accrual date will be the last business day of the
month, and
--if the numerically corresponding day is not a business day with respect
to that class or tranche, the monthly principal accrual date will be
the next following business day, unless that business day would fall in
the following month, in which case the monthly principal accrual date
will be the last business day of the earlier month.
"performing" means, with respect to any derivative agreement, that no payment
default or repudiation by the derivative counterparty has occurred.
"portfolio yield" means, for any month, the annualized percentage equivalent
of a fraction:
.the numerator of which is equal to the sum of:
--available funds for the related transfer date, minus
--payments received with respect to such month from a derivative
counterparty pursuant to a derivative agreement for any tranche of
notes for interest in dollars, minus
--the aggregate investor default amount for such month, and
. the denominator of which is the weighted average outstanding dollar
principal amount of all notes issued by the issuer backed by the
collateral certificate for such month.
"telerate page 3750" means the display page currently so designated on the
Bridge Telerate Market Report (or such other page as may replace that page on
that service for the purpose of displaying comparable rates or prices).
S-35
<PAGE>
ANNEX I
MBNA and MBNA Corporation
MBNA America Bank, National Association (referred to in this prospectus
supplement as MBNA) is a wholly-owned subsidiary of MBNA Corporation. MBNA has
two wholly owned foreign bank subsidiaries, MBNA International Bank Limited
located in the United Kingdom and MBNA Canada Bank, located in Canada.
On a managed basis, including loans originated by MBNA International Bank
Limited and MBNA Canada Bank, MBNA maintained loan accounts with aggregate
outstanding balances of $[.] billion as of [.][.],[.]. Of this amount, $[.]
billion were MasterCard and VISA credit card loans originated in the United
States. As of [.][.],[.], the premium credit card portfolio in the United
States accounted for [.]% of MBNA's domestic MasterCard and VISA credit card
accounts with outstanding balances and [.]% of MBNA's outstanding domestic
MasterCard and VISA credit card loans. As of [.][.],[.], MBNA had assets of
$[.] billion, deposits of $[.] billion and capital and surplus accounts of $[.]
billion, and MBNA Corporation had consolidated assets of $[.] billion,
consolidated deposits of $[.] billion and capital and surplus accounts of $[.]
billion.
MBNA's Credit Card Portfolio
Billing and Payments
MBNA, using MBNA Hallmark Information Services, Inc. as its service bureau,
generates and mails to cardholders monthly statements summarizing account
activity and processes cardholder monthly payments. Generally, cardholders must
make a monthly minimum payment at least equal to the lesser of (i) the sum of
all finance charges, bank imposed fees, a stated minimum amount (generally $15)
and past due amounts or (ii) 2.25% of the statement balance plus past due
amounts, but generally not less than $15. Certain eligible cardholders are
given the option periodically to take a payment deferral.
The finance charges on purchases, which are assessed monthly, are calculated
by multiplying the account's average daily purchase balance by the applicable
daily periodic rate, and multiplying the result by the number of days in the
billing cycle. Finance charges are calculated on purchases from the date of the
purchase or the first day of the billing cycle in which the purchase is posted
to the account, whichever is later. Monthly periodic finance charges are not
assessed in most circumstances on new purchases if all balances shown on the
previous billing statement are paid by the due date, which is generally at
least 25 days after the billing date. Monthly periodic finance charges are not
assessed in most circumstances on previous purchases if all balances shown on
the two previous billing statements are paid by their respective due dates.
The finance charges, which are assessed monthly on cash advances (including
balance transfers), are calculated by multiplying the account's average cash
advance balance by the applicable daily periodic rate, and multiplying the
result by the number of days in the billing cycle. Finance charges are
calculated on cash advances (including balance transfers) from the date of the
transaction. Currently, MBNA generally treats the day on which a cash advance
check is deposited or cashed as the transaction date for such check.
MBNA offers fixed rate and variable rate credit card accounts. MBNA also
offers temporary promotional rates.
MBNA assesses annual membership fees on certain accounts although under
various marketing programs these fees may be waived or rebated. For most credit
card accounts, MBNA also assesses late, overlimit and returned check charges.
MBNA generally assesses a fee on cash advances and certain purchase
transactions.
A-I-1
<PAGE>
Delinquencies and Collection Efforts
An account is contractually delinquent if the minimum payment is not received
by the due date indicated on the customer's statement. Efforts to collect
contractually delinquent credit card receivables currently are made by MBNA's
Customer Assistance personnel. Collection activities include statement
messages, telephone calls and formal collection letters. MBNA employs two
principal computerized systems for collecting past due accounts. The Predictive
Management System analyzes each cardholder's purchase and repayment habits and
selects accounts for initial contact with the objective of contacting the
highest risk accounts first. The accounts selected are queued to MBNA's
proprietary Outbound Call Management System. This system sorts accounts by a
number of factors, including time zone, degree of delinquency and dollar amount
due, and automatically dials delinquent accounts in order of priority.
Representatives are automatically linked to the cardholder's account
information and voice line when a contact is established.
Accounts are worked continually at each stage of delinquency through the 180
day past due level. As an account enters the 180 day delinquency level, it is
classified as a potential charge-off. Accounts failing to make a payment during
the 180 day cycle are written off. Managers may defer a charge-off of an
account for another month, pending continued payment activity or other special
circumstances. Senior manager approval is required on all exceptions to charge-
off. Accounts of cardholders in bankruptcy are currently charged-off no later
than is consistent with this policy.
In February 1999, the Federal Financial Institutions Examination Council
published a revised policy statement on the classification of consumer loans.
The revised policy establishes uniform guidelines for charge-off of loans to
delinquent, bankrupt and deceased borrowers, for charge-off of fraudulent
accounts, and for re-aging, extending, deferring or rewriting delinquent
accounts. The guidelines must be implemented by December 31, 2000. MBNA expects
to complete its implementation of the guidelines prior to or on December 31,
2000. MBNA, as servicer, will accelerate charge-off of some delinquent loans
when it implements the guidelines and does not expect implementation to have an
effect upon the payment of principal and interest on the certificates. This
statement is a forward-looking statement, subject to certain risks and
uncertainties. The implementation of the guidelines could, in combination with
other adverse changes, such as a material increase in charge-off rates or in
the rate of interest payable to certificateholders, have a material adverse
effect upon the payments of principal and interest on the certificates.
The Master Trust II Portfolio
The receivables conveyed to master trust II arise in accounts selected from
the bank portfolio on the basis of criteria set forth in master trust II
agreement as applied on the "cut-off date" and, with respect to additional
accounts, as of the related date of their designation. The seller has the
right, subject to certain limitations and conditions set forth therein, to
designate from time to time additional accounts and to transfer to master trust
II all receivables of such additional accounts. Any additional accounts
designated must be eligible accounts as of the date the seller designates such
accounts as additional accounts. The seller has designated additional accounts
and conveyed the receivables arising therein to master trust II [.] times since
the cut-off date. The aggregate total principal receivables added to master
trust II in those additions was approximately $[.] billion.
A-I-2
<PAGE>
Delinquency and Gross Charge-Off Experience
The following tables set forth the delinquency and gross charge-off
experience for each of the periods shown for the master trust II portfolio.
Delinquency Experience
Master Trust II Portfolio
(Dollars in Thousands)
<TABLE>
<CAPTION>
[.][.], December 31,
----------------------- -----------------------------------------------------------------------
[.] [.] [.] [.]
----------------------- ----------------------- ----------------------- -----------------------
Percentage Percentage Percentage Percentage
of Total of Total of Total of Total
Receivables Receivables Receivables Receivables Receivables Receivables Receivables Receivables
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Receivables
Outstanding(1)........ $ $ $ $
Receivables Delinquent:
30-59 Days............ $ % $ % $ % $ %
60-89 Days............
90 or More............
--------- ---- --------- ---- --------- ---- --------- ----
Total................. $ % $ % $ % $ %
========= ==== ========= ==== ========= ==== ========= ====
</TABLE>
--------
(1) The receivables outstanding on the accounts consist of all amounts due from
cardholders as posted to the accounts as of the end of the period shown.
Gross Charge-Off Experience
Master Trust II Portfolio
(Dollars in Thousands)
<TABLE>
<CAPTION>
[.] Months Year Ended December 31,
Ended ------------------------
[.][.],
[.] [.] [.] [.]
---------- ------- -------- -------
<S> <C> <C> <C> <C>
Average Receivables Outstanding(1)......... $ $ $ $
Total Gross Charge-Offs(2).................
Total Gross Charge-Offs as a percentage of
Average Receivables Outstanding(3)........ % % % %
</TABLE>
--------
(1) Average receivables outstanding is the average of the daily receivable
balance during the period indicated.
(2) Total gross charge-offs as a percentage of average receivables outstanding
for the month ended [.][.], [.] was [.]% calculated as an annualized
figure. Total gross charge-offs are total principal and interest charge-
offs before recoveries and do not include the amount of any reductions in
average receivables outstanding due to fraud, returned goods, customer
disputes or other miscellaneous credit adjustments.
(3) The percentage reflected for the [.] months ended [.][.], [.] is an
annualized figure.
Revenue Experience
The gross revenues from finance charges and fees billed to accounts in the
master trust II portfolio for each of the three calendar years contained in the
period ended [.][.], [.] and the [.] calendar months contained in the period
ended [.][.], [.] are set forth in the following table.
The historical yield figures in the following table are calculated on a cash
basis.
A-I-3
<PAGE>
The yield on both an accrual and a cash basis will be affected by numerous
factors, including the monthly periodic finance charges on the receivables, the
amount of the annual membership fees and other fees, changes in the delinquency
rate on the receivables and the percentage of cardholders who pay their
balances in full each month and do not incur monthly periodic finance charges.
See "Risk Factors" in the prospectus.
Revenue Experience
Master Trust II Portfolio
<TABLE>
<CAPTION>
[.] Months Year Ended December 31,
Ended -----------------------
[.][.],
[.] [.] [.] [.]
---------- ------- ------- -------
<S> <C> <C> <C> <C>
Average Account Monthly Accrued Finance
Charges
and Fees(1)(2)............................ $ $ $ $
Average Account Balance(3)................. $ $ $ $
Yield from Finance Charges and Fees(4)..... % % % %
Yield from Interchange(5).................. % % % %
Yield from Finance Charges, Fees and
Interchange(6)............................ % % % %
</TABLE>
--------
(1) Finance charges and fees are comprised of monthly periodic finance charges
and other credit card fees.
(2) Average account monthly accrued finance charges and fees are presented net
of adjustments made pursuant to MBNA's normal servicing procedures,
including removal of incorrect or disputed monthly periodic finance
charges.
(3) Average account balance includes purchases, cash advances and accrued and
unpaid monthly periodic finance charges and other charges and is calculated
based on the average of the account balances during the periods shown for
accounts with charging privileges.
(4) Yield from finance charges and fees is the result of dividing the
annualized average account monthly accrued finance charges and fees by the
average account balance for the period.
(5) Yield from interchange is the result of dividing annualized revenue
attributable to interchange received during the period by the average
account balance for the period. The amount of interchange for each of the
periods indicated above has been estimated.
(6) The percentage reflected for the [.] months ended [.] [.], [.] is an
annualized figure.
The revenue for the master trust II portfolio shown in the above table is
comprised of monthly periodic finance charges, credit card fees and
interchange. These revenues vary for each account based on the type and volume
of activity for each account. See "MBNA's Credit Card Activities" in the
prospectus.
Interchange
MBNA, as seller, will transfer to master trust II a percentage of the
interchange attributed to cardholder charges for goods and services in the
accounts of master trust II. Interchange will be allocated to a series of
master trust II investor certificates based on such series's investor interest
and such series's portion of cardholder charges for goods and services in the
accounts of master trust II relative to the total amount of cardholder charges
for goods and services in the MasterCard and VISA credit card accounts owned by
MBNA, as reasonably estimated by the seller.
MasterCard and VISA may from time to time change the amount of interchange
reimbursed to banks issuing their credit cards. Interchange will be treated as
collections of finance charge receivables for the purposes of determining the
amount of finance charge receivables, allocating collections of finance charge
receivables, making required monthly payments and calculating the portfolio
yield. Under the circumstances described herein, interchange will be used to
pay a portion of the investor servicing fee required to be paid on each
transfer date. See "Master Trust II--Servicing Compensation and Payment of
Expenses" and "MBNA's Credit Card Activities--Interchange" in the prospectus.
A-I-4
<PAGE>
Payment Rates
The following table sets forth the highest and lowest cardholder monthly
payment rates for the master trust II portfolio during any month in the periods
shown and the average cardholder monthly payment rates for all months during
the periods shown, in each case calculated as a percentage of total opening
monthly account balances during the periods shown. Payment rates shown in the
table are based on amounts which would be deemed payments of principal
receivables and finance charge receivables with respect to the accounts.
Cardholder Monthly Payment Rates
Master Trust II Portfolio
<TABLE>
<CAPTION>
[.] Months
Ended Year Ended [.][.],
[.][.], ----------------------
[.] [.] [.] [.]
---------- ------ ------ ------
<S> <C> <C> <C> <C>
Lowest Month........................ % % % %
Highest Month....................... % % % %
Monthly Average..................... % % % %
</TABLE>
Generally, cardholders must make a monthly minimum payment at least equal to
the lesser of (i) the sum of all finance charges, bank imposed fees, a stated
minimum amount (generally $15) and past due amounts or (ii) 2.25% of the
statement balance plus past due amounts, but generally not less than $15.
Certain eligible cardholders are given the option periodically to take a
payment deferral. We cannot assure you that the cardholder monthly payment
rates in the future will be similar to the historical experience set forth
above. In addition, the amount of collections of receivables may vary from
month to month due to seasonal variations, general economic conditions and
payment habits of individual cardholders.
MBNA, as seller, will be required to designate additional accounts, to the
extent available:
(a) to maintain the seller interest so that, during any period of thirty
(30) consecutive days, the seller interest averaged over that period equals
or exceeds the minimum seller interest for the same period; and
(b) to maintain, for so long as master trust II investor certificates of
any series (including the collateral certificate) remain outstanding, an
aggregate amount of principal receivables equal to or greater than the
minimum aggregate principal receivables.
MBNA, as seller, has the right, subject to certain limitations and
conditions, to designate certain removed accounts and to require master trust
II trustee to reconvey all receivables in such removed accounts to the seller.
Once an account is removed, receivables existing or guaranteed under that
account are not transferred to master trust II.
As of the beginning of the day on [.][.], [.]:
. the master trust II portfolio included $ of principal receivables and
$[.] of finance charge receivables;
. the accounts had an average principal receivable balance of $[.] and an
average credit limit of $[.];
. the percentage of the aggregate total receivable balance to the
aggregate total credit limit was [.]%;
. the average age of the accounts was approximately [.] months;
. cardholders whose accounts are included in the master trust II portfolio
had billing addresses in all 50 States and the District of Columbia;
A-I-5
<PAGE>
. [.]% of the accounts were standard accounts and [.]% were premium
accounts; and
. the aggregate principal receivable balances of standard accounts and
premium accounts, as a percentage of the total aggregate principal
receivables, were [.]% and [.]%, respectively.
The following tables summarize the master trust II portfolio by various
criteria as of the beginning of the day on [.][.], [.]. Because the future
composition of the master trust II portfolio may change over time, these tables
do not describe the composition of the master trust II portfolio at any future
time.
Composition by Account Balance
Master Trust II Portfolio
<TABLE>
<CAPTION>
Percentage
of Percentage
Number Total Number of Total
Account Balance Range of Accounts of Accounts Receivables Receivables
--------------------- ----------- ------------ ----------- -----------
<S> <C> <C> <C> <C>
Credit Balance................. % $ %
No Balance.....................
$ .01-$ 5,000.00..........
$ 5,000.01-$10,000.00..........
$10,000.01-$15,000.00..........
$15,000.01-$20,000.00..........
$20,000.01-$25,000.00..........
$25,000.01 or More.............
--- --- ------ ---
Total........................ % $ %
=== === ====== ===
</TABLE>
Composition by Credit Limit
Master Trust II Portfolio
<TABLE>
<CAPTION>
Percentage
of Total Percentage
Number Number of of Total
Credit Limit Range of Accounts Accounts Receivables Receivables
------------------ ----------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Less than or equal to
$5,000.00..................... % $ %
$ 5,000.01-$10,000.00..........
$10,000.01-$15,000.00..........
$15,000.01-$20,000.00..........
$20,000.01-$25,000.00..........
$25,000.01 or More.............
--- --- ------ ---
Total........................ % $ %
=== === ====== ===
</TABLE>
Composition by Period of Delinquency
Master Trust II Portfolio
<TABLE>
<CAPTION>
Percentage
of Total Percentage
Period of Delinquency (Days Number Number of of Total
Contractually Delinquent) of Accounts Accounts Receivables Receivables
--------------------------- ----------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Not Delinquent................. % $ %
Up to 29 Days..................
30 to 59 Days..................
60 to 89 Days..................
90 or More Days................
--- --- ------ ---
Total........................ % $ %
=== === ====== ===
</TABLE>
A-I-6
<PAGE>
Composition by Account Age
Master Trust II Portfolio
<TABLE>
<CAPTION>
Percentage
of Total Percentage
Number Number of of Total
Account Age of Accounts Accounts Receivables Receivables
----------- ----------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Not More than 6 Months.......... % $ %
Over 6 Months to 12 Months......
Over 12 Months to 24 Months.....
Over 24 Months to 36 Months.....
Over 36 Months to 48 Months.....
Over 48 Months to 60 Months.....
Over 60 Months to 72 Months.....
Over 72 Months..................
--- --- ------ ---
Total......................... % $ %
=== === ====== ===
</TABLE>
Geographic Distribution of Accounts
Master Trust II Portfolio
<TABLE>
<CAPTION>
Percentage
of Total Percentage
Number of Number of of Total
State Accounts Accounts Receivables Receivables
----- --------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
California......................... % $ %
New York...........................
Texas..............................
Florida............................
Pennsylvania.......................
New Jersey.........................
Illinois...........................
Ohio...............................
Virginia...........................
Michigan...........................
Other..............................
--- --- ------ ---
Total............................ % $ %
=== === ====== ===
</TABLE>
A-I-7
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this prospectus is not complete and may be changed. We may +
+not sell these securities until the registration statement filed with the +
+Securities and Exchange Commission is effective. This prospectus is not an +
+offer to sell these securities and is not seeking an offer to buy these +
+securities in any state where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION DATED NOVEMBER 20, 2000
Prospectus
MBNA Credit Card Master Note Trust
Issuer
MBNA America Bank, National Association
Originator of the Issuer
<TABLE>
<S> <C>
------------------- The issuer--
You should
consider the . may periodically issue notes in one or more series,
discussion classes or tranches; and
under "Risk
Factors" . will own--
beginning on
page 11 of this --an undivided interest in master trust II, whose
prospectus assets include a portfolio of consumer revolving
before you credit card accounts; and
purchase any
notes. --other property described in this prospectus and in
the accompanying prospectus supplement.
MBNA Credit Card
Master Note Trust
is the issuer of The notes--
the notes. The
notes are . will be secured by the issuer's assets and will be paid
obligations of only from proceeds of the issuer's assets;
the issuer only
and are not . offered with this prospectus will be rated in one of
obligations of the four highest rating categories by at least one
any other person. nationally recognized rating organization; and
Each tranche of
notes is secured . may be issued as part of a designated series, class or
by only some of tranche.
the assets of
the issuer.
Noteholders
will have no
recourse to any
other assets of
the issuer for
the payment of
the notes.
The notes are
not insured or
guaranteed by
the Federal
Deposit Insurance
Corporation or
any other
governmental
agency.
-------------------
</TABLE>
Neither the SEC nor any state securities commission has approved these notes or
determined that this prospectus is truthful, accurate or complete. Any
representation to the contrary is a criminal offense.
[.][.], 2000
<PAGE>
Important Notice about Information Presented in this
Prospectus and the Accompanying Prospectus Supplement
We provide information to you about the notes in two separate documents that
progressively provide more detail: (a) this prospectus, which provides general
information, some of which may not apply to a particular series, class or
tranche of notes, including your series, class or tranche, and (b) the
accompanying prospectus supplement, which will describe the specific terms of
your series, class or tranche of notes, including:
. the timing of interest and principal payments;
. financial and other information about the issuer's assets;
. information about enhancement for each class or tranche;
. the ratings for each class or tranche; and
. the method for selling the notes.
This prospectus may be used to offer and sell any series, class or tranche of
notes only if accompanied by the prospectus supplement for that series, class
or tranche.
If the terms of a particular series, class or tranche of notes vary between
this prospectus and the prospectus supplement, you should rely on the
information in the prospectus supplement.
You should rely only on the information provided in this prospectus and the
accompanying prospectus supplement including the information incorporated by
reference. We have not authorized anyone to provide you with different
information. We are not offering the notes in any state where the offer is not
permitted. We do not claim the accuracy of the information in this prospectus
or the accompanying prospectus supplement as of any date other than the dates
stated on their respective covers.
We include cross-references in this prospectus and in the accompanying
prospectus supplement to captions in these materials where you can find further
related discussions. The Table of Contents in this prospectus and in the
accompanying prospectus supplement provide the pages on which these captions
are located.
----------------
2
<PAGE>
Table of Contents
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary........................................................ 5
Securities Offered....................................................... 5
Risk Factors............................................................. 5
Issuer................................................................... 5
Master Trust II.......................................................... 5
MBNA..................................................................... 5
Indenture Trustee........................................................ 5
Series, Classes and Tranches of Notes.................................... 5
Interest Payments........................................................ 6
Expected Principal Payment Date and Legal Maturity Date.................. 6
Stated Principal Amount, Outstanding Dollar Principal Amount and Nominal
Liquidation Amount of Notes............................................. 6
Subordination............................................................ 7
Limit on Repayment of All Notes.......................................... 7
Sources of Funds to Pay the Notes........................................ 8
Redemption and Early Redemption of Notes................................. 8
Events of Default........................................................ 8
Event of Default Remedies................................................ 9
Security for the Notes................................................... 9
Limited Recourse to the Issuer........................................... 10
Registration, Clearance and Settlement................................... 10
ERISA Eligibility........................................................ 10
Tax Status............................................................... 10
Denominations............................................................ 10
Record Date.............................................................. 10
Risk Factors.............................................................. 11
Glossary.................................................................. 20
The Issuer................................................................ 20
Use of Proceeds........................................................... 21
MBNA and MBNA Corporation................................................. 21
The Notes................................................................. 21
General.................................................................. 21
Interest................................................................. 22
Principal................................................................ 22
Stated Principal Amount, Outstanding Dollar Principal Amount and Nominal
Liquidation Amount...................................................... 23
Stated Principal Amount................................................. 23
Outstanding Dollar Principal Amount..................................... 23
Nominal Liquidation Amount.............................................. 23
Final Payment of the Notes............................................... 25
Subordination of Principal............................................... 25
Required Subordination Protection........................................ 26
</TABLE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
Redemption and Early Redemption of Notes.................................. 26
Issuances of New Series, Classes and Tranches of Notes.................... 26
Payments on Notes; Paying Agent........................................... 28
Denominations............................................................. 28
Record Date............................................................... 28
Governing Law............................................................. 28
Form, Exchange, and Registration and Transfer of Notes.................... 28
Book-Entry Notes.......................................................... 29
The Depository Trust Company.............................................. 30
Clearstream, Luxembourg................................................... 30
Euroclear System.......................................................... 31
Distributions on Book-Entry Notes......................................... 31
Global Clearance and Settlement Procedures................................ 32
Definitive Notes.......................................................... 33
Replacement of Notes...................................................... 33
Acquisition and Cancellation of Notes by the Issuer....................... 33
Sources of Funds to Pay the Notes.......................................... 33
The Collateral Certificate................................................ 33
General.................................................................. 33
Deposit and Application of Funds......................................... 35
Issuer Accounts........................................................... 36
Derivative Agreements..................................................... 36
Sale of Credit Card Receivables........................................... 36
Limited Recourse to the Issuer; Security for the Notes.................... 37
Indenture.................................................................. 37
Indenture Trustee......................................................... 37
Issuer Covenants.......................................................... 37
Events of Default......................................................... 38
Events of Default Remedies................................................ 38
Early Redemption Events................................................... 40
Meetings.................................................................. 40
Voting.................................................................... 41
Amendments to the Indenture............................................... 41
Tax Opinions for Amendments............................................... 43
Addresses for Notices..................................................... 43
Issuer's Annual Compliance Statement...................................... 43
Indenture Trustee's Annual Report......................................... 43
List of Noteholders....................................................... 43
Reports................................................................... 43
MBNA's Credit Card Activities.............................................. 44
General................................................................... 44
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
Acquisition and Use of Credit Card Accounts............................... 44
MBNA Hallmark............................................................. 45
Interchange............................................................... 45
Master Trust II............................................................ 45
General................................................................... 45
Master Trust II Trustee................................................... 45
The Receivables........................................................... 46
Investor Certificates..................................................... 46
Transfer and Assignment of Receivables.................................... 47
Addition of Master Trust II Assets........................................ 47
Removal of Accounts....................................................... 48
Collection and Other Servicing Procedures................................. 49
Master Trust II Accounts.................................................. 49
Investor Percentage....................................................... 50
Transfer of Annual Membership Fees........................................ 50
Application of Collections................................................ 50
Defaulted Receivables; Rebates and Fraudulent Charges..................... 51
Master Trust II Termination............................................... 52
Pay Out Events............................................................ 52
Servicing Compensation and Payment of Expenses............................ 53
New Issuances............................................................. 54
Representations and Warranties............................................ 55
Certain Matters Regarding MBNA as Seller and as Servicer.................. 57
Servicer Default.......................................................... 58
Evidence as to Compliance................................................. 58
Amendments to the Master Trust II Agreement............................... 59
</TABLE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
Certificateholders Have Limited Control of Actions....................... 60
Material Legal Aspects of the Receivables................................. 60
Transfer of Receivables.................................................. 60
Certain Matters Relating to Conservatorship or Receivership.............. 61
Consumer Protection Laws................................................. 62
Federal Income Tax Consequences........................................... 62
General.................................................................. 62
Tax Characterization of the Issuer and the Notes......................... 63
Consequences to Holders of the Offered Notes............................. 64
State and Local Tax Consequences......................................... 66
Benefit Plan Investors.................................................... 66
Prohibited Transactions.................................................. 66
Potential Prohibited Transactions from Investment in Notes............... 66
Prohibited Transactions between the Benefit Plan and a Party in
Interest................................................................ 66
Prohibited Transactions between the Issuer or Master Trust II and a Party
in Interest............................................................. 67
Investment by Benefit Plan Investors..................................... 68
Tax Consequences to Benefit Plans........................................ 68
Plan of Distribution...................................................... 68
Legal Matters............................................................. 69
Where You Can Find More Information....................................... 69
Glossary of Defined Terms................................................. 70
</TABLE>
4
<PAGE>
Prospectus Summary
This summary does not contain all the information you may need to make an
informed investment decision. You should read the entire prospectus and any
supplement to this prospectus before you purchase any notes. The accompanying
supplement to this prospectus may supplement disclosure in this prospectus.
There is a glossary beginning on page 70 where you will find the definitions
of some terms used in this prospectus.
Securities Offered
The issuer is offering notes. The notes will be issued pursuant to an indenture
between the issuer and The Bank of New York, as indenture trustee.
Risk Factors
Investment in notes involves risks. You should consider carefully the risk
factors beginning on page 11 in this prospectus and any risk factors disclosed
in the accompanying prospectus supplement.
Issuer
MBNA Credit Card Master Note Trust, a Delaware trust, is the issuer of the
notes. The issuer's primary asset is the collateral certificate issued by
master trust II. The address of the issuer is MBNA Credit Card Master Note
Trust, c/o MBNA America Bank, National Association, as beneficiary, [Address].
Its telephone number is (302) [.]-[.].
Master Trust II
The issuer's primary asset is the collateral certificate issued by the MBNA
Master Credit Card Trust II, master trust II. For a description of the
collateral certificate, see "Sources of Funds to Pay the Notes--The Collateral
Certificate." Master trust II's assets consist primarily of credit card
receivables arising in a portfolio of revolving credit card accounts. For a
description of master trust II, see "Master Trust II."
MBNA
MBNA America Bank, National Association formed master trust II and has
transferred and may continue to transfer credit card receivables to master
trust II. MBNA will be responsible for servicing, managing and making
collections on the credit card receivables in master trust II.
MBNA is the originator of and the administrator for the issuer.
Indenture Trustee
The Bank of New York is the indenture trustee under the indenture for the
notes.
Series, Classes and Tranches of Notes
The notes will be issued in series. Each series is entitled to its allocable
share of the issuer's assets. It is expected that most series will consist of
multiple classes. A class designation determines the relative seniority for
receipt of cash flows and funding of default amounts on receivables allocated
to the related series of notes. For example, subordinated classes of notes
provide credit enhancement for senior classes of notes in the same series.
Some series of notes will be multiple tranche series, meaning that they may
have classes consisting of multiple tranches. Tranches of notes within a class
may be issued on different dates and have different stated principal amounts,
rates of interest, interest payment dates, expected principal payment dates,
legal maturity dates and other material terms as described in the related
prospectus supplement.
In a multiple tranche series, the expected principal payment dates and the
legal maturity dates of the senior and subordinated classes of such series may
be different. As such, certain subordinated tranches of notes may have expected
principal payment dates and legal maturity dates earlier than some or all of
the senior notes of such series. However, subordinated notes will not be repaid
before their legal maturity dates, unless, after payment, the remaining
subordinated notes provide the required amount of credit enhancement for the
senior notes. In addition, senior notes will not be issued unless, after
issuance, there are enough outstanding subordinated notes to provide the
required amount of credit enhancement for the senior notes. See "The Notes--
Issuance of New Series, Classes and Tranches of Notes."
5
<PAGE>
Some series may not be multiple tranche series. For these series, there is only
one tranche per class and each class is generally issued on the same date. The
expected principal payment dates and legal maturity dates of the subordinated
classes of such a series will either be the same as or later than those of the
senior classes of that series.
Interest Payments
Each tranche of notes, other than zero-coupon discount notes, will bear
interest from the date and at the rate set forth or as determined in a
supplement to this prospectus. Interest on the notes will be paid on the
interest payment dates specified in a supplement to this prospectus.
Expected Principal Payment Date and Legal Maturity Date
Unless otherwise specified in a supplement to this prospectus, the issuer
expects to pay the stated principal amount of each note in one payment on that
note's expected principal payment date. The expected principal payment date of
a note is [.] months before its legal maturity date. The legal maturity date is
the date on which a note is legally required to be fully paid. The expected
principal payment date and legal maturity date for a note will be specified in
a supplement to this prospectus.
The issuer is obligated to pay the stated principal amount of a note on its
expected principal payment date, or upon the occurrence of an early redemption
event or event of default only to the extent that funds are available for that
purpose and, in the case of subordinated notes of a multiple tranche series
that payment is permitted by the subordination provisions of the senior notes
of the same series. The remedies a noteholder may exercise following an event
of default and acceleration or on the legal maturity date are described in
"Indenture--Events of Default" and "Sources of Funds to Pay the Notes--Sale of
Credit Card Receivables."
Stated Principal Amount, Outstanding Dollar Principal Amount and Nominal
Liquidation Amount of Notes
Each note has a stated principal amount, an outstanding dollar principal amount
and a nominal liquidation amount.
. Stated Principal Amount. The stated principal amount of a note is the amount
that is stated on the face of the note to be payable to the holder. It can be
denominated in U.S. dollars or a foreign currency.
. Outstanding Dollar Principal Amount. For U.S. dollar notes, the outstanding
dollar principal amount will be the same as the stated principal amount, less
principal payments to noteholders. For foreign currency notes, the
outstanding dollar principal amount will be the U.S. dollar equivalent of the
stated principal amount of the notes, less dollar payments to derivative
counterparties with respect to principal. For discount notes, the outstanding
dollar principal amount will be an amount stated in, or determined by a
formula described in, the applicable supplement to this prospectus.
. Nominal Liquidation Amount. The nominal liquidation amount of a note is a
U.S. dollar amount based on the outstanding dollar principal amount of the
note, but after deducting:
--that note's share of reallocations of available principal amounts used to
pay interest on senior classes of notes or the servicing fee of the same
series;
--that note's share of the charge-offs for uncovered defaults in master trust
II;
--amounts on deposit in the principal funding subaccount for that note;
and adding back all reimbursements, from excess available funds allocated to
that note, of (i) reallocations of available principal amounts used to pay
interest on senior classes of notes or the servicing fee or (ii) charge-offs
for uncovered defaults in master trust II. Excess available funds are available
funds that remain after the payment of interest and other required payments
with respect to the notes.
The nominal liquidation amount of a tranche of notes corresponds to the portion
of the investor interest of the collateral certificate that is allocated to
support that tranche of notes.
6
<PAGE>
The aggregate nominal liquidation amount of all of the notes is equal to the
investor interest of the collateral certificate. The investor interest of the
collateral certificate corresponds to the amount of principal receivables in
master trust II that is allocated to support the collateral certificate. For a
more detailed discussion, see the definition of investor interest in the
glossary. Anything that increases or decreases the aggregate nominal
liquidation amount of the notes will also increase or decrease the investor
interest of the collateral certificate.
Upon a sale of credit card receivables held by master trust II directed by a
tranche of notes following an event of default and acceleration, or on that
tranche's legal maturity date, as described in "Sources of Funds to Pay the
Notes--Sale of Credit Card Receivables," the nominal liquidation amount of that
tranche will be reduced to zero.
For a detailed discussion of nominal liquidation amount, see "The Notes--Stated
Principal Amount, Outstanding Dollar Principal Amount and Nominal Liquidation
Amount."
Subordination
Unless otherwise specified in the prospectus supplement, available principal
amounts allocable to subordinated classes of notes may be reallocated to pay
interest on senior classes of notes in that series or the portion of the master
trust II servicing fee allocable to that series. In addition, charge-offs from
uncovered defaults allocable to a series will generally be allocated to each
tranche pro rata and then reallocated from tranches in the senior classes to
tranches in the subordinated classes to the extent credit enhancement in the
form of subordination is still available to such senior tranches.
In addition, available principal amounts are first utilized to fund targeted
deposits to the principal funding subaccounts of senior classes before being
applied to the principal funding subaccounts of the subordinated classes.
Subordinated notes that reach their expected principal payment date, or that
have an early redemption event, event of default or other optional or mandatory
redemption, will not be paid to the extent that those notes are necessary to
provide the required subordinated amount to senior classes of notes of the same
series. If a tranche of subordinated notes cannot be paid because of the
subordination provisions of its respective indenture supplement, prefunding of
the principal funding subaccounts for the senior notes of the same series will
begin, as described in the related prospectus supplement. After that time, the
subordinated notes will be paid only to the extent that:
. the principal funding subaccounts for the senior classes of notes of that
series are prefunded in an amount such that none of the subordinated notes
that have reached their expected principal payment date are necessary to
provide the required subordinated amount; or
. new tranches of subordinated notes of that series are issued so that the
subordinated notes that have reached their expected principal payment date
are no longer necessary to provide the required subordinated amount; or
. enough notes of senior classes of that series are repaid so that the
subordinated notes that have reached their expected principal payment date
are no longer necessary to provide the required subordinated amount; or
. the subordinated notes reach their legal maturity date.
On the legal maturity date of a tranche of notes, available principal amounts,
if any, allocable to that tranche, after giving effect to all reallocations and
sales of receivables, will be paid to the noteholders of that tranche, even if
payment would reduce the amount of subordination below the required
subordinated amount of the senior classes of that series.
Limit on Repayment of All Notes
You may not receive full repayment of your notes if:
. the nominal liquidation amount of your notes has been reduced by charge-offs
due to uncovered defaults in master trust II or as a result of reallocations
of available principal amounts to pay interest on senior classes of notes or
the servicing fee, and those amounts have not been reimbursed from excess
available funds; or
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. receivables are sold after an event of default and acceleration or on the
legal maturity date and the proceeds from the sale of receivables are
insufficient.
Sources of Funds to Pay the Notes
The issuer will have the following sources of funds to pay principal and
interest on the notes:
. Collateral Certificate. The collateral certificate is an investor certificate
issued as "Series 2001-[.]" by master trust II to the issuer. It represents
an undivided interest in the assets of master trust II. Master trust II owns
primarily credit card receivables arising in selected MasterCard and VISA
revolving credit card accounts. MBNA has transferred credit card receivables
to master trust II in accordance with the terms of a pooling and servicing
agreement between MBNA and The Bank of New York, as master trust II trustee.
Both collections of principal receivables and finance charge receivables
will, in general, be allocated among holders of interests in master trust
II--including the collateral certificate--based generally on the investment
in credit card receivables of each interest in master trust II. If
collections of receivables allocable to the collateral certificate are less
than expected, payments of principal of and interest on the notes could be
delayed or remain unpaid.
The collateral certificate will receive an investment grade rating from at
least one nationally recognized rating agency.
. Derivative Agreements. Some notes may have the benefit of one or more
derivative agreements, including interest rate or currency swaps, or other
similar agreements with various counterparties. MBNA or any of its affiliates
may be counterparties to a derivative agreement. A description of the
specific terms of each derivative agreement and each derivative counterparty
will be included in the applicable prospectus supplement.
. The Issuer Accounts. The issuer has established a collection account for the
purpose of receiving payments of collections of finance charge receivables
and principal receivables from master trust II payable under the collateral
certificate. If so specified in the prospectus supplement, the issuer may
establish supplemental accounts for any series, class or tranche of notes.
Each month, distributions on the collateral certificate will be deposited into
the collection account. Those deposits will then be allocated among each series
of notes and applied as described in the accompanying prospectus supplement.
Redemption and Early Redemption of Notes
If so specified in the accompanying prospectus supplement, under certain
circumstances the issuer or a noteholder may, at its option, redeem the notes
of any series, class or tranche before its expected principal payment date. The
prospectus supplement will indicate who will have that right of redemption as
well as the terms of that redemption.
In addition, the issuer is required to redeem any note upon the occurrence of
an early redemption event with respect to that note, but only to the extent
funds are available for such redemption after giving effect to all allocations
and reallocations.
Early redemption events include the following:
. the occurrence of a note's expected principal payment date;
. each of the pay out events applicable to the collateral certificate, as
described under "Master Trust II--Pay Out Events";
. the issuer becoming an "investment company" within the meaning of the
Investment Company Act of 1940, as amended; or
. any additional early redemption events specified in the accompanying
prospectus supplement.
Events of Default
The documents that govern the terms and conditions of the notes include a list
of adverse events known as events of default. Some events of default result in
an automatic acceleration of those notes, and others result in the right of the
holders of the affected series, class or tranche of notes to demand
acceleration after an affirmative vote by holders of more than 50% of the
outstanding dollar principal amount of the affected series, class or tranche of
notes.
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Events of default for any series, class or tranche of notes include the
following:
. the issuer's failure, for a period of thirty-five (35) days, to pay interest
on any note of the related series, class or tranche when due;
. the issuer's failure to pay the stated principal amount of any note of the
related series, class or tranche on its legal maturity date;
. the issuer's default in the performance, or breach, of any other of its
covenants or warranties in the indenture for a period of sixty (60) days
after written notice to the issuer by the indenture trustee or to the issuer
and the indenture trustee by the holders of 25% of the aggregate outstanding
dollar principal amount of the outstanding notes of the affected series,
class or tranche, and, as a result of such default, the interests of the
related noteholders are materially and adversely affected and continue to be
materially and adversely affected during the sixty (60) day period;
. the occurrence of certain events of bankruptcy, insolvency, conservatorship
or receivership of the issuer; and
. any additional events of default specified in the accompanying prospectus
supplement.
It is not an event of default if the stated principal amount of a note is not
paid on its expected principal payment date. An event of default with respect
to one series, class or tranche of notes will not necessarily be an event of
default with respect to any other series, class or tranche of notes.
It is not an event of default if the issuer fails to redeem a note because it
does not have sufficient funds available or because payment of the note is
delayed to provide required subordination protection to a senior class of
notes.
Event of Default Remedies
After an event of default and acceleration of a series, class or tranche of
notes, funds on deposit in the applicable issuer accounts for the affected
notes will be applied to pay principal of and interest on those notes. Then, in
each following month, available principal amounts and available funds allocated
to those notes will be applied to make monthly principal and interest payments
on those notes until the earlier of the date those notes are paid in full or
the legal maturity date of those notes. However, subordinated notes of a
multiple tranche series will receive payment of principal of those notes prior
to the legal maturity date of such notes only if and to the extent that funds
are available for that payment and, after giving effect to that payment, the
required subordinated amount will be maintained for senior notes in that
series.
If an event of default of a series, class or tranche of notes occurs and that
series, class or tranche of notes is accelerated, the indenture trustee may,
and at the direction of the majority of the noteholders of the affected series,
class or tranche will, direct master trust II to sell credit card receivables.
However, this sale of receivables may occur only if the conditions specified in
"Indenture--Events of Default" are satisfied or on the legal maturity date of
those notes. The holders of the accelerated notes will be paid their allocable
share of the proceeds of a sale of credit card receivables. Upon the sale of
the receivables of the accelerated notes, the nominal liquidation amount of
those notes will be reduced to zero. See "Sources of Funds to Pay the Notes--
Sale of Credit Card Receivables."
Security for the Notes
The notes of all series are secured by a shared security interest in the
collateral certificate and the collection account, but each tranche of notes is
entitled to the benefits of only that portion of those assets allocated to it
under the indenture and the indenture supplement.
Each tranche of notes is also secured by:
. a security interest in any applicable supplemental account; and
. a security interest in any derivative agreement for that tranche.
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Limited Recourse to the Issuer
The sole source of payment for principal of or interest on a tranche of notes
is provided by:
. the portion of collections of principal receivables and finance charge
receivables received by the issuer under the collateral certificate and
available to that tranche of notes after giving effect to all allocations and
reallocations;
. funds in the applicable issuer accounts for that tranche of notes; and
. payments received under any applicable derivative agreement for that tranche
of notes.
Noteholders will have no recourse to any other assets of the issuer or any
other person or entity for the payment of principal of or interest on the
notes.
If a tranche of notes directs master trust II to sell credit card receivables
following an event of default and acceleration, or on the applicable legal
maturity date, as described in "Sources of Funds to Pay the Notes--Sale of
Credit Card Receivables," that tranche of notes has recourse only to the
proceeds of that sale and investment earnings on those proceeds.
Registration, Clearance and Settlement
The notes offered by this prospectus will be registered in the name of The
Depository Trust Company or its nominee, and purchasers of notes will not be
entitled to receive a definitive certificate except under limited
circumstances. Owners of notes may elect to hold their notes through The
Depository Trust Company in the United States or through Clearstream,
Luxembourg, formerly known as Cedelbank, societe anonyme, or the Euroclear
System in Europe. Transfers will be made in accordance with the rules and
operating procedures of those clearing systems. See "The Notes--Book- Entry
Notes."
ERISA Eligibility
The indenture permits benefit plans to purchase notes of every class. A
fiduciary of a benefit plan should consult its counsel as to whether a purchase
of notes by the plan is permitted by ERISA and the Internal Revenue Code.
Tax Status
Subject to important considerations described under "Federal Income Tax
Consequences" in this prospectus, Orrick, Herrington & Sutcliffe LLP, as
special tax counsel to the issuer, is of the opinion that, for United States
federal income tax purposes (1) the notes will be treated as indebtedness and
(2) the issuer will not be an association or a publicly traded partnership
taxable as a corporation. In addition, noteholders will agree, by acquiring
notes, to treat the notes as debt of the transferor for federal, state and
local income and franchise tax purposes.
Denominations
The notes offered by this prospectus will be issued in denominations of $1,000
and multiples of $1,000 in excess of that amount.
Record Date
The record date for payment of the notes will be the last day of the month
before the related payment date.
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Risk Factors
The risk factors disclosed in this section of the prospectus and in the
prospectus supplement describe the principal risk factors of an investment in
the notes.
Some liens may be given priority over your notes
which could cause your receipt of payments to be
delayed or reduced.
MBNA treats the transfer of receivables to master
trust II as a sale for accounting purposes. However,
a court could conclude that MBNA still owns the
receivables subject to a security interest in favor
of master trust II in the receivables. MBNA has taken
steps to give the master trust II trustee a "first
priority perfected security interest" in the
receivables in the event a court concludes MBNA still
owns the receivables. If a court concludes that the
transfer to master trust II is only a grant by MBNA
of a security interest in the receivables, a tax or
government lien (or other lien imposed under
applicable state or federal law without the consent
of MBNA) on MBNA's property arising before new
receivables come into existence may be senior to
master trust II's interest in such receivables. Also,
if MBNA became insolvent or the Federal Deposit
Insurance Corporation was appointed conservator or
receiver of MBNA, the FDIC's administrative expenses
might be paid from the receivables before master
trust II received any payments on the receivables. If
insolvency proceedings were commenced by or against
MBNA, as servicer of the receivables, or if certain
time periods were to elapse, master trust II may not
have a first-priority perfected security interest in
collections commingled and used for the benefit of
MBNA, as servicer. If these events occur, payments to
you could be delayed or reduced. See "Material Legal
Aspects of the Receivables--Transfer of Receivables"
and "Master Trust II--Representations and Warranties"
in this prospectus.
If a conservator or receiver were appointed for MBNA,
delays or reductions in payment of your notes could
occur.
MBNA is chartered as a national banking association
and is regulated and supervised by the Office of the
Comptroller of the Currency, which is authorized to
appoint the FDIC as conservator or receiver for MBNA
if certain events occur relating to MBNA's financial
condition or the propriety of its actions. In
addition, the FDIC could appoint itself as
conservator or receiver for MBNA.
Although MBNA will treat its transfer of the
receivables to master trust II as a sale for
accounting purposes, the transfer may constitute the
grant of a security interest under general applicable
law. Nevertheless, the FDIC has issued regulations
surrendering certain rights under the Federal Deposit
Insurance Act, as amended by the Financial
Institutions Reform, Recovery and Enforcement Act of
1989, to reclaim, recover or recharacterize a bank's
transfer of financial assets such as the receivables
if (i) the transfer involved a securitization of the
financial assets and meets specified conditions for
treatment as a sale under relevant accounting
principles, (ii) the bank received adequate
consideration for the transfer, (iii) the parties
intended that the transfer constitute a sale for
accounting purposes and (iv) the financial assets
were not transferred fraudulently, in contemplation
of the bank's insolvency,
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or with the intent to hinder, delay or defraud the
bank or its creditors. The master trust II agreement
and the transfer of the receivables by MBNA to master
trust II have been structured to satisfy all of these
conditions.
If a condition required under the FDIC's regulations
were found not to have been met, however, the FDIC
could reclaim, recover or recharacterize MBNA's
transfer of the receivables. The FDIA would limit
master trust II's damages in this event to its
"actual direct compensatory damages" determined as of
the date that the FDIC was appointed as conservator
or receiver for MBNA. The FDIC, moreover, could delay
its decision whether to reclaim, recover or
recharacterize MBNA's transfer of the receivables for
a reasonable period following its appointment as
conservator or receiver for MBNA. Therefore, if the
FDIC were to reclaim, recover or recharacterize
MBNA's transfer of the receivables, payments to the
issuer (and therefore to the noteholders) could be
delayed or reduced.
Even if the conditions set forth in the regulations
were satisfied and the FDIC did not reclaim, recover
or recharacterize MBNA's transfer of the receivables,
noteholders could suffer a loss on their investment
if (i) the master trust II agreement or MBNA's
transfer of the receivables were found to violate the
regulatory requirements of the FDIA, (ii) the master
trust II trustee, the issuer or the indenture trustee
were required to comply with the claims process
established under the FDIA in order to collect
payments on the receivables, (iii) the FDIC were to
request a stay of any action by the master trust II
trustee, the issuer or the indenture trustee to
enforce the master trust II agreement, the collateral
certificate, the indenture or the notes or (iv) the
FDIC were to repudiate other parts of the master
trust II agreement, such as any obligation to collect
payments on or otherwise service the receivables.
In addition, regardless of the terms of the master
trust II agreement, the indenture or the instructions
of those authorized to direct the master trust II
trustee's or the indenture trustee's actions, the
FDIC may have the power (i) to prevent or require the
commencement of a rapid amortization period or rapid
accumulation period, (ii) to prevent, limit, or
require the early liquidation of the receivables and
termination of master trust II or the issuer, or
(iii) to require, prohibit or limit the continued
transfer of receivables to master trust II. The FDIC,
moreover, could prevent the master trust II trustee
or the certificateholders from appointing a successor
servicer under the master trust II agreement. If any
of these events were to occur, payments to
noteholders could be delayed or reduced.
Allocations of defaulted receivables and reallocation
of available principal amounts could reduce payment
of principal to you.
MBNA, as servicer, will write off the receivables
arising in accounts in the master trust II portfolio
if the receivables become uncollectible. Your tranche
of notes will be allocated a portion of these
defaulted receivables. In addition, available
principal amounts allocated to your tranche of notes
may be reallocated to pay interest on more senior
classes of notes or to pay the servicing fee. You may
not receive full repayment of your notes if the
nominal liquidation amount of your notes has been
reduced by charge-offs resulting from uncovered
default amounts or as the result of reallocations of
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available principal amounts to pay interest and
servicing fees, and those amounts have not been
reimbursed from excess available funds. For a
discussion of nominal liquidation amount, see "The
Notes--Stated Principal Amount, Outstanding Dollar
Principal Amount and Nominal Liquidation Amount."
Changes to consumer protection laws may impede
collection efforts or alter timing and amount of
collections which may result in a reduction in
payments on your notes.
Receivables that do not comply with consumer
protection laws may not be valid or enforceable under
their terms against the obligors of those
receivables.
Federal and state consumer protection laws regulate
the creation and enforcement of consumer loans.
Congress and the states could further regulate the
credit card and consumer credit industry in ways that
make it more difficult for MBNA as servicer of master
trust II to collect payments on the receivables or
that reduce the finance charges and other fees that
MBNA as seller to master trust II can charge on
credit card account balances. For example, if MBNA
were required to reduce its finance charges and other
fees, resulting in a corresponding decrease in the
accounts' effective yield, this could lead to a pay
out event with respect to the collateral certificate
and could result in an early payment of your notes.
See "Master Trust II--Pay Out Events" and "Material
Legal Aspects of the Receivables--Consumer Protection
Laws" in this prospectus.
If a cardholder sought protection under federal or
state bankruptcy or debtor relief laws, a court could
reduce or discharge completely the cardholder's
obligations to repay amounts due on its account and,
as a result, the related receivables would be written
off as uncollectible. The noteholders could suffer a
loss if no funds are available from credit
enhancement or other sources. See "Master Trust II--
Defaulted Receivables; Rebates and Fraudulent
Charges" in this prospectus.
Competition in the credit card industry may result in
a decline in ability to generate new receivables.
This may result in the payment of principal earlier
or later than the expected principal payment date.
The credit card industry is highly competitive. As
new credit card companies enter the market and
companies try to expand their market share, effective
advertising, target marketing and pricing strategies
grow in importance. MBNA's ability to compete in this
industry environment will affect its ability to
generate new receivables and might also affect
payment patterns on the receivables. If the rate at
which MBNA generates new receivables declines
significantly, MBNA might be unable to transfer
additional receivables or designate additional
accounts to master trust II and a pay out event could
occur, resulting in payment of principal sooner than
expected. If the rate at which MBNA generates new
receivables decreases significantly at a time when
noteholders are scheduled to receive principal,
noteholders might receive principal more slowly than
planned.
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Payment patterns of cardholders may not be consistent
over time and variations in these payment patterns
may result in reduced payment of principal, or
receipt of payment of principal earlier or later than
expected.
Collections of principal receivables available to pay
your notes on any principal payment date or to make
deposits into an issuer account will depend on many
factors, including:
. the rate of repayment of credit card balances by
cardholders, which may be earlier or later than
expected;
. the extent of credit card usage by cardholders,
and the creation of additional receivables in
the accounts designated to master trust II; and
. the rate of default by cardholders, which means
that receivables may not be paid at all.
Changes in payment patterns and credit card usage
result from a variety of economic, social and legal
factors. Economic factors include the rate of
inflation, unemployment levels and relative interest
rates. The availability of incentive or other award
programs may also affect cardholders' actions. Social
factors include consumer confidence levels and the
public's attitude about incurring debt and the
consequences of personal bankruptcy. We cannot
predict how these or other factors will affect
repayment patterns or card use and, consequently, the
timing and amount of payments on your notes.
The note interest rate and the receivables interest
rate may re-set at different times or fluctuate
differently, resulting in delayed or reduced payments
to you.
Some credit card accounts may have finance charges
set at a variable rate based on a designated index
(for example, the prime rate). A series, class or
tranche of notes may bear interest either at a fixed
rate or at a floating rate based on a different
index. If the rate charged on the credit card
accounts declines, collections of finance charge
receivables allocated to the collateral certificate
may be reduced without a corresponding reduction in
the amounts payable as interest on the notes and
other amounts paid from collections of finance charge
receivables. This could result in delayed or reduced
principal and interest payments to you.
Issuance of additional notes or master trust II
investor certificates may affect the timing and
amount of payments to you.
The issuer expects to issue notes from time to time,
and master trust II may issue new investor
certificates from time to time. New notes and master
trust II investor certificates may be issued without
notice to existing noteholders, and without their
consent, and may have different terms from
outstanding notes and investor certificates. For a
description of the conditions that must be met before
master trust II can issue new investor certificates
or the issuer can issue new notes, see "Master Trust
II--New Issuances" and "The Notes--Issuances of New
Series, Classes and Tranches of Notes."
The issuance of new notes or master trust II investor
certificates could adversely affect the timing and
amount of payments on outstanding notes. For example,
if notes in your series issued after your notes are
issued have a
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higher interest rate than your notes, the result
could be that there is a smaller amount of available
funds available to pay interest on your notes. Also,
when new notes or investor certificates are issued,
the voting rights of your notes may be diluted. See
"Risk Factors--You may have limited or no ability to
control actions under the indenture and the master
trust II agreement."
Addition of accounts to master trust II may decrease
the credit quality of the assets securing the
repayment of your notes. If this occurs, your receipt
of payments of principal and interest may be reduced,
delayed or accelerated.
The assets of master trust II, and therefore the
assets allocable to the collateral certificate held
by the issuer, change every day. MBNA may choose, or
may be required, to add credit card receivables to
master trust II. The credit card accounts from which
these receivables arise may have different terms and
conditions from the credit card accounts already
designated for master trust II. For example, the new
credit card accounts may have higher or lower fees or
interest rates, or different payment terms. We cannot
guarantee that new credit card accounts will be of
the same credit quality as the credit card accounts
currently or historically designated for master trust
II. If the credit quality of the assets in master
trust II were to deteriorate, the issuer's ability to
make payments on the notes could be adversely
affected. See "Master Trust II-- Addition of Master
Trust II Assets."
MBNA may not be able to generate new receivables or
designate new credit card accounts to master trust II
when required by the master trust II agreement
thereby lessening the issuer's ability to make
payments to you.
The issuer's ability to make payments on the notes
will be impaired if sufficient new credit card
receivables are not generated by MBNA. We do not
guarantee that new credit card receivables will be
created, that any credit card receivables will be
added to master trust II or that credit card
receivables will be repaid at a particular time or
with a particular pattern.
The master trust II agreement provides that MBNA must
add additional credit card receivables to master
trust II if the total amount of principal receivables
in master trust II falls below specified percentages
of the total investor interests of investor
certificates in master trust II. There is no
guarantee that MBNA will have enough receivables to
add to master trust II. If MBNA does not make an
addition of receivables within five business days
after the date it is required to do so, a pay out
event will occur with respect to the collateral
certificate. This would constitute an early
redemption event and could result in an early payment
of your notes. See "Master Trust II--Addition of
Master Trust II Assets," "--Pay Out Events" and
"Indenture--Early Redemption Events."
MBNA may change the terms of the credit card accounts
in a way that reduces or slows collections. These
changes may result in reduced or early or later
payments to you.
MBNA transfers the receivables to master trust II but
continues to own the accounts. As owner of the
accounts, MBNA retains the right to change various
account terms (including finance charges and other
fees it charges and
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the required monthly minimum payment). An early
redemption event could occur if MBNA reduced the
finance charges and other fees it charges and a
corresponding decrease in the collection of finance
charges and fees resulted. In addition, changes in
the account terms may alter payment patterns. If
payment rates decrease significantly at a time when
you are scheduled to receive principal, you might
receive principal more slowly than planned.
MBNA will not reduce the interest rate it charges on
the receivables or other fees if that action would
reduce the portfolio yield below the base rate unless
MBNA is required by law or determines it is necessary
to maintain its credit card business, based on its
good faith assessment of its business competition.
MBNA will not change the terms of the accounts or its
servicing practices (including the reduction of the
required minimum monthly payment and the calculation
of the amount or the timing of finance charges, other
fees and charge-offs) unless MBNA reasonably believes
the portfolio yield would not be reduced below the
base rate or a master trust II pay out event would
not occur for any master trust II series of investor
certificates and takes the same action on its other
substantially similar accounts, to the extent
permitted by those accounts.
For a discussion of portfolio yield and base rate,
see the prospectus supplement.
MBNA has no restrictions on its ability to change the
terms of the accounts except as described above or in
the accompanying prospectus supplement. Changes in
relevant law, changes in the marketplace or prudent
business practices could cause MBNA to change account
terms.
The effect on noteholders of certain litigation
against MBNA is unclear.
In May 1996, Andrew B. Spark filed a lawsuit against
MBNA Corporation, MBNA and certain of its officers
and its subsidiary, MBNA Marketing Systems, Inc. The
case is pending in the United States District Court
for the District of Delaware. This suit is a
purported class action. The plaintiff alleges that
MBNA's advertising of its cash promotional annual
percentage rate program was fraudulent and deceptive.
The plaintiff seeks unspecified damages including
actual, treble and punitive damages and attorneys'
fees for an alleged breach of contract, violation of
the Delaware Deceptive Trade Practices Act and the
federal Racketeer Influenced and Corrupt
Organizations Act. In February 1998, a class was
certified. In September 2000, the court gave
preliminary approval to a settlement of this case.
This case should have no effect with respect to the
collateral certificate or the noteholders' interests.
In October 1998, Gerald D. Broder filed a lawsuit
against MBNA Corporation and MBNA in the Supreme
Court of the State of New York, County of New York.
This suit is a purported class action. The plaintiff
alleges that MBNA's advertising of its cash
promotional annual percentage rate program was
fraudulent and deceptive. The plaintiff seeks
unspecified damages including actual, treble and
punitive damages and attorneys' fees for an alleged
breach of contract, common law fraud and violation of
New York consumer protection statutes. In April 2000,
summary judgment was granted to MBNA Corporation on
the common law fraud claim and a class was certified
by the court. In May 2000, MBNA
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Corporation filed an appeal from the order certifying
a class and denying part of defendants' motion for
summary judgment. MBNA Corporation believes that its
advertising practices are proper under applicable
federal and state law and intends to defend this
action vigorously. It is not clear at this point in
time what effect, if any, this case will have with
respect to the collateral certificate or the
noteholders' interests. See "Master Trust II--
Representations and Warranties" in this prospectus.
If MBNA breaches representations and warranties
relating to the receivables, payments on your notes
may be reduced.
MBNA, as seller of the receivables, makes
representations and warranties relating to the
validity and enforceability of the receivables
arising under the credit card accounts in the master
trust II portfolio, and as to the perfection and
priority of the master trust II trustee's interests
in the receivables. However, the master trust II
trustee will not make any examination of the
receivables or the related assets for the purpose of
determining the presence of defects, compliance with
the representations and warranties or for any other
purpose.
If a representation or warranty relating to the
receivables is violated, the related obligors may
have defenses to payment or offset rights, or
creditors of MBNA may claim rights to the master
trust II assets. If a representation or warranty is
violated, MBNA may have an opportunity to cure the
violation. If it is unable to cure the violation,
subject to certain conditions described under "The
Notes--Representations and Warranties" in this
prospectus, MBNA must accept reassignment of each
receivable affected by the violation. These
reassignments are the only remedy for breaches of
representations and warranties, even if your damages
exceed your share of the reassignment price. See
"Master Trust II--Representations and Warranties" in
this prospectus.
There is no public market for the notes. As a result
you may be unable to sell your notes or the price of
the notes may suffer.
The underwriters of the notes may assist in resales
of the notes but they are not required to do so. A
secondary market for any notes may not develop. If a
secondary market does develop, it might not continue
or it might not be sufficiently liquid to allow you
to resell any of your notes.
In addition, some notes have a more limited trading
market and experience more price volatility. There
may be a limited number of buyers when you decide to
sell those notes. This may affect the price you
receive for the notes or your ability to sell the
notes at all. You should not purchase notes unless
you understand and know you can bear the investment
risks.
You may not be able to reinvest any early redemption
proceeds in a comparable security.
If your notes are redeemed at a time when prevailing
interest rates are relatively low, you may not be
able to reinvest the redemption proceeds in a
comparable security with an effective interest rate
as high as that of your notes.
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If the ratings of the notes are lowered or withdrawn,
their market value could decrease.
The initial rating of a note addresses the likelihood
of the payment of interest on that note when due and
the ultimate payment of principal of that note by its
legal maturity date. The ratings do not address the
likelihood of payment of principal of a note on its
expected principal payment date. In addition, the
ratings do not address the possibility of an early
payment or acceleration of a note, which could be
caused by an early redemption event or an event of
default. See "Indenture and Trust Agreement--Early
Redemption Events" and "--Events of Default."
The ratings of the notes are not a recommendation to
buy, hold or sell the notes. The ratings of the notes
may be lowered or withdrawn entirely at any time by
the applicable rating agency. The market value of the
notes could decrease if the ratings are lowered or
withdrawn.
You may have limited or no ability to control actions
under the indenture and the master trust II
agreement. This may result in, among other things,
payment of principal being accelerated when it is in
your interest to receive payment of principal at the
expected principal payment date, or it may result in
payment of principal not being accelerated when it is
in your interest to receive early payment of
principal.
Under the indenture, some actions require the consent
of noteholders holding a specified percentage of the
aggregate outstanding dollar principal amount of
notes of a series, class or tranche or all the notes.
These actions include consenting to amendments
relating to the collateral certificate. In the case
of votes by series or votes by holders of all of the
notes, the outstanding dollar principal amount of
senior-most classes of notes will generally be
substantially greater than the outstanding dollar
principal amounts of the subordinated classes of
notes. Consequently, the noteholders in the senior-
most class of notes will generally have the ability
to determine whether and what actions should be
taken. The subordinated noteholders will generally
need the concurrence of the senior-most noteholders
to cause actions to be taken.
The collateral certificate is an investor certificate
under the master trust II agreement, and noteholders
have indirect consent rights under the master trust
II agreement. See "Indenture--Voting." Under the
master trust II agreement, some actions require the
vote of a specified percentage of the aggregate
principal amount of all of the investor certificates.
These actions include consenting to amendments to the
master trust II agreement. In the case of votes by
holders of all of the investor certificates, the
outstanding principal amount of the collateral
certificate is and may continue to be substantially
smaller than the outstanding principal amount of the
other series of investor certificates issued by
master trust II. Consequently, the holders of
investor certificates--other than the collateral
certificate--will generally have the ability to
determine whether and what actions should be taken.
The noteholders, in exercising their voting powers
under the collateral certificate, will generally need
the concurrence of the holders of the other investor
certificates to cause actions to be taken.
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If an event of default occurs, your remedy options
may be limited and you may not receive full payment
of principal and accrued interest.
Your remedies may be limited if an event of default
under your class or tranche of notes occurs. After an
event of default affecting your class or tranche of
notes and an acceleration of your notes, any funds in
an issuer account with respect to that class or
tranche of notes will be applied to pay principal of
and interest on those notes. Then, in each following
month, available principal amounts and available
funds will be deposited into the applicable issuer
account, and applied to make monthly principal and
interest payments on those notes until the legal
maturity date of those notes.
However, if your notes are subordinated notes, you
generally will receive full payment of principal of
those notes only if and to the extent that, after
giving effect to that payment, the required
subordinated amount, if any, will be maintained for
the senior classes of notes in that series.
Following an event of default and acceleration, and
on the applicable legal maturity date, holders of
notes will have the ability to direct a sale of
credit card receivables held by master trust II only
under the limited circumstances as described in
"Indenture--Events of Default" and "Sources of Funds
to Pay the Notes--Sale of Credit Card Receivables."
Even if a sale of receivables is permitted, we can
give no assurance that the proceeds of the sale will
be enough to pay unpaid principal of and interest on
the accelerated notes.
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Glossary
This prospectus uses defined terms. You can find a listing of defined terms
in the "Glossary of Defined Terms" beginning on page 70 in this prospectus. To
assist you in understanding this prospectus, the terms that are defined in the
"Glossary of Defined Terms" in this prospectus appear in bold typeface the
first time they appear in each of the following sections and subsections.
The Issuer
MBNA Credit Card Master Note Trust is the issuer of the notes. The issuer's
principal offices are at Rodney Square North 100 N. Market Street, Wilmington,
Delaware 19890-0001, in care of Wilmington Trust Company, as owner trustee.
The issuer's activities are limited to:
. acquiring and holding the collateral certificate and the other assets of
the issuer and the proceeds from these assets,
. issuing notes,
. making payments on the notes, and
. engaging in other activities that are necessary or incidental to
accomplish these limited purposes.
The assets of the issuer consist primarily of:
. the collateral certificate;
. derivative agreements that the issuer will enter into from time to time
to manage interest rate or currency risk relating to certain series,
classes or tranches of notes; and
. funds on deposit in the issuer accounts.
The issuer does not expect to have any other significant assets.
UCC financing statements will be filed to perfect the ownership or security
interests of the issuer and the indenture trustee described herein.
The issuer is operated pursuant to a trust agreement between MBNA and
Wilmington Trust Company, the owner trustee. The issuer does not have any
officers or directors. Its sole beneficiary is MBNA. As beneficiary, MBNA will
generally direct the actions of the issuer.
MBNA and the owner trustee may amend the trust agreement without the consent
of the noteholders or the indenture trustee so long as the amendment will not
adversely affect in any material respect the interests of the noteholders and
the rating agencies confirm that the amendment will not cause the rating
assigned to any outstanding series, class or tranche of notes to be withdrawn
or reduced. Accordingly, neither the indenture trustee nor any holder of any
note will be entitled to vote on any such amendment.
In addition, if noteholders holding not less than 66 2/3% of the aggregate
outstanding dollar principal amount of the outstanding notes affected by an
amendment consent, and the rating agencies confirm that the amendment will not
cause the rating assigned to any outstanding notes to be withdrawn or reduced,
the trust agreement may also be amended for the purpose of adding, changing or
eliminating any provisions of the trust agreement or of modifying the rights of
those noteholders.
See "Indenture--Tax Opinions for Amendments" for additional conditions to
amending the trust agreement.
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Use of Proceeds
The net proceeds from the sale of each tranche of notes offered hereby will
be paid to MBNA. MBNA will use such proceeds for its general corporate
purposes.
MBNA and MBNA Corporation
MBNA America Bank, National Association, a national banking association
located in Wilmington, Delaware, conducts nationwide consumer lending programs
principally comprised of credit card related activities. MBNA has two wholly
owned foreign bank subsidiaries, MBNA International Bank Limited located in the
United Kingdom and MBNA Canada Bank, located in Canada.
MBNA conducts all direct customer contact processes with respect to the
cardholder. This involves a 24 hour, 365 day per year Customer Service
telephone staff, Credit Decisions, Correspondence Resolution, Security and
Collection Operations.
MBNA is a wholly-owned subsidiary of MBNA Corporation. MBNA was established
in January 1991 in connection with a restructuring of the former MBNA America
Bank, N.A., a wholly-owned subsidiary of MNC Financial, Inc. MBNA Corporation
is a bank holding company organized under the laws of Maryland in 1990 and
registered under the Bank Holding Company Act of 1956, as amended. The
principal asset of MBNA Corporation is the capital stock of MBNA.
The Notes
The notes will be issued pursuant to the indenture. The indenture does not
limit the aggregate stated principal amount of notes that may be issued. The
notes will be issued in series. Each series of notes will represent a
contractual debt obligation of the issuer, where such series shall be in
addition to the debt obligations of the issuer represented by any other series
of notes issued by the issuer. Each series will be issued pursuant to the
indenture and an indenture supplement, a copy of the form of which is filed as
an exhibit to the registration statement of which this prospectus is a part.
Each prospectus supplement will describe the provisions specific to the related
series, class or tranche of notes.
The following summaries describe certain provisions common to each series of
notes.
General
Each series of notes is expected to consist of multiple classes of notes.
Each class of notes may have multiple tranches, if so specified in the
accompanying prospectus supplement, and may be issued on different days.
Whenever a "class" of notes is referred to in this prospectus or any prospectus
supplement, it also includes all tranches of that class, unless the context
otherwise requires.
The issuer may issue different tranches of notes of a series at the same time
or at different times, but no senior tranche of notes of a series may be issued
unless a sufficient amount of subordinated notes of that series will be issued
on that date or has previously been issued and is outstanding. See "--Required
Subordination Protection." If and to the extent specified in a supplement to
this prospectus, the notes of a series may be included in a group of series for
purposes of sharing available principal amounts and available funds.
The issuer may offer notes denominated in U.S. dollars or any foreign
currency. We will describe the specific terms of any note denominated in a
foreign currency in the related prospectus supplement.
If so specified in the accompanying prospectus supplement, the noteholders of
a particular tranche may have the benefit of a derivative agreement, including
an interest rate or currency swap, cap, collar, guaranteed
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investment contract or other similar agreement with various counterparties. The
specific terms of each derivative agreement and a description of each
counterparty will be included in the related prospectus supplement.
The issuer will pay principal of and interest on a tranche of notes solely
from the portion of available funds and available principal amounts which are
allocable to that tranche of notes after giving effect to all allocations and
reallocations, amounts in any issuer accounts relating to that tranche of
notes, and amounts received under any derivative agreement relating to that
tranche of notes. If those sources are not sufficient to pay the notes of that
tranche, those noteholders will have no recourse to any other assets of the
issuer or any other person or entity for the payment of principal of or
interest on those notes.
Holders of notes of any outstanding class or series will not have the right
to prior review of, or consent to, any subsequent issuance of notes.
Interest
Interest will accrue on the notes, except on zero-coupon discount notes, from
the relevant issuance date at the applicable note rate, which may be a fixed,
floating or other type of rate as specified in the accompanying prospectus
supplement. Interest will be distributed or deposited with respect to
noteholders on the dates described in the related prospectus supplement.
Interest payments or deposits will be funded from available funds allocated to
the notes during the preceding monthly period or periods and, from any
applicable credit enhancement, if necessary, or certain other amounts as
specified in the accompanying prospectus supplement.
For each issuance of fixed rate notes, we will designate in the related
prospectus supplement the fixed rate of interest at which interest will accrue
on that note. For each issuance of floating rate notes, we will designate in
the related prospectus supplement the interest rate index or other formula on
which the interest is based. A discount note will be issued at a price lower
than the stated principal amount payable on the expected principal payment date
of that note. Until the expected principal payment date for a discount note,
accreted principal will be capitalized as part of the principal of the note and
reinvested in the collateral certificate. If applicable, the related prospectus
supplement will specify the interest rate to be borne by a discount note after
an event of default or after its expected principal payment date.
Each payment of interest on a note will include all interest accrued from the
preceding interest payment date--or, for the first interest period, from the
issuance date--through the day preceding the current interest payment date, or
any other period as may be specified in the related prospectus supplement. We
refer to each period during which interest accrues as an "interest period."
Interest on a note will be due and payable on each interest payment date.
If interest on a note is not paid within thirty-five (35) days after it is
due, an event of default will occur with respect to that note. See "Indenture--
Events of Default."
Principal
The timing of payment of principal of a note will be specified in the related
prospectus supplement.
It is not an event of default if the principal of a note is not paid on its
expected principal payment date.
Principal of a note may be paid earlier than its expected principal payment
date if an early redemption event or an event of default and acceleration
occurs. See "Indenture--Early Redemption Events" and "--Events of Default."
Principal of a note may be paid later than its expected principal payment
date if sufficient funds are not allocable from master trust II to the
collateral certificate or are not allocable to the series, class and tranche of
the note to be paid. If the stated principal amount of a note is not paid in
full by its legal maturity date, an event of default will occur with respect to
that note. See "Indenture--Events of Default."
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See "Risk Factors--You may receive principal payments earlier or later than
the expected principal payment date" for a discussion of factors that may
affect the timing of principal payments on the notes.
Stated Principal Amount, Outstanding Dollar Principal Amount and Nominal
Liquidation Amount
In order to understand the subordination, if any, of the different classes of
notes and the allocations of funds to different classes and tranches of notes,
an investor needs to understand three concepts:
. the stated principal amount;
. the outstanding dollar principal amount; and
. the nominal liquidation amount.
Each tranche of notes has a stated principal amount, an outstanding dollar
principal amount and a nominal liquidation amount.
Stated Principal Amount
The stated principal amount of a tranche of notes is the amount that is
stated on the face of the notes to be payable to the holder. It can be
denominated in U.S. dollars or in a foreign currency.
Outstanding Dollar Principal Amount
For dollar notes, the outstanding dollar principal amount will be the stated
principal amount, less principal payments to the noteholders. For foreign
currency notes, the outstanding dollar principal amount will be the dollar
equivalent of the stated principal amount of the notes, less dollar payments to
derivative counterparties or, in the event the derivative agreement is non-
performing, less dollar payments converted to make payments to noteholders,
each with respect to principal. For discount notes, the outstanding dollar
principal amount will be an amount stated in, or determined by a formula
described in, the related prospectus supplement. The outstanding dollar
principal amount of a discount note will increase over time as principal
accretes. The outstanding dollar principal amount of any note will decrease as
a result of each payment of principal of the note.
Nominal Liquidation Amount
The nominal liquidation amount of a tranche of notes is a dollar amount based
on the outstanding dollar principal amount of that tranche of notes, but with
some reductions--including reductions from reallocations of available principal
amounts and allocations of charge-offs for uncovered defaults allocable to the
collateral certificate--and increases described below. The aggregate nominal
liquidation amount of all of the notes will always be equal to the investor
interest of the collateral certificate, and the nominal liquidation amount of a
tranche of notes corresponds to the portion of the investor interest of the
collateral certificate that would be allocated to that tranche of notes if
master trust II were liquidated.
The nominal liquidation amount of a tranche of notes may be reduced as
follows:
. If available funds allocable to the notes are insufficient to fund the
portion of defaults allocated to the collateral certificate, such
uncovered defaults will be allocated among the series of notes pro rata
based on the nominal liquidation amount of all notes in the series.
Within each series, unless otherwise specified in the related prospectus
supplement, the reductions will be initially allocated pro rata to each
class of notes based on the nominal liquidation amount of that class.
Then, the reductions initially allocated to the senior-most classes of
notes will be reallocated to the subordinated classes of notes in that
series in succession, beginning with the most subordinated classes.
However, these reallocations will be made from a senior class to a
subordinated class only to the extent that the senior class has not used
all of its required subordinated amount. For any series, the
subordination usage limits will be specified in the related prospectus
supplement. Reductions that cannot
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be reallocated to a subordinated class will reduce the nominal liquidation
amount of the class to which the reductions were initially allocated.
. If available principal amounts are reallocated from a subordinated class
of notes of a series to pay interest on the senior classes of notes, any
shortfall in the payment of the master trust II servicing fee or any
other shortfall with respect to available funds for which available
principal amounts are reallocated to cover, the nominal liquidation
amount of that subordinated class will be reduced by the amount of the
reallocations. The amount of the reallocation of available principal
amounts will be applied to reduce the nominal liquidation amount of the
subordinated classes of notes in that series in succession, to the extent
of such senior class' required subordinated amount of the related
subordinated notes, beginning with the most subordinated classes. No
principal on the senior-most classes of notes will be reallocated to
available funds shortfalls. In a multiple tranche series, these
reductions will be allocated to each outstanding tranche of the series
based on the nominal liquidation amount of each tranche.
. The nominal liquidation amount of a tranche of notes will be reduced by
the amount on deposit in its principal funding subaccount after giving
effect to all allocations and payments.
. The nominal liquidation amount of a tranche of notes will be reduced by
the amount of all payments of principal of that tranche.
. If a tranche of notes directs a sale of credit card receivables after an
event of default and acceleration or on its legal maturity date, its
nominal liquidation amount is automatically reduced to zero. See "Sources
of Funds to Pay the Notes--Sale of Credit Card Receivables."
There are two ways in which the nominal liquidation amount of a note can be
increased.
. For a class of discount notes, the nominal liquidation amount of that
tranche will increase over time as principal accretes, to the extent that
available funds are allocated to that tranche for that purpose.
. If excess available funds are available, they will be applied to
reimburse earlier reductions in the nominal liquidation amount from
charge-offs for uncovered defaults in master trust II, or from
reallocations of available principal amounts from subordinated classes to
pay shortfalls of available funds. Within each series, the increases will
be allocated first to the senior-most class with a deficiency in its
nominal liquidation amount and then, in succession, to the subordinated
classes with a deficiency in the nominal liquidation amount. In a
multiple tranche series, the increases will be allocated to each tranche
of a class pro rata based on the deficiency in the nominal liquidation
amount in each tranche.
In most circumstances, the nominal liquidation amount of a tranche of notes,
together with any accumulated available principal amounts held in a principal
funding subaccount, will be equal to the outstanding dollar principal amount
of that tranche. However, if there are reductions in the nominal liquidation
amount of a tranche of notes as a result of reallocations of principal
collections from that tranche to pay interest on senior classes or the
servicing fee, or as a result of charge-offs for uncovered defaults allocable
to the collateral certificate, there will be a deficit in the nominal
liquidation amount of that tranche. Unless that deficiency is reimbursed
through the reinvestment of excess available funds in the collateral
certificate, the stated principal amount of that tranche of notes will not be
paid in full.
The nominal liquidation amount is used to calculate the maximum amount of
funds that may be reallocated from a subordinated class of notes to pay
interest on a senior class of notes or the servicing fee of the same series
and the maximum amount of charge-offs for uncovered defaults on the
receivables in master trust II that may be reallocated from a senior class or
tranche of notes to a subordinated class or tranche of notes. The nominal
liquidation amount is also used to calculate the amount of available principal
amounts that can be allocated for payment to a tranche of notes, or paid to
the counterparty to a derivative agreement, if applicable. This means that if
the nominal liquidation amount of a tranche of notes has been reduced by
charge-offs for uncovered defaults in master trust II or by reallocations of
available principal amounts to pay interest on senior classes of notes or the
servicing fee, the holders of notes with the reduced nominal liquidation
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amount may receive less than the full stated principal amount of their notes,
either because the amount of dollars allocated to pay them is less than the
outstanding dollar principal amount of the notes, or because the amount of
dollars allocated to pay the counterparty to a derivative agreement is less
than the amount necessary to obtain enough of the applicable foreign currency
for payment of their notes in full.
The nominal liquidation amount of a tranche of notes may not be reduced below
zero, and may not be increased above the outstanding dollar principal amount of
that tranche of notes, less any amounts on deposit in the applicable principal
funding subaccount.
If a note held by MBNA, the issuer or any of their affiliates is canceled,
the nominal liquidation amount of that note is automatically reduced to zero,
with a corresponding automatic reduction in the investor interest of the
collateral certificate.
For any series, the cumulative amount of reductions of the nominal
liquidation amount of any class of notes due to reallocation of available
principal amounts to pay available funds shortfalls will be limited as
described in the related prospectus supplement.
Allocations of charge-offs for uncovered defaults in master trust II and
reallocations of available principal amounts to cover available funds
shortfalls reduce the nominal liquidation amount of outstanding notes only and
do not affect notes that are issued after that time.
Final Payment of the Notes
Noteholders will generally not receive payment of principal, or in the case
of foreign currency notes, or any amount received by the issuer under a
derivative agreement with respect to principal, in excess of the highest
outstanding dollar principal amount of that tranche:
. minus, any unreimbursed reductions in the nominal liquidation amount of
that tranche from charge-offs for uncovered defaults in master trust II;
. minus, any unreimbursed reallocations of available principal to pay
interest on senior classes of notes or the servicing fee.
Following acceleration or on the legal maturity date of a tranche of notes,
the proceeds of a sale of receivables will be applied to the extent available
to pay the outstanding dollar principal amount of that tranche on the date of
the sale.
A tranche of notes will be considered to be paid in full, the holders of
those notes will have no further right or claim, and the issuer will have no
further obligation or liability for principal or interest, on the earliest to
occur of:
. the date of the payment in full of the stated principal amount of and all
accrued interest on that tranche of notes;
. the date on which the outstanding dollar principal amount of that tranche
of notes is reduced to zero, and all accrued interest on that tranche of
notes is paid in full; or
. on the legal maturity date of that tranche of notes, after giving effect
to all deposits, allocations, reallocations, sales of credit card
receivables and payments to be made on that date.
Subordination of Principal
Principal payments on subordinated classes of notes of a series may be
subordinated as described in the related prospectus supplement.
Available principal amounts that are allocable to subordinated classes of
notes may be reallocated to pay interest on senior classes of notes or the
servicing fee of that series. In addition, charge-offs from uncovered
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defaults on receivables in master trust II are generally allocated first to the
subordinated classes of a series, reducing the nominal liquidation amount of
such subordinated class. See "The Notes--Stated Principal Amount, Outstanding
Dollar Principal Amount and Nominal Liquidation Amount--Nominal Liquidation
Amount."
Required Subordination Protection
The required subordinated amount of a senior class or tranche of notes means
the amount of a subordinated class that is required to be outstanding on the
date when the senior class or tranche of notes is issued to provide
subordination protection for that senior class or tranche. It is also used to
determine whether a subordinated class or tranche of a series of notes may be
repaid before the legal maturity date while senior classes or tranches of notes
of that series are outstanding. Such amounts will be specified in the
applicable prospectus supplement.
No notes of a series may be issued unless the required subordinated amount
for that class of notes is available at the time of its issuance, as described
in the related prospectus supplement.
Redemption and Early Redemption of Notes
Each tranche of notes will be subject to mandatory redemption on its expected
principal payment date, which will be [.] months before its legal maturity
date.
If so specified in the accompanying prospectus supplement, the issuer may, at
its option, redeem the notes of any series, class or tranche before its
expected principal payment date. The prospectus supplement will indicate at
what times the issuer may exercise that right of redemption and if the
redemption may be made in whole or in part as well as any other terms of the
redemption. The issuer will give notice to holders of the affected notes before
any optional redemption date.
If so specified in the accompanying prospectus supplement, a noteholder may,
at its option, require the issuer to redeem notes before the expected principal
payment date. The prospectus supplement will indicate at what times a
noteholder may exercise that right to require redemption and if the redemption
may be made in whole or in part as well as any other terms of the redemption.
In addition, if an early redemption event occurs, the issuer will be required
to redeem each tranche of the affected notes before the expected principal
payment date of that tranche of notes to the extent funds are available for
that purpose. The issuer will give notice to holders of the affected notes
before an early redemption date. See "Indenture--Early Redemption Events" for a
description of the early redemption events and their consequences to
noteholders.
Whenever the issuer redeems a tranche of notes, it will do so only to the
extent of available funds and available principal amounts allocated to that
tranche of notes, and only to the extent that the tranche of notes to be
redeemed is not required to provide a required subordinated amount to a senior
class of notes. A noteholder will have no claim against the issuer if the
issuer fails to make a required redemption of notes because no funds are
available for that purpose or because the notes to be redeemed are required to
provide subordination protection to a senior class of notes. The failure to
redeem before the legal maturity date under these circumstances will not be an
event of default.
Issuances of New Series, Classes and Tranches of Notes
Unless otherwise specified in the accompanying prospectus supplement, the
issuer may issue new series, classes or tranches of notes, only if the
conditions of issuance are met. These conditions include:
. on or before the fourth business day before a new issuance of notes, the
issuer gives the indenture trustee and the rating agencies written notice
of the issuance;
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. the issuer delivers to the indenture trustee and each rating agency a
certificate stating to the effect that:
--the issuer reasonably believes that the new issuance will not at the
time of its occurrence or at a future date (i) cause an early
redemption event or event of default, (ii) adversely affect the amount
or timing of payments to noteholders of any series or (iii) adversely
affect the security interest of the indenture trustee in the collateral
securing the outstanding notes;
--all instruments furnished to the indenture trustee conform to the
requirements of the indenture and constitute sufficient authority under
the indenture for the indenture trustee to authenticate and deliver the
notes;
--the form and terms of the notes have been established in conformity
with the provisions of the indenture;
--all laws and requirements with respect to the execution and delivery by
the issuer of the notes have been complied with, the issuer has the
power and authority to issue the notes, and the notes have been duly
authorized and delivered by the issuer, and, assuming due
authentication and delivery by the indenture trustee, constitute legal,
valid and binding obligations of the issuer enforceable in accordance
with their terms (subject to certain limitations and conditions), and
are entitled to the benefits of the indenture equally and ratably with
all other notes, if any, of such series or class outstanding subject to
the terms of the indenture, each indenture supplement and each terms
document; and
--any other matters as the indenture trustee may reasonably request;
. the issuer delivers to the indenture trustee and the rating agencies an
opinion of counsel that for federal income tax purposes (i) the new
issuance will not adversely affect the characterization as debt of any
outstanding series of investor certificates issued by master trust II,
other than the collateral certificate, (ii) following the new issuance,
master trust II will not be an association, or a publicly traded
partnership, taxable as a corporation, and (iii) the new issuance will
not cause or constitute an event in which gain or loss would be
recognized by any certificateholder or the issuer;
. the issuer delivers to the indenture trustee and the rating agencies an
opinion of counsel that for federal income tax purposes (i) the new
issuance will not adversely affect the characterization of the notes of
any outstanding series, class or tranche of notes as debt, (ii) the new
issuance will not cause a taxable event to holders of any outstanding
notes, (iii) following the new issuance, the issuer will not be an
association, or publicly traded partnership, taxable as a corporation,
and (iv) following the new issuance of a series, class or tranche of
notes, the newly issued series, class or tranche of notes will be
properly characterized as debt;
. the issuer delivers to the indenture trustee an indenture supplement and
terms document relating to the applicable series, class and tranche of
notes;
. no pay out event has occurred or is continuing as of the date of the new
issuance;
. in the case of foreign currency notes, the issuer appoints one or more
paying agents in the appropriate countries;
. the provisions governing required subordination amounts are satisfied;
. the investor interest of the collateral certificate will be increased by
an amount equal to the initial outstanding dollar principal amount of the
notes issued in the new issuance; and
. any other conditions specified in the accompanying prospectus supplement
are satisfied.
However, if the issuer receives written approval from the rating agencies,
then the issuer will not need to meet certain of the foregoing conditions to
issuance. Additionally, the issuer and the indenture trustee are not required
to obtain the consent of any noteholder of any outstanding series, class or
tranche to issue any additional notes of any series, class or tranche.
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Payments on Notes; Paying Agent
The notes offered by this prospectus will be issued in book-entry form and
payments of principal of and interest on the notes will be made in U.S. dollars
as described under "--Book-Entry Notes" unless the stated principal amount of
the notes is denominated in a foreign currency.
The issuer and the indenture trustee, and any agent of the issuer or the
indenture trustee, will treat the registered holder of any note as the absolute
owner of that note, whether or not the note is overdue and notwithstanding any
notice to the contrary, for the purpose of making payment and for all other
purposes.
The issuer will make payments on a note to the registered holder of the note
at the close of business on the record date established for the related payment
date.
The issuer has designated the corporate trust office of The Bank of New York
in New York City as its paying agent for the notes of each series. The issuer
will identify any other entities appointed to serve as paying agents on notes
of a series, class or tranche in a supplement to this prospectus. The issuer
may at any time designate additional paying agents or rescind the designation
of any paying agent or approve a change in the office through which any paying
agent acts. However, the issuer will be required to maintain a paying agent in
each place of payment for a series, class or tranche of notes.
After notice by publication, all funds paid to a paying agent for the payment
of the principal of or interest on any note of any series which remains
unclaimed at the end of two years after the principal or interest becomes due
and payable will be repaid to the issuer. After funds are repaid to the issuer,
the holder of that note may look only to the issuer for payment of that
principal or interest.
Denominations
The notes offered by this prospectus will be issued in denominations of
$1,000 and multiples of $1,000 in excess of that amount.
Record Date
The record date for payment of the notes will be the last day of the month
before the related payment date.
Governing Law
The laws of the State of New York will govern the notes and the indenture.
Form, Exchange, and Registration and Transfer of Notes
The notes offered by this prospectus will be issued in registered form. The
notes will be represented by one or more global notes registered in the name of
The Depository Trust Company, as depository, or its nominee. We refer to each
beneficial interest in a global note as a "book-entry note." For a description
of the special provisions that apply to book-entry notes, see "--Book-Entry
Notes."
A holder of notes may exchange those notes for other notes of the same class
and tranche of any authorized denominations and of the same aggregate stated
principal amount and tenor.
Any holder of a note may present that note for registration of transfer, with
the form of transfer properly executed, at the office of the note registrar or
at the office of any transfer agent that the issuer designates. Holders of
notes will not be charged any service charge for the exchange or transfer of
their notes. Holders of notes that are to be transferred or exchanged will be
liable for the payment of any taxes and other governmental charges described in
the indenture before the transfer or exchange will be completed. The note
registrar or transfer agent, as the case may be, will effect a transfer or
exchange when it is satisfied with the documents of title and identity of the
person making the request.
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The issuer has appointed The Bank of New York as the note registrar for the
notes. The issuer also may at any time designate additional transfer agents for
any series, class or tranche of notes. The issuer may at any time rescind the
designation of any transfer agent or approve a change in the location through
which any transfer agent acts. However, the issuer will be required to maintain
a transfer agent in each place of payment for a series, class or tranche of
notes.
Book-Entry Notes
The notes offered by this prospectus will be in book-entry form. This means
that, except under the limited circumstances described in this subheading under
"--Definitive Notes," purchasers of notes will not be entitled to have the
notes registered in their names and will not be entitled to receive physical
delivery of the notes in definitive paper form. Instead, upon issuance, all the
notes of a class will be represented by one or more fully registered permanent
global notes, without interest coupons.
Each global note will be deposited with a securities depository named The
Depository Trust Company and will be registered in the name of its nominee,
Cede & Co. No global note representing book-entry notes may be transferred
except as a whole by DTC to a nominee of DTC, or by a nominee of DTC to another
nominee of DTC. Thus, DTC or its nominee will be the only registered holder of
the notes and will be considered the sole representative of the beneficial
owners of notes for purposes of the indenture.
The registration of the global notes in the name of Cede & Co. will not
affect beneficial ownership and is performed merely to facilitate subsequent
transfers. The book-entry system, which is also the system through which most
publicly traded common stock is held, is used because it eliminates the need
for physical movement of securities. The laws of some jurisdictions, however,
may require some purchasers to take physical delivery of their notes in
definitive form. These laws may impair the ability to own or transfer book-
entry notes.
Purchasers of notes in the United States can hold interests in the global
notes only through DTC, either directly, if they are participants in that
system--such as a bank, brokerage house or other institution that maintains
securities accounts for customers with DTC or its nominee--or otherwise
indirectly through a participant in DTC. Purchasers of notes in Europe can hold
interests in the global notes only through Clearstream, Luxembourg, or through
Morgan Guaranty Trust Company of New York, Brussels Office, as operator of the
Euroclear system.
Because DTC will be the only registered owner of the global notes,
Clearstream, Luxembourg and Euroclear will hold positions through their
respective U.S. depositories, which in turn will hold positions on the books of
DTC.
As long as the notes are in book-entry form, they will be evidenced solely by
entries on the books of DTC, its participants and any indirect participants.
DTC will maintain records showing:
. the ownership interests of its participants, including the U.S.
depositories; and
. all transfers of ownership interests between its participants.
The participants and indirect participants, in turn, will maintain records
showing:
. the ownership interests of their customers, including indirect
participants, that hold the notes through those participants; and
. all transfers between these persons.
Thus, each beneficial owner of a book-entry note will hold its note
indirectly through a hierarchy of intermediaries, with DTC at the "top" and the
beneficial owner's own securities intermediary at the "bottom."
The issuer, the indenture trustee and their agents will not be liable for the
accuracy of, and are not responsible for maintaining, supervising or reviewing
DTC's records or any participant's records relating to
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book-entry notes. The issuer, the indenture trustee and their agents also will
not be responsible or liable for payments made on account of the book-entry
notes.
Until definitive notes are issued to the beneficial owners as described in
this subheading under "--Definitive Notes," all references to "holders" of
notes means DTC. The issuer, the indenture trustee and any paying agent,
transfer agent or securities registrar may treat DTC as the absolute owner of
the notes for all purposes.
Beneficial owners of book-entry notes should realize that the issuer will
make all distributions of principal and interest on their notes to DTC and will
send all required reports and notices solely to DTC as long as DTC is the
registered holder of the notes. DTC and the participants are generally required
by law to receive and transmit all distributions, notices and directions from
the indenture trustee to the beneficial owners through the chain of
intermediaries.
Similarly, the indenture trustee will accept notices and directions solely
from DTC. Therefore, in order to exercise any rights of a holder of notes under
the indenture, each person owning a beneficial interest in the notes must rely
on the procedures of DTC and, in some cases, Clearstream, Luxembourg or
Euroclear. If the beneficial owner is not a participant in that system, then it
must rely on the procedures of the participant through which that person owns
its interest. DTC has advised the issuer that it will take actions under the
indenture only at the direction of its participants, which in turn will act
only at the direction of the beneficial owners. Some of these actions, however,
may conflict with actions it takes at the direction of other participants and
beneficial owners.
Notices and other communications by DTC to participants, by participants to
indirect participants, and by participants and indirect participants to
beneficial owners will be governed by arrangements among them.
Beneficial owners of book-entry notes should also realize that book-entry
notes may be more difficult to pledge because of the lack of a physical note.
Beneficial owners may also experience delays in receiving distributions on
their notes since distributions will initially be made to DTC and must be
transferred through the chain of intermediaries to the beneficial owner's
account.
The Depository Trust Company
DTC is a limited-purpose trust company organized under the New York Banking
Law and is a "banking institution" within the meaning of the New York Banking
Law. DTC is also 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 under Section 17A of the Securities Exchange Act
of 1934. DTC was created to hold securities deposited by its participants and
to facilitate the clearance and settlement of securities transactions among its
participants through electronic book-entry changes in accounts of the
participants, thus eliminating the need for physical movement of securities.
DTC is owned by a number of its participants and by the New York Stock
Exchange, Inc., the American Stock Exchange, Inc., and the National Association
of Securities Dealers, Inc. The rules applicable to DTC and its participants
are on file with the Securities and Exchange Commission.
Clearstream, Luxembourg
Clearstream, Luxembourg is registered as a bank in Luxembourg and is
regulated by the Banque Centrale du Luxembourg, the Luxembourg Central Bank,
which supervises Luxembourg banks. Clearstream, Luxembourg holds securities for
its customers and facilitates the clearance and settlement of securities
transactions by electronic book-entry transfers between their accounts.
Clearstream, Luxembourg provides various services, including safekeeping,
administration, clearance and settlement of internationally traded securities
and securities lending and borrowing. Clearstream, Luxembourg also deals with
domestic securities markets in over 30 countries through established depository
and custodial relationships. Clearstream,
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Luxembourg has established an electronic bridge with Euroclear in Brussels to
facilitate settlement of trades between Clearstream, Luxembourg and Euroclear.
Clearstream, Luxembourg currently accepts over 110,000 securities issues on its
books.
Clearstream, Luxembourg's customers are worldwide financial institutions
including underwriters, securities brokers and dealers, banks, trust companies
and clearing corporations. Clearstream, Luxembourg's U.S. customers are limited
to securities brokers and dealers, and banks. Currently, Clearstream,
Luxembourg has approximately 2,000 customers located in over 80 countries,
including all major European countries, Canada, and the United States. Indirect
access to Clearstream, Luxembourg is available to other institutions that clear
through or maintain a custodial relationship with an account holder of
Clearstream, Luxembourg.
Euroclear System
Euroclear was created in 1968 to hold securities for participants of
Euroclear and to clear and settle transactions between Euroclear participants
through simultaneous electronic book-entry delivery against payment. This
system eliminates the need for physical movement of securities and any risk
from lack of simultaneous transfers of securities and cash. Euroclear includes
various other services, including securities lending and borrowing and
interfaces with domestic markets in several countries. The Euroclear Operator
is the Brussels, Belgium office of Morgan Guaranty Trust Company of New York,
under contract with Euro-clear Clearance Systems S.C., a Belgian cooperative
corporation, known as the "Cooperative." The Euroclear Operator conducts all
operations. All Euroclear securities clearance accounts and Euroclear cash
accounts are accounts with the Euroclear Operator, not the Cooperative. The
Cooperative establishes policy for Euroclear on behalf of Euroclear
participants. Euroclear participants include banks, including central banks,
securities brokers and dealers and other professional financial intermediaries
and may include the underwriters. Indirect access to Euroclear is also
available to other firms that clear through or maintain a custodial
relationship with a Euroclear participant, either directly or indirectly.
The Euroclear Operator is the Belgian branch of a New York banking
corporation which is a member bank of the Federal Reserve System. For this
reason, it is regulated and examined by the Board of Governors of the Federal
Reserve System and the New York State Banking Department, as well as the
Belgian Banking Commission.
Securities clearance accounts and cash accounts with the Euroclear Operator
are governed by the Terms and Conditions Governing Use of Euroclear and the
related Operating Procedures of the Euroclear System, and applicable Belgian
law. These Terms and Conditions govern transfers of securities and cash within
Euroclear, withdrawals of securities and cash from Euroclear, and receipts of
payments with respect to securities in Euroclear. All securities in Euroclear
are held on a fungible basis without attribution of specific securities to
specific securities clearance accounts. The Euroclear Operator acts under the
Terms and Conditions only on behalf of Euroclear participants, and has no
record of or relationship with persons holding through Euroclear participants.
This information about DTC, Clearstream, Luxembourg and Euroclear has been
provided by each of them for informational purposes only and is not intended to
serve as a representation, warranty or contract modification of any kind.
Distributions on Book-Entry Notes
The issuer will make distributions of principal of and interest on book-entry
notes to DTC. These payments will be made in immediately available funds by the
issuer's paying agent, The Bank of New York, at the office of the paying agent
in New York City that the issuer designates for that purpose.
In the case of principal payments, the global notes must be presented to the
paying agent in time for the paying agent to make those payments in immediately
available funds in accordance with its normal payment procedures.
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Upon receipt of any payment of principal of or interest on a global note, DTC
will immediately credit the accounts of its participants on its book-entry
registration and transfer system. DTC will credit those accounts with payments
in amounts proportionate to the participants' respective beneficial interests
in the stated principal amount of the global note as shown on the records of
DTC. Payments by participants to beneficial owners of book-entry notes will be
governed by standing instructions and customary practices, as is now the case
with securities held for the accounts of customers in bearer form or registered
in "street name," and will be the responsibility of those participants.
Distributions on book-entry notes held beneficially through Clearstream,
Luxembourg will be credited to cash accounts of Clearstream, Luxembourg
participants in accordance with its rules and procedures, to the extent
received by its U.S. depository.
Distributions on book-entry notes held beneficially through Euroclear will be
credited to the cash accounts of Euroclear participants in accordance with the
Terms and Conditions, to the extent received by its U.S. depository.
In the event definitive notes are issued, distributions of principal and
interest on definitive notes will be made directly to the holders of the
definitive notes in whose names the definitive notes were registered at the
close of business on the related record date.
Global Clearance and Settlement Procedures
Initial settlement for the notes will be made in immediately available funds.
Secondary market trading between DTC participants will occur in the ordinary
way in accordance with DTC's rules and will be settled in immediately available
funds using DTC's Same-Day Funds Settlement System. Secondary market trading
between Clearstream, Luxembourg participants and/or Euroclear participants will
occur in the ordinary way in accordance with the applicable rules and operating
procedures of Clearstream, Luxembourg and Euroclear and will be settled using
the procedures applicable to conventional eurobonds in immediately available
funds.
Cross-market transfers between persons holding directly or indirectly through
DTC, on the one hand, and directly or indirectly through Clearstream,
Luxembourg or Euroclear participants, on the other, will be effected in DTC in
accordance with DTC's rules on behalf of the relevant European international
clearing system by the U.S. depositories. However, cross-market transactions of
this type will require delivery of instructions to the relevant European
international clearing system by the counterparty in that system in accordance
with its rules and procedures and within its established deadlines, European
time. The relevant European international clearing system will, if the
transaction meets its settlement requirements, deliver instructions to its U.S.
depository to take action to effect final settlement on its behalf by
delivering or receiving notes in DTC, and making or receiving payment in
accordance with normal procedures for same-day funds settlement applicable to
DTC. Clearstream, Luxembourg participants and Euroclear participants may not
deliver instructions directly to DTC.
Because of time-zone differences, credits to notes received in Clearstream,
Luxembourg or Euroclear as a result of a transaction with a DTC participant
will be made during subsequent securities settlement processing and will be
credited the business day following a DTC settlement date. The credits to or
any transactions in the notes settled during processing will be reported to the
relevant Euroclear or Clearstream, Luxembourg participants on that business
day. Cash received in Clearstream, Luxembourg or Euroclear as a result of sales
of notes by or through a Clearstream, Luxembourg participant or a Euroclear
participant to a DTC participant will be received with value on the DTC
settlement date, but will be available in the relevant Clearstream, Luxembourg
or Euroclear cash account only as of the business day following settlement in
DTC.
Although DTC, Clearstream, Luxembourg and Euroclear have agreed to these
procedures in order to facilitate transfers of notes among participants of DTC,
Clearstream, Luxembourg and Euroclear, they are under no obligation to perform
or continue to perform these procedures and these procedures may be
discontinued at any time.
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Definitive Notes
Beneficial owners of book-entry notes may exchange those notes for definitive
notes registered in their name only if:
. DTC is unwilling or unable to continue as depository for the global notes
or ceases to be a registered "clearing agency" and the issuer is unable
to find a qualified replacement for DTC;
. the issuer, in its sole discretion, elects to terminate the book-entry
system through DTC; or
. any event of default has occurred with respect to those book-entry notes,
and beneficial owners evidencing not less than 50% of the unpaid
outstanding dollar principal amount of the notes of that class advise the
indenture trustee and DTC that the continuation of a book-entry system is
no longer in the best interests of those beneficial owners.
If any of these three events occurs, DTC is required to notify the beneficial
owners through the chain of intermediaries that the definitive notes are
available. The appropriate global note will then be exchangeable in whole for
definitive notes in registered form of like tenor and of an equal aggregate
stated principal amount, in specified denominations. Definitive notes will be
registered in the name or names of the person or persons specified by DTC in a
written instruction to the registrar of the notes. DTC may base its written
instruction upon directions it receives from its participants. Thereafter, the
holders of the definitive notes will be recognized as the "holders" of the
notes under the indenture.
Replacement of Notes
The issuer will replace at the expense of the holder any mutilated note, upon
surrender of that note to the indenture trustee. The issuer will replace at the
expense of the holder any notes that are destroyed, lost or stolen upon
delivery to the indenture trustee of evidence of the destruction, loss or theft
of those notes satisfactory to the issuer and the indenture trustee. In the
case of a destroyed, lost or stolen note, the issuer and the indenture trustee
may require the holder of the note to provide an indemnity satisfactory to the
indenture trustee and the issuer before a replacement note will be issued.
Acquisition and Cancellation of Notes by the Issuer
The issuer may acquire notes in the open market or otherwise.
The issuer may cause the notes acquired by it to be canceled by the indenture
trustee and notes so canceled will no longer be outstanding. However, any
cancellation of notes will observe any limitations for payments of subordinated
classes as described in the related prospectus supplement.
Sources of Funds to Pay the Notes
The Collateral Certificate
General
The primary source of funds for the payment of principal of and interest on
the notes is the collateral certificate issued by master trust II to the
issuer. For a description of master trust II and its assets, see "Master Trust
II." The collateral certificate is the only master trust II investor
certificate issued pursuant to Series 2001-[.].
The collateral certificate represents an undivided interest in the assets of
master trust II. The assets of master trust II consist primarily of credit card
receivables arising in selected MasterCard and VISA revolving credit card
accounts that have been transferred by MBNA. The amount of credit card
receivables in master trust II will fluctuate from day to day as new
receivables are generated or added to or removed from master trust II and as
other receivables are collected, charged off as uncollectible, or otherwise
adjusted.
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The collateral certificate has a fluctuating investor interest, representing
the investment of that certificate in credit card receivables. The investor
interest of the collateral certificate will be the same as the total nominal
liquidation amount of the outstanding notes secured by the collateral
certificate. For a discussion of investor interest, see the definition of
investor interest in the glossary.
The collateral certificate has no specified interest rate. The issuer, as
holder of the collateral certificate, is entitled to receive its allocable
share of collections of finance charge receivables and principal receivables
payable by master trust II.
Finance charge receivables are all periodic finance charges, annual
membership fees, cash advance fees and late charges on amounts charged for
merchandise and services, and some other fees designated by MBNA. Principal
receivables are all amounts charged by cardholders for merchandise and
services, amounts advanced to cardholders as cash advances and all other fees
billed to cardholders on the credit card accounts. Interchange consists of fees
received by MBNA, as a credit card-issuing bank, from MasterCard International
and VISA as partial compensation for taking credit risk, absorbing fraud losses
and funding receivables for a limited period before initial billing.
Interchange varies from approximately 1% to 2% of the transaction amount, but
these amounts may be changed by MasterCard International or VISA. Interchange
will be treated as collections of finance charge receivables.
Each month, master trust II will allocate collections of finance charge
receivables and principal receivables and defaults to the investor certificates
outstanding under master trust II, including the collateral certificate.
Allocations of defaults and collections of finance charge receivables are
made pro rata based on the investor interest of each series of investor
certificates issued by master trust II, including the collateral certificate,
and the principal receivables allocable to the seller interest. In general, the
investor interest of each other series of investor certificates issued by
master trust II will equal the stated dollar amount of the investor
certificates issued to investors in that series, less unreimbursed charge-offs
for uncovered defaults in master trust II allocated to those investors and
principal payments made to those investors. The seller interest, which is owned
by MBNA, represents the interest in the principal receivables in master trust
II not represented by any master trust II series of investor certificates. For
example, if the total principal receivables in master trust II at the end of
the month is 500, the investor interest of the collateral certificate is 100,
the investor interests of the other investor certificates are 200 and the
seller interest is 200, the collateral certificate is entitled, in general, to
1/5--or 100/500--of the defaults and collections of finance charge receivables
for the applicable month.
Collections of principal receivables are allocated similarly to the
allocation of collections of finance charge receivables when no principal
amounts are needed for deposit into a principal funding account or needed to
pay principal to a noteholder. However, collections of principal receivables
are allocated when principal amounts need to be deposited into master trust II
principal funding accounts or paid to master trust II investors. When the
principal amount of a master trust II investor certificate other than the
collateral certificate begins to accumulate or amortize, collections of
principal receivables continue to be allocated to the series as if the investor
interest of that series had not been reduced by principal collections deposited
to a principal funding account or paid to investors. Allocations of principal
collections between the investors in a series of certificates issued by master
trust II, other than the collateral certificate, and the seller interest is
based on the investor interest of the series "fixed" at the time immediately
before the first deposit of principal collections into a principal funding
subaccount or the time immediately before the first payment of principal
collections to investors. In the case of the collateral certificate, each
tranche of notes is allocated collections of principal receivables at all times
based on an investor interest calculation which is an aggregate of the investor
interest calculation for each individual tranche and class of notes. For
tranches and classes of notes which do not require principal amounts, the
investor interest calculation will be the same as the calculation used for
allocating collections of finance charge receivables, based on the most recent
calculation of the investor interest. For tranches or classes of notes which
require principal amounts to be deposited into a principal funding account or
paid to noteholders, the investor interest will be "fixed" immediately before
the issuer
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begins to allocate available principal amounts to the principal funding
subaccount for that tranche or class, whether for budgeted deposits or
prefunding, or upon the occurrence of the expected principal payment date, an
early redemption event, event of default or other optional or mandatory
redemption, based on the calculation of the investor interest without any
reductions for deposits or payments of principal.
For a detailed description of the percentage used in allocating finance
charge collections and defaults to the collateral certificate, see the
definition of "floating investor percentage" in the glossary. For a detailed
description of the percentage used in allocating principal collections to the
collateral certificate, see the definition of "principal investor percentage"
in the glossary.
If principal collections allocated to the collateral certificate are needed
to pay the notes or to make a deposit into the issuer accounts within a month,
they will be deposited into the issuer's collection account. Otherwise,
collections of principal receivables allocated to the collateral certificate
will be reallocated to other series of master trust II investor certificates
which have principal collection shortfalls--which does not reduce the investor
interest of the collateral certificate--or reinvested in master trust II to
maintain the investor interest of the collateral certificate. If the collateral
certificate has a principal collection shortfall, but other series of investor
certificates issued by master trust II have excess principal collections, a
portion of the excess principal collections allocated to other series of
investor certificates issued by master trust II will be reallocated to the
collateral certificate and any other master trust II investor certificate which
may have a principal collection shortfall and the collateral certificate's
share of the excess principal collections from the other series will be paid to
the issuer and treated as available principal amounts.
Upon a sale of credit card receivables, or interests therein, following an
event of default and acceleration, or on the applicable legal maturity date for
a class or tranche of notes, as described in the accompanying prospectus
supplement, the portion of the nominal liquidation amount, and thereby the
investor interest, related to that class or tranche will be reduced to zero and
that class or tranche will no longer receive any allocations of collections of
finance charge receivables or principal receivables from master trust II and
any allocations of available funds or available principal amounts from the
issuer.
Following a payout event, which is an early redemption for the notes, all
collections of principal receivables for any monthly period allocated to the
investor interest of the collateral certificate will be used to cover principal
payments to the issuer as holder of the collateral certificate.
For a detailed description of the application of collections and allocation
of defaults by master trust II, see "Master Trust II--Application of
Collections" and "--Defaulted Receivables; Rebates and Fraudulent Charges" in
this prospectus.
Deposit and Application of Funds
Collections of finance charge receivables allocated and paid to the issuer,
as holder of the collateral certificate, as described in "--The Collateral
Certificate--General" above and "Master Trust II--Application of Collections"
in this prospectus, will be treated as available funds. Such available funds
will be:
. allocated pro rata to each series of notes based on the ratio of the
aggregate nominal liquidation amount of the notes in such series at the
end of the prior monthly period to the aggregate nominal liquidation
amount of all notes at the end of the prior monthly period, in each case
adjusted for nominal liquidation amount increases due to accretions of
principal on discount notes, releases of prefunded amounts from principal
funding subaccounts to master trust II and additional issuances of notes;
and
. applied as described in the accompanying prospectus supplement.
Collections of principal receivables allocated and paid to the issuer, as
holder of the collateral certificate, as described in "--The Collateral
Certificate--General" above and "Master Trust--Application of
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Collections" in this prospectus, will be treated as available principal
amounts. Such available principal amounts will be:
. allocated pro rata to each series of notes based on the ratio of the
relative portion of the investor interest amount used to calculate the
principal investor percentage attributable to that series of notes to the
investor interest amount used to calculate the principal investor
percentage; and
. applied as described in the accompanying prospectus supplement.
In the case of a series of notes having more than one class or tranche,
available principal amounts and available funds allocated to that series will
be allocated and applied to each class or tranche in the manner and order of
priority described in the accompanying prospectus supplement.
Issuer Accounts
The issuer has established a collection account for the purpose of receiving
payments of finance charge collections and principal collections from master
trust II payable under the collateral certificate.
If so specified in the accompanying prospectus supplement, the issuer may
direct the indenture trustee to establish and maintain in the name of the
indenture trustee supplemental accounts for any series, class or tranche of
notes for the benefit of the related noteholders.
Each month, distributions on the collateral certificate will be deposited
into one or more supplemental accounts, to make payments of interest on and
principal of the notes, to make payments under any applicable derivative
agreements, and for the other purposes as specified in the accompanying
prospectus supplement.
The supplemental accounts described in this section are referred to as issuer
accounts. Issuer accounts are qualified accounts and amounts maintained in
issuer accounts may only be invested in permitted investments.
Derivative Agreements
Some notes may have the benefit of one or more derivative agreements,
including interest rate or currency swaps, or other similar arrangements with
various counterparties. In general, the issuer will receive payments from
counterparties to the derivative agreements in exchange for the issuer's
payments to them, to the extent required under the derivative agreements.
Payments received from derivative counterparties with respect to interest
payments on dollar notes will generally be treated as available funds. The
specific terms of a derivative agreement applicable to a series, class or
tranche of notes and a description of the related counterparty will be included
in the related prospectus supplement.
Sale of Credit Card Receivables
If a tranche of notes has an event of default and is accelerated before its
legal maturity date, master trust II may sell credit card receivables, or
interests therein, if the conditions described in "Indenture--Events of
Default" are satisfied. This sale will take place at the option of the
indenture trustee or at the direction of the holders of a majority of aggregate
outstanding dollar principal amount of notes of that tranche.
Those majority holders will also have the power to determine the time of the
sale, except that any sale of receivables for a subordinated tranche of notes
in a multiple tranche series may be delayed until the senior classes of notes
of the same series are prefunded, or enough notes of senior classes have been
repaid, to the extent that the subordinated tranche is no longer needed to
provide the required subordination for the senior classes of that series.
If principal of or interest on a tranche of notes has not been paid in full
on its legal maturity date, the sale will automatically take place on that date
regardless of the subordination requirements of any senior classes of notes.
Proceeds from such sale will be immediately paid to the noteholders of the
related tranche.
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The amount of credit card receivables sold will be up to the nominal
liquidation amount of the tranches of notes that directed the sale to be made.
The nominal liquidation amount of the tranche of notes that directed the sale
to be made will be automatically reduced to zero upon such sale. No more
available principal amounts or available funds will be allocated to that
tranche.
If a tranche of notes directs a sale of credit card receivables, then that
tranche will no longer be entitled to subordination protection from
subordinated classes of notes of the same series.
Tranches of notes that have directed sales of credit card receivables are no
longer outstanding under the indenture.
After giving effect to a sale of receivables for a tranche of notes, the
amount of proceeds on deposit in a principal funding subaccount may be less
than the outstanding dollar principal amount of that class. This deficiency can
arise because the nominal liquidation amount of that tranche was reduced before
the sale of receivables or if the sale price for the receivables was less than
the outstanding dollar principal amount. These types of deficiencies will not
be reimbursed.
Limited Recourse to the Issuer; Security for the Notes
Only the portion of available funds and available principal amounts allocable
to a tranche of notes after giving effect to all allocations and reallocations,
funds on deposit in the applicable issuer accounts, any applicable derivative
agreement and proceeds of sales of credit card receivables provide the source
of payment for principal of or interest on any tranche of notes. Noteholders
will have no recourse to any other assets of the issuer or any other person or
entity for the payment of principal of or interest on the notes.
The notes of all series are secured by a shared security interest in the
collateral certificate and the collection account, but each class or tranche of
notes is entitled to the benefits of only that portion of those assets
allocated to it under the indenture and the related indenture supplement. Each
class or tranche of notes is also secured by a security interest in any
applicable supplemental account and any applicable derivative agreement.
Indenture
Indenture Trustee
The Bank of New York is the trustee under the indenture for the notes. Its
principal corporate trust office is located at 101 Barclay Street, Floor 12
East, New York, New York 10286.
The indenture trustee may resign at any time. The issuer may also remove the
indenture trustee if the indenture trustee is no longer eligible to act as
trustee under the indenture or if the indenture trustee becomes insolvent. In
all circumstances, the issuer must appoint a successor indenture trustee for
the notes. Any resignation or removal of the indenture trustee and appointment
of a successor indenture trustee will not become effective until the successor
indenture trustee accepts the appointment.
The issuer or its affiliates may maintain accounts and other banking or
trustee relationships with the indenture trustee and its affiliates.
Issuer Covenants
The issuer will not, among other things:
. claim any credit on or make any deduction from the principal and interest
payable on the notes, other than amounts withheld in good faith from such
payments under the Internal Revenue Code or other applicable tax law,
. voluntarily dissolve or liquidate, or
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. permit (A) the validity or effectiveness of the indenture to be impaired,
or permit the lien created by the indenture to be amended, hypothecated,
subordinated, terminated or discharged, or permit any person to be
released from any covenants or obligations with respect to the notes
under the indenture except as may be expressly permitted by the
indenture, (B) any lien, charge, excise, claim, security interest,
mortgage or other encumbrance (other than the lien created by the
indenture) to be created on or extend to or otherwise arise upon or
burden the collateral for the notes or proceeds thereof or (C) the lien
of the indenture not to constitute a valid first priority security
interest in the assets of the issuer.
The issuer may not engage in any activity other than the activities described
in "The Issuer" in this prospectus. The issuer will not incur, assume,
guarantee or otherwise become liable, directly or indirectly, for any
indebtedness except for the notes.
Events of Default
Each of the following events is an "event of default" for any related series,
class or tranche of notes:
. the issuer's failure, for a period of thirty-five (35) days, to pay
interest on any note of the related series, class or tranche when due;
. the issuer's failure to pay the stated principal amount of any note of
the related series, class or tranche on its legal maturity date;
. the issuer's default in the performance, or breach, of any other of its
covenants or warranties in the indenture, for a period of sixty (60) days
after written notice to the issuer by the indenture trustee or to the
issuer and the indenture trustee by the holders of 25% of the aggregate
outstanding dollar principal amount of the outstanding notes of the
affected series, class or tranche, and, as a result of such default, the
interests of the related noteholders are materially and adversely
affected and continue to be materially and adversely affected during the
sixty (60) day period;
. the occurrence of certain events of bankruptcy, insolvency,
conservatorship or receivership of the issuer; and
. any additional events of default specified in the prospectus supplement
relating to the series, class or tranche.
Failure to pay the full stated principal amount of a note on its expected
principal payment date will not constitute an event of default. An event of
default with respect to one series, class or tranche of notes will not
necessarily be an event of default with respect to any other series, class or
tranche of notes.
Events of Default Remedies
The occurrence of some events of default involving the bankruptcy or
insolvency of the issuer results in an automatic acceleration of all of the
notes. If other events of default occur and are continuing with respect to any
series, class or tranche, either the indenture trustee or the holders of more
than a majority in aggregate outstanding dollar principal amount of the notes
of that series, class or tranche may declare the principal of all those
outstanding notes to be immediately due and payable. This declaration of
acceleration may generally be rescinded by the holders of a majority in
aggregate outstanding dollar principal amount of outstanding notes of that
series, class or tranche.
If a series, class or tranche of notes is accelerated before its legal
maturity date, the indenture trustee may at any time thereafter, and at the
direction of the holders of a majority of aggregate outstanding dollars
principal amount of notes of that tranche at any time thereafter will, direct
master trust II to sell credit card receivables as described in "Sources of
Funds to Pay the Notes--Sale of Credit Card Receivables," but only if at least
one of the following conditions is met:
. the noteholders of 90% of the aggregate outstanding dollar principal
amount of the accelerated series, class or tranche of notes consent; or
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. the net proceeds of such sale (plus amount on deposit in the applicable
subaccounts and payments to be received from any applicable derivative
agreement) would be sufficient to pay all outstanding amounts due on the
accelerated series, class or tranche of notes; or
. the indenture trustee does not determine that the funds to be allocated
to the accelerated series, class or tranche of notes, taking into account
available funds and available principal amounts allocable to the
accelerated series, class or tranche of notes, payments to be received
under any applicable derivative agreement and amounts on deposit in the
applicable principal funding subaccount and interest funding subaccount
and, in the case of Class C notes, the applicable Class C reserve
subaccount is likely to be sufficient to make payments on the accelerated
notes when due, and the holders of not less than 66 2/3% of the aggregate
outstanding principal dollar amount of notes of the accelerated series,
class or tranche, as applicable, consent to the sale.
A sale of receivables following an event of default and acceleration of a
subordinated tranche in a multiple tranche series may be delayed as described
under "Source of Funds to Pay the Notes--Sale of Credit Card Receivables."
If a sale of credit card receivables does not take place following an
acceleration of a series, class or tranche of notes, then:
. The issuer will continue to hold the collateral certificate, and
distributions on the collateral certificate will continue to be applied
in accordance with the distribution provisions of the indenture.
. Principal will be paid on the accelerated series, class or tranche of
notes to the extent funds are received from master trust II and available
to the accelerated series, class or tranche after giving effect to all
allocations and reallocations and payment is permitted by the
subordination provisions of the accelerated class or tranche.
. If the accelerated notes are a subordinated tranche of a multiple tranche
series, and subordination requirements prevent the payment of the
accelerated subordinated tranche, prefunding of the senior classes of
that series will begin, as described in the applicable prospectus
supplement. Thereafter, payment will be made to the extent described in
the applicable prospectus supplement.
. On the legal maturity date of the accelerated notes, if the notes have
not been paid in full and if the notes have a nominal liquidation amount
in excess of zero, the indenture trustee will direct master trust II to
sell credit card receivables as described in the applicable prospectus
supplement.
The holders of a majority in aggregate outstanding dollar principal amount of
any accelerated series, class or tranche of notes have the right to direct the
time, method and place of conducting any proceeding for any remedy available to
the indenture trustee, or exercising any trust or power conferred on the
indenture trustee. However, this right may be exercised only if the direction
provided by the noteholders does not conflict with applicable law or the
indenture or the related indenture supplement or have a substantial likelihood
of involving the indenture trustee in personal liability.
Generally, if an event of default occurs and any notes are accelerated, the
indenture trustee is not obligated to exercise any of its rights or powers
under the indenture unless the holders of affected notes offer the indenture
trustee reasonable indemnity. Upon acceleration of the maturity of a series,
class or tranche of notes following an event of default, the indenture trustee
will have a lien on the collateral for those notes ranking senior to the lien
of those notes for its unpaid fees and expenses.
If an event of default occurs relating to the failure to pay principal of or
interest on a series, class or tranche of notes in full on the legal maturity
date, the issuer will automatically direct the master trust to sell credit card
receivables on the date, as described in "Sources of Funds to Pay the Notes--
Sale of Credit Card Receivables."
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The indenture trustee has agreed, and the noteholders will agree, that they
will not at any time institute against the issuer, MBNA or master trust II any
bankruptcy, reorganization or other proceeding under any federal or state
bankruptcy or similar law.
Early Redemption Events
The issuer is required to redeem in whole or in part, to the extent that
funds are available for that purpose, each affected series, class or tranche of
notes of a series upon the occurrence of an early redemption event. Early
redemption events include the following:
. the occurrence of a note's expected principal payment date;
. each of the pay out events applicable to the collateral certificate, as
described under "Master Trust II--Pay Out Events";
. the issuer becoming an "investment company" within the meaning of the
Investment Company Act of 1940, as amended; or
. any additional early redemption event specified in the accompanying
prospectus supplement.
The redemption price of a note so redeemed will be the outstanding dollar
principal amount of that note, plus accrued interest--or, in the case of
discount notes, principal accreted--but unpaid on that note to but excluding
the date of redemption, which will be the next payment date. If the amount of
available funds and available principal amounts allocable to the series, class
or tranche of notes to be redeemed, together with funds on deposit in the
applicable principal funding subaccount, interest funding subaccount and Class
C reserve account and any amounts payable to the issuer under any applicable
derivative agreement are insufficient to pay the redemption price in full on
the next payment date after giving effect to subordination and allocations to
any other notes ranking equally with that note, monthly payments on the notes
to be redeemed will thereafter be made on each payment date until the stated
principal amount of the notes plus all accrued and unpaid interest is paid in
full, or the legal maturity date of the notes occurs, whichever is earlier.
No available principal amounts will be allocated to a series, class or
tranche of notes with a nominal liquidation amount of zero, even if the stated
principal amount of that series, class or tranche has not been paid in full.
However, any funds in the applicable principal funding subaccount, interest
funding subaccount and Class C reserve subaccount and any amounts received from
an applicable derivative agreement will still be available to pay principal of
and interest on that class or tranche of notes. In addition, if excess
available funds are available, they can be applied to reimburse reductions in
the nominal liquidation amount of that class or tranche resulting from
reallocations of principal collections to pay interest on senior classes of
notes or the servicing fee, or from charge-offs for uncovered defaults in
master trust II.
Payments on redeemed notes will be made in the same priority as described in
the related prospectus supplement. The issuer will give notice to holders of
the affected notes before an early redemption date.
Meetings
The indenture trustee may call a meeting of the holders of notes of a series,
class or tranche at any time. The indenture trustee will call a meeting upon
request of the issuer or the holders of at least 10% in aggregate outstanding
dollar principal amount of the outstanding notes of the series, class or
tranche. In any case, a meeting will be called after notice is given to holders
of notes in accordance with "Notices and Reports--Notices" in this prospectus
supplement.
The quorum for a meeting is a majority of the holders of the outstanding
dollar principal amount of the series, the class or the tranche of notes that
is to have the meeting, as the case may be, unless a higher percentage is
specified for approving action taken at the meeting, in which case the quorum
is the higher percentage.
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Voting
Any action or vote to be taken by the holders of a majority or larger
specified percentage of the notes, any series of notes, any class of notes or
any tranche of notes may be adopted by the affirmative vote of the holders of a
majority or the applicable larger specified percentage in aggregate outstanding
dollar principal amount of the outstanding notes, of that series, class or
tranche, as the case may be.
Any action or vote taken at any meeting of holders of notes duly held in
accordance with the indenture will be binding on all holders of the affected
notes or the affected series, class or tranche of notes, as the case may be.
Notes held by the issuer, MBNA or their affiliates will not be deemed
outstanding for purposes of voting or calculating quorum at any meeting of
noteholders.
Amendments to the Indenture
The issuer and the indenture trustee may modify and amend the indenture or
any supplemental indenture with prior notice to each rating agency and the
consent of the holders of not less than a majority in aggregate dollar
principal amount of the outstanding notes of each series affected by that
modification or amendment. However, if the modification or amendment would
result in any of the following events occurring, it may be made only with the
consent of the holders of each outstanding note affected by the modification or
amendment:
. a change in any date scheduled for the payment of interest on any note,
the expected principal payment date or legal maturity date of any note;
. a reduction of the stated principal amount of, or interest rate on, any
note, or change the method of computing the outstanding dollar principal
amount, the adjusted outstanding dollar principal amount, or the nominal
liquidation amount in a manner that is adverse to any noteholder;
. reduce the amount of a discount note payable upon the occurrence of an
early redemption event or other optional or mandatory redemption or upon
the acceleration of its legal maturity date;
. an impairment of the right to institute suit for the enforcement of any
payment on any note;
. a reduction of the percentage in outstanding dollar principal amount of
notes of any series, class or tranche, the consent of whose holders is
required for modification or amendment of the indenture or any
supplemental indenture or for waiver of compliance with provisions of the
indenture or supplemental indenture or for waiver of defaults and their
consequences;
. permission is given to create any lien or other encumbrance on the
collateral ranking senior to the lien of the indenture;
. change the city or political subdivision so designated with respect to
any series, class or tranche of notes where any principal of, or interest
on, any note is payable;
. a change in the method of computing the amount of principal of, or
interest on, any note on any date; or
. to make any other amendment other than those explicitly permitted by the
indenture without the consent of noteholders.
Notwithstanding the foregoing, the issuer and the indenture trustee may also
amend, supplement or otherwise modify the indenture without the consent of any
noteholders to establish any form of note under the indenture, and to provide
for the issuance of any series, class or tranche of notes (as described under
"The Notes--Issuance of New Series, Classes and Tranches of Notes") and to set
forth the terms thereof, or to add to the rights of the noteholders of any
series, class or tranche. In addition, upon delivery of a master trust tax
opinion and issuer tax opinion and satisfaction of the rating agency condition,
the indenture may be amended supplemented or otherwise modified to:
. evidence the succession of another entity to the issuer, and the
assumption by such successor of the covenants of the issuer in the
indenture and the notes;
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. add to the covenants of the issuer, or have the issuer surrender any of
its rights or powers under the issuer, for the benefit of the noteholders
of any or all series, classes or tranches;
. cure any ambiguity or to correct or supplement any provision in the
indenture;
. add to the indenture certain provisions expressly permitted by the Trust
Indenture Act, as amended;
. provide for the acceptance of a successor indenture trustee under the
indenture with respect to one or more series, classes or tranches of
notes and add to or change any of the provisions of this indenture as
will be necessary to provide for or facilitate the administration of the
trusts under the indenture by more than one indenture trustee;
. add any additional early redemption events or events of default with
respect to the notes of any or all series, classes or tranches;
. provide for the consolidation of master trust II and the issuer after the
termination of all series of certificates of master trust II (other than
the collateral certificate);
. if one or more additional sellers are added to the master trust II
agreement, or one or more additional beneficiaries are added to the trust
agreement, make any necessary changes to the indenture or any other
related document;
. provide for the addition of collateral securing the notes and the
issuance of notes backed by any such additional collateral; or
. make any other amendment that could not reasonably be expected to result
in an early redemption event or event of default, adversely affect the
amount of funds available to the noteholders of any series, class or
tranche or adversely affect the security interest of the indenture
trustee in the collateral securing the notes.
The issuer also may, without consent of the noteholders but with prior notice
to each rating agency, merge with master trust II upon:
. written notice to the trustee and each rating agency;
. delivery of an officer's certificate of the issuer to the master trust II
trustee to the effect that the issuer reasonably believes that such
merger will not have to result in an early redemption event or event of
default, adversely affect the amount of funds available to the
noteholders of any series, class or tranche or adversely affect the
security interest of the indenture trustee in the collateral securing the
notes, and is not reasonably expected to have any similar effect at any
time in the future; and
. delivery of a master trust tax opinion and an issuer tax opinion to
master trust II trustee and the rating agencies.
The holders of a majority in aggregate outstanding dollar principal amount of
the notes of a series may waive, on behalf of the holders of all the notes of
that series, compliance by the issuer with specified restrictive provisions of
the indenture.
The holders of a majority in aggregate outstanding dollar principal amount of
the notes of an affected series, class or tranche may, on behalf of all holders
of notes of that series, class or tranche, waive any past default under the
indenture with respect to notes of that series, class or tranche. However, the
consent of the holders of all outstanding notes of a series, class or tranche
is required to waive any past default in the payment of principal of, or
interest on, any note of that series, class or tranche or in respect of a
covenant or provision of the indenture that cannot be modified or amended
without the consent of the holders of each outstanding note of that series,
class or tranche.
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Tax Opinions for Amendments
No amendment to the indenture, the master trust II agreement or the trust
agreement will be effective unless the issuer has delivered to the indenture
trustee, the owner trustee and the rating agencies an opinion of counsel that:
. for federal income and franchise tax purposes (1) the amendment will not
adversely affect the characterization as debt of any outstanding series
or class of investor certificates issued by master trust II that were
characterized as debt at the time of their issuance, (2) the amendment
will not cause a taxable event to holders of master trust investor
certificates, and (3) following the amendment, master trust II will not
be an association, or publicly traded partnership, taxable as a
corporation; and
. for federal and Delaware income and franchise tax purposes (1) the
amendment will not adversely affect the characterization of the notes of
any outstanding series or class as debt, (2) the amendment will not cause
a taxable event to holders of any outstanding notes, and (3) following
the amendment, the issuer will not be an association, or publicly traded
partnership, taxable as a corporation.
Addresses for Notices
Notices to holders of notes will be given by mail sent to the addresses of
the holders as they appear in the note register.
Issuer's Annual Compliance Statement
The issuer is required to furnish annually to the indenture trustee a
statement concerning its performance or fulfillment of covenants, agreements or
conditions in the indenture as well as the presence or absence of defaults
under the indenture.
Indenture Trustee's Annual Report
The indenture trustee is required to mail each year to all registered
noteholders a report concerning:
. its eligibility and qualifications to continue as trustee under the
indenture,
. any amounts advanced by it under the indenture,
. the amount, interest rate and maturity date or indebtedness owing by the
issuer to it in the indenture trustee's individual capacity,
. the property and funds physically held by it as indenture trustee,
. any release or release and substitution of collateral subject to the lien
of the indenture that has not previously been reported, and
. any action taken by it that materially affects the notes and that has not
previously been reported.
List of Noteholders
Three or more holders of notes of any series, each of whom has owned a note
for at least six months, may, upon written request to the indenture trustee,
obtain access to the current list of noteholders of the issuer for purposes of
communicating with other noteholders concerning their rights under the
indenture or the notes. The indenture trustee may elect not to give the
requesting noteholders access to the list if it agrees to mail the desired
communication or proxy to all applicable noteholders.
Reports
Monthly reports containing information on the notes and the collateral
securing the notes will be filed with the Securities and Exchange Commission.
These reports will not be sent to noteholders. See "Where You Can Find More
Information" in this prospectus for information as to how these reports may be
accessed.
On or before [.][.] of each calendar year, the paying agent, on behalf of the
indenture trustee, will furnish to each person who at any time during the prior
calendar year was a noteholder of record a statement containing the information
required to be provided by an issuer of indebtedness under the Internal Revenue
Code. See "Tax Matters" in this prospectus.
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MBNA's Credit Card Activities
General
The receivables conveyed or to be conveyed to master trust II by MBNA
pursuant to the master trust II agreement have been or will be generated from
transactions made by holders of selected MasterCard and VISA credit card
accounts, including premium accounts and standard accounts, from the portfolio
of MasterCard and VISA accounts owned by MBNA called the bank portfolio.
Generally, both premium and standard accounts undergo the same credit analysis,
but premium accounts carry higher credit limits and offer a wider variety of
services to the cardholders. MBNA currently services the bank portfolio in the
manner described below. Certain data processing and administrative functions
associated with the servicing of the bank portfolio are performed on behalf of
MBNA by MBNA Hallmark Information Services, Inc. See "--MBNA Hallmark" below.
MBNA Hallmark is a wholly-owned subsidiary of MBNA.
Acquisition and Use of Credit Card Accounts
MBNA primarily relies on affinity marketing in the acquisition of new credit
card accounts. Affinity marketing involves the solicitation of prospective
cardholders from identifiable groups with a common interest or a common cause.
Affinity marketing is conducted through two approaches: (1) solicitation of
members of organized membership groups with the endorsement of such group's
leadership; and (2) direct solicitation of purchased list prospects. This may
be supplemented by the purchase of affinity relationships, including related
credit card receivables. MBNA also relies on targeted direct response marketing
in the acquisition of new accounts.
Credit applications that are approved are reviewed individually by a credit
analyst. Credit analysts approve applications and assign credit lines based on
a review of the potential customer's financial history and capacity to repay.
Credit analysts review credit reports obtained through an independent credit
reporting agency, and use a delinquency probability model to assist them in
reaching a credit decision for each applicant. Credit analysts also review and
verify other information, such as employment and income, when necessary to make
a credit decision. Further levels of review are automatically triggered,
depending upon the levels of risk indicated by the delinquency probability
model. Credit analysts review applications obtained through pre-approved offers
to ensure adherence to credit standards and that the appropriate credit limit
is assigned. MBNA's Loan Review Department independently reviews selected
applications to ensure quality and consistency. Less than half of all credit
applications are approved.
Credit card accounts that have been purchased by MBNA were originally opened
using criteria established by institutions other than MBNA and may not have
been subject to the same level of credit review as accounts established by
MBNA. It is expected that portfolios of credit card accounts purchased by MBNA
from other credit card issuers will be added to master trust II from time to
time.
Each cardholder is subject to an agreement with MBNA governing the terms and
conditions of the related MasterCard or VISA account. Under each such
agreement, MBNA reserves the right, upon advance notice to the cardholder, to
add or to change any terms, conditions, services or features of its MasterCard
or VISA accounts at any time, including increasing or decreasing periodic
finance charges, other charges or minimum payment terms. The agreement with
each cardholder provides that MBNA may apply such changes, when applicable, to
current outstanding balances as well as to future transactions. The cardholder
can avoid certain changes in terms by giving timely written notification to
MBNA and by not using the account.
A cardholder may use the credit card for two types of transactions: purchases
and cash advances. Cardholders make purchases when using the credit card to pay
for goods or services. A cash advance is made when a credit card is used to
obtain cash from a financial institution or an automated teller machine.
Cardholders may use special cash advance checks issued by MBNA to draw against
their MasterCard or VISA credit lines. Cardholders may draw against their MBNA
credit lines as a cash advance by transferring balances owed to other creditors
to their MBNA accounts.
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MBNA Hallmark
Credit card processing services performed by MBNA Hallmark include data
processing, payment processing, statement rendering, card production and
network services. MBNA Hallmark's data network provides an interface to
MasterCard International Inc. and VISA U.S.A., Inc. for performing
authorizations and funds transfers. Most data processing and network functions
are performed at MBNA Hallmark's facility in Addison, Texas.
Interchange
Creditors participating in the VISA and MasterCard associations receive
certain fees called interchange from VISA and MasterCard as partial
compensation for taking credit risk, absorbing fraud losses and funding
receivables for a limited period prior to initial billing. Under the VISA and
MasterCard systems, a portion of this interchange in connection with cardholder
charges for goods and services is passed from banks which clear the
transactions for merchants to credit card issuing banks. Interchange fees are
set annually by MasterCard and VISA and are based on the number of credit card
transactions and the amount charged per transaction. MBNA will be required to
transfer to master trust II a percentage of the interchange attributed to
cardholder charges for goods and services in the related accounts. Interchange
arising under the related accounts will be allocated to the collateral
certificate and will be treated as collections of finance charge receivables
and will be used to pay required monthly payments to the issuer and to pay a
portion of the servicing fee paid to the master trust II servicer.
Master Trust II
General
Master trust II has been formed in accordance with the laws of the State of
Delaware. Master trust II is governed by the Pooling and Servicing Agreement,
dated August 4, 1994, between MBNA, as seller and servicer, and The Bank of New
York, as master trust II trustee, which has been and may be amended from time
to time, and is referred to in this prospectus as the master trust II
agreement. Master trust II will only engage in the following business
activities:
. acquiring and holding master trust assets;
. issuing series of certificates and other interests in master trust II;
. making payments on the collateral certificates and other interests; and
. engaging in related activities (including, with respect to any series,
obtaining any enhancement and entering into an enhancement agreement
relating thereto).
As a consequence, master trust II is not expected to have any need for
additional capital resources other than the assets of master trust II.
Master Trust II Trustee
The Bank of New York is the master trust II trustee under the master trust II
agreement. MBNA, the servicer and their respective affiliates may from time to
time enter into normal banking and trustee relationships with the master trust
II trustee and its affiliates. The master trust II trustee, MBNA, the servicer
and any of their respective affiliates may hold certificates in their own
names. For purposes of meeting the legal requirements of certain local
jurisdictions, the master trust II trustee shall have the power to appoint a
co-master trust II trustee or separate master trust II trustees of all or any
part of master trust II. In the event of such appointment, all rights, powers,
duties and obligations conferred or imposed upon the master trust II trustee by
the master trust II agreement will be conferred or imposed upon the master
trust II trustee and such separate trustee or co-trustee jointly, or, in any
jurisdiction in which the master trust II trustee shall be incompetent or
unqualified to perform certain acts, singly upon such separate trustee or co-
trustee who shall exercise and perform such rights, powers, duties and
obligations solely at the direction of the master trust II trustee.
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The master trust II trustee may resign at any time, in which event MBNA will
be obligated to appoint a successor master trust II trustee. MBNA may also
remove the master trust II trustee if the master trust II trustee ceases to be
eligible to continue as such under the master trust II agreement or if the
master trust II trustee becomes insolvent. In such circumstances, MBNA will be
obligated to appoint a successor master trust II trustee. Any resignation or
removal of the master trust II trustee and appointment of a successor master
trust II trustee does not become effective until acceptance of the appointment
by the successor master trust II trustee.
The Receivables
The master trust II portfolio will arise in accounts selected from the bank
portfolio on the basis of criteria set forth in the master trust II agreement
as applied on the cut-off date and, with respect to additional accounts, as of
the date of their designation. MBNA will have the right (subject to certain
limitations and conditions set forth therein), and in some circumstances will
be obligated, to designate from time to time additional eligible revolving
credit card accounts to be included as accounts and to transfer to master trust
II all receivables of such additional accounts, whether such receivables are
then existing or thereafter created, or to transfer to master trust II
participations in receivables instead. Any additional accounts designated by
MBNA must meet certain eligibility requirements on the date of designation.
MBNA also has the right (subject to certain limitations and conditions) to
require the master trust II trustee to reconvey all receivables in accounts
designated by MBNA for removal, whether such receivables are then existing or
thereafter created. Throughout the term of master trust II, the accounts from
which the receivables arise will be the accounts designated by MBNA on the cut-
off date plus any additional accounts minus any removed accounts. With respect
to each series of certificates issued by master trust II, MBNA will represent
and warrant to master trust II that, as of the date of issuance of the related
series and the date receivables are conveyed to master trust II, such
receivables meet certain eligibility requirements. See "--Representations and
Warranties" below.
The prospectus supplement relating to each series, class or tranche of notes
will provide certain information about the master trust II portfolio as of the
date specified. Such information will include, but not be limited to, the
amount of principal receivables, the amount of finance charge receivables, the
range of principal balances of the accounts and the average thereof, the range
of credit limits of the accounts and the average thereof, the range of ages of
the accounts and the average thereof, the geographic distribution of the
accounts, the types of accounts and delinquency statistics relating to the
accounts.
Investor Certificates
Each series of master trust II certificates will represent interests in
certain assets of master trust II, including the right to the applicable
investor percentage of all cardholder payments on the receivables in master
trust II. For the collateral certificate, the investor interest on any date
will be equal to sum of the nominal liquidation amounts for each tranche of
notes.
MBNA initially will own the seller interest which represents the interest in
master trust II not represented by the certificates issued and outstanding
under master trust II or the rights, if any, of any credit enhancement
providers to receive payments from master trust II. The holder of the seller
interest, subject to certain limitations, will have the right to the seller
percentage of all cardholder payments from the receivables in master trust II.
The seller interest may be transferred in whole or in part subject to certain
limitations and conditions set forth in the master trust II agreement. At the
discretion of MBNA, the seller interest may be held either in an uncertificated
form or in the form of a certificate representing the seller interest, called a
seller certificate. See "--Certain Matters Regarding MNBA as Seller and
Servicer" below.
The amount of principal receivables in master trust II will vary each day as
new principal receivables are created and others are paid or charged-off as
uncollectible. The amount of the seller interest will fluctuate each day,
therefore, to reflect the changes in the amount of the principal receivables in
master trust II. As a result, the seller interest will generally increase to
reflect reductions in the investor interest for such series and will also
change to reflect the variations in the amount of principal receivables in
master trust II. The seller interest
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will generally decrease as a result of the issuance of a new series of investor
certificates by master trust II or as a result of an increase in the collateral
certificate due to the issuance of a new series, class or tranche of notes or
otherwise. See "--New Issuances" below and "The Notes--Issuance of New Series,
Classes and Tranches of Notes" in this prospectus.
Transfer and Assignment of Receivables
MBNA has transferred and assigned all of its right, title and interest in and
to the receivables in the accounts and all receivables thereafter created in
the accounts.
In connection with each previous transfer of the receivables to master trust
II, MBNA indicated, and in connection with each subsequent transfer of
receivables to master trust II, MBNA will indicate, in its computer files that
the receivables have been conveyed to master trust II. In addition, MBNA has
provided to the master trust II trustee computer files or microfiche lists,
containing a true and complete list showing each account, identified by account
number and by total outstanding balance on the date of transfer. MBNA will not
deliver to the master trust II trustee any other records or agreements relating
to the accounts or the receivables, except in connection with additions or
removals of accounts. Except as stated above, the records and agreements
relating to the accounts and the receivables in master trust II maintained by
MBNA or the servicer are not and will not be segregated by MBNA or the servicer
from other documents and agreements relating to other credit card accounts and
receivables and are not and will not be stamped or marked to reflect the
transfer of the receivables to master trust II, but the computer records of
MBNA are and will be required to be marked to evidence such transfer. MBNA has
filed Uniform Commercial Code financing statements with respect to the
receivables in master trust II meeting the requirements of Delaware state law.
See "Risk Factors" and "Material Legal Aspects of the Receivables" in this
prospectus.
Addition of Master Trust II Assets
As described above under "--The Receivables," MBNA has the right to designate
to master trust II, from time to time, additional accounts for the related
receivables to be included as receivables transferred to master trust II. MBNA
will convey to master trust II its interest in all receivables of such
additional accounts, whether such receivables are then existing or thereafter
created.
Each additional account must be an eligible account at the time of its
designation. However, additional accounts may not be of the same credit quality
as the initial accounts transferred to master trust II. Additional accounts may
have been originated by MBNA using credit criteria different from those which
were applied by MBNA to the initial accounts transferred to master trust II or
may have been acquired by MBNA from an institution which may have had different
credit criteria.
In addition to or in lieu of additional accounts, MBNA is permitted to add to
master trust II participations representing interests in a pool of assets
primarily consisting of receivables arising under consumer revolving credit
card accounts owned by MBNA and collections thereon. Participations may be
evidenced by one or more certificates of ownership issued under a separate
pooling and servicing agreement or similar agreement entered into by MBNA which
entitles the certificateholder to receive percentages of collections generated
by the pool of assets subject to such participation agreement from time to time
and to certain other rights and remedies specified therein. Participations may
have their own credit enhancement, pay out events, servicing obligations and
servicer defaults, all of which are likely to be enforceable by a separate
trustee under the participation agreement and may be different from those
specified in this prospectus. The rights and remedies of master trust II as the
holder of a participation (and therefore the certificateholders) will be
subject to all the terms and provisions of the related participation agreement.
The master trust II agreement may be amended to permit the addition of a
participation in master trust II without the consent of the related
certificateholders if:
. MBNA delivers to the master trust II trustee a certificate of an
authorized officer to the effect that, in the reasonable belief of MBNA,
such amendment will not as of the date of such amendment adversely affect
in any material respect the interest of such certificateholders; and
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. such amendment will not result in a withdrawal or reduction of the rating
of any outstanding series under master trust II by any rating agency.
A conveyance by MBNA to master trust II of receivables in additional accounts
or participations is subject to the following conditions, among others:
. MBNA shall give the master trust II trustee, each rating agency and the
servicer written notice that such additional accounts or participations
will be included, which notice shall specify the approximate aggregate
amount of the receivables or interests therein to be transferred;
. MBNA shall have delivered to the master trust II trustee a written
assignment (including an acceptance by the master trust II trustee on
behalf of master trust II for the benefit of the certificateholders) as
provided in the assignment agreement relating to such additional accounts
or participations and, MBNA shall have delivered to the master trust II
trustee a computer file or microfiche list, dated as of the addition
date, containing a true and complete list of such additional accounts or
participations transferred to master trust II;
. MBNA shall represent and warrant that:
--each additional account is, as of the addition date, an eligible
account, and each receivable in such additional account is, as of the
addition date, an eligible receivable;
--no selection procedures believed by the seller to be materially adverse
to the interests of the certificateholders were utilized in selecting
the additional accounts from the available eligible accounts from the
bank portfolio; and
--as of the addition date, MBNA is not insolvent;
. MBNA shall deliver certain opinions of counsel with respect to the
transfer of the receivables in the additional accounts or the
participations to master trust II; and
. each rating agency then rating any series of certificates outstanding
under master trust II shall have previously, or, in certain limited
circumstances, within a three-month period, consented to the addition of
such additional accounts or participations.
In addition to the periodic reports otherwise required to be filed by the
servicer with the SEC pursuant to the Securities Exchange Act of 1934, as
amended, the servicer intends to file, on behalf of master trust II, a report
on Form 8-K with respect to any addition to master trust II of receivables in
additional accounts or participations that would have a material effect on the
composition of the assets of master trust II.
Removal of Accounts
MBNA may, but shall not be obligated to, designate from time to time certain
accounts to be removed accounts, all receivables in which shall be subject to
removal from master trust II. MBNA, however, may not make more than one such
designation in any monthly period. MBNA will be permitted to designate and
require reassignment to it of the receivables from removed accounts only upon
satisfaction of the following conditions:
. the removal of any receivables of any removed accounts shall not, in the
reasonable belief of MBNA, cause a pay out event to occur;
. MBNA shall have delivered to master trust II for execution a written
assignment and a computer file or microfiche list, dated as of the
removal date, containing a true and complete list of all removed accounts
identified by account number and the aggregate amount of the receivables
in such removed accounts;
. MBNA shall represent and warrant that no selection procedures believed by
MBNA to be materially adverse to the interests of the holders of any
series of certificates outstanding under master trust II were utilized in
selecting the removed accounts to be removed from master trust II;
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. each rating agency then rating each series of certificates outstanding
under master trust II shall have received notice of such proposed removal
of accounts and MBNA shall have received notice from each such rating
agency that such proposed removal will not result in a downgrade of its
then-current rating for any such series;
. the aggregate amount of principal receivables of the accounts then
existing in master trust II less the aggregate amount of principal
receivables of the removed accounts shall not be less than the amount, if
any, specified for any period specified;
. the principal receivables of the removed accounts shall not equal or
exceed 5% of the aggregate amount of the principal receivables in master
trust II at such time; except, that if any series of master trust II
investor certificates or tranche of notes has been paid in full, the
principal receivables in such removed accounts may not equal or exceed
the sum of:
--the initial investor interest or the aggregate principal amount of the
certificates of such series or tranche, as applicable, of such series;
plus
--5% of the aggregate amount of the principal receivables in master trust
II at such time after giving effect to the removal of accounts pursuant
to clause (a) above; and
. MBNA shall have delivered to the master trust II trustee an officer's
certificate confirming the items set forth above.
MBNA will be permitted to designate as a removed account without the consent
of the master trust II trustee, certificateholders or rating agencies, and
without having to satisfy the conditions described above, any account that has
a zero balance and which MBNA will remove from its computer file.
Collection and Other Servicing Procedures
The servicer will be responsible for servicing and administering the
receivables in accordance with the servicer's policies and procedures for
servicing credit card receivables comparable to the receivables. The servicer
will be required to maintain fidelity bond coverage insuring against losses
through wrongdoing of its officers and employees who are involved in the
servicing of credit card receivables covering such actions and in such amounts
as the servicer believes to be reasonable from time to time.
The servicer may not resign from its obligations and duties under the master
trust II agreement, except upon determination that performance of its duties is
no longer permissible under applicable law. No such resignation will become
effective until the master trust II trustee or a successor to the servicer has
assumed the servicer's responsibilities and obligations under the master trust
II agreement. MBNA, as initial servicer, intends to delegate some of its
servicing duties to MBNA Hallmark; however, such delegation will not relieve it
of its obligation to perform such duties in accordance with the master trust II
agreement.
Master Trust II Accounts
The servicer will establish and maintain, in the name of master trust II, for
the benefit of certificateholders of all series, an account established for the
purpose of holding collections of receivables, called a master trust II
collection account, which will be a non-interest bearing segregated account
established and maintained with the servicer or with a qualified institution. A
qualified institution may also be a depository institution, which may include
the master trust II trustee, which is acceptable to each rating agency.
In addition, for the benefit of the investor certificateholders of
certificates issued by master trust II, the master trust II trustee will
establish and maintain in the name of master trust II two separate accounts,
called a finance charge account and a principal account, in segregated master
trust II accounts (which need not be deposit accounts). Funds in the principal
account and the finance charge account for master trust II will be invested, at
the direction of the servicer, in permitted investments.
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Any earnings (net of losses and investment expenses) on funds in the finance
charge account or the principal account allocable to the collateral certificate
will be included in collections of finance charge receivables allocable to the
collateral certificate. The servicer will have the revocable power to withdraw
funds from the master trust II collection account and to instruct the master
trust II trustee to make withdrawals and payments from the finance charge
account and the principal account for the purpose of carrying out the
servicer's duties.
Investor Percentage
The servicer will allocate between the investor interest of each series
issued and outstanding and the seller interest, all amounts collected on
finance charge receivables, all amounts collected on principal receivables and
all receivables in defaulted accounts, based on a varying percentage called the
investor percentage. The servicer will make each allocation by reference to the
applicable investor percentage of each series and the seller percentage, and,
in certain circumstances, the percentage interest of certain credit enhancement
providers, with respect to such series. For a description of how allocations
will be made to the collateral certificate by master trust II, see "Sources of
Funds to Pay the Notes--The Collateral Certificate."
Transfer of Annual Membership Fees
Before the distribution date following each annual membership fee processing
date, MBNA will accept reassignment of the receivables representing such annual
membership fee from master trust II. MBNA will pay to master trust II for such
receivable the amount of such annual membership fee. An amount equal to the
product of (a) the investor percentages with respect to all series issued by
master trust II with respect to finance charge receivables and (b) the amount
of such annual membership fee will be deposited by MBNA into the finance charge
account, and an amount equal to the product of (a) the seller percentage and
(b) the amount of such annual membership fee will be paid to the holder of the
seller interest. Simultaneously with such reassignment, MBNA will retransfer
the receivable representing such annual membership fee to master trust II. Upon
such retransfer, MBNA will make certain representations and warranties with
respect to such receivables, as provided above under "--Representations and
Warranties," as if such receivable were a new receivable created in an existing
account of master trust II. Further, the amount of the seller interest will be
increased to reflect the addition of such annual membership fee receivable to
master trust II. Collections with respect to such annual membership fees will
be treated as collections of principal receivables.
Application of Collections
Except as otherwise provided below, the servicer will deposit into the master
trust II collection account, no later than the second business day following
the date of processing, any payment collected by the servicer on the
receivables in master trust II. On the same day as any such deposit is made,
the servicer will make the deposits and payments to the accounts and parties as
indicated below. MBNA, as servicer, may make such deposits and payments on a
monthly or other periodic basis on each transfer date in an amount equal to the
net amount of such deposits and payments which would have been made on a daily
basis if:
. (i) the servicer provides to the master trust II trustee a letter of
credit covering collection risk of the servicer acceptable to the
specified rating agency, and (ii) MBNA shall not have received a notice
from such rating agency that such letter of credit would result in the
lowering of such rating agency's then-existing rating of any series of
certificates previously-issued by master trust II and then-outstanding;
or
. the servicer has and maintains a certificate of deposit rating of P-1 by
Moody's and of A-1 by Standard & Poor's and deposit insurance.
However, with respect to collections of principal receivables allocable to
the subordinated notes and available for reallocation to cover shortfalls in
available funds, MBNA, as servicer, will deposit such collections into the
principal account up to an amount equal to 1.5 times the highest aggregate
investor default amount allocable to the collateral certificate in the three
(3) prior monthly periods.
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Whether the servicer is required to make monthly or daily deposits from the
master trust II collection account into the finance charge account or the
principal account, with respect to any monthly period:
. the servicer will only be required to deposit collections from the master
trust II collection account into the finance charge account, the
principal account or any series account established by a related series
supplement up to the required amount to be deposited into any such
deposit account or, without duplication, distributed or deposited on or
prior to the related distribution date to certificateholders; and
. if at any time prior to such distribution date the amount of collections
deposited in the master trust II collection account, finance charge
account or principal account exceeds the amount required to be deposited
pursuant to the first paragraph of this section, the servicer, subject to
certain limitations, will be permitted to withdraw the excess from the
master trust II collection account, finance charge account or principal
account, as applicable.
The servicer will withdraw the following amounts from the master trust II
collection account for application as indicated:
(a) an amount equal to the seller percentage of the aggregate amount of
such deposits in respect of principal receivables will be:
--paid to the holder of the seller interest if, and only to the extent
that, the seller interest is greater than the minimum seller interest;
or
--deposited in the principal account and treated as unallocated principal
collections;
(b) an amount equal to the seller percentage of the aggregate amount of
such deposit in respect of finance charge receivables will be:
--paid to the issuer if, and only to the extent that, amounts are on
deposit in a principal funding account for any tranche or class of
notes, and the earnings on such amounts are less than the amount of
interest payable to noteholders on such amounts; or
--paid to the holder of the seller interest.
(c) an amount equal to the applicable investor percentage of the
aggregate amount of such deposits in respect of finance charge receivables
will be deposited into the finance charge account for application and
distribution in accordance with the related series supplement;
(d) for the collateral certificate, deposits in respect of finance charge
receivables and principal receivables will be allocated to the collateral
certificate as described in "Source of Funds to Pay the Notes--The
Collateral Certificate" in this prospectus.
Any unallocated principal collections will be paid to and held in the
principal account and paid to the holder of the seller interest if, and only to
the extent that, the seller interest is greater than the minimum seller
interest. Unallocated principal collections will be held for or distributed to
investor certificateholders of the series of certificates issued by master
trust II (including the collateral certificate) in accordance with related
series supplements.
Defaulted Receivables; Rebates and Fraudulent Charges
On each determination date, the servicer will calculate the aggregate
investor default amount for the preceding monthly period, which will be equal
to the aggregate amount of the investor percentage of principal receivables in
defaulted accounts; that is, accounts which in such monthly period were written
off as uncollectible in accordance with the servicer's policies and procedures
for servicing credit card receivables comparable to the receivables in master
trust II.
If the servicer adjusts the amount of any principal receivable because of
transactions occurring in respect of a rebate or refund to a cardholder, or
because such principal receivable was created in respect of merchandise
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which was refused or returned by a cardholder, then the seller interest will be
reduced by the amount of the adjustment. In addition, the seller interest will
be reduced as a result of transactions in respect of any principal receivable
which was discovered as having been created through a fraudulent or counterfeit
charge.
Master Trust II Termination
Master trust II will terminate on the master trust II termination date. Upon
the termination of master trust II and the surrender of the seller interest,
the master trust II trustee shall convey to the holder of the seller interest
all right, title and interest of master trust II in and to the receivables and
other funds of master trust II.
Pay Out Events
A pay out event will cause the early redemption of the notes. A pay out event
refers to any of the following events:
(a) failure on the part of MBNA (i) to make any payment or deposit on the
date required under the master trust II agreement or the Series 2001-
[.] supplement (or within the applicable grace period which shall not
exceed five (5) days) or (ii) to observe or perform in any material
respect any other covenants or agreements of MBNA set forth in the
master trust II agreement or the Series 2001-[.] supplement, which
failure has a material adverse effect on the certificateholders and
which continues unremedied for a period of sixty (60) days after
written notice of such failure, requiring the same to be remedied, and
continues to materially and adversely affect the interests of the
certificateholders for such period;
(b) any representation or warranty made by MBNA in the master trust II
agreement or the Series 2001-[.] supplement, or any information
required to be given by MBNA to the master trust II trustee to identify
the accounts, proves to have been incorrect in any material respect
when made or delivered and which continues to be incorrect in any
material respect for a period of sixty (60) days after written notice
of such failure, requiring the same to be remedied, and as a result of
which the interests of the certificateholders are materially and
adversely affected and continue to be materially and adversely affected
for such period, except that a pay out event pursuant to this
subparagraph (b) will not occur if MBNA has accepted reassignment of
the related receivable or all such receivables, if applicable, during
such period (or such longer period as the master trust II trustee may
specify) in accordance with the provisions of the master trust II
agreement;
(c) a failure by MBNA to convey receivables arising under additional
accounts, or participations, to master trust II when required by the
master trust II agreement;
(d) any servicer default occurs which would have a material adverse effect
on the certificateholders;
(e) certain events of insolvency, conservatorship or receivership relating
to MBNA;
(f) MBNA becomes unable for any reason to transfer receivables to master
trust II in accordance with the provisions of the master trust II
agreement; or
(g) master trust II becomes an "investment company" within the meaning of
the Investment Company Act of 1940, as amended.
In the case of any event described in clause (a), (b) or (d) above, a pay out
event will occur only if, after any applicable grace period, either the master
trust II trustee or the holders of the collateral certificate evidencing
interests aggregating not less than 50% of the investor interest of Series
2001-[.], by written notice to MBNA and the servicer (and to the master trust
II trustee if given by the certificateholders) declare that a pay out event has
occurred as of the date of such notice.
In the case of any event described in clause (c), (e), (f) or (g), a pay out
event will occur without any notice or other action on the part of the master
trust II trustee or the holders of the collateral certificate immediately upon
the occurrence of such event.
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In addition to the consequences of a pay out event discussed above, if
pursuant to certain provisions of federal law, MBNA voluntarily enters
liquidation or a receiver is appointed for MBNA, on the day of such event MBNA
will immediately cease to transfer principal receivables to master trust II and
promptly give notice to the master trust II trustee of such event. Within 15
days, the master trust II trustee will publish a notice of the liquidation or
the appointment stating that the master trust II trustee intends to sell,
dispose of, or otherwise liquidate the receivables in master trust II in a
commercially reasonable manner. Unless otherwise instructed within a specified
period by certificateholders representing interests aggregating more than 50%
of the investor interest of each series issued and outstanding, the master
trust II trustee will sell, dispose of, or otherwise liquidate the receivables
in master trust II in a commercially reasonable manner and on commercially
reasonable terms. The holders of the collateral certificate will be deemed to
have disapproved of such sale, liquidation or disposition. The proceeds from
the sale, disposition or liquidation of such receivables will be treated as
collections of the receivables and applied as specified above in "--Application
of Collections" and in this prospectus.
If the only pay out event to occur is either the insolvency of MBNA or the
appointment of a conservator or receiver for MBNA, the conservator or receiver
may have the power to prevent the early sale, liquidation or disposition of the
receivables in master trust II and the commencement of a rapid amortization
period. In addition, a conservator or receiver may have the power to cause the
early sale of the receivables in master trust II and the early retirement of
the certificates. See "Risk Factors" in this prospectus.
On the date on which a pay out event occurs, the rapid amortization period
will commence. A pay out event for the collateral certificate is also an early
redemption event for the notes. See "Indenture--Early Redemption Events."
Servicing Compensation and Payment of Expenses
The share of the servicing fee allocable to the collateral certificate for
any transfer date, called the investor servicing fee, will equal one-twelfth of
the product of (i) 2.0% and (ii) the weighted average investor interest for the
monthly period preceding such transfer date, except that for the first transfer
date, the investor servicing fee will be equal the product of (i) the weighted
average investor interest for the first monthly period, (ii) 2.0% and (iii) a
fraction, the numerator of which is [.] and the denominator of which is 360. On
each transfer date, if MBNA or The Bank of New York is the servicer, servicer
interchange for the related monthly period that is on deposit in the finance
charge account will be withdrawn from the finance charge account and paid to
the servicer in payment of a portion of the investor servicing fee for such
monthly period.
The servicer interchange for any monthly period for which MBNA or The Bank of
New York is the servicer will be an amount equal to the portion of collections
of finance charge receivables allocated to the investor interest for such
monthly period that is attributable to interchange. However, servicer
interchange for a monthly period will not exceed one-twelfth of the product of
(i) the weighted average investor interest for such monthly period (ii) 0.75%;
except that for the first transfer date, the servicer interchange may equal but
shall not exceed the product of (i) the weighted average investor interest for
the first monthly period, (ii) 0.75% and (iii) a fraction, the numerator of
which is [.] and the denominator of which is 360. In the case of any
insufficiency of servicer interchange on deposit in the finance charge account,
a portion of the investor servicing fee with respect to such monthly period
will not be paid to the extent of such insufficiency and in no event shall
master trust II, the master trust II trustee or the collateral
certificateholder be liable for the share of the servicing fee to be paid out
of servicer interchange.
The share of the investor servicing fee allocable to the collateral
certificate for any transfer date, called the net servicing fee, is equal to
one-twelfth of the product of (i) the weighted average investor interest and
(ii) 1.25%, or if MBNA or The Bank of New York is not the servicer, 2.0%;
except that for the first transfer date the net servicing fee will be equal to
the product of (i) the (i) the weighted average investor interest for the first
monthly period, (ii) 1.25%, or if MBNA or The Bank of New York is not the
servicer, 2.0% and (iii) a fraction, the numerator of which is [.] and the
denominator of which is 360.
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The investor servicing fee will be funded from collections of finance charge
receivables allocated to the collateral certificate. The remainder of the
servicing fee for master trust II will be allocable to the seller interest, the
investor interests of any other series issued by master trust II and any other
interests in master trust II, if any, with respect to such series. Neither
master trust II nor the certificateholders of any series issued by master trust
II (including the collateral certificate) will have any obligation to pay the
portion of the servicing fee allocable to the seller interest.
The servicer will pay from its servicing compensation certain expenses
incurred in connection with servicing the receivables including, without
limitation, payment of the fees and disbursements of the master trust II
trustee and independent certified public accountants and other fees which are
not expressly stated in the master trust II agreement to be payable by master
trust II, the certificateholders or the collateral interest holder other than
federal, state and local income and franchise taxes, if any, of master trust
II.
New Issuances
The master trust II agreement provides that the holder of the seller interest
may cause the master trust II trustee to issue one or more new series of
certificates and may define all principal terms of such series. Each series
issued may have different terms and enhancements than any other series. None of
MBNA, the servicer, the master trust II trustee or master trust II is required
or intends to obtain the consent of any certificateholder of any other series
previously issued by master trust II or any noteholder of a series previously
issued by the issuer prior to the issuance of a new series of master trust II
investor certificates. However, as a condition of a new issuance, the holder of
the seller interest will deliver to the master trust II trustee written
confirmation that the new issuance will not result in the reduction or
withdrawal by any rating agency of its rating of any outstanding series.
Under the master trust II agreement, the holder of the seller interest may
cause a new issuance by notifying the master trust II trustee at least three
days in advance of the date upon which the new issuance is to occur. The notice
will state the designation of any series to be issued and:
. its initial principal amount (or method for calculating such amount)
which amount may not be greater than the current principal amount of the
seller interest;
. its certificate rate (or method of calculating such rate); and
. the provider of any credit enhancement.
The master trust II trustee will authenticate a new series only if it
receives the following, among others:
. a series supplement specifying the principal terms of such series;
. an opinion of counsel to the effect that, unless otherwise stated in the
related series supplement, the certificates of such series will be
characterized as indebtedness for federal income tax purposes;
. a master trust tax opinion;
. if required by the related series supplement, the form of credit
enhancement;
. if credit enhancement is required by the series supplement, an
appropriate credit enhancement agreement executed by MBNA and the credit
enhancer;
. written confirmation from each rating agency that the new issuance will
not result in such rating agency's reducing or withdrawing its rating on
any then outstanding series rated by it; and
. an officer's certificate of MBNA to the effect that after giving effect
to the new issuance MBNA would not be required to add additional accounts
pursuant to the master trust II agreement and the seller interest would
be at least equal to the minimum seller interest.
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Representations and Warranties
MBNA has made in the master trust II agreement certain representations and
warranties to master trust II to the effect that, among other things:
. as of the closing date, MBNA is duly incorporated and in good standing
and that it has the authority to consummate the transactions contemplated
by the master trust II agreement; and
. as of the cut-off date (or as of the date of the designation of
additional accounts), each account was an eligible account (as defined in
the glossary).
If,
. any of these representations and warranties proves to have been incorrect
in any material respect when made, and continues to be incorrect for 60
days after notice to MBNA by the master trust II trustee or to the seller
and the master trust II trustee by the certificateholders holding more
than 50% of the investor interest of the related series; and
. as a result the interests of the certificateholders are materially and
adversely affected, and continue to be materially and adversely affected
during such period;
then the master trust II trustee or certificateholders holding more than 50% of
the investor interest may give notice to MBNA (and to the master trust II
trustee in the latter instance) declaring that a pay out event has occurred,
thereby causing an early redemption event to occur with respect to the notes.
MBNA has also made representations and warranties to master trust II relating
to the receivables in master trust II to the effect that, among other things:
. as of the closing date of the initial series of certificates issued by
master trust II, each of the receivables then existing in master trust II
is an eligible receivable; and
. as of the date of creation of any new receivable, such receivable is an
eligible receivable and the representation and warranty that the transfer
was a sale or the grant of a perfected security interest, as described
below, is true and correct with respect to such receivable.
In the event:
. of a breach of any representation and warranty set forth in this
paragraph, within sixty (60) days, or such longer period as may be agreed
to by the master trust II trustee, of the earlier to occur of the
discovery of such breach by MBNA, as seller or as master trust II
servicer, or receipt by MBNA of written notice of such breach given by
the master trust II trustee, or, with respect to certain breaches
relating to prior liens, immediately upon the earlier to occur of such
discovery or notice; and
. that as a result of such breach, the receivables in the accounts of
master trust II are charged-off as uncollectible, master trust II's
rights in, to or under the receivables or its proceeds are impaired or
the proceeds of such receivables are not available for any reason to
master trust II free and clear of any lien (except for certain tax,
governmental and other nonconsensual liens);
then MBNA shall accept reassignment of each principal receivable as an
ineligible receivable to which such breach relates on the terms and conditions
set forth below. However, no such reassignment shall be required to be made
with respect to such ineligible receivable if, on any day within the applicable
period (or such longer period as may be agreed to by the master trust II
trustee), the representations and warranties with respect to such ineligible
receivable shall then be true and correct in all material respects.
MBNA will accept reassignment of each ineligible receivable by directing the
servicer to deduct the amount of each such ineligible receivable from the
aggregate amount of principal receivables used to calculate the seller
interest. In the event that the exclusion of an ineligible receivable from the
calculation of the seller
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interest would cause the seller interest to be a negative number, on the date
of reassignment of such ineligible receivable MBNA shall make a deposit in the
principal account in immediately available funds in an amount equal to the
amount by which the seller interest would be reduced below zero. Any such
deduction or deposit shall be considered a repayment in full of the ineligible
receivable. The obligation of MBNA to accept reassignment of any ineligible
receivable is the sole remedy respecting any breach of the representations and
warranties set forth in this paragraph with respect to such receivable
available to the certificateholders or the master trust II trustee on behalf of
certificateholders.
MBNA has also represented and warranted to master trust II to the effect
that, among other things, as of the closing date of the initial series of
certificates issued by master trust II:
. the master trust II agreement will constitute a legal, valid and binding
obligation of MBNA; and
. the transfer of receivables by it to master trust II under the master
trust II agreement will constitute either:
--a valid transfer and assignment to master trust II of all right, title
and interest of MBNA in and to the receivables in master trust II
(other than receivables in additional accounts), whether then existing
or thereafter created and the proceeds thereof (including amounts in
any of the accounts established for the benefit of certificateholders);
or
--the grant of a first priority perfected security interest in such
receivables (except for certain tax, governmental and other
nonconsensual liens) and the proceeds thereof (including amounts in any
of the accounts established for the benefit of certificateholders),
which is effective as to each such receivable upon the creation
thereof.
In the event of a breach of any of the representations and warranties
described in this paragraph, either the master trust II trustee or the holders
of certificates evidencing interests in master trust II aggregating more than
50% of the aggregate investor interest of all series outstanding under master
trust II may direct MBNA to accept reassignment of master trust II portfolio
within sixty (60) days of such notice, or within such longer period specified
in such notice. MBNA will be obligated to accept reassignment of such
receivables in master trust II on a distribution date occurring within such
applicable period. Such reassignment will not be required to be made, however,
if at any time during such applicable period, or such longer period, the
representations and warranties shall then be true and correct in all material
respects. The deposit amount for such reassignment will be equal to:
. the investor interest for each series outstanding under master trust II
on the last day of the monthly period preceding the distribution date on
which the reassignment is scheduled to be made; minus
. the amount, if any, previously allocated for payment of principal to such
certificateholders (or other interest holders) on such distribution date;
plus
. an amount equal to all accrued and unpaid interest less the amount, if
any, previously allocated for payment of such interest on such
distribution date.
The payment of this reassignment deposit amount and the transfer of all other
amounts deposited for the preceding month in the distribution account will be
considered a payment in full of the investor interest for each such series
required to be repurchased and will be distributed upon presentation and
surrender of the certificates for each such series. If the master trust II
trustee or certificateholders give a notice as provided above, the obligation
of MBNA to make any such deposit will constitute the sole remedy respecting a
breach of the representations and warranties available to the master trust II
trustee or such certificateholders.
It is not required or anticipated that the master trust II trustee will make
any initial or periodic general examination of the receivables or any records
relating to the receivables for the purpose of establishing the presence or
absence of defects, compliance with the MBNA's representations and warranties
or for any other purpose. The servicer, however, will deliver to the master
trust II trustee on or before March 31 of each year
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(or such other date specified in the accompanying prospectus supplement) an
opinion of counsel with respect to the validity of the security interest of
master trust II in and to the receivables and certain other components of
master trust II.
Certain Matters Regarding MBNA as Seller and as Servicer
The master trust II agreement provides that the servicer will indemnify
master trust II and the master trust II trustee from and against any loss,
liability, expense, damage or injury suffered or sustained by reason of any
acts or omissions or alleged acts or omissions of the servicer with respect to
the activities of master trust II or the master trust II trustee. The servicer,
however, will not indemnify:
. the master trust II trustee for liabilities imposed by reason of fraud,
negligence, or willful misconduct by the master trust II trustee in the
performance of its duties under the master trust II agreement;
. master trust II, the certificateholders or the certificate owners for
liabilities arising from actions taken by the master trust II trustee at
the request of certificateholders;
. master trust II, the certificateholders or the certificate owners for any
losses, claims, damages or liabilities incurred by any of them in their
capacities as investors, including without limitation, losses incurred as
a result of defaulted receivables or receivables which are written off as
uncollectible; or
. master trust II, the certificateholders or the certificate owners for any
liabilities, costs or expenses of master trust II, the certificateholders
or the certificate owners arising under any tax law, including without
limitation, any federal, state or local income or franchise tax or any
other tax imposed on or measured by income (or any interest or penalties
with respect thereto or arising from a failure to comply therewith)
required to be paid by master trust II, the certificateholders or the
certificate owners in connection with the master trust II agreement to
any taxing authority.
In addition, the master trust II agreement provides that, subject to certain
exceptions, MBNA will indemnify an injured party for any losses, claims,
damages or liabilities (other than those incurred by a certificateholder as an
investor in the certificates or those which arise from any action of a
certificateholder) arising out of or based upon the arrangement created by the
master trust II agreement as though the master trust II agreement created a
partnership under the Delaware Uniform Partnership Law in which MBNA is a
general partner.
Neither MBNA, the servicer nor any of their respective directors, officers,
employees or agents will be under any other liability to master trust II, the
master trust II trustee, the investor certificateholders of any certificates
issued by master trust II or any other person for any action taken, or for
refraining from taking any action, in good faith pursuant to the master trust
II agreement. Neither MBNA, the servicer nor any of their respective directors,
officers, employees or agents will be protected against any liability which
would otherwise be imposed by reason of willful misfeasance, bad faith or gross
negligence of MBNA, the servicer or any such person in the performance of its
duties or by reason of reckless disregard of obligations and duties thereunder.
In addition, the master trust II agreement provides that the servicer is not
under any obligation to appear in, prosecute or defend any legal action which
is not incidental to its servicing responsibilities under the master trust II
agreement and which in its opinion may expose it to any expense or liability.
MBNA may transfer its interest in all or a portion of the seller interest,
provided that prior to any such transfer:
. the master trust II trustee receives written notification from each
rating agency that such transfer will not result in a lowering of its
then-existing rating of the certificates of each outstanding series rated
by it; and
. the master trust II trustee receives a written opinion of counsel
confirming that such transfer would not adversely affect the treatment of
the certificates of each outstanding series issued by master trust II as
debt for federal income tax purposes.
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Any person into which, in accordance with the master trust II agreement, MBNA
or the servicer may be merged or consolidated or any person resulting from any
merger or consolidation to which MBNA or the servicer is a party, or any person
succeeding to the business of MBNA or the servicer, upon execution of a
supplement to the master trust II agreement, delivery of an opinion of counsel
with respect to the compliance of the transaction with the applicable
provisions of the master trust II agreement, will be the successor to MBNA or
the servicer, as the case may be, under the master trust II agreement.
Servicer Default
In the event of any servicer default, either the master trust II trustee or
certificateholders representing interests aggregating more than 50% of the
investor interests for all series of certificates of master trust II, by
written notice to the servicer (and to the master trust II trustee if given by
the certificateholders), may terminate all of the rights and obligations of the
servicer under the master trust II agreement and the master trust II trustee
may appoint a new servicer, called a service transfer. The rights and interest
of MBNA under the master trust II agreement and in the seller interest will not
be affected by such termination. The master trust II trustee shall as promptly
as possible appoint a successor servicer. If no such servicer has been
appointed and has accepted such appointment by the time the servicer ceases to
act as servicer, all authority, power and obligations of the servicer under the
master trust II agreement will pass to the master trust II trustee. If the
master trust II trustee is unable to obtain any bids from eligible servicers
and the servicer delivers an officer's certificate to the effect that it cannot
in good faith cure the servicer default which gave rise to a transfer of
servicing, and if the master trust II trustee is legally unable to act as
successor servicer, then the master trust II trustee shall give MBNA the right
of first refusal to purchase the receivables on terms equivalent to the best
purchase offer as determined by the master trust II trustee.
Upon the occurrence of any servicer default, the servicer shall not be
relieved from using its best efforts to perform its obligations in a timely
manner in accordance with the terms of the master trust II agreement. The
servicer is required to provide the master trust II trustee, any provider of
enhancement and/or any issuer of any third-party credit enhancement, MBNA and
the holders of certificates of each series issued and outstanding under master
trust II prompt notice of such failure or delay by it, together with a
description of the cause of such failure or delay and its efforts to perform
its obligations.
In the event of a servicer default, if a conservator or receiver is appointed
for the servicer and no servicer default other than such conservatorship or
receivership or the insolvency of the servicer exists, the conservator or
receiver may have the power to prevent either the master trust II trustee or
the majority of the certificateholders from effecting a service transfer.
Evidence as to Compliance
On or before August 31 of each calendar year, the servicer is required to
cause a firm of independent certified public accountants to furnish a report,
based upon established criteria that meets the standards applicable to
accountants' reports intended for general distribution, attesting to the
fairness of the assertion of the servicer's management that its internal
controls over the functions performed as servicer of master trust II are
effective, in all material respects, in providing reasonable assurance master
trust II assets are safeguarded against loss from unauthorized use or
disposition, on the date of such report, and that such servicing was conducted
in compliance with the sections of the master trust II agreement during the
period covered by such report (which shall be the period from July 1 (or for
the initial period, the relevant closing date) of the preceding calendar year
to and including June 30 of such calendar year), except for such exceptions or
errors as such firm believes to be immaterial and such other exceptions as
shall be set forth in such statement.
The servicer is also required to provide an annual statement signed by an
officer of the servicer to the effect that the servicer has fully performed its
obligations under the master trust II agreement throughout the preceding year,
or, if there has been a default in the performance of any such obligation,
specifying the nature and status of the default.
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Amendments to the Master Trust II Agreement
By accepting a note, a noteholder will be deemed to acknowledge that MBNA and
the master trust II trustee may amend the master trust II agreement and any
series supplement without the consent of any investor certificateholder
(including the issuer) or any noteholder, so long as the amendment will not
materially adversely affect the interest of any investor certificateholder
(including the holder of the collateral certificate).
For the purposes of any vote or consent under the master trust II agreement
or any series supplement:
. that requires the consent or vote of each investor certificateholder,
each noteholder will be treated as an investor certificateholder;
. that requires the consent or vote of any series of investor certificates
issued by master trust II, each series of notes will be treated as a
series of investor certificates issued by master trust II; and
. that requires the consent or vote of any class of investor certificates
issued by master trust II, each tranche of notes will be treated as a
class of investor certificates issued by master trust II.
No amendment to the master trust II agreement will be effective unless the
issuer delivers the opinions of counsel described under "Indenture--Tax
Opinions for Amendments."
The master trust II agreement and any series supplement may be amended by
MBNA, the servicer and the master trust II trustee, without the consent of
certificateholders of any series then outstanding, for any purpose, so long as:
. MBNA delivers an opinion of counsel acceptable to the master trust II
trustee to the effect that such amendment will not adversely affect in
any material respect the interest of such certificateholders; and
. such amendment will not result in a withdrawal or reduction of the rating
of any outstanding series under master trust II.
The master trust II agreement and any related series supplement may be
amended by MBNA, the servicer and the master trust II trustee, without the
consent of the certificateholders of any series then outstanding, to provide
for additional enhancement or substitute enhancement with respect to a series,
to change the definition of eligible account or to provide for the addition to
master trust II of a participation, so long as:
. MBNA delivers to the master trust II trustee a certificate of an
authorized officer to the effect that, in the reasonable belief of MBNA,
such amendment will not as of the date of such amendment adversely affect
in any material respect the interest of such certificateholders; and
. such amendment will not result in a withdrawal or reduction of the rating
of any outstanding series under master trust II.
The master trust II agreement and the related series supplement may be
amended by MBNA, the servicer and the master trust II trustee with the consent
of the holders of certificates evidencing interests aggregating not less than
66 2/3% (or such other percentage specified in the accompanying prospectus
supplement) of the investor interests for all series of master trust II, for
the purpose of adding any provisions to, changing in any manner or eliminating
any of the provisions of the master trust II agreement or the related series
supplement or of modifying in any manner the rights of certificateholders of
any outstanding series of master trust II. No such amendment, however, may:
. reduce in any manner the amount of, or delay the timing of, distributions
required to be made on the related series or any series;
. change the definition of or the manner of calculating the interest of any
certificateholder of such series or any certificateholder of any other
series issued by master trust II; or
. reduce the aforesaid percentage of interests the holders of which are
required to consent to any such amendment, in each case without the
consent of all certificateholders of the related series and
certificateholders of all series adversely affected.
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In addition, the Series 2001-[.] supplement may be amended by MBNA without
the consent of the servicer, the master trust II trustee, the collateral
certificateholder or any noteholder if MBNA provides the master trust II
trustee with (a) an opinion of counsel to the effect that such amendment or
modification would reduce the risk that master trust II would be treated as
taxable as a publicly traded partnership pursuant to Section 7704 of the
Internal Revenue Code of 1986, as amended and (b) a certificate that such
amendment or modification would not materially and adversely affect any
certificateholder, except that no such amendment shall be deemed effective
without the master trust II trustee's consent, if the master trust II trustee's
rights, duties and obligations under the Series 2001-[.] supplement are thereby
modified. Promptly after the effectiveness of any such amendment, MBNA shall
deliver a copy of such amendment to each of the servicer, the master trust II
trustee and each rating agency described in the Series 2001-[.] supplement.
Promptly following the execution of any amendment to the master trust II
agreement, the master trust II trustee will furnish written notice of the
substance of such amendment to each certificateholder. Any series supplement
and any amendments regarding the addition or removal of receivables from master
trust II will not be considered an amendment requiring certificateholder
consent under the provisions of the master trust II agreement and any series
supplement.
Certificateholders Have Limited Control of Actions
Certificateholders of any series or class within a series may need the
consent or approval of a specified percentage of the investor interest of other
series or a class of such other series to take or direct certain actions,
including to require the appointment of a successor servicer after a servicer
default, to amend the master trust II agreement in some cases, and to direct a
repurchase of all outstanding series after certain violations of MBNA's
representations and warranties. The interests of the certificateholders of any
such series may not coincide with yours, making it more difficult for any
particular certificateholder to achieve the desired results from such vote.
Material Legal Aspects of the Receivables
Transfer of Receivables
MBNA has represented and warranted in the master trust II agreement that the
transfer of receivables by it to master trust II is either: an absolute
transfer and assignment to master trust II of all right, title and interest of
MBNA in and to the related receivables, except for the interest of MBNA as
holder of the seller interest, or the grant to master trust II of a security
interest in such receivables.
MBNA also has represented and warranted that, in the event the transfer of
receivables by MBNA to master trust II is deemed to create a security interest
under the Uniform Commercial Code, as in effect in the State of Delaware, there
will exist an enforceable first priority perfected security interest in the
receivables in favor of master trust II, except for certain tax and other
governmental liens and other nonconsensual liens. For a discussion of master
trust II's rights arising from a breach of these warranties, see "Master Trust
II--Representations and Warranties" in this prospectus.
MBNA has represented as to previously conveyed receivables to master trust
II, and will represent as to receivables to be conveyed to master trust II,
that the receivables are "accounts" for purposes of the Delaware UCC. Both the
transfer and assignment of accounts and the transfer of accounts as security
for an obligation are treated under Article 9 of the Delaware UCC as creating a
security interest therein and are subject to its provisions, and the filing of
an appropriate financing statement is required to perfect the security interest
of master trust II. Financing statements covering the receivables have been and
will be filed with the appropriate state governmental authority to protect the
interests of master trust II in the receivables.
There are certain limited circumstances in which a prior or subsequent
transferee of receivables coming into existence after the closing date could
have an interest in such receivables with priority over master
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trust II's interest. Under the master trust II agreement, however, MBNA has
represented and warranted that it transferred MBNA's interest in the
receivables to master trust II free and clear of the lien of any third party.
In addition, MBNA has covenanted and will covenant that it will not sell,
pledge, assign, transfer or grant any lien on any receivable in master trust II
(or any interest therein) other than to master trust II.
A tax or government lien or other nonconsensual lien on property of MBNA
arising prior to the time a receivable comes into existence may also have
priority over the interest of master trust II in such receivable. In addition,
if the FDIC were appointed as conservator or receiver of MBNA, certain
administrative expenses of the conservator or receiver may also have priority
over the interest of master trust II in such receivable.
Certain cash collections allocable to the collateral certificate held by the
servicer may be commingled and used for the benefit of the servicer prior to
each transfer date and, in the event of the insolvency of the servicer or, in
certain circumstances, the lapse of certain time periods, master trust II may
not have a first-priority perfected security interest in such collections. In
such an event, the amount payable to you could be lower than the outstanding
principal and accrued interest on the notes, thus resulting in losses to you.
Certain Matters Relating to Conservatorship or Receivership
MBNA is chartered as a national banking association and is regulated and
supervised by the Office of the Comptroller of the Currency, which is
authorized to appoint the Federal Deposit Insurance Corporation as conservator
or receiver for MBNA if certain events occur relating to MBNA's financial
condition or the propriety of its actions. In addition, the FDIC could appoint
itself as conservator or receiver for MBNA.
Although MBNA will treat its transfer of the receivables to master trust II
as a sale for accounting purposes, the transfer may constitute the grant of a
security interest under general applicable law. Nevertheless, the FDIC has
issued regulations surrendering certain rights under the Federal Deposit
Insurance Act, as amended by the Financial Institutions Reform, Recovery and
Enforcement Act of 1989, to reclaim, recover, or recharacterize a bank's
transfer of financial assets such as the receivables if (i) the transfer
involved a securitization of the financial assets and meets specified
conditions for treatment as a sale under relevant accounting principles, (ii)
the bank received adequate consideration for the transfer, (iii) the parties
intended that the transfer constitute a sale for accounting purposes and (iv)
the financial assets were not transferred fraudulently, in contemplation of the
bank's insolvency, or with the intent to hinder, delay or defraud the bank or
its creditors. The master trust II agreement and the transfer of the
receivables by MBNA to master trust II have been structured to satisfy all of
these conditions.
If a condition required under the FDIC's regulations were found not to have
been met, however, the FDIC could reclaim, recover or recharacterize MBNA's
transfer of the receivables. The FDIA would limit master trust II's damages in
this event to its "actual direct compensatory damages" determined as of the
date that the FDIC was appointed as conservator or receiver for MBNA. The FDIC,
moreover, could delay its decision whether to reclaim, recover or
recharacterize MBNA's transfer of the receivables for a reasonable period
following its appointment as conservator or receiver for MBNA. Therefore, if
the FDIC were to reclaim, recover or recharacterize MBNA's transfer of the
receivables, payments to the issuer (and therefore to the noteholders) could be
delayed or reduced.
Even if the conditions set forth in the regulations were satisfied and the
FDIC did not reclaim, recover or recharacterize MBNA's transfer of the
receivables, noteholders could suffer a loss on their investment if (i) the
master trust II agreement or MBNA's transfer of the receivables were found to
violate the regulatory requirements of the FDIA, (ii) the master trust II, the
issuer or the indenture trustee were required to comply with the claims process
established under the FDIA in order to collect payments on the receivables,
(iii) the FDIC were to request a stay of any action by the master trust II
trustee, the issuer or the indenture trustee to enforce the master trust II
agreement, the collateral certificate, the indenture or the notes or (iv) the
FDIC were to repudiate other parts of the master trust II agreement, such as
any obligation to collect payments on or otherwise service the receivables.
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In addition, regardless of the terms of the master trust II agreement, the
indenture or the instructions of those authorized to direct the master trust II
trustee's or the indenture trustee's actions, the FDIC may have the power (i)
to prevent or require the commencement of a rapid amortization period, (ii) to
prevent, limit or require the early liquidation of the receivables and
termination of master trust II or the issuer, or (iii) to require, prohibit or
limit the continued transfer of receivables to master trust II. The FDIC,
moreover, could prevent the master trust II trustee or the certificateholders
from appointing a successor servicer under the master trust II agreement. If
any of these events were to occur, payments to noteholders could be delayed or
reduced.
Consumer Protection Laws
The relationships of the cardholder and credit card issuer and the lender are
extensively regulated by federal and state consumer protection laws. With
respect to credit cards issued by MBNA, the most significant laws include the
federal Truth-in-Lending, Equal Credit Opportunity, Fair Credit Reporting, Fair
Debt Collection Practice and Electronic Funds Transfer Acts. These statutes
impose disclosure requirements when a credit card account is advertised, when
it is opened, at the end of monthly billing cycles, and at year end. In
addition, these statutes limit customer liability for unauthorized use,
prohibit certain discriminatory practices in extending credit, and impose
certain limitations on the type of account-related charges that may be
assessed. Cardholders are entitled under these laws to have payments and
credits applied to the credit card accounts promptly, to receive prescribed
notices and to require billing errors to be resolved promptly.
Master trust II may be liable for certain violations of consumer protection
laws that apply to the receivables, either as assignee from MBNA with respect
to obligations arising before transfer of the receivables to master trust II or
as a party directly responsible for obligations arising after the transfer. In
addition, a cardholder may be entitled to assert such violations by way of set-
off against his obligation to pay the amount of receivables owing. MBNA has
represented and warranted in the master trust II agreement that all of the
receivables have been and will be created in compliance with the requirements
of such laws. The servicer also agrees in the master trust II agreement to
indemnify master trust II, among other things, for any liability arising from
such violations caused by the servicer. For a discussion of master trust II's
rights arising from the breach of these warranties, see "Master Trust II--
Representations and Warranties" in this prospectus.
Certain jurisdictions may attempt to require out-of-state credit card issuers
to comply with such jurisdiction's consumer protection laws (including laws
limiting the charges imposed by such credit card issuers) in connection with
their operations in such jurisdictions. A successful challenge by such a
jurisdiction could have an adverse impact on MBNA's credit card operations or
the yield on the receivables in master trust II.
If a cardholder sought protection under federal or state bankruptcy or debtor
relief laws, a court could reduce or discharge completely the cardholder's
obligations to repay amounts due on its account and, as a result, the related
receivables would be written off as uncollectible. The certificateholders could
suffer a loss if no funds are available from credit enhancement or other
sources. See "Master Trust II--Defaulted Receivables; Rebates and Fraudulent
Charges" in this prospectus.
Federal Income Tax Consequences
General
The following summary describes generally the material United States federal
income tax consequences of an investment in the notes. Additional federal
income tax considerations relevant to a particular tranche may be set forth in
the accompanying prospectus supplement. The following summary has been prepared
and reviewed by Orrick, Herrington & Sutcliffe LLP as special tax counsel to
the issuer. The summary is based on the Internal Revenue Code of 1986, as
amended as of the date hereof, and existing final, temporary and proposed
Treasury regulations, revenue rulings and judicial decisions, all of which are
subject to prospective and retroactive changes. The summary is addressed only
to original purchasers of the notes, deals only with notes held as capital
assets within the meaning of Section 1221 of the Internal Revenue Code and,
except as specifically set forth below, does
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not address tax consequences of holding notes that may be relevant to investors
in light of their own investment circumstances or their special tax situations,
such as certain financial institutions, tax-exempt organizations, life
insurance companies, dealers in securities, non-U.S. persons, or investors
holding the notes as part of a conversion transaction, as part of a hedge or
hedging transaction, or as a position in a straddle for tax purposes. Further,
this discussion does not address alternative minimum tax consequences or any
tax consequences to holders of interests in a noteholder. Special tax counsel
is of the opinion that the following summary of federal income tax consequences
is correct in all material respects. An opinion of special tax counsel,
however, is not binding on the Internal Revenue Service or the courts, and no
ruling on any of the issues discussed below will be sought from the Internal
Revenue Service. Moreover, there are no authorities on similar transactions
involving interests issued by an entity with terms similar to those of the
notes described in this prospectus. Accordingly, persons considering the
purchase of notes should consult their own tax advisors with regard to the
United States federal income tax consequences of an investment in the notes and
the application of United States federal income tax laws, as well as the laws
of any state, local or foreign taxing jurisdictions, to their particular
situations.
Tax Characterization of the Issuer and the Notes
Treatment of the Issuer as an Entity Not Subject to Tax
Special tax counsel is of the opinion that, although no transaction closely
comparable to that contemplated herein has been the subject of any Treasury
regulation, revenue ruling or judicial decision, the issuer will not be
classified as an association or as a publicly traded partnership taxable as a
corporation for federal income tax purposes. As a result, the issuer will not
be subject to federal income tax. However, as discussed above, this opinion is
not binding on the Internal Revenue Service and no assurance can be given that
this characterization will prevail.
The precise tax characterization of the issuer for federal income tax
purposes is not certain. It might be viewed as merely holding assets on behalf
of the transferor as collateral for notes issued by the transferor. On the
other hand, the issuer could be viewed as a separate entity for tax purposes
issuing its own notes. This distinction, however, should not have a significant
tax effect on noteholders except as stated below under "Possible Alternative
Characterizations."
Treatment of the Notes as Debt
Special tax counsel is of the opinion that, although no transaction closely
comparable to that contemplated herein has been the subject of any Treasury
regulation, revenue ruling or judicial decision, the notes will be
characterized as debt for United States federal income tax purposes.
Additionally, the issuer will agree by entering into the indenture, and the
noteholders will agree by their purchase and holding of notes, to treat the
notes as debt for United States federal income tax purposes.
Possible Alternative Characterizations
If, contrary to the opinion of special tax counsel, the Internal Revenue
Service successfully asserted that a series or class of notes did not represent
debt for United States federal income tax purposes, those notes might be
treated as equity interests in the issuer, master trust II or some other entity
for such purposes. If so treated, investors could be treated either as partners
in a partnership or, alternatively, as shareholders in a taxable corporation
for such purposes. Treatment of a noteholder as a partner could have adverse
tax consequences to certain holders; for example, income to foreign persons
generally would be subject to United States tax and United States tax return
filing and withholding requirements, and individual holders might be subject to
certain limitations on their ability to deduct their share of partnership
expenses. If notes instead were treated as corporate stock, corporate tax
imposed with respect to such corporation could materially reduce cash available
to make payments on the notes, and foreign investors could be subject to
withholding taxes. In addition, even if the notes are treated as debt, the
issuer and master trust II are also able to issue other securities which may be
treated as debt or as equity interests in the issuer or master trust II. The
issuance of such securities requires the
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delivery of a new opinion of counsel generally to the effect that such issuance
will not cause the issuer or master trust II, as applicable, to become taxable
as a separate entity for federal income tax purposes; however, any such new
opinion would not bind the Internal Revenue Service, and the issuer or master
trust II, as applicable, could become taxable as a corporation as a result of
such issuance, potentially reducing cash available to make payments on the
notes. Prospective investors should consult their own tax advisors with regard
to the consequences of possible alternative characterizations to them in their
particular circumstances; the following discussion assumes that the
characterization of the notes as debt is correct.
Consequences to Holders of the Offered Notes
Interest and Original Issue Discount
In general, stated interest on a note will be includible in gross income as
it accrues or is received in accordance with an noteholder's usual method of
tax accounting. If a class of notes is issued with original issue discount, the
provisions of Sections 1271 through 1273 and 1275 of the Internal Revenue Code
will apply to
those notes. Under those provisions, a holder of such a note (including a cash
basis holder) generally would be required to include the original issue
discount on a note in income for federal income tax purposes on a constant
yield basis, resulting in the inclusion of original issue discount in income in
advance of the receipt of cash attributable to that income. In general, a note
will be treated as having original issue discount to the extent that its
"stated redemption price" exceeds its "issue price," if such excess equals or
exceeds 0.25 percent multiplied by the weighted average life of the note
(determined by taking into account the number of complete years following
issuance until payment is made for each partial principal payment). Under
Section 1272(a)(6) of the Internal Revenue Code, special provisions apply to
debt instruments on which payments may be accelerated due to prepayments of
other obligations securing those debt instruments. However, no regulations have
been issued interpreting those provisions, and the manner in which those
provisions would apply to the notes is unclear, but the application of Section
1272(a)(6) could affect the rate of accrual of original issue discount and
could have other consequences to holders of the notes. Additionally, the
Internal Revenue Service could take the position based on Treasury regulations
that none of the interest payable on a note is "unconditionally payable" and
hence that all of such interest should be included in the note's stated
redemption price at maturity. If sustained, such treatment should not
significantly affect tax liabilities for most holders of the notes, but
prospective noteholders should consult their own tax advisors concerning the
impact to them in their particular circumstances. The issuer intends to take
the position that interest on the notes constitutes "qualified stated interest"
and that the above consequences do not apply.
Market Discount
A holder of a note who purchases an interest in a note at a discount that
exceeds any original issue discount not previously includible in income may be
subject to the "market discount" rules of Sections 1276 through 1278 of the
Internal Revenue Code. These rules provide, in part, that gain on the sale or
other disposition of a note and partial principal payments on a note are
treated as ordinary income to the extent of accrued market discount. The market
discount rules also provide for deferral of interest deductions with respect to
debt incurred to purchase or carry a note that has market discount.
Market Premium
A holder of a note who purchases an interest in a note at a premium may elect
to amortize the premium against interest income over the remaining term of the
note in accordance with the provisions of Section 171 of the Internal Revenue
Code.
Disposition of the Notes
Upon the sale, exchange or retirement of a note, the holder of the note
generally will recognize taxable gain or loss in an amount equal to the
difference between the amount realized on the disposition (other than amounts
attributable to accrued interest) and the holder's adjusted tax basis in the
note. The holder's adjusted
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tax basis in the note generally will equal the cost of the note to such holder,
increased by any market or original issue discount previously included in
income by such holder with respect to the note, and decreased by the amount of
any bond premium previously amortized and any payments of principal or original
issue discount previously received by such holder with respect to such note.
Any such gain or loss generally will be capital gain or loss, except to the
extent of accrued market discount not previously included in income, and will
be long-term capital gain or loss if at the time of sale the note has been held
for more than one year.
Foreign Holders
Under United States federal income tax law now in effect, payments of
interest by the issuer to a holder of a note who, as to the United States, is a
nonresident alien individual or a foreign corporation (a "foreign person")
generally will be considered "portfolio interest," and generally will not be
subject to United States federal income tax and withholding tax, provided the
interest is not effectively connected with the conduct of a trade or business
within the United States by the foreign person and the foreign person (i) is
not for United States federal income tax purposes (a) actually or
constructively a "10 percent shareholder" of the transferor,
the issuer or master trust II, (b) a "controlled foreign corporation" with
respect to which the transferor, the issuer or master trust II is a "related
person" within the meaning of the Internal Revenue Code, or (c) a bank
extending credit pursuant to a loan agreement entered into in the ordinary
course of its trade or business, and (ii) provides the person who is otherwise
required to withhold United States tax with respect to the notes with an
appropriate statement (on IRS Form W-8BEN or a substitute form), signed under
penalties of perjury, certifying that the beneficial owner of the note is a
foreign person and providing the foreign person's name, address and certain
additional information. If a note is held through a securities clearing
organization or certain other financial institutions (as is expected to be the
case unless definitive notes are issued), the organization or institution may
provide the relevant signed statement generally to the withholding agent; in
that case, however, the signed statement generally must be accompanied by an
IRS Form W-8BEN or substitute form provided by the foreign person that owns the
note. If such interest is not portfolio interest, then it will be subject to
United States federal income and withholding tax at a rate of 30%, unless
reduced or eliminated pursuant to an applicable tax treaty or such interest is
effectively connected with the conduct of a trade or business within the United
States and, in either case, the appropriate statement has been provided.
Any capital gain realized on the sale, redemption, retirement or other
taxable disposition of a note by a foreign person will be exempt from United
States federal income tax and withholding tax, provided that (i) such gain is
not effectively connected with the conduct of a trade or business in the United
States by the foreign person, and (ii) in the case of an individual foreign
person, such individual is not present in the United States for 183 days or
more in the taxable year.
Backup Withholding and Information Reporting
Payments of principal and interest, as well as payments of proceeds from the
sale, retirement or disposition of a note, may be subject to "backup
withholding" tax under Section 3406 of the Internal Revenue Code at a rate of
31% if a recipient of such payments fails to furnish to the payor certain
identifying information. Any amounts deducted and withheld would be allowed as
a credit against such recipient's United States federal income tax, provided
appropriate proof is provided under rules established by the Internal Revenue
Service. Furthermore, certain penalties may be imposed by the Internal Revenue
Service on a recipient of payments that is required to supply information but
that does not do so in the proper manner. Backup withholding will not apply
with respect to payments made to certain exempt recipients, such as
corporations and financial institutions. Information may also be required to be
provided to the Internal Revenue Service concerning payments, unless an
exemption applies. Holders of the notes should consult their tax advisors
regarding their qualification for exemption from backup withholding and
information reporting and the procedure for obtaining such an exemption.
The United States federal income tax discussion set forth above is included
for general information only, may not be applicable depending upon a holder's
particular tax situation, and does not purport to
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address the issues described with the degree of specificity that would be
provided by a taxpayer's own tax advisor. Prospective purchasers should
consult their own tax advisors with respect to the tax consequences to them of
the purchase, ownership and disposition of the notes and the possible effects
of changes in federal tax laws.
State and Local Tax Consequences
The discussion above does not address the taxation of the issuer or the tax
consequences of the purchase, ownership or disposition of an interest in the
notes under any state or local tax law. Each investor should consult its own
tax adviser regarding state and local tax consequences.
Benefit Plan Investors
Benefit plans are required to comply with restrictions under the Internal
Revenue Code and the Employee Retirement Income Security Act of 1974, known as
ERISA. These restrictions include rules concerning prudence and
diversification of the investment of assets of a benefit plan--referred to as
"plan assets." A benefit plan fiduciary should consider whether an investment
by the benefit plan in notes complies with these requirements.
In general, a benefit plan for these purposes includes:
. a plan arrangement which provides deferred compensation or certain health
or other welfare benefits to employees;
. an employee benefit plan that is tax-qualified under the Internal Revenue
Code and provides deferred compensation to employees--such as a pension,
profit-sharing, section 401(k) or Keogh plan; and
. a collective investment fund or other entity if (a) the fund or entity
has one or more benefit plan investors and (b) certain "look-through"
rules apply and treat the assets of the fund or entity as constituting
plan assets of the benefit plan investor.
However, a plan maintained by a governmental employer is not a benefit plan
for these purposes. Most plans maintained by religious organizations and plans
maintained by foreign employers for the benefit of employees employed outside
the United States are also not benefit plans for these purposes. A fund or
other entity--including an insurance company general account--considering an
investment in notes should consult its tax advisors concerning whether its
assets might be considered plan assets of benefit plan investors under these
rules.
Prohibited Transactions
ERISA and Section 4975 of the Internal Revenue Code also prohibit
transactions of a specified type between a benefit plan and a party in
interest who is related in a specified manner to the benefit plan. Individual
retirement accounts and tax-qualified plans that provide defined compensation
to employees are also benefit plans for these prohibited transaction rules
unless they are maintained by a governmental employer or (in most cases) a
religious organization. Violation of these prohibited transaction rules may
result in significant penalties. There are statutory exemptions from the
prohibited transaction rules, and the U.S. Department of Labor has granted
administrative exemptions for specified transactions.
Potential Prohibited Transactions from Investment in Notes
There are two categories of prohibited transactions that might arise from a
benefit plan's investment in notes. Fiduciaries of benefit plans contemplating
an investment in notes should carefully consider whether the investment would
violate these rules.
Prohibited Transactions between the Benefit Plan and a Party in Interest
The first category of prohibited transaction could arise on the grounds that
the benefit plan, by purchasing notes, was engaged in a prohibited transaction
with a party in interest. A prohibited transaction could arise, for
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example, if the notes were viewed as debt of MBNA and MBNA is a party in
interest as to the benefit plan. A prohibited transaction could also arise if
MBNA, the master trust II trustee, the indenture trustee, the servicer or
another party with an economic relationship to the issuer or master trust II
either:
. is involved in the investment decision for the benefit plan to purchase
notes or
. is otherwise a party in interest as to the benefit plan.
If a prohibited transaction might result from the benefit plan's purchase of
notes, an administrative exemption from the prohibited transaction rules might
be available to permit an investment in notes. The exemptions that are
potentially available include the following prohibited transaction class
exemptions:
. 96-23, available to "in-house asset managers";
. 95-60, available to insurance company general accounts;
. 91-38, available to bank collective investment funds;
. 90-1, available to insurance company pooled separate accounts; and
. 84-14, available to "qualified professional asset managers."
However, even if the benefit plan is eligible for one of these exemptions,
the exemption may not cover every aspect of the investment by the benefit plan
that might be a prohibited transaction.
Prohibited Transactions between the Issuer or Master Trust II and a Party in
Interest
The second category of prohibited transactions could arise if
. a benefit plan acquires notes, and
. under the U.S. Department of Labor plan asset regulation, assets of the
issuer are treated as if they were plan assets of the benefit plan.
In this case, every transaction by the issuer would be treated as a
transaction by the benefit plan using plan assets.
If assets of the issuer are treated as plan assets, a prohibited transaction
could result if the issuer itself engages in a transaction with a party in
interest as to the benefit plan. For example, if the issuer's assets are
treated as assets of a benefit plan investor and master trust II holds a credit
card receivable that is an obligation of a participant in that same benefit
plan, then there would be a prohibited extension of credit between the benefit
plan and a party in interest, the plan participant.
As a result, if assets of the issuer are treated as plan assets, there would
be a significant risk of a prohibited transaction. Moreover, the prohibited
transaction class exemptions referred to above could not be relied on to exempt
all the transactions of the issuer or master trust II from the prohibited
transaction rules. In addition, because all the assets of the issuer or master
trust II would be treated as plan assets, managers of those assets might be
required to comply with the fiduciary responsibility rules of ERISA.
Under an exemption in the plan asset regulation, assets of the issuer would
not be considered plan assets, and so this risk of prohibited transactions
would not arise, if a benefit plan purchased a note that:
. was treated as indebtedness under local law, and
. had no "substantial equity features."
The issuer expects that all notes offered by this prospectus will be
indebtedness under local law. Likewise, although there is no authority directly
on point, the issuer believes that the notes should not be considered to have
substantial equity features. As a result, the plan asset regulations should not
apply to cause assets of the issuer to be treated as plan assets.
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Investment by Benefit Plan Investors
For the reasons described in the preceding sections, benefit plans can
purchase notes. However, the fiduciary of the benefit plan must ultimately
determine whether the requirements of the plan asset regulation are satisfied.
More generally, the fiduciary must determine whether the benefit plan's
investment in notes will result in one or more nonexempt prohibited
transactions or otherwise violate the provisions of ERISA or the Internal
Revenue Code.
Tax Consequences to Benefit Plans
In general, assuming the notes are debt for federal income tax purposes,
interest income on notes would not be taxable to benefit plans that are tax-
exempt under the Internal Revenue Code, unless the notes were "debt-financed
property" because of borrowings by the benefit plan itself. However, if,
contrary to the opinion of tax counsel, for federal income tax purposes, the
notes are equity interests in a partnership and the partnership or master trust
II is viewed as having other outstanding debt, then all or part of the interest
income on the notes would be taxable to the benefit plan as "debt- financed
income." Benefit plans should consult their tax advisors concerning the tax
consequences of purchasing notes.
Plan of Distribution
The issuer may offer and sell the notes in any of three ways:
. directly to one or more purchasers;
. through agents; or
. through underwriters.
Any underwriter or agent that offers the notes may be an affiliate of the
issuer, and offers and sales of notes may include secondary market transactions
by affiliates of the issuer. These affiliates may act as principal or agent in
secondary market transactions. Secondary market transactions will be made at
prices related to prevailing market prices at the time of sale.
The issuer will specify in a supplement to this prospectus the terms of each
offering, including
. the name or names of any underwriters or agents,
. the managing underwriters of any underwriting syndicate,
. the public offering or purchase price,
. the net proceeds to the issuer from the sale,
. any underwriting discounts and other items constituting underwriters'
compensation,
. any discounts and commissions allowed or paid to dealers,
. any commissions allowed or paid to agents, and
. the securities exchanges, if any, on which the notes will be listed.
Dealer trading may take place in some of the notes, including notes not
listed on any securities exchange. Direct sales may be made on a national
securities exchange or otherwise. If the issuer, directly or through agents,
solicits offers to purchase notes, the issuer reserves the sole right to accept
and, together with its agents, to reject in whole or in part any proposed
purchase of notes.
The issuer may change any initial public offering price and any discounts or
concessions allowed or reallowed or paid to dealers. If indicated in a
supplement to this prospectus, the issuer will authorize underwriters or agents
to solicit offers by certain institutions to purchase securities from the
issuer pursuant to delayed delivery contracts providing for payment and
delivery at a future date.
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Any underwriter or agent participating in the distribution of securities,
including notes offered by this prospectus, may be deemed to be an underwriter
of those securities under the Securities Act of 1933 and any discounts or
commissions received by them and any profit realized by them on the sale or
resale of the securities may be deemed to be underwriting discounts and
commissions.
The issuer may agree to indemnify underwriters, agents and their controlling
persons against certain civil liabilities, including liabilities under the
Securities Act of 1933 in connection with their participation in the
distribution of issuer's notes.
Underwriters and agents participating in the distribution of the securities,
and their controlling persons, may engage in transactions with and perform
services for the issuer or its affiliates in the ordinary course of business.
Legal Matters
Certain legal matters relating to the issuance of the notes and the
collateral certificate will be passed upon for MBNA by John W. Scheflen,
Executive Vice President, General Counsel and Secretary of MBNA Corporation and
Vice Chairman, Cashier and Secretary of MBNA, and by Orrick, Herrington &
Sutcliffe LLP, Washington, D.C., special counsel to MBNA. Certain legal matters
relating to the issuance of the certificates under the laws of the State of
Delaware will be passed upon for MBNA by Richards, Layton & Finger, P.A.,
Wilmington, Delaware. Certain legal matters relating to the federal tax
consequences of the issuance of the certificates will be passed upon for MBNA
by Orrick, Herrington & Sutcliffe LLP. Certain legal matters relating to the
issuance of the certificates will be passed upon for the underwriters by
Skadden, Arps, Slate, Meagher & Flom LLP, New York, New York. Mr. Scheflen owns
beneficially in excess of 700,000 shares of common stock of MBNA Corporation,
including options exercisable within sixty days under the Corporation's 1991
and 1997 Long Term Incentive Plans.
Where You Can Find More Information
We filed a registration statement relating to the certificates with the
Securities and Exchange Commission. This prospectus is part of the registration
statement, but the registration statement includes additional information.
The servicer will file with the SEC all required annual, monthly and special
SEC reports and other information about master trust II.
You may read and copy any reports, statements or other information we file at
the SEC's public reference room in Washington, D.C. You can request copies of
these documents, upon payment of a duplicating fee, by writing to the SEC.
Please call the SEC at (800) SEC-0330 for further information on the operation
of the public reference rooms. Our SEC filings are also available to the public
on the SEC Internet site (http://www.sec.gov).
The SEC allows us to "incorporate by reference" information we file with it,
which means that we can disclose important information to you by referring you
to those documents. The information incorporated by reference is considered to
be part of this prospectus. Information that we file later with the SEC will
automatically update the information in this prospectus. In all cases, you
should rely on the later information over different information included in
this prospectus or the accompanying prospectus supplement. We incorporate by
reference any future annual, monthly and special SEC reports and proxy
materials filed by or on behalf of master trust II until we terminate our
offering of the certificates.
As a recipient of this prospectus, you may request a copy of any document we
incorporate by reference, except exhibits to the documents (unless the exhibits
are specifically incorporated by reference), at no cost, by writing or calling
us at: Investor Relations; MBNA America Bank, National Association; Wilmington,
Delaware 19884-0131; (800) 362-6255.
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Glossary of Defined Terms
"addition date" means the date of any assignment of receivables in additional
accounts to the master trust II portfolio.
"adjusted outstanding dollar principal amount" means, for any tranche of
notes, the outstanding dollar principal amount of such tranche, less any funds
on deposit in the principal funding subaccount for such tranche.
"aggregate investor default amount" means, for any monthly period, the sum of
the investor default amounts for such monthly period.
"available funds" means, with respect to any monthly period, (a) with respect
to the issuer, the collections of finance charge receivables allocated and paid
to the issuer, as holder of the collateral certificate, and (b) with respect to
any series, class or tranche of notes, the amount of collections in clause (a)
allocated to such series, class or tranche, as applicable, plus any other
amounts, or allocable portion thereof, to be treated as available funds with
respect to such series, class or tranche.
"available principal amounts" means, with respect to any monthly period, (a)
with respect to the issuer, the collections of principal receivables allocated
and paid to the issuer, as holder of the collateral certificate, and (b) with
respect to any series, class or tranche of notes, the amount of collections in
clause (a) allocated to such series, class or tranche, as applicable, plus any
other amounts, or allocable portion thereof, to be treated as available
principal amounts with respect to such series, class or tranche.
"bank portfolio" means the portfolio of MasterCard and VISA accounts owned by
MBNA.
"business day" is, unless otherwise indicated, any day other than a Saturday,
a Sunday or a day on which banking institutions in New York, New York or
Newark, Delaware are authorized or obligated by law or executive order to be
closed.
"cut-off date" means June 22, 1994.
"default amount" means the aggregate amount of principal receivables (other
than ineligible receivables) in a defaulted account on the day such account
became a defaulted account.
"defaulted accounts" means certain accounts in the master trust II portfolio,
the receivables of which have been written off as uncollectible by the
servicer.
"definitive notes" means notes in definitive, fully registered form.
"determination date" means the fourth business day preceding each transfer
date.
"distribution date" means [.][.],[.] and the 15th day of each month
thereafter (or, if such 15th day is not a business day, the next succeeding
business day).
"eligible account" means, as of the cut-off date (or, with respect to
additional accounts, as of their date of designation for inclusion in master
trust II), each account owned by MBNA:
. which was in existence and maintained with MBNA;
. which is payable in United States dollars;
. the customer of which has provided, as his most recent billing address,
an address located in the United States or its territories or
possessions;
. which has not been classified by MBNA as cancelled, counterfeit, deleted,
fraudulent, stolen or lost;
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. which has either been originated by MBNA or acquired by MBNA from other
institutions; and
. which has not been charged-off by MBNA in its customary and usual manner
for charging-off such account as of the cut-off date and, with respect to
additional accounts, as of their date of designation for inclusion in
master trust II.
"eligible receivable" means each receivable:
. which has arisen under an eligible account;
. which was created in compliance, in all material respects, with all
requirements of law applicable to MBNA, and pursuant to a credit card
agreement which complies in all material respects with all requirements
of law applicable to MBNA;
. with respect to which all consents, licenses or authorizations of, or
registrations with, any governmental authority required to be obtained or
given by MBNA in connection with the creation of such receivable or the
execution, delivery, creation and performance by MBNA of the related
credit card agreement have been duly obtained or given and are in full
force and effect as of the date of the creation of such receivable;
. as to which, at the time of its creation, MBNA or master trust II had
good and marketable title free and clear of all liens and security
interests arising under or through MBNA (other than certain tax liens for
taxes not then due or which MBNA is contesting);
. which is the legal, valid and binding payment obligation of the obligor
thereon, legally enforceable against such obligor in accordance with its
terms (with certain bankruptcy-related exceptions); and
. which constitutes an "account" under Article 9 of the UCC;
provided, however, the definition of eligible account may be changed by
amendment to the master trust II agreement without the consent of the
certificateholders if:
. MBNA delivers to the trustee a certificate of an authorized officer to
the effect that, in the reasonable belief of MBNA, such amendment will
not as of the date of such amendment adversely affect in any material
respect the interest of such certificateholders; and
. such amendment will not result in a withdrawal or reduction of the rating
of any outstanding series under master trust II by any rating agency.
"excess available funds" means, with respect to any series of notes, the
amount by which available funds allocable to such series, exceed the sum of (1)
the aggregate amount targeted to be deposited in the interest funding account
with respect to such series, (2) the portion of the master trust II servicing
fee allocable to such series and (3) the defaults on receivables in master
trust II allocable to such series.
"floating investor percentage" means, for any monthly period, a percentage
based on a fraction, the numerator of which is the investor interest at the end
of the prior monthly period (or the initial investor interest in the case of
the first monthly period) and the denominator of which is the greater of (a)
the total principal receivables in master trust II at the end of the prior
monthly period, and (b) the sum of the investor interests at the end of the
prior monthly period for all outstanding master trust II series of investor
certificates on such date of determination. However, this floating investor
percentage will be adjusted for investor interest increases, as well as
additions and certain removals of accounts from master trust II, during the
related monthly period.
"investor default amount" means, for any receivable, the product of:
. the floating investor percentage on the day the applicable account became
a defaulted account; and
. the default amount.
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"investor interest" means, for any date of determination:
. with respect to the collateral certificate, the sum of the nominal
liquidation amounts for each tranche of notes outstanding as of such
date; and
. with respect to all other series of master trust II investor
certificates, the initial outstanding principal amount of the investor
certificates of that series, less the amount of principal paid to the
related investor certificateholders and the amount of unreimbursed
charge-offs for uncovered defaults and reallocations of principal
collections.
"investor servicing fee" has the meaning described in "Master Trust II--
Servicing Compensation and Payment of Expenses" in this prospectus.
"master trust II portfolio" means certain accounts selected form the bank
portfolio and included in master trust II as of the cut-off date and, with
respect to additional accounts, as of the related date of their designation,
based on the eligibility criteria set forth in the master trust II agreement.
"master trust II termination date" means, unless the servicer and the holder
of the seller interest instruct otherwise, the earliest of:
. the day after the distribution date on which the outstanding amount of
the other interests in master trust II (excluding the seller interest),
if any, with respect to each series outstanding is zero;
. December 31, 2024; or
. if the receivables are sold, disposed of or liquidated following the
occurrence of an event of insolvency or receivership of MBNA, immediately
following such sale, disposition or liquidation.
"minimum seller interest" for any period means 4% of the average principal
receivables for such period. MBNA may reduce the minimum seller interest to not
less than 2% of the average principal receivables for such period upon
notification that such reduction will not cause a reduction or withdrawal of
the rating of any outstanding investor certificates issued by master trust II
that are rated by the rating agencies rating those investor certificates and
certain other conditions to be set forth in the master trust II agreement.
"monthly period" means the period from and including the first day of a
calendar month to and including the last day of such calendar month (other than
the initial monthly period, which will commence on and include the closing date
and end on and include [.] [.],[.]).
"net servicing fee" has the meaning described in "Master Trust II--Servicing
Compensation and Payment of Expenses" in this prospectus.
"pay out events" with respect to a series are the events described in "Master
Trust II--Pay Out Events" in this prospectus and any other events described in
the related prospectus supplement.
"permitted investments" means:
. obligations of or fully guaranteed by the United States of America;
. time deposits or certificates of deposit of depositary institutions or
trust companies, the certificates of deposit of which have the highest
rating from each rating agency;
. commercial paper having, at the time of master trust II's investment, a
rating in the highest rating category from each rating agency;
. bankers' acceptances issued by any depository institution or trust
company described in clause (a)(ii) above; and
. money market funds which have the highest rating from, or have otherwise
been approved in writing by, each rating agency;
72
<PAGE>
. certain open end diversified investment companies; and
. any other investment if each rating agency confirms in writing that such
investment will not adversely affect its then-current rating or ratings
of the certificates.
"principal investor percentage" means, for any monthly period, a percentage
based on a fraction, the numerator of which is the investor interest at the end
of the prior monthly period and the denominator of which is the greater of (a)
the total principal receivables in master trust II at the end of the prior
monthly period, and (b) the sum of the investor interests at the end of the
prior monthly period for all outstanding master trust II series of investor
certificates on such date of determination. However, this principal investor
percentage will be adjusted for investor increases, as well as additions and
removals of accounts, during the related monthly period. In calculating the
principal investor percentage, the investor interest is the sum of (i) for each
tranche of notes which is not accumulating or paying principal, the investor
interest at the end of the prior monthly period and (ii) for each tranche of
notes which is accumulating or paying principal, the investor interest without
giving effect to any reductions for accumulations or payments of principal.
"qualified account" means either:
. a segregated account (including a securities account) with a qualified
institution or
. a segregated trust account with the corporate trust department of a
depository institution organized under the laws of the United States of
America or any one of the states thereof or the District of Columbia (or
any domestic branch of a foreign bank), having corporate trust powers and
acting as trustee for funds deposited in such account, so long as any of
the securities of such depository institution shall have a credit rating
from each rating agency in one of its generic rating categories which
signifies investment grade.
"qualified institution" means either:
. a depository institution, which may include the indenture trustee or the
owner trustee (so long as it is a paying agent), organized under the laws
of the United States of America or any one of the states thereof or the
District of Columbia, the deposits in which are insured by the FDIC and
which at all times has a short-term unsecured debt rating in the
applicable investment category of each rating agency or
. a depository institution acceptable to each rating agency.
"rapid amortization period" means for Series 2001-[.] the period beginning on
and including the pay out commencement date and ending on the earlier of the
Series 2001-[.] termination date and the master trust II termination date.
"removal date" means the date of any removal of receivables in accounts
removed from the master trust II portfolio.
"seller interest" is the interest in master trust II not represented by the
certificates issued and outstanding under master trust II or the rights, if
any, of any credit enhancement providers to receive payments from master trust
II.
"seller percentage" means a percentage equal to 100% minus the aggregate
investor percentages and, if applicable, the percentage interest of credit
enhancement providers, for all series issued by master trust II that are then
outstanding.
"servicer default" means any of the following events:
(a) failure by the servicer to make any payment, transfer or deposit, or
to give instructions to the trustee to make certain payments, transfers or
deposits, on the date the servicer is required to do so under the master
trust II agreement or any series supplement (or within the applicable grace
period, which shall not exceed 10 business days);
73
<PAGE>
(b) failure on the part of the servicer duly to observe or perform in any
respect any other covenants or agreements of the servicer which has a
material adverse effect on the certificateholders of any series issued and
outstanding under master trust II and which continues unremedied for a
period of 60 days after written notice and continues to have a material
adverse effect on such certificateholders; or the delegation by the
servicer of its duties under the master trust II agreement, except as
specifically permitted thereunder;
(c) any representation, warranty or certification made by the servicer in
the master trust II agreement, or in any certificate delivered pursuant to
the master trust II agreement, proves to have been incorrect when made
which has a material adverse effect on the certificateholders of any series
issued and outstanding under trust II, and which continues to be incorrect
in any material respect for a period of 60 days after written notice and
continues to have a material adverse effect on such certificateholders;
(d) the occurrence of certain events of bankruptcy, insolvency,
conservatorship or receivership of the servicer; or
(e) such other event specified in the accompanying prospectus supplement.
Notwithstanding the foregoing, a delay in or failure of performance referred to
in clause (a) above for a period of 10 business days, or referred to under
clause (b) or (c) for a period of 60 business days, will not constitute a
servicer default if such delay or failure could not be prevented by the
exercise of reasonable diligence by the servicer and such delay or failure was
caused by an act of God or other similar occurrence.
"transfer date" means the business day immediately prior to the fifteenth day
of each month, or if such fifteenth day is not a business day, the next
succeeding business day.
"unallocated principal collections" means any amounts collected in respect of
principal receivables that are allocable to, but not paid to, MBNA because the
seller interest is less than the minimum seller interest.
"weighted average investor interest" shall mean, with respect to any period,
the sum of the investor interest as of the close of business on each day during
such period divided by the actual number of days in such period.
74
<PAGE>
MBNA Credit Card Master Note Trust
Issuer
[MBNA AMERICA Logo Appears Here]
MBNA America Bank, National Association
Originator of the Issuer
MBNAseries
$[.]
Class [.] Notes of [.] [.]
[Floating Rate]
----------------
PROSPECTUS SUPPLEMENT
----------------
Underwriters of the Class [.] Notes
[Co. A]
[Co. B]
[Co. C]
[Co. D]
You should rely only on the information contained or
incorporated by reference in this prospectus supplement and
the accompanying prospectus. We have not authorized anyone to
provide you with different information.
We are not offering the notes in any state where the offer is
not permitted.
We do not claim the accuracy of the information in this
prospectus supplement and the accompanying prospectus as of
any date other than the dates stated on their respective
covers.
Dealers will deliver a prospectus supplement and prospectus
when acting as underwriters of the notes and with respect to
their unsold allotments or subscriptions. In addition, until
the date which is 90 days after the date of this prospectus
supplement, all dealers selling the notes will deliver a
prospectus supplement and prospectus.
This document is printed entirely on recycled paper.
[Recycle Logo Appears Here]
<PAGE>
PART II
Item 14. Other Expenses of Issuance and Distribution
The following is an itemized list of the estimated expenses to be incurred in
connection with the offering of the securities being offered hereunder other
than underwriting discounts and commissions.
<TABLE>
<S> <C>
Registration Fee.............................................. $2,640,000 **
Printing and Engraving........................................ *
Trustee's Fees................................................ *
Legal Fees and Expenses....................................... *
Blue Sky Fees and Expenses.................................... *
Accountants' Fees and Expenses................................ *
Rating Agency Fees............................................ *
Miscellaneous Fees............................................ *
----------
Total..................................................... $ *
==========
</TABLE>
--------
* To be provided by amendment
**Actual
Item 15. Indemnification of Directors and Officers
Article TENTH of the Articles of Association of MBNA America Bank, National
Association (the "Bank"), provides that the Bank shall indemnify and advance
expenses to (a) its currently acting and its former directors to the fullest
extent permitted by the Maryland General Corporation Law, and (b) to its
officers to the same extent as its directors (and may do so to such further
extent as is consistent with law). In addition, such Article provides that the
Board of Directors may by by-law, resolution or agreement make further
provision for indemnification of directors, officers, employees and agents to
the fullest extent permitted by the Maryland General Corporation Law. Further,
such Article provides that the Bank may purchase insurance for the purpose of
indemnifying its directors and officers to the extent that such indemnification
is permitted by the foregoing provisions and not prohibited by federal banking
laws and regulations.
Section 17 of the By-laws of the Bank provides that the Bank shall indemnify
(a) its directors to the fullest extent that indemnification of directors is
permitted by the Maryland General Corporation Law and (b) its officers to the
same extent as its directors (and to such further extent as is consistent with
law). In addition, such Section provides that the Bank shall indemnify its
directors and officers who, while serving as directors or officers of the Bank,
also serve at the request of the Bank as a director, officer, partner, trustee,
employee, agent or fiduciary of another corporation, partnership, joint
venture, trust, other enterprise or employee benefit plan to the fullest extent
consistent with law.
Section 17 of the Bank's By-laws also provides that any director or officer
seeking indemnification within the foregoing rights of indemnification shall be
entitled to advances from the Bank for payment of the reasonable expenses
incurred by him in connection with the matter as to which he is seeking
indemnification in the manner and to the fullest extent permissible under the
Maryland General Corporation Law and that the Board of Directors may make
further provision consistent with law for indemnification and advance of
expenses to directors, officers, employees and agents by resolution, agreement
or otherwise. Further, such Section provides that the foregoing rights of
indemnification shall not be deemed exclusive of any other right, with respect
to indemnification or otherwise, to which those seeking indemnification may be
entitled under any insurance or other agreement or resolution of stockholders
or disinterested directors or otherwise.
The Maryland General Corporation Law provides that a corporation may
indemnify any director made a party to a proceeding by reason of service in
that capacity unless it is established that: (1) the act or omission of the
director was material to the matter giving rise to the proceeding and (a) was
committed in bad faith or
II-1
<PAGE>
(b) was the result of active and deliberate dishonesty, or (2) the director
actually received an improper personal benefit in money, property or services,
or (3) in the case of any criminal proceeding, the director had reasonable
cause to believe that the act or omission was unlawful. To the extent that a
director had been successful in defense of any proceeding, the Maryland General
Corporation Law provides that he shall be indemnified against reasonable
expenses incurred in connection therewith. A Maryland corporation may indemnify
its officers to the same extent as its directors and to such further extent as
is consistent with law.
Item 16. Exhibits and Financial Statements
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
1.1 --Form of Underwriting Agreement*
4.1 --Form of Indenture for the Notes
4.2 --Form of Indenture Supplement for the Notes
4.3 --Form of Series Supplement to the Pooling and Servicing Agreement
relating to the Collateral Certificate
4.4 --Pooling and Servicing Agreement dated as of August 4, 1994, and
certain other related agreements as Exhibits thereto (incorporated by
reference to Form 8-K filed with the Securities and Exchange
Commission on October 14, 1994)
4.5 --First Amendment to Pooling and Servicing Agreement dated as of March
11, 1996 (incorporated by reference to Form 8-K filed with the
Securities and Exchange Commission on May 14, 1996)
4.6 --Second Amendment to Pooling and Servicing Agreement and Amendment to
the Series Supplements dated as of June 2, 1998 (incorporated by
reference to Form 8-K filed with the Securities and Exchange
Commission on July 14, 1998)
4.7 --Third Amendment to Pooling and Servicing Agreement dated as of
January 10, 1999 (included in Exhibit 4.01 to the Registrant's Form
8-K, as filed with the Securities and Exchange Commission on January
22, 1999, which is incorporated herein by reference)
4.8 --Fourth Amendment to Pooling and Servicing Agreement dated as of
October 2, 2000 (included in Exhibit 4.1 to the Registrant's Form 8-
K, as filed with the Securities and Exchange Commission on October
13, 2000, which is incorporated herein by reference)
4.9 --Form of Trust Agreement of MBNA Credit Card Master Note Trust
4.10 --Form of Notes*
4.11 --Form of Collateral Certificate*
5.1 --Opinion of Richards, Layton & Finger, P.A., with respect to legality
of the Collateral Certificate, including an opinion of John W.
Scheflen, Esq. with respect to certain corporate matters as an
Exhibit thereto, and an opinion of Orrick, Herrington & Sutcliffe LLP
with respect to legality of the Notes*
8.1 --Opinion of Orrick, Herrington & Sutcliffe LLP with respect to tax
matters*
23.1 --Consent of John W. Scheflen, Esq. (included in his opinion filed as
an Exhibit to Exhibit 5.1)*
23.2 --Consent of Orrick, Herrington & Sutcliffe LLP (included in its
opinions filed as Exhibits 5.1 and 8.1)*
23.3 --Consent of Richards, Layton & Finger (included in its opinion filed
as Exhibit 5.1)*
24.1 --Powers of Attorney (included on page II-5)
25.1 --Form T-1 Statement of Eligibility and Qualification under the Trust
Indenture Act of 1939, as amended, of The Bank of New York, as
Indenture Trustee under the Indenture
</TABLE>
--------
* To be filed by amendment.
II-2
<PAGE>
(b) Financial Statements
All financial statements, schedules and historical financial information have
been omitted as they are not applicable.
Item 17. Undertakings
The undersigned registrant hereby undertakes:
(a) (1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement; (i) to
include any prospectus required by Section 10(a)(3) of the Securities
Act of 1933; (ii) to reflect in the prospectus any facts or events
arising after the effective date of the registration statement (or the
most recent post-effective amendment thereof) which, individually or in
the aggregate, represent a fundamental change in the information set
forth in the registration statement; notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high and of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than 20 percent change in
the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement; (iii)
to include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change in such information in the registration statement;
provided, however, that (a)(i) and (a)(ii) will not apply if the
information required to be included in a post-effective amendment
thereby is contained in periodic reports filed with or furnished to the
Commission by the registrant pursuant to Section 13 or Section 15(d) of
the Securities Exchange Act of 1934 that are incorporated by reference
in this registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) That, for purposes of determining any liability under the Securities
Act of 1933, each filing of the registrant's annual report pursuant to
Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (and, where
applicable, each filing of an employee benefit plan's annual report
pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the registration statement shall be deemed to
be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(c) That insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the provisions described
under Item 15 above, or otherwise, the registrant has been advised that in
the opinion of the Securities and Exchange Commission such indemnification
is against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in
the successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to
a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
II-3
<PAGE>
(d) That, for purposes of determining any liability under the Securities
Act of 1933, the information omitted from the form of prospectus filed as
part of this Registration Statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act of 1933 shall be deemed
to be part of this Registration Statement as of the time it was declared
effective.
(e) That, for the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a form
of prospectus shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering thereof.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, each
Co-Registrant certifies that it has reasonable grounds to believe that it
meets all of the requirements for filing on Form S-3, reasonably believes that
the security rating requirement contained in Transaction Requirement B.5. of
Form S-3 will be met by the time of the sale of the securities registered
hereunder and has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of
Wilmington, State of Delaware, on November 20, 2000.
MBNA AMERICA BANK, NATIONAL ASSOCIATION
as originator of MBNA Master Credit Card
Trust II and MBNA Credit Card Master Note
Trust and Co-Registrant and as Servicer on
behalf of MBNA Master Credit Card Trust II
as Co-Registrant
/s/ Thomas D. Wren
By: __________________________________________
Thomas D. Wren
Senior Executive Vice President
Treasurer
Know All Men By These Presents, that each person whose signature appears
below constitutes and appoints Vernon H. C. Wright, Thomas Wren and M. Scot
Kaufman, and each of them, his true and lawful attorneys-in-fact and agents,
with full power of substitution and resubstitution, for and in his name, place
and stead, in any and all capacities to sign any or all amendments (including
post-effective amendments) to this Registration Statement and any or all other
documents in connection therewith, and to file the same, with all exhibits
thereto, with the Securities and Exchange Commission, granting unto said
authority and to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as might or could be done in person, hereby ratifying and confirming
all said attorneys-in-fact and agents or any of them, or their substitute or
substitutes, or may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed on November 20, 2000 by the following
persons in the capacities indicated.
Signature Title
/s/ Gregg Bacchieri Director
-------------------------------------
Gregg Bacchieri
/s/ James H. Berick, Esq. Director
-------------------------------------
James H. Berick, Esq.
/s/ Kenneth F. Boehl Director
-------------------------------------
Kenneth F. Boehl
/s/ Jules J. Bonavolonta Director
-------------------------------------
Jules J. Bonavolonta
/s/ Charles M. Cawley Chief Executive Officer,
------------------------------------- Director
Charles M. Cawley
/s/ Benjamin R. Civiletti, Esq. Director
-------------------------------------
Benjamin R. Civiletti, Esq.
/s/ John R. Cochran Director
-------------------------------------
John R. Cochran
II-5
<PAGE>
Signature Title
/s/ Ronald W. Davies Director
------------------------------------
Ronald W. Davies
/s/ Bruce L. Hammonds Director
------------------------------------
Bruce L. Hammonds
/s/ William L. Jews Director
------------------------------------
William L. Jews
/s/ M. Scot Kaufman Director
------------------------------------
M. Scot Kaufman
/s/ Charles C. Krulak Director
------------------------------------
Charles C. Krulak
/s/ Alfred Lerner Director
------------------------------------
Alfred Lerner
/s/ Randolph D. Lerner Director
------------------------------------
Randolph D. Lerner
/s/ Victor P. Manning Chief Accounting Officer
------------------------------------
Victor P. Manning
/s/ Stuart L. Markowitz, M.D. Director
------------------------------------
Stuart L. Markowitz, M.D.
/s/ Michael G. Rhodes Director
------------------------------------
Michael G. Rhodes
/s/ Michael Rosenthal, Ph.D. Director
------------------------------------
Michael Rosenthal, Ph.D.
/s/ John W. Scheflen Director
------------------------------------
John W. Scheflen
/s/ Michelle D. Shepherd Director
------------------------------------
Michelle D. Shepherd
/s/ David W. Spartin Director
------------------------------------
David W. Spartin
/s/ Richard K. Struthers Director
------------------------------------
Richard K. Struthers
/s/ Kenneth A. Vecchione Chief Financial Officer
------------------------------------
Kenneth A. Vecchione
/s/ Lance L. Weaver Director
------------------------------------
Lance L. Weaver
/s/ Vernon H. C. Wright Chief Corporate Finance
------------------------------------ Officer, Director
Vernon H. C. Wright
II-6
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
------- ----------------------------------------------------------------------
<C> <S>
1.1 --Form of Underwriting Agreement*
4.1 --Form of Indenture for the Notes
4.2 --Form of Indenture Supplement for the Notes
4.3 --Form of Series Supplement to the Pooling and Servicing Agreement
relating to the Collateral Certificate
4.4 --Pooling and Servicing Agreement dated as of August 4, 1994, and
certain other related agreements as Exhibits thereto (incorporated by
reference to Form 8-K filed with the Securities and Exchange
Commission on October 14, 1994)
4.5 --First Amendment to Pooling and Servicing Agreement dated as of March
11, 1996 (incorporated by reference to Form 8-K filed with the
Securities and Exchange Commission on May 14, 1996)
4.6 --Second Amendment to Pooling and Servicing Agreement and Amendment to
the Series Supplements dated as of June 2, 1998 (incorporated by
reference to Form 8-K filed with the Securities and Exchange
Commission on July 14, 1998)
4.7 --Third Amendment to Pooling and Servicing Agreement dated as of
January 10, 1999 (included in Exhibit 4.01 to the Registrant's Form
8-K, as filed with the Securities and Exchange Commission on January
22, 1999, which is incorporated herein by reference)
4.8 --Fourth Amendment to Pooling and Servicing Agreement dated as of
October 2, 2000 (included in Exhibit 4.1 to the Registrant's Form 8-
K, as filed with the Securities and Exchange Commission on October
13, 2000, which is incorporated herein by reference)
4.9 --Form of Trust Agreement of MBNA Credit Card Master Note Trust
4.10 --Form of Notes*
4.11 --Form of Collateral Certificate*
5.1 --Opinion of Richards, Layton & Finger, P.A., with respect to legality
of the Collateral Certificate, including an opinion of John W.
Scheflen, Esq. with respect to certain corporate matters as an
Exhibit thereto, and an opinion of Orrick, Herrington & Sutcliffe LLP
with respect to the legality of the Notes*
8.1 --Opinion of Orrick, Herrington & Sutcliffe LLP with respect to tax
matters*
23.1 --Consent of John W. Scheflen, Esq. (included in his opinion filed as
an Exhibit to Exhibit 5.1)*
23.2 --Consent of Orrick, Herrington & Sutcliffe LLP (included in its
opinion filed as Exhibit 8.1)*
23.3 --Consent of Richards, Layton & Finger (included in its opinion filed
as Exhibit 5.1)*
24.1 --Powers of Attorney (included on page II-5)
25.1 --Form T-1 Statement of Eligibility and Qualification under the Trust
Indenture Act of 1939, as amended, of The Bank of New York, as
Indenture Trustee under the Indenture
</TABLE>
--------
* To be filed by amendment.
