<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 3, 1996
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------------
MBNA CORPORATION
(Exact name of registrant as specified in its charter)
MARYLAND 52-1713008
(State or other jurisdiction (I.R.S. employer identification no.)
of incorporation or organization)
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 PRESIDENT, CHIEF FINANCIAL OFFICER AND CHIEF ACCOUNTING OFFICER
MBNA CORPORATION
WILMINGTON, DELAWARE 19884-0864
(800) 362-6255
(Name, address, including zip code, and telephone
number, including area code, of agent for service)
--------------------------
COPIES TO:
JOHN W. SCHEFLEN JOHN B. TEHAN
EXECUTIVE VICE PRESIDENT, SIMPSON THACHER & BARTLETT
GENERAL COUNSEL & SECRETARY 425 LEXINGTON AVENUE
MBNA CORPORATION NEW YORK, NEW YORK 10017
WILMINGTON, DELAWARE 19884-0616
--------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC:
From time to time after the effective date of this Registration Statement, as
determined in light of market conditions.
If the only securities being registered on this Form are being 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, please 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. /X/
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<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
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PROPOSED
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE OFFERING PRICE OFFERING REGISTRATION
BE REGISTERED REGISTERED(1) PER UNIT(2) PRICE(2) FEE
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<S> <C> <C> <C> <C>
Debt Securities . . . . . . . . .
Preferred Stock . . . . . . . . . $600,000,000(3) 100% $600,000,000(3) $181,819
Depositary Shares representing
Preferred Stock(4) . . . . . .
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</TABLE>
(1) In U.S. dollars or equivalent thereof in other currencies, including
composite currencies, on the basis of exchange rates on the date an
agreement to issue and sell the applicable Debt Securities is entered
into.
(2) Estimated solely for the purpose of computing the registration fee.
(3) Such amount represents the principal amount of any Debt Securities issued
at their principal amount, the issue price rather than the principal
amount of any Debt Securities issued at an original issue discount and the
liquidation preference of any Preferred Stock.
(4) Such indeterminate number of Depositary Shares to be evidenced by
Depositary Receipts issued pursuant to a Deposit Agreement. In the event
the Registrant elects to offer to the public fractional interests in
shares of the Preferred Stock registered hereunder, Depositary Receipts
will be distributed to those persons purchasing such fractional interests
and the shares of Preferred Stock will be issued to the Depositary under
the Deposit Agreement. No separate consideration will be received for the
Depositary Shares.
PURSUANT TO RULE 429 UNDER THE SECURITIES ACT OF 1933, THE PROSPECTUS
CONTAINED IN THIS REGISTRATION STATEMENT AND SUPPLEMENTS TO SUCH PROSPECTUS
WILL ALSO BE USED IN CONNECTION WITH UP TO $400,000,000 AGGREGATE PRINCIPAL
AMOUNT OF DEBT SECURITIES OR THE NUMBER OF SHARES OF PREFERRED STOCK AND
DEPOSITARY SHARES REGISTERED UNDER REGISTRATION STATEMENT NO. 33-95600. THIS
REGISTRATION STATEMENT CONSTITUTES POST- EFFECTIVE AMENDMENT NO. 1 TO
REGISTRANT'S REGISTRATION STATEMENT ON FORM S-3 (NO. 33-95600), AND SUCH POST-
EFFECTIVE AMENDMENT SHALL HEREAFTER BECOME EFFECTIVE CONCURRENTLY WITH THE
EFFECTIVENESS OF THIS REGISTRATION STATEMENT AND IN ACCORDANCE WITH SECTION
8(c) OF THE SECURITIES ACT OF 1933.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
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 THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
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<PAGE> 3
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
SUBJECT TO COMPLETION, DATED DECEMBER 3, 1996
$1,000,000,000
MBNA CORPORATION
DEBT SECURITIES AND PREFERRED STOCK
MBNA Corporation (the "Company") from time to time may offer and sell
(i) debt securities, consisting of debentures, notes and/or other unsecured
evidences of indebtedness (the "Debt Securities"), which may be either
unsecured senior Debt Securities (the "Senior Debt Securities") or unsecured
subordinated Debt Securities (the "Subordinated Debt Securities") and (ii)
preferred stock, par value $.01 per share (the "Preferred Stock"), which may
be issued in the form of depositary shares evidenced by depositary receipts
(the "Depositary Shares"). The Debt Securities and the Preferred Stock are
collectively referred to herein as the "Securities."
The Securities offered pursuant to this Prospectus may be issued in
one or more series or issuances and will be limited to $1,000,000,000 aggregate
public offering price (or its equivalent (based on the applicable exchange rate
at the time of sale) in one or more foreign currencies, currency units or
composite currencies as shall be designated by the Company). Certain specific
terms of the particular Securities in respect of which this Prospectus is being
delivered are set forth in the accompanying Prospectus Supplement, including,
where applicable, in the case of Debt Securities, the specific title, aggregate
principal amount, the denominations (which may be in U.S. dollars, in any other
currency or in composite currencies), maturity, premium, if any, the interest
rate (which may be fixed, floating or adjustable), the time and method of
calculating payment of interest, if any, the place or places where principal of
(and premium, if any) and interest, if any, on such Debt Securities will be
payable, the currency in which principal of (and premium, if any) and interest,
if any, on such Debt Securities will be payable, any terms of redemption at the
option of the Company or the holder, any sinking fund provisions, the form of
the Debt Securities (which may be in registered form or book-entry form), the
initial public offering price and any other terms of such Debt Securities, and,
in the case of Preferred Stock, the specific title, the aggregate amount, any
dividend (including the method of calculating payment of dividends),
liquidation, redemption, voting and other rights, any terms for any conversion
or exchange into other Securities, the initial public offering price and any
other terms of such Preferred Stock.
The Senior Debt Securities, when issued, will rank on a parity with
all other unsecured and unsubordinated indebtedness of the Company, and the
Subordinated Debt Securities, when issued, will be subordinated as described
under "Description of Debt Securities -- Subordination of Subordinated Debt
Securities."
-----------------------------------------
The Securities will be sold directly by the Company, through agents,
underwriters or dealers as designated from time to time, or through a
combination of such methods. If agents of the Company or any dealers or
underwriters are involved in the sale of the Securities in respect of which this
Prospectus is being delivered, the names of such agents, dealers or underwriters
and any applicable commissions or discounts are set forth in or may be
calculated from the Prospectus Supplement with respect to such Securities.
Except as indicated in the applicable Prospectus Supplement, the
Securities are not expected to be listed on a securities exchange, and any
underwriters or dealers will not be obligated to make a market in Securities.
The Company cannot predict the activity or liquidity of any trading in the
Securities.
THE SECURITIES WILL NOT BE DEPOSITS OR OTHER OBLIGATIONS OF A BANK AND
WILL NOT BE INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE BANK
INSURANCE FUND OR ANY OTHER GOVERNMENTAL AGENCY.
<PAGE> 4
THIS PROSPECTUS MAY NOT BE USED TO CONSUMMATE SALES OF SECURITIES
UNLESS ACCOMPANIED BY A PROSPECTUS SUPPLEMENT.
-----------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
-----------------------------------------
THE DATE OF THIS PROSPECTUS IS , 1996.
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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND ANY
ACCOMPANYING PROSPECTUS SUPPLEMENT IN CONNECTION WITH THE OFFERING DESCRIBED
HEREIN AND THEREIN, AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY
OR BY ANY UNDERWRITER, DEALER OR AGENT. NEITHER THIS PROSPECTUS NOR ANY
PROSPECTUS SUPPLEMENT SHALL CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY ANY SECURITIES OFFERED HEREUNDER IN ANY JURISDICTION TO ANY PERSON
TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION OR SALE IN SUCH
JURISDICTION. NEITHER THE DELIVERY OF THIS PROSPECTUS OR ANY PROSPECTUS
SUPPLEMENT NOR ANY SALE MADE HEREUNDER IMPLIES THAT THERE HAS BEEN NO CHANGE IN
THE AFFAIRS OF THE COMPANY AT ANY TIME SUBSEQUENT TO THE DATE HEREOF OR THAT THE
INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Such reports, proxy
and information statements and other information, including the documents
incorporated by reference herein, can be inspected and copied at the public
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549; and at the Commission's regional offices at 75 Park
Place, New York, New York 10007 and Suite 1400, Northwestern Atrium Center, 500
West Madison Street, Chicago, Illinois 60661, or obtained through the
Commission's Internet address at http://www.sec.gov. Copies of such material
can be obtained from the Public Reference Section of the Commission, 450 Fifth
Street, N.W., Washington, D.C. 20549 at prescribed rates. Such material can
also be inspected and copied at the office of the New York Stock Exchange, 20
Broad Street, New York, New York 10005.
The Company has filed a registration statement on Form S-3 (herein,
together with all amendments and exhibits, referred to as the "Registration
Statement") under the Securities Act of 1933, as amended (the "Securities
Act"), with respect to the securities offered hereby. This Prospectus does not
contain all of the information set forth in the Registration Statement, certain
parts of which are omitted in accordance with the rules and regulations of the
Commission.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
There are hereby incorporated by reference in this Prospectus the
following documents and information heretofore filed with the Commission:
1. The Company's Annual Report on Form 10-K for the year
ended December 31, 1995 as amended by Form 10-K/A-1 provided, however,
that the information referred to in Item 402(a)(8) of Regulation S-K
promulgated by the Commission shall not be deemed to be specifically
incorporated by reference herein.
2. The Company's Quarterly Reports on Form 10-Q for the
quarters ended March 31, 1996, June 30, 1996 and September 30, 1996.
3. The Company's Current Reports on Form 8-K dated
November 26, 1996 and December 3, 1996.
All documents filed by the Company pursuant to Sections 13(a), 13(c),
14 or 15(d) of the Exchange Act, after the date of this Prospectus and prior to
the termination of the offering of the Securities hereby shall be deemed to be
incorporated herein by reference. Any statement contained in a document
incorporated or deemed to be incorporated by reference herein shall be deemed
to be modified or superseded for purposes of this Prospectus and the
Registration Statement of which it is a part to the extent that a statement
contained herein or in any other subsequently filed document which is also
incorporated or deemed to be incorporated by reference herein modifies or
supersedes such statement. Any statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part of this
Prospectus or such Registration Statement.
The Company undertakes to provide without charge to each person,
including any beneficial owner, to whom a copy of this Prospectus has been
delivered, upon written or oral request of such person, a copy of any or all of
the documents which have been or may be incorporated herein by reference, other
than exhibits to such documents (unless such exhibits are specifically
incorporated by reference to such documents). Requests for such copies should
be directed to MBNA Corporation, Wilmington, Delaware 19884, Attention:
Investor Relations (800) 362-6255.
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THE COMPANY
MBNA Corporation (the "Company"), is a registered bank holding company
incorporated under the laws of Maryland in 1990. It is the parent corporation
of MBNA America Bank, National Association (the "Bank"), a national bank
organized in January 1991, as the successor to a national bank organized in
1982.
The Company's principal executive offices are located in Wilmington,
Delaware 19884, and its telephone number is (800) 362-6255.
USE OF PROCEEDS
Except as otherwise described in the applicable Prospectus Supplement,
the net proceeds from the sale of the Securities offered hereby will be applied
to the Company's general funds to be utilized for general corporate purposes,
including the reduction of short-term debt, possible acquisitions, investments
in, or extension of credit to, the Company's subsidiaries and the possible
acquisition of real property for use in the Company's business.
RATIO OF EARNINGS TO FIXED CHARGES AND
RATIO OF EARNINGS TO COMBINED FIXED CHARGES
AND PREFERRED STOCK DIVIDEND REQUIREMENTS
The following are the consolidated ratio of earnings to fixed charges
and ratio of earnings to combined fixed charges and preferred stock dividend
requirements for the Company for each of the years in the five-year period
ended December 31, 1995 and the nine-month period ended September 30, 1996:
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER 30, YEARS ENDED DECEMBER 31,
------------- ------------------------------------
1996* 1995 1994 1993** 1992 1991
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<S> <C> <C> <C> <C> <C> <C>
Earnings to Fixed Charges:
Including Interest on Deposits. . . 1.9 2.0 2.4 2.0 2.1 1.6
Excluding Interest on Deposits. . . 4.0 4.4 5.7 6.0 15.7 12.9
Earnings to Combined Fixed
Charges and Preferred Stock
Dividends:
Including Interest on Deposits. . . 1.8 2.0 2.4 2.0 2.1 1.6
Excluding Interest on Deposits. . . 3.6 4.3 5.7 6.0 15.7 12.9
</TABLE>
- --------------------
* Income before income taxes for the nine months ended September 30,
1996, includes a charge of $54.3 million related to the launch of the MBNA
Platinum Plus Visa(R) and MasterCard(R) program. Without the charge, the
ratio of earnings to fixed charges, including and excluding interest on
deposits, would have been 2.0 and 4.3, respectively and the ratio of
earnings to combined fixed charges and preferred stock dividend
requirements, including and excluding interest on deposits, would have
been 1.9 and 3.9, respectively.
** Income before income taxes for 1993 includes a charge of $150.0 million
for the termination of a marketing agreement with an independent
third-party marketing organization. Without the charge, the ratio of
earnings to fixed charges and the ratio of earnings to combined fixed
charges and preferred stock dividend requirements, including and excluding
interest on deposits, would have been 2.9 and 9.9, respectively.
The ratio of earnings to fixed charges is computed by dividing (i) income
before income taxes and fixed charges less interest capitalized during such
period, net of amortization of previously capitalized interest, by (ii) fixed
charges. The ratio of earnings to combined fixed charges and preferred stock
dividend requirements is computed by dividing (i) income before income taxes
and fixed charges less interest capitalized during such period, net of
amortization of previously capitalized interest, by (ii) fixed charges and
preferred stock dividend requirements. Fixed charges consist of interest
expense on borrowings, including capitalized interest (including or excluding
deposits, as the case may be), and the portion of rental expense which is
deemed representative of interest. The preferred stock dividend requirements
represent the pre-tax earnings which would be required to cover such dividend
requirements on the Company's preferred stock outstanding. The Company did not
have any preferred stock outstanding during the periods prior to 1995 presented
above and accordingly there were no preferred stock dividend requirements
during such periods.
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REGULATORY MATTERS
The following discussion sets forth certain of the elements of the
comprehensive regulatory framework applicable to bank holding companies and
banks and provides certain specific information relevant to the Company and its
subsidiaries. Federal regulation of financial institutions such as the Company
and the Bank is intended primarily for the protection of depositors and the
Bank Insurance Fund rather than shareholders or other creditors.
GENERAL
As a bank holding company, the Company is subject to the supervision of
the Board of Governors of the Federal Reserve System (the "Federal Reserve
Board"). The Bank is subject to supervision and examination by applicable
federal agencies, principally the Office of the Comptroller of the Currency
(the "Comptroller"), which is the Bank's primary regulator. The Bank's deposits
are insured by, and therefore the Bank is also subject to the regulations of,
the FDIC. In addition to the impact of regulation, commercial banks are
affected significantly by the actions of the Federal Reserve Board as it
attempts to control the money supply and credit availability in order to
influence the economy.
As a bank holding company, the Company is also subject to regulation under
the Bank Holding Company Act of 1956 (the "BHCA") and to the BHCA's examination
and reporting requirements. Under the BHCA, bank holding companies must, in
some cases, obtain the approval of the Federal Reserve Board prior to acquiring
direct or indirect ownership or control of more than five percent of the voting
shares or substantially all of the assets of any company, including a bank. In
addition, bank holding companies are prohibited under the BHCA from engaging in
nonbanking activities other than those that the Federal Reserve Board has
determined are closely related to banking.
The earnings of the Bank, and therefore the earnings of the Company, are
affected by general economic conditions, management policies and the
legislative and governmental actions of various regulatory authorities,
including the Federal Reserve Board, the FDIC and the Comptroller. In addition,
there are numerous governmental requirements and regulations which affect the
activities of the Company.
DIVIDEND RESTRICTIONS
The Company is a legal entity separate and distinct from its banking and
other subsidiaries. The principal source of cash flow of the Company, including
cash flow to pay dividends on its stock or principal (premium, if any) and
interest on debt securities, is dividends from the Bank. The approval of the
Comptroller is required for any dividend paid or declared by a national bank if
the total of all dividends paid or declared by the bank in any calendar year
would exceed the total of its net income for that year combined with its
retained net income for the preceding two years less any required transfers to
surplus or a fund for the retirement of any preferred stock. In addition, a
national bank may not pay a dividend in an amount greater than its undivided
profits. Under current regulatory practice, national banks may pay
dividends only out of current operating earnings. The payment of dividends by
the Bank may also be affected by other factors, such as requirements for the
maintenance of adequate capital. Under these provisions, the Bank could have
declared, as of September 30, 1996, without obtaining prior regulatory
approval, aggregate dividends of approximately $353.8 million. The Bank's
payment of dividends to the Company may also be limited by a tangible net worth
requirement under the Bank's revolving credit facility. This facility was not
drawn upon as of September 30, 1996. If this facility were drawn upon as of
September 30, 1996, the amount of retained earnings available for declaration
of dividends would have been limited to $138.2 million.
In addition, under the Federal Deposit Insurance Corporation Improvement
Act of 1991 ("FDICIA"), a FDIC- insured depository institution may not make
capital distributions (including the payment of dividends) or pay any
management fees to its holding company or pay any dividend if it is
undercapitalized or if such payment would cause it to become undercapitalized.
See "-- FDICIA and FDIC Insurance."
HOLDING COMPANY STRUCTURE
The Bank is subject to restrictions under federal law which limit the
transfer of funds by the Bank to the Company and its nonbanking subsidiaries,
whether in the form of loans, extensions of credit, investments or asset
purchases. Such transfers by the Bank to the Company or any nonbanking
subsidiary are limited in amount to 10% of the Bank's capital and surplus and,
with respect to the Company and all such nonbanking subsidiaries, to an
aggregate of 20% of the Bank's
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capital and surplus. Furthermore, loans and extensions of credit by the Bank to
the Company or its nonbanking subsidiaries are required to be secured in
specified amounts.
Extensions of credit and other transactions between the Bank and the
Corporation must be on terms and under circumstances, including credit
standards, that are substantially the same or at least as favorable to the Bank
as those prevailing at the time for comparable transactions with non-affiliated
companies.
Under Federal Reserve Board policy, the Company is expected to act as a
source of financial strength to each of its subsidiary banks and to commit
resources to support each such subsidiary bank, in circumstances where the
Company might not do so absent such policy. Any capital loans by the Company to
a subsidiary bank would also be subordinate in right of payment to deposits and
to certain other indebtedness of such bank. In addition, the Crime Control Act
of 1990 provides that in the event of a bank holding company's bankruptcy, any
commitment by the bank holding company to a federal bank regulatory agency to
maintain the capital of a subsidiary bank will be assumed by the bankruptcy
trustee and entitled to a priority of payment.
Federal law permits the Comptroller to order the pro rata assessment of
shareholders of a national bank whose capital stock has become impaired, by
losses or otherwise, to relieve a deficiency in such national bank's capital
stock. The statute also provides for the enforcement of any such pro rata
assessment of shareholders of such national bank to cover such impairment of
capital stock by sale, to the extent necessary, of the capital stock of any
assessed shareholder failing to pay the assessment. The Company, as the sole
stockholder of the Bank, is subject to such provisions.
CAPITAL ADEQUACY
Under the Federal Reserve Board's risk-based capital guidelines for bank
holding companies and member banks, the minimum ratio of total capital to
risk-adjusted assets (including certain off-balance sheet items) is 8%. At
least half of the total capital is to be comprised of common equity, retained
earnings, minority interests in consolidated subsidiaries, noncumulative
perpetual preferred stock and a limited amount of cumulative perpetual
preferred stock, less goodwill and less certain other intangible assets ("Tier
1 capital"). The remainder ("Tier 2 capital") may consist of hybrid capital
instruments, perpetual debt, mandatory convertible debt securities, a limited
amount of subordinated debt, other preferred stock and a limited amount of loan
and lease loss reserves. The total of Tier 1 capital and Tier 2 capital is
referred to as "Total capital." In addition, the Federal Reserve Board has
approved minimum leverage ratio guidelines for bank holding companies and state
member banks. These guidelines provide for a minimum ratio of Tier 1 capital to
quarterly average assets ("Leverage Ratio") of 3% for bank holding companies
and state member banks that meet certain specified criteria, including that
they have the highest regulatory rating. All other bank holding companies and
state member banks will be required to maintain a Leverage Ratio of 3% plus an
additional cushion of 100 to 200 basis points. The guidelines also provide that
banking organizations experiencing internal growth or making acquisitions will
be expected to maintain strong capital positions substantially above the
minimum supervisory levels, without significant reliance on intangible assets.
Furthermore, the guidelines indicate that the Board will continue to consider a
"tangible Tier 1 leverage ratio" in evaluating proposals for expansion or new
activities. The tangible Tier 1 leverage ratio is the ratio of a banking
organization's Tier 1 capital, less all intangibles, to total assets. The Bank
is also subject to similar capital requirements adopted by the Comptroller.
Under the guidelines, as of September 30, 1996, the Company's Tier 1 and total
capital to risk-adjusted assets ratios were 11.32% and 13.65%, respectively,
and the Company's Leverage Ratio was 10.28%. As of September 30, 1996, the
Bank's Tier 1 and total capital to risk-adjusted assets ratios were 8.32% and
10.91%, respectively, and the Bank's Leverage Ratio was 7.42%. Neither the
Company nor the Bank has been advised by its appropriate federal regulatory
agency of any specific leverage ratio applicable to it.
FDICIA AND FDIC INSURANCE
FDICIA provides for expanded regulation of banks and bank holding
companies. The expanded regulation includes expanded federal banking agency
examinations and increased powers of federal banking agencies to take
corrective action to resolve the problems of insured depository institutions
with capital deficiencies. Those powers vary depending on which of several
levels of capitalization a particular institution meets.
FDICIA permits only "well capitalized" institutions to accept brokered
deposits without restrictions. As of September 30, 1996 the Bank met the FDIC's
definition of a well capitalized institution for purposes of accepting brokered
deposits. For the purposes of the brokered deposit rules, a bank is defined to
be "well capitalized" if it maintains a ratio of Tier 1 risk-based capital to
risk-adjusted assets of at least 6.0%, a ratio of Total risk-based capital to
risk-adjusted assets of at
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<PAGE> 9
least 10.0% and a leverage ratio of at least 5.0% and is not subject to any
order, direction or written agreement to maintain specific capital levels.
Under the regulatory definition of brokered deposits, as of September 30, 1996,
the Bank had brokered deposits of $2.2 billion.
The Bank is subject to FDIC deposit insurance assessments for the Bank
Insurance Fund ("BIF"). Each financial institution is assigned to one of three
capital groups -- well capitalized, adequately capitalized or undercapitalized
- -- and further assigned to one of three subgroups within a capital group, on
the basis of supervisory evaluations by the institution's primary federal and,
if applicable, state supervisors and other information relevant to the
institution's financial condition and the risk posed to the applicable
insurance fund. In 1995, as a result of the recapitalization of the BIF, the
FDIC adopted a new assessment rate schedule, reducing the Bank's assessment
from $.23 for every $100 of deposits to the minimum annual assessment of
$2,000. The rate schedule is subject to future adjustment by the FDIC.
On September 30, 1996, President Clinton signed legislation which, among
other things, recapitalized the Savings Association Insurance Fund ("SAIF") by
imposing a one-time assessment on SAIF-insured deposits. The Bank does not hold
any SAIF-insured deposits. The legislation also provides for annual assessments
on both banks and savings associations to pay interest on bonds issued by the
Financing Corporation in connection with the cost of savings associations
insolvencies. This legislation is expected to result in BIF insurance premiums
for the Bank in 1997 of 1.3 cents per $100 of deposits.
REGULATION OF THE CREDIT CARD BUSINESS
The relationship between the Bank and its cardholders is extensively
regulated by federal and state consumer protection laws. The Truth in Lending
Act requires credit card issuers to make certain disclosures along with their
applications and solicitations, upon opening an account and with each periodic
statement. The Act also imposes certain substantive requirements and
restrictions on credit card issuers and provides cardholders with certain
rights to dispute unauthorized charges and to have their billing errors
corrected promptly. Cardholders are also given the right to have their payments
promptly credited to their accounts.
The Equal Credit Opportunity Act prohibits lenders from making credit
decisions on certain bases such as sex, race and marital status among others.
In order to protect borrowers from such discrimination, the Act requires credit
card issuers to disclose the principal reasons they took adverse action against
an applicant or a cardholder.
The Fair Credit Reporting Act generally regulates credit reporting
agencies, but also imposes some duties on credit card issuers as users of
consumer credit reports. For instance, the Act prohibits the use of a consumer
credit report by a credit card issuer except in connection with a proposed
business transaction with the consumer. The Act also requires that credit card
issuers notify consumers when they take adverse action based upon information
obtained from credit reporting agencies.
The federal regulators are authorized to impose penalties for violations
of these statutes and, in certain cases, to order the Bank to pay restitution
to injured cardholders. Cardholders may bring actions for damages for such
violations. In addition, a cardholder may be entitled to assert a violation of
these consumer protection laws by way of set-off against his obligation to pay
the outstanding credit card balance.
In May 1996, a lawsuit was filed against the Bank in the United States
District Court for the Middle District of Florida. This suit is a purported
class action. The plaintiff complains that the Bank's advertising of its cash
advance promotional rate program was deceptive. The plaintiff seeks to recover
unspecified damages which the plaintiff alleges resulted from the Bank's breach
of contract and violation of federal and state law. In October, 1996, the case
was transferred to the District Court of Delaware. The Bank believes its
advertising practices are proper under applicable federal and state law and
intends to defend vigorously against the action.
DESCRIPTION OF DEBT SECURITIES
The Senior Debt Securities are to be issued under an Indenture (the
"Senior Indenture") between the Company and Bankers Trust Company, as Trustee
(the "Senior Trustee"). The Subordinated Debt Securities are to be issued under
a second Indenture (the "Subordinated Indenture") between the Company and
Harris Trust and Savings Bank, as Trustee (the "Subordinated Trustee"). Copies
of the Senior Indenture and the Subordinated Indenture have been filed with the
Commission as exhibits to the Registration Statement. The Senior Indenture and
the Subordinated Indenture are
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sometimes referred to collectively as the "Indentures" and the Senior Trustee
and the Subordinated Trustee are sometimes referred to collectively as the
"Trustees." The following summaries of the provisions of the Senior Debt
Securities, the Subordinated Debt Securities and the Indentures do not purport
to be complete and are subject to, and are qualified in their entirety by
reference to, all the provisions of the Indenture applicable to a particular
series of Debt Securities (the "Applicable Indenture"), including the
definitions therein of certain terms. Wherever particular Sections, Articles or
defined terms of the Applicable Indenture are referred to, it is intended that
such Sections, Articles or defined terms shall be incorporated herein by
reference. Article and Section references used herein are references to the
Applicable Indenture. Capitalized terms not otherwise defined herein shall have
the meaning given to them in the Applicable Indenture.
The following sets forth certain general terms and provisions of the Debt
Securities offered hereby. The particular terms of the Debt Securities offered
by any Prospectus Supplement (the "Offered Debt Securities") will be described
in the Prospectus Supplement relating to such Offered Debt Securities (the
"Applicable Prospectus Supplement").
The Company is a bank holding company, and the right of the Company to
participate as a shareholder in any distribution of assets of any subsidiary
upon its liquidation or reorganization or winding-up (and thus the ability of
Holders of the Debt Securities to benefit, as creditors of the Company, from
such distribution) is subject to the prior claims of creditors of any such
subsidiary. The Bank is subject to claims by creditors for long-term and
short-term debt obligations, including deposit liabilities, obligations for
federal funds purchased and securities sold under repurchase agreements. There
are also various legal limitations on the extent to which the Bank may pay
dividends or otherwise supply funds to the Company or its affiliates. See
"Regulatory Matters."
GENERAL
The Indentures do not limit the amount of Debt Securities that may be
issued thereunder and provide that Debt Securities may be issued thereunder
from time to time in one or more series. The Debt Securities will be unsecured
obligations of the Company.
The general provisions of the Indentures and the Debt Securities do not
contain any provisions that would limit the ability of the Company or its
Subsidiaries to incur indebtedness, that would require the Company or an
acquiror to repurchase Debt Securities in the event of a "change in control" or
that would afford holders of Debt Securities protection in the event of a
highly leveraged or similar transaction involving the Company or its
Subsidiaries. Reference is made to the Applicable Prospectus Supplement for
information with respect to any deletions from, modifications of or additions
to the Events of Default or covenants of the Company described below that are
applicable to the Debt Securities, including any addition of covenants or other
provisions providing event risk or similar protection.
Unless otherwise indicated in the Applicable Prospectus Supplement,
principal of, premium, if any, and interest on the Debt Securities will be
payable, and the transfer of Debt Securities will be registerable, at the
office or agency of the Company in the Borough of Manhattan, The City of New
York maintained by the Company and at any other office or agency maintained by
the Company for such purpose, except that, at the option of the Company,
interest may be paid by mailing a check to the address of the Person entitled
thereto as it appears on the register for the Debt Securities. (Sections 301,
305 and 1002) The Debt Securities will be issued only in fully registered form
without coupons and, unless otherwise indicated in the Applicable Prospectus
Supplement, in denominations of $1,000 or integral multiples thereof. (Section
302) No service charge will be made for any registration of transfer or
exchange of the Debt Securities, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge imposed in connection
therewith. (Section 305)
The Applicable Prospectus Supplement will describe the following terms of
the Offered Debt Securities: (1) the title of the Offered Debt Securities; (2)
whether the Offered Debt Securities are Senior Debt Securities or Subordinated
Debt Securities; (3) any limit on the aggregate principal amount of the Offered
Debt Securities; (4) the date or dates on which the principal of the Offered
Debt Securities will mature; (5) the rate or rates (which may be fixed or
variable) at which the Offered Debt Securities will bear interest, if any, and
the date or dates from which any such interest, if any, will accrue; (6) the
dates on which such interest, if any, on the Offered Debt Securities will be
payable and the Regular Record Dates for such Interest Payment Dates; (7) the
place or places where the principal of and any premium and interest on the
Offered Debt Securities shall be payable; (8) any mandatory or optional sinking
funds or analogous provisions; (9) the date, if any, after which and the price
or prices at which the Offered Debt Securities may, pursuant to any optional or
mandatory redemption provisions, be redeemed and the other detailed terms and
provisions of any such optional or mandatory redemption provision; (10) the
obligation of the Company, if any, to redeem or repurchase the
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Offered Debt Securities at the option of the Holder; (11) if other than
denominations of $1,000 and any integral multiple thereof, the denominations in
which the Offered Debt Securities shall be issuable; (12) if other than the
principal amount thereof; the portion of the principal amount of the Offered
Debt Securities that will be payable upon the declaration of acceleration of
the Maturity thereof; (13) the currency of payment of principal of and any
premium and interest on the Offered Debt Securities; (14) any index used to
determine the amount of payment of principal of and any premium and interest on
the Offered Debt Securities; (15) if the Offered Debt Securities will be
issuable only in the form of a Global Security, the Depositary or its nominee
with respect to the Offered Debt Securities and the circumstances under which
the Global Security may be registered for transfer or exchange in the name of a
Person other than the Depositary or its nominee; (16) the applicability, if
any, of the provisions described under "Defeasance and Covenant Defeasance";
(17) any additional Event of Default, and in the case of any Offered
Subordinated Debt Securities, any additional Event of Default that would result
in the acceleration of the maturity thereof; and (18) any other terms of the
Offered Debt Securities. (Section 301)
Both Senior Debt Securities and Subordinated Debt Securities may be issued
as Original Issue Discount Debt Securities to be offered and sold at a
substantial discount below their stated principal amount. Federal income tax
consequences and other special considerations applicable to any such Original
Issue Discount Debt Securities will be described in the Applicable Prospectus
Supplement. "Original Issue Discount Debt Security" means any Debt Security
which provides for an amount less than the principal amount thereof to be due
and payable upon the declaration of acceleration of the Maturity thereof upon
the occurrence of an Event of Default and the continuation thereof. (Section
101)
SUBORDINATION OF SUBORDINATED DEBT SECURITIES
Unless otherwise indicated in the Applicable Prospectus Supplement, the
following provisions shall apply to the Subordinated Debt Securities. The
following Section references are to Sections of the Subordinated Indenture.
The payment of the principal of, premium, if any, and interest on the
Subordinated Debt Securities will, to the extent set forth in the Subordinated
Indenture, be subordinated in right of payment to the prior payment in full of
all Senior Indebtedness (as defined below). In certain events of insolvency, the
payment of the principal of, premium, if any, and interest on the Subordinated
Debt Securities will, to the extent set forth in the Subordinated Indenture,
also be effectively subordinated in right of payment to the prior payment in
full of all Other Financial Obligations (as defined below). Upon any payment or
distribution of assets to creditors upon any liquidation, dissolution, winding
up, reorganization, assignment for the benefit of creditors, marshalling of
assets or any bankruptcy, insolvency or similar proceedings of the Company, the
holders of all Senior Indebtedness will first be entitled to receive payment in
full of all amounts due or to become due thereon before the Holders of the
Subordinated Debt Securities will be entitled to receive any payment in respect
of the principal of, premium, if any, or interest on the Subordinated Debt
Securities. (Section 1302) If, upon any such payment or distribution of assets
to creditors, there remain, after giving effect to such subordination provisions
in favor of the holders of Senior Indebtedness, any amounts of cash, property or
securities available for payment or distribution in respect of Subordinated Debt
Securities (as defined in the Subordinated Indenture, "Excess Proceeds") and if,
at such time, any person entitled to payment pursuant to the terms of Other
Financial Obligations (as defined in the Subordinated Indenture, "Entitled
Person") has not received payment in full of all amounts due or to become due on
or in respect of such Other Financial Obligations, then such Excess Proceeds
shall first be applied to pay or provide for the payment in full of such Other
Financial Obligations before any payment or distribution may be made in respect
of the Subordinated Debt Securities. In the event of the acceleration of the
maturity of any Subordinated Debt Securities, the holders of all Senior
Indebtedness will first be entitled to receive payment in full of all amounts
due or to become due thereon before the Holders of the Subordinated Debt
Securities will be entitled to receive any payment of the principal of, premium,
if any, or interest on the Subordinated Debt Securities. (Section 1303)
Accordingly, in case of such an acceleration, all Senior Indebtedness would have
to be repaid before any payment could be made in respect of the Subordinated
Debt Securities. No payments on account of principal, premium, if any, or
interest in respect of the Subordinated Debt Securities may be made if there
shall have occurred and be continuing a default in any payment with respect to
any Senior Indebtedness, or an event of default with respect to any Senior
Indebtedness permitting the holders thereof to accelerate the maturity thereof,
or if any judicial proceeding shall be pending with respect to any such
default. (Section 1304)
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By reason of such subordination, in the event of the insolvency of the
Company, creditors of the Company who are not holders of Senior Indebtedness or
the Subordinated Debt Securities may recover less, ratably, than holders of
Senior Indebtedness and may recover more, ratably, than Holders of the
Subordinated Debt Securities.
"Senior Indebtedness" is defined in the Subordinated Indenture to mean the
principal of, premium, if any, and interest on (i) all indebtedness of the
Company for money borrowed (including indebtedness of others guaranteed by the
Company) other than the Subordinated Debt Securities, whether outstanding on
the date of the Subordinated Indenture or thereafter created, assumed or
incurred and (ii) any amendments, renewals, extensions, modifications and
refundings of any such indebtedness, unless in either case in the instrument
creating or evidencing any such indebtedness or pursuant to which it is
outstanding it is provided that such indebtedness is not superior in right of
payment to the Subordinated Debt Securities. (Section 101) For the purposes of
this definition, "indebtedness for money borrowed" is defined as (i) any
obligation of, or any obligation guaranteed by, the Company for the repayment
of borrowed money, whether or not evidenced by bonds, debentures, notes or
other written instruments, (ii) any deferred payment obligation of, or any such
obligation guaranteed by, the Company for the payment of the purchase price of
property or assets evidenced by a note or similar instrument, and (iii) any
obligation of, or any such obligation guaranteed by, the Company for the
payment of rent or other amounts under a lease of property or assets which
obligation is required to be classified and accounted for as a capitalized
lease on the balance sheet of the Company under generally accepted accounting
principles.
"Other Financial Obligations" is defined in the Subordinated Indenture to
mean all obligations of the Company to make payment pursuant to the terms of
financial instruments, such as (i) securities contracts and foreign currency
exchange contracts, (ii) derivative instruments, such as swap agreements
(including interest rate and currency and foreign exchange rate swap
agreements), cap agreements, floor agreements, collar agreements, interest rate
agreements, foreign exchange agreements, options, commodity futures contracts,
commodity options contracts and (iii) in the case of both (i) and (ii) above,
similar financial instruments other than (x) obligations on account of Senior
Indebtedness and (y) obligations on account of indebtedness for money borrowed
ranking pari passu with or subordinate to the Subordinated Debt Securities.
(Section 101)
The Subordinated Indenture does not limit the amount of other
indebtedness, including Senior Indebtedness and obligations of the Company in
respect of Other Financial Obligations, that may be issued by the Company or
any of its Subsidiaries. As of September 30, 1996, the aggregate amount of
Senior Indebtedness outstanding was $1.0 billion.
RESTRICTION ON SALE OR ISSUANCE OF VOTING STOCK OF THE BANK
The Senior Indenture contains a covenant by the Company that it will
not, and will not permit any Subsidiary to, sell, assign, transfer, grant a
security interest or otherwise dispose of any shares of Voting Stock, or any
securities convertible into, or options, warrants or rights to subscribe for or
purchase shares, of Voting Stock of the Bank or any Subsidiary owning, directly
or indirectly, any shares of the Bank and that it will not permit the Bank or
any Subsidiary owning, directly or indirectly, any shares of Voting Stock of the
Bank to issue any shares of the Bank's Voting Stock or any securities
convertible into, or options, warrants or rights to subscribe for or purchase
shares of the Bank's Voting Stock, except for sales, assignments, transfers,
issuances, grants of security interests or other dispositions which: (i) are for
fair market value (as determined by the Board of Directors of the Company) and
if, after giving effect thereto, the Company will own not less than 80% of the
shares of Voting Stock of the Bank or any such Subsidiary owning any shares of
Voting Stock of the Bank free and clear of any security interest; (ii) are made
(x) in compliance with an order of a court or regulatory authority of competent
jurisdiction, or (y) in compliance with a condition imposed by any such court or
authority permitting the acquisition by the Company, directly or indirectly, of
any other bank or entity the activities of which are legally permissible for a
Person such as the Company or a Subsidiary to engage in, or (z) in compliance
with an undertaking made to such an authority in connection with an acquisition
by the Company, directly or indirectly, of any bank or entity the activities of
which are legally permissible for a Person such as the Company or a Subsidiary
to engage in (provided that, in the case of clauses (y) and (z), the assets of
the bank or entity being acquired and its consolidated subsidiaries equal or
exceed 75% of the assets of the Bank or such Subsidiary owning, directly or
indirectly, any shares of Voting Stock of the Bank and its respective
consolidated subsidiaries on the date of acquisition); or (iii) are made to the
Company or any Wholly-owned Subsidiary. Notwithstanding the foregoing, the Bank
may be merged into or consolidated with another banking institution organized
under the laws of the United States, any State thereof or the District of
Columbia, if, after giving effect to such merger or consolidation, the Company
or any Wholly-owned Subsidiary owns at least 80% of the Voting Stock of such
other banking institution then issued and outstanding
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free and clear of any security interest and if, immediately after giving effect
thereto, no Event of Default, and no event which, after notice or lapse of time
or both, would become an Event of Default, shall have happened and be
continuing. (Section 1008)
The foregoing restriction is not included in the Subordinated Indenture.
EVENTS OF DEFAULT
The Senior Indenture (with respect to any series of Senior Debt
Securities) and, unless otherwise provided in the Applicable Prospectus
Supplement, the Subordinated Indenture (with respect to any series of
Subordinated Debt Securities) define an Event of Default as any one of the
following events: (a) default in the payment of any interest upon any Debt
Security when it becomes due and payable, and continuance of such default for a
period of 30 days (in the case of the Subordinated Indenture, whether or not
payment is prohibited by the subordination provisions); (b) default in the
payment of the principal of (or premium, if any, on) any Debt Security at its
Maturity (in the case of the Subordinated Indenture, whether or not payment is
prohibited by the subordination provisions); (c) failure to deposit any sinking
fund payment when due (in the case of the Subordinated Indenture, whether or
not payment is prohibited by the subordination provisions); (d) failure to
perform any other covenants or warranties of the Company in the Applicable
Indenture (other than a covenant or warranty included in the Applicable
Indenture solely for the benefit of a series of Debt Securities thereunder
other than that series) continued for a period of 60 days after the holders of
at least 25% in principal amount of the Outstanding Debt Securities have given
written notice as provided in the Applicable Indenture; (e) failure to pay when
due the principal of, or acceleration of, any indebtedness for borrowed money
in an aggregate principal amount exceeding $10,000,000 of the Company or of the
Bank, if such acceleration is not annulled within 10 days after written notice
as provided in the Applicable Indenture; (f) certain events of bankruptcy,
insolvency or reorganization of the Company or of the Bank; and (g) any other
Event of Default provided with respect to Debt Securities of that series.
(Section 501) If an Event of Default occurs with respect to Debt Securities of
any series, the Trustee under the Applicable Indenture shall give the Holders
of Debt Securities of such series notice of such default, provided however,
that in the case of a default described in (d) above, no such notice to Holders
shall be given until at least 30 days after the occurrence thereof. (Section
602)
If an Event of Default with respect to the Senior Debt Securities of any
series at the time Outstanding occurs and is continuing, either the Senior
Trustee or the Holders of at least 25% in aggregate principal amount of the
Outstanding Debt Securities of that series may declare the principal amount
(or, if the Debt Securities of that series are Original Issue Discount Debt
Securities, such portion of the principal amount as may be specified in the
terms thereof) of all the Senior Debt Securities of that series to be due and
payable immediately. Payment of the principal of the Subordinated Debt
Securities may be accelerated only in the case of certain events of bankruptcy,
insolvency or reorganization of the Company. The Subordinated Trustee and the
Holders will not be entitled to accelerate the maturity of the Subordinated
Debt Securities upon the occurrence of any of the Events of Default described
above except for those described in subparagraph (f) (i.e., the bankruptcy,
insolvency or reorganization of the Company). Accordingly, there is no right of
acceleration in the case of a default in the performance of any covenant with
respect to the Subordinated Debt Securities, including the payment of interest
or principal. At any time after a declaration of acceleration with respect to
Debt Securities of any series has been made, but before a judgment or decree
based on acceleration has been obtained, the Holders of a majority in aggregate
principal amount of Outstanding Debt Securities of that series may, under
certain circumstances, rescind and annul such acceleration. (Section 502)
The Indentures provide that, subject to the duty of the Trustee during
default to act with the required standard of care, the Trustee will be under no
obligation to exercise any of its rights or powers under the Indenture at the
request or direction of any of the Holders, unless such Holders shall have
offered to the Trustee reasonable indemnity. (Section 603) Subject to such
provisions for the indemnification of the Trustee and to certain other
conditions, the Holders of a majority in aggregate principal amount of the
Outstanding Debt Securities of any series will have the right to direct the
time, method and place of conducting any proceeding for any remedy available to
the Trustee, or exercising any trust or power conferred on the Trustee,
with respect to the Debt Securities of that series. (Section 512)
No Holder of any series of Debt Securities will have any right to
institute any proceeding with respect to the Applicable Indenture or for the
appointment of a receiver or a trustee or for any remedy thereunder, unless
such Holder shall have previously given to the Trustee under the Applicable
Indenture written notice of a continuing Event of Default and unless the
Holders of at least 25% in aggregate principal amount of the Outstanding Debt
Securities of that series
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shall have made written request, and offered reasonable indemnity, to the
Trustee to institute such proceeding as trustee, and the Trustee shall not have
received from the Holders of a majority in aggregate principal amount of the
Outstanding Debt Securities of that series a direction inconsistent with such
request and shall have failed to institute such proceeding within 60 days.
(Section 507) However, such limitations do not apply to a suit instituted by a
Holder of a Debt Security for enforcement of payment of the principal of and
premium, if any, or interest on such Debt Security on or after the respective
due dates expressed in such Debt Security. (Section 508)
The Company is required under each Indenture to furnish to the Trustee
annually a statement as to the performance by the Company of certain of its
obligations under such Indenture and as to any default in such performance.
(Section 1004)
DEFEASANCE AND COVENANT DEFEASANCE
The Indentures provide, if such provision is made applicable to the Debt
Securities of any series pursuant to Section 301 of the Applicable Indenture
(which will be indicated in the Applicable Prospectus Supplement), that the
Company may elect either (a) to defease and be discharged from any and all
obligations in respect of such Debt Securities then outstanding (including, in
the case of Subordinated Debt Securities, the provisions described under
"Subordination of Subordinated Debt Securities" and except for certain
obligations to register the transfer of or exchange of such Debt Securities,
replace stolen, lost or mutilated Debt Securities, maintain paying agencies and
hold monies for payment in trust) ("defeasance") or (b) to be released from its
obligations with respect to such Debt Securities under any covenant applicable
to such Debt Securities which is determined pursuant to Section 301 of the
Applicable Indenture to be subject to covenant defeasance and, with respect to
Senior Debt Securities, to be released from its obligations concerning the
restriction on sale or issuance of Voting Stock described under "Restriction on
Sale or Issuance of Voting Stock of the Bank" ("covenant defeasance"), and the
occurrence of an event described in clause (d) (insofar as with respect to
covenants subject to covenant defeasance) or clause (e) under "Events of
Default" above shall no longer be an Event of Default, in each case (a) or (b),
if the Company deposits, in trust, with the Trustee under the Applicable
Indenture money or U.S. Government Obligations, which through the payment of
interest thereon and principal thereof in accordance with their terms will
provide money, in an amount sufficient, without reinvestment, to pay all the
principal of (and premium, if any) and interest on such Debt Securities on the
dates such payments are due (which may include one or more redemption dates
designated by the Company) and any mandatory sinking fund or analogous payments
thereon in accordance with the terms of such Debt Securities. Such a trust may
only be established if, among other things, (i) no Event of Default or event
which with the giving of notice or lapse of time, or both, would become an
Event of Default under the Indenture shall have occurred and be continuing on
the date of such deposit, (ii) such deposit will not cause the Trustee under
the Applicable Indenture to have any conflicting interest with respect to other
securities of the Company, (iii) the Company shall have delivered an Opinion of
Counsel to the effect that the Holders will not recognize income, gain or loss
for Federal income tax purposes as a result of such deposit or defeasance and
will be subject to Federal income tax in the same manner as if such defeasance
had not occurred and (iv) in the case of Subordinated Debt Securities, no
default in the payment of principal of any Senior Indebtedness shall have
occurred or be continuing and no other event of default with respect to any
Senior Indebtedness shall have occurred and be continuing, permitting, after
notice or lapse of time or both, the acceleration thereof.
The Company may exercise its defeasance option with respect to such Debt
Securities notwithstanding its prior exercise of its covenant defeasance option.
If the Company exercises its defeasance option, payment of such Debt Securities
may not be accelerated because of an Event of Default. If the Company exercises
its covenant defeasance option, payment of such Debt Securities may not be
accelerated by reference to the covenants noted under clause (b) above. In the
event the Company omits to comply with its remaining obligations with respect to
such Debt Securities under the Applicable Indenture after exercising its
covenant defeasance option and such Debt Securities are declared due and payable
because of the occurrence of any Event of Default, the amount of money and U.S.
Government Obligations on deposit with the applicable Trustee may be
insufficient to pay amounts due on the Debt Securities of such series at the
time of the acceleration resulting from such Event of Default. However, the
Company will remain liable in respect of such payments. (Article Thirteen and
Article Fourteen of the Senior Indenture and the Subordinated Indenture,
respectively.)
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MODIFICATION AND WAIVER
Modifications and amendments of each of the Senior Indenture or the
Subordinated Indenture may be made by the Company and the Trustee under the
Applicable Indenture with the consent of the Holders of not less than 66 2/3%
in aggregate principal amount of the Outstanding Debt Securities of each series
issued under such Indenture and affected by the modification or amendments;
provided, however, that no such modification or amendment may, without the
consent of the Holders of all Debt Securities affected thereby, (i) change the
Stated Maturity of the principal of, or any installment of principal of or
interest on, any Debt Security; (ii) reduce the principal amount of, or the
premium, if any, or (except as otherwise provided in the Applicable Prospectus
Supplement) interest on, any Debt Security (including in the case of an
Original Issue Discount Debt Security the amount payable upon acceleration of
the maturity thereof); (iii) change the place or currency of payment of
principal of, premium, if any, or interest on any Debt Security; (iv) impair
the right to institute suit for the enforcement of any payment on any Debt
Security on or at the Stated Maturity thereof (or in the case of redemption, on
or after the Redemption Date); (v) in the case of the Subordinated Indenture,
modify the subordination provisions in a manner adverse to the Holders of the
Subordinated Debt Securities; or (vi) reduce the percentage in principal amount
of Outstanding Debt Securities of any series, the consent of whose Holders is
required for modification or amendment of the Indenture or for waiver of
certain defaults or, in the case of the Senior Indenture, for waiver of
compliance with certain provisions of such Indenture. (Section 902)
The Holders of at least 66 2/3% in aggregate principal amount of the
Outstanding Senior Debt Securities of any series may, on behalf of all Holders
of that series, waive compliance by the Company with certain restrictive
provisions of the Applicable Indenture. (Section 1009) The Holders of a
majority in aggregate principal amount of the Senior Debt Securities or the
Subordinated Debt Securities may, on behalf of all Holders of the Senior Debt
Securities or the Subordinated Debt Securities, respectively, waive any past
default under the Applicable Indenture, except a default in the payment of
principal, premium or interest or in the performance of certain covenants.
(Section 513)
CONSOLIDATION, MERGER AND SALE OF ASSETS
Under each Indenture, the Company may consolidate with or merge into any
other corporation or convey, transfer or lease its properties and assets
substantially as an entirety to any Person without the consent of the Holders
of any of the Outstanding Debt Securities provided that (i) any successor or
purchaser is a corporation organized under the laws of the United States of
America, any State or the District of Columbia, and any such successor or
purchaser expressly assumes the Company's obligations on the Debt Securities
under a supplemental Indenture, (ii) immediately after giving effect to the
transaction no Event of Default, and no event which, after notice or lapse of
time or both, would become an Event of Default, shall have occurred and be
continuing, (iii) if properties or assets of the Company become subject to a
mortgage, pledge, lien, security interest or other encumbrance not permitted by
such Indenture, the Company or such successor Person, as the case may be, takes
such steps as shall be necessary effectively to secure the Securities equally
and ratably with (or prior to) all indebtedness secured thereby, and (iv) the
Company has delivered to the Trustee under the Applicable Indenture an
Officers' Certificate and an Opinion of Counsel stating compliance with these
provisions. (Section 801)
GLOBAL DEBT SECURITIES
The Debt Securities of a series may be issued in the form of one or more
Global Securities that will be deposited with a Depositary or its nominee
identified in the Applicable Prospectus Supplement. In such a case, one or more
Global Securities will be issued in a denomination or aggregate denominations
equal to the portion of the aggregate principal amount of Outstanding Debt
Securities of the series to be represented by such Global Security or
Securities. Unless and until it is exchanged in whole or in part for Debt
Securities in definitive registered form, a Global Security may not be
registered for transfer or exchange except as a whole by the Depositary for
such Global Security to a nominee for such Depositary and except in
the circumstances described in the Applicable Prospectus Supplement.
(Sections 204 and 305)
The specific terms of the depositary arrangement with respect to any
portion of a series of Debt Securities to be represented by a Global Security
will be described in the Applicable Prospectus Supplement.
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CONCERNING THE TRUSTEES
Bankers Trust Company and Harris Trust and Savings Bank are Trustees under
the Senior Indenture and the Subordinated Indenture, respectively. In the
normal course of business, the Company and its subsidiaries conduct banking
transactions with the Trustees, and the Trustees conduct banking transactions
with the Company and its subsidiaries. Bankers Trust Company serves as trustee
for several of the trusts established in connection with certain of the Bank's
asset securitizations.
DESCRIPTION OF PREFERRED STOCK
The following summary contains a description of the general terms of
the Preferred Stock to which any Prospectus Supplement may relate. Certain
terms of any series of the Preferred Stock offered by any Prospectus Supplement
will be described in the Prospectus Supplement relating to such series of the
Preferred Stock. If so indicated in the Prospectus Supplement, the terms of any
such series, including any Depositary Shares (as defined below) issued in
respect thereof, may differ from the terms set forth below. The description of
certain provisions of the Preferred Stock set forth below and in any Prospectus
Supplement does not purport to be complete and is subject to, and qualified in
its entirety by reference to, the Company's Articles of Incorporation and the
articles supplementary to the Company's Articles of Incorporation which will be
filed with the Commission in connection with the offering of such series of
Preferred Stock.
GENERAL
Under the Company's Articles of Incorporation, the Board of Directors
of the Company is authorized, without further shareholder action, to provide
for the issuance of shares of Preferred Stock, par value $.01 per share, in one
or more series, with such terms, including preferences, conversion and other
rights, voting power, restrictions, limitations as to dividends, qualifications
and terms and conditions of redemption, as shall be established in or pursuant
to the resolution or resolutions providing for the issue thereof to be adopted
by the Board of Directors. Currently, under the Company's Articles of
Incorporation, 20,000,000 shares are classified as Preferred Stock. The
Company's Board of Directors has authority, without further shareholder
approval, to reclassify authorized but unissued shares of any stock as
Preferred Stock or other stock having preferred dividend and voting rights and
other characteristics determined by the Board of Directors. Prior to the
issuance of each series of Preferred Stock, the Board of Directors (as used
herein the term "Board of Directors" includes any duly authorized committee
thereof) will adopt resolutions creating and designating such series as a
series of Preferred Stock. As of the date of this Prospectus, the Company has
outstanding 6,000,000 shares of 7 1/2% Cumulative Preferred Stock, Series A,
and 6,000,000 shares of Adjustable Rate Cumulative Preferred Stock, Series B.
The Preferred Stock shall have the dividend, liquidation, and voting
rights set forth below, unless otherwise provided in the Prospectus Supplement
relating to a particular series of the Preferred Stock. Reference is made to
the Prospectus Supplement relating to the particular series of the Preferred
Stock offered thereby for specific terms, including: (i) the designation of
such Preferred Stock and the number of shares offered; (ii) the amount of
liquidation preference per share; (iii) the price at which such Preferred Stock
will be issued; (iv) the dividend rate (or method of calculation), the dates on
which dividends shall be payable, whether such dividends shall be cumulative or
noncumulative and, if cumulative, the dates from which dividends shall commence
to cumulate; (v) any redemption or sinking fund provisions of such Preferred
Stock; (vi) whether the Company has elected to offer Depositary Shares (as
defined below); and (vii) any additional voting, dividend, liquidation,
redemption, sinking fund and other rights, preferences, privileges, limitations
and restrictions of such Preferred Stock.
The Preferred Stock will, when issued, be fully paid and nonassessable
and have no preemptive rights. Unless otherwise specified in the Prospectus
Supplement relating to a particular series of the Preferred Stock, each series
of the Preferred Stock will rank on a parity as to dividends and liquidation
rights in all respects with each other series of the Preferred Stock.
RANK
Any series of the Preferred Stock will, with respect to dividend
rights and rights on liquidation, winding up and dissolution rank (i) senior to
all classes of common stock of the Company and to all equity securities issued
by the Company the terms of which specifically provide that such equity
securities will rank junior to the Preferred Stock
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<PAGE> 17
(collectively referred to as the "Junior Securities"); (ii) on a parity with
all equity securities issued by the Company the terms of which specifically
provide that such equity securities will rank on a parity with the Preferred
Stock (collectively referred to as the "Parity Securities"); and (iii) junior
to all equity securities issued by the Company the terms of which specifically
provide that such equity securities will rank senior to the Preferred Stock.
DIVIDEND RIGHTS
Holders of the Preferred Stock of each series will be entitled to
receive, when, as and if declared by the Board of Directors of the Company, out
of funds of the Company legally available therefor, cash dividends at such
rates and on such dates as are set forth in the Prospectus Supplement relating
to such series of the Preferred Stock. Such rate may be fixed or variable or
both. Each such dividend will be payable to the holders of record as they
appear on the stock record books of the Company (or, if applicable, the records
of the Depositary referred to below under "Depositary Shares") on such record
dates as will be fixed by the Board of Directors of the Company or a duly
authorized committee thereof. Dividends on any series of the Preferred Stock
may be cumulative or noncumulative, as provided in the Prospectus Supplement
relating thereto. The Company's ability to pay dividends on its Preferred Stock
is subject to policies established by the Federal Reserve Board. See
"Regulatory Matters -- Dividend Restrictions."
No full dividends may be declared or paid or funds set apart for the
payment of dividends on any Parity Securities unless dividends shall have been
paid or set apart for such payment on the Preferred Stock. If full dividends
are not so paid, the Preferred Stock shall share dividends pro rata with the
Parity Securities. No dividends may be declared or paid or funds set apart for
the payment of dividends on any Junior Securities unless full cumulative
dividends for all dividend periods terminating on or prior to the date of such
declaration or payment shall have been paid or declared and a sum sufficient
for the payment thereof set apart for payment on the Preferred Stock.
Each series of Preferred Stock will be entitled to dividends as
described in the Prospectus Supplement relating to such series, which may be
based upon one or more methods of determination. Different series of the
Preferred Stock may be entitled to dividends at different rates or based upon
different methods of determination.
VOTING RIGHTS
Except as indicated in the Prospectus Supplement relating to a
particular series of Preferred Stock, or except as expressly required by
applicable law, the holders of the Preferred Stock will not be entitled to any
voting rights.
Under regulations adopted by the Board of Governors of the Federal
Reserve System (the "Federal Reserve Board") if the holders of shares of any
series of Preferred Stock of the Company become entitled to vote for the
election of directors because dividends on such series are in arrears such
series may then be deemed a "class of voting securities" and a holder of 25% or
more of such series (or a holder of 5% or more if it otherwise exercises a
"controlling influence" over the Company) may then be subject to regulation as
a bank holding company in accordance with the Bank Holding Company Act. In
addition, at such time as such series is deemed a class of voting securities,
(i) any other bank holding company may be required to obtain the approval of
the Federal Reserve Board under the Bank Holding Company Act to acquire or
retain 5% or more of such series and (ii) any person other than a bank holding
company may be required to obtain the approval of the Federal Reserve Board
under the Change in Bank Control Act or the Bank Holding Company Act to acquire
or retain 10% or more of such series.
RIGHTS UPON LIQUIDATION
In the event of any voluntary or involuntary liquidation, dissolution
or winding up of the Company, the holders of each series of Preferred Stock
will be entitled to receive out of assets of the Company available for
distribution to shareholders, before any distribution of assets is made to
holders of Junior Securities, including common stock, liquidating distributions
in the amount set forth in the Prospectus Supplement relating to such series of
the Preferred Stock plus an amount equal to accrued and unpaid dividends for
the then-current dividend period and, if such series of the Preferred Stock is
cumulative, for all dividend periods prior thereto, all as set forth in the
Prospectus Supplement with respect to such shares. If upon any voluntary or
involuntary liquidation, dissolution or winding up of the Company, the amounts
payable with respect to the Preferred Stock of any series and any other Parity
Securities are not paid in full, the holders of the Preferred Stock of such
series and the Parity Securities will share ratably in any such distribution of
assets of the Company in proportion to the full liquidation preferences to
which each is entitled. After payment of the full
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<PAGE> 18
amount of the liquidation preference to which they are entitled, the holders of
such series of Preferred Stock will not be entitled to any further
participation in any distribution of assets of the Company.
Because the Company is a bank holding company, its rights, the rights
of its creditors and of its stockholders, including the holders of the shares
of the Preferred Stock offered hereby, to participate in the assets of any
subsidiary, including the Bank, upon the latter's liquidation or
recapitalization may be subject to the prior claims of the subsidiary's
creditors except to the extent that the Company may itself be a creditor with
recognized claims against the subsidiary.
REDEMPTION
A series of the Preferred Stock may be redeemable, in whole or in
part, at the option of the Company or the holder thereof, and may be subject to
mandatory redemption pursuant to a sinking fund, in each case upon terms, at
the times and at the redemption prices set forth in the Prospectus Supplement
relating to such series.
In the event of partial redemptions of Preferred Stock, whether by
mandatory or optional redemption, the shares to be redeemed will be determined
by lot or pro rata, as may be determined by the Board of Directors of the
Company, a committee thereof or by any other method determined to be equitable
by the Board of Directors.
On or after a redemption date, unless the Company defaults in the
payment of the redemption price, dividends will cease to accrue on shares of
Preferred Stock called for redemption and all rights of holders of such shares
will terminate except for the right to receive the redemption price.
Under current regulations, bank holding companies may exercise an
option to redeem shares of preferred stock included as Tier 1 capital, or
exchange such preferred stock for debt securities, without the prior approval
of the Federal Reserve Board, if the bank holding company will remain well
capitalized, received a composite rating of 1 or 2 of its most recent BOPEC
inspection and is not the subject of any unresolved supervisory issues.
CONVERSION
The Prospectus Supplement for any series of the Preferred Stock will
state the terms, if any, on which shares of that series are convertible into
other securities of the Company.
DEPOSITARY SHARES
General. The Company may, at its option, elect to offer receipts for
fractional interests ("Depositary Shares") in Preferred Stock, rather than full
shares of Preferred Stock. In such event, receipts ("Depositary Receipts") for
Depositary Shares, each of which will represent a fraction (to be set forth in
the Prospectus Supplement relating to a particular series of Preferred Stock)
of a share of a particular series of Preferred Stock, will be issued as
described below.
The shares of any series of Preferred Stock represented by Depositary
Shares will be deposited under a Deposit Agreement (the "Deposit Agreement")
between the Company and the depositary named in the Prospectus Supplement (the
"Depositary"). Subject to the terms of the Deposit Agreement, each owner of a
Depositary Share will be entitled, in proportion to the applicable fraction of
a share of Preferred Stock represented by such Depositary Share, to all the
rights and preferences of the Preferred Stock represented thereby (including
dividend, voting, redemption, subscription and liquidation rights). The
following summary of certain provisions of the Deposit Agreement does not
purport to be complete and is subject to, and is qualified in its entirety by
reference to, all the provisions of the Deposit Agreement, including the
definitions therein of certain terms. Whenever particular sections of the
Deposit Agreement are referred to, it is intended that such sections shall be
incorporated herein by reference. Copies of the forms of Deposit Agreement and
Depositary Receipt are filed as an exhibit to the Registration Statement of
which this Prospectus is a part, and the following summary is qualified in its
entirety by reference to such exhibits.
Dividends and Other Distributions. The Depositary will distribute all
cash dividends or other cash distributions received in respect to the Preferred
Stock to the record holders of Depositary Shares relating to such Preferred
Stock in proportion to the numbers of such Depositary Shares owned by such
holders. (Section 4.01)
In the event of a distribution other than in cash, the Depositary will
distribute property received by it to the record holders of Depositary Shares
in an equitable manner, unless the Depositary determines that it is not
feasible to
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<PAGE> 19
make such distribution, in which case the Depositary may sell such property and
distribute the net proceeds for such sale to such holders. (Section 4.02)
Redemption of Depositary Shares. If a series of Preferred Stock
represented by Depositary Shares is subject to redemption, the Depositary
Shares will be redeemed from the proceeds received by the Depositary resulting
from the redemption, in whole or in part, of such series of Preferred Stock
held by the Depositary. The redemption price per Depositary Shares will be
equal to the applicable fraction of the redemption price per share payable with
respect to such series of the Preferred Stock. Whenever the Company redeems
shares of Preferred Stock held by the Depositary, the Depositary will redeem as
of the same redemption date the number of Depositary Shares representing shares
of Preferred Stock so redeemed. If fewer than all the Depositary Shares are to
be redeemed, the Depositary Shares to be redeemed will be selected by lot, pro
rata or by any other equitable method as may be determined by the Depositary.
(Section 2.08)
Voting the Preferred Stock. Upon receipt of notice of any meeting at
which the holders of the Preferred Stock are entitled to vote, the Depositary
will mail the information contained in such notice of meeting to the record
holders of the Depositary Shares relating to such Preferred Stock. Each record
holder of such Depositary Shares on the record date (which will be the same
date as the record date for the Preferred Stock) will be entitled to instruct
the Depositary as to the exercise of the voting rights pertaining to the amount
of the Preferred Stock represented by such holder's Depositary Shares. The
Depositary will endeavor, insofar as practicable, to vote the amount of the
Preferred Stock represented by such Depositary Shares in accordance with such
instructions, and the Company will agree to take all reasonable action which
may be deemed necessary by the Depositary in order to enable the Depositary to
do so. The Depositary will abstain from voting shares of the Preferred Stock
to the extent it does not receive specific instructions from the holder of
Depositary Shares representing such Preferred Stock. (Section 4.05)
Amendment and Termination of the Deposit Agreement. The form of
Depositary Receipt evidencing the Depositary Shares and any provision of the
Deposit Agreement may at any time be amended by agreement between the Company
and the Depositary. However, any amendment which materially and adversely
alters the rights of the holders of Depositary Shares will not be effective
unless such amendment has been approved by the holders of at least a majority
of the Depositary Shares then outstanding. (Section 6.01) The Deposit Agreement
will only terminate if (i) all outstanding Depositary Shares have been redeemed
or (ii) there has been a final distribution in respect of the Preferred Stock
in connection with any liquidation, dissolution or winding up of the Company
and such distribution has been distributed to the holders of Depositary
Receipts. (Section 6.02)
Charges of Depositary. The Company will pay all transfer and other
taxes and governmental charges arising solely from the existence of the
depositary arrangements. The Company will pay charges of the Depositary in
connection with the initial deposit of the Preferred Stock and issuance of
Depositary Receipts, all withdrawals of shares of Preferred Stock by owners of
Depositary Shares and any redemption of the Preferred Stock. Holders of
Depositary Receipts will pay other transfer and other taxes and governmental
charges and such other charges as are expressly provided in the Deposit
Agreement to be for their accounts. (Section 5.07)
Resignation and Removal of Depositary. The Depositary may resign at
any time by delivering to the Company notice of its election to do so, and the
Company may at any time remove the Depositary, any such resignation or removal
to take effect upon the appointment of a successor Depositary and its
acceptance of such appointment. Such successor Depositary must be appointed
within 60 days after delivery of the notice of resignation or removal and must
be a bank or trust company having its principal office in the United States and
having a combined capital and surplus of at least $50,000,000. (Section 5.04)
Miscellaneous. The Depositary will forward all reports and
communications from the Company which are delivered to the Depositary and which
the Company is required or otherwise determines to furnish to the holders of
the Preferred Stock. (Section 4.07)
Neither the Depositary nor the Company will be liable under the
Deposit Agreement to holders of Depositary Receipts other than for its
negligence, willful misconduct or bad faith. Neither the Company nor the
Depositary will be obligated to prosecute or defend any legal proceeding in
respect of any Depositary Shares or Preferred Stock unless satisfactory
indemnity is furnished. The Company and the Depositary may rely upon written
advice of counsel or accountants, or upon information provided by persons
presenting Preferred Stock for deposit, holders of Depositary Receipts or other
persons believed to be competent and on documents believed to be genuine.
(Section 5.03)
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PLAN OF DISTRIBUTION
The Company may sell Securities to or through underwriters or dealers,
and also may sell Securities directly to other purchasers or through agents.
Each Prospectus Supplement will describe the method of distribution of the
Securities being offered thereby.
The distribution of the Securities may be effected from time to time
in one or more transactions at a fixed price or prices, which may be changed,
or at market prices prevailing at the time of sale, at prices related to such
prevailing market prices or at negotiated prices.
In connection with the sale of Securities, underwriters may receive
compensation from the Company or from purchasers of Securities for whom they
may act as agents in the form of discounts, concessions or commissions.
Underwriters may sell Securities to or through dealers, and such dealers may
receive compensation in the form of discounts, concessions or commissions from
the underwriters and/or commissions from the purchasers for whom they may act
as agents. Underwriters, dealers and agents that participate in the
distribution of Securities may be deemed to be underwriters, and any discounts
or commissions received by them from the Company and any profit on the resale
of Securities by them may be deemed to be underwriting discounts and
commissions, under the Securities Act. Any such underwriter or agent will be
identified, and any such compensation received from the Company will be
described, in the Prospectus Supplement.
If so indicated in the Applicable Prospectus Supplement and subject to
existing market conditions, the Company will authorize underwriters or other
persons acting as the Company's agents to solicit offers by certain
institutions to purchase Offered Debt Securities from the Company pursuant to
contracts providing for payment and delivery on a future date. Institutions
with which such contracts may be made include but are not limited to commercial
and savings banks, insurance companies, pension funds, investment companies,
educational and charitable institutions and others, but in all cases such
institutions must be approved by the Company. The obligations of any purchaser
under any such contract will be subject to the condition that the purchase of
the Offered Debt Securities shall not at the time of delivery be prohibited
under the laws of the jurisdiction to which such purchaser is subject. The
underwriters and such other agents will not have any responsibility in respect
of the validity or performance of such contracts.
Underwriters and agents who participate in the distribution of
Securities may be entitled under agreements which may be entered into by the
Company to indemnification by the Company against certain liabilities,
including liabilities under the Securities Act.
Except as indicated in the Applicable Prospectus Supplement, the
Securities are not expected to be listed on a securities exchange, and any
underwriters or dealers will not be obligated to make a market in Securities.
The Company cannot predict the activity or liquidity of any trading in the
Securities.
VALIDITY OF SECURITIES
The validity of the Securities will be passed upon for the Company by
John W. Scheflen, Executive Vice President, General Counsel and Secretary of
the Company, and for any underwriters, dealers or agents by Simpson Thacher &
Bartlett (a partnership which includes professional corporations), New York,
New York. Simpson Thacher & Bartlett will rely on the opinion of Mr. Scheflen
as to matters of Maryland law and Mr. Scheflen will rely on the opinion of
Simpson Thacher & Bartlett as to matters of New York law. Mr. Scheflen owns
beneficially 225,624 shares of common stock of the Company, including options
exercisable within sixty days under the Company's 1991 Long Term Incentive
Plan. Simpson Thacher & Bartlett regularly performs legal services for the
Company and its subsidiaries.
EXPERTS
The consolidated financial statements of MBNA Corporation incorporated
by reference in MBNA Corporation's Annual Report (Form 10-K) for the year ended
December 31, 1995, have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report thereon incorporated by reference
therein and incorporated herein by reference. Such consolidated financial
statements are incorporated herein by reference in reliance upon such report
given upon the authority of such firm as experts in accounting and auditing.
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PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The Company estimates that expenses, other than underwriting
compensation, in connection with the offering described in this Registration
Statement will be as follows:
<TABLE>
<S> <C>
Registration fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 181,819
Trustee's fees and expenses . . . . . . . . . . . . . . . . . . . . . . . 50,000
Printing and engraving expenses . . . . . . . . . . . . . . . . . . . . . 120,000
Legal fees and expenses . . . . . . . . . . . . . . . . . . . . . . . . . 120,000
Accountants' fees and expenses . . . . . . . . . . . . . . . . . . . . . 100,000
Rating agency fees . . . . . . . . . . . . . . . . . . . . . . . . . . . 600,000
Blue Sky fees and expenses . . . . . . . . . . . . . . . . . . . . . . . 25,000
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53,181
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,250,000
==========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Registrant's Articles of Incorporation and By-Laws provide that
the Registrant shall indemnify and advance expenses to its currently acting and
its former directors to the maximum extent permitted by the Maryland General
Corporation Law, and that the Registrant shall indemnify and advance expenses
to its officers to the same extent as its directors and to such further extent
as is consistent with law. 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 (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 has 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.
The Underwriting Agreements filed as Exhibits 1(a) and 1(b) to this
Registration Statement and the Distribution Agreement filed as Exhibit 1(c) to
this Registration Statement provide for indemnification of directors and
officers of the Company by the underwriters and agents against certain
liabilities under the Securities Act of 1933, as amended, in certain instances.
ITEM 16. EXHIBITS.
(1)(a) -- Debt Underwriting Agreement (incorporated by reference to exhibit 1(a)
from the Registrant's Registration Statement on form S-3 (Commission
file No. 33-95600) filed with the Securities and Exchange Commission
("Registration Statement 33-95600")).
(1)(b) -- Form of Preferred Stock Underwriting Agreement (incorporated by
reference to exhibit 1(b) from the Registrant's Registration Statement
on Form S-3 (Commission File No. 33-76278) filed with the Securities
and Exchange Commission).
(1)(c) -- Distribution Agreement dated April 11, 1994 among the Company, Lehman
Brothers Inc., Bear, Stearns & Co., Inc., CS First Boston Corporation,
Goldman, Sachs & Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated and J.P. Morgan Securities Inc. (incorporated by
reference to exhibit 1(c) from Registration Statement 33-95600).
(1)(d) -- Amendment to Distribution Agreement dated May 1, 1995 among the
Company, Lehman Brothers Inc., Bear, Stearns & Co., Inc., CS First
Boston Corporation, Goldman, Sachs & Co., Merrill Lynch, Pierce,
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<PAGE> 22
Fenner & Smith Incorporated and J.P. Morgan Securities Inc.
(incorporated by reference to exhibit 1(d) from Registration Statement
33-95600).
(1)(e) -- Amendment to Distribution Agreement dated September 13, 1995 among the
Company, Lehman Brothers Inc., Bear, Stearns & Co., Inc., CS First
Boston Corporation, Goldman, Sachs & Co., Merrill Lynch, Pierce,
Fenner & Smith Incorporated and J.P. Morgan Securities Inc.
(4)(a) -- Senior Indenture, dated as of September 29, 1992, between the Company
and Bankers Trust Company as Trustee (incorporated by reference to
exhibit 4(a) from Registration Statement 33-95600).
(4)(b) -- Subordinated Indenture, dated as of November 24, 1992, between the
Company and Harris Trust and Savings Bank as Trustee (incorporated by
reference to exhibit 4(b) from Registration Statement 33-95600).
(4)(c) -- Form of fixed rate Senior Medium-Term Note Due Nine Months or More
From Date of Issue (incorporated by reference to exhibit 4(b) from the
Registrant's Current Report on Form 8-K dated November 24, 1992, filed
with the Securities and Exchange Commission (Commission File No.
1-10683)).
(4)(d) -- Form of floating rate Senior Medium-Term Note Due Nine Months or More
From Date of Issue (incorporated by reference to exhibit 4(c) from the
Registrant's Current Report on Form 8-K dated November 24, 1992, filed
with the Securities and Exchange Commission (Commission File No.
1-10683)).
(4)(e) -- Form of fixed rate Subordinated Medium-Term Note Due Nine Months or
More from Date of Issue (incorporated by reference to exhibit 4(d)
from the Registrant's Current Report on Form 8-K dated November 24,
1992, filed with the Securities and Exchange Commission (Commission
File No. 1-10683)).
(4)(f) -- Form of floating rate Subordinated Medium-Term Note Due Nine Months or
More From Date of Issue (incorporated by reference to exhibit 4(e)
from the Registrant's Current Report on Form 8-K dated November 24,
1992, filed with the Securities and Exchange Commission (Commission
File No. 1-10683)).
(4)(g) -- Form of Articles Supplementary relating to each series of Preferred
Stock (to be filed by amendment or incorporated by reference in
connection with the offering of each series of Preferred Stock).
(4)(h) -- Form of Deposit Agreement (incorporated by reference to exhibit 4(h)
from the Registrant's Registration Statement on Form S-3 (Commission
File No. 33-76278) filed with the Securities and Exchange
Commission)).
(5) -- Opinion and Consent of John W. Scheflen, Executive Vice President,
General Counsel and Secretary of the Company.
(12) -- Statement re: Computation of Ratio of Earnings to Fixed Charges and
Ratio of Earnings to Fixed Charges and Preferred Stock Dividends.
(23)(a)-- Consent of Ernst & Young LLP.
(23)(b)-- Consent of John W. Scheflen (included in exhibit 5).
(24) -- Powers of Attorney (included in signature page).
(25)(a)-- Statement of Eligibility on Form T-1 under the Trust Indenture Act of
1939, as amended, of Bankers Trust Company (incorporated by reference
to exhibit 25(a) from the Registrant's Registration Statement on Form
S-3 (Commission File No. 33-76278) filed with the Securities and
Exchange Commission).
(25)(b)-- Statement of Eligibility on Form T-1 under the Trust Indenture Act of
1939, as amended, of Harris Trust and Savings Bank (incorporated by
reference to exhibit 25(b) from the Registrant's Registration
Statement on Form S-3 (Commission File No. 33-76278) filed with the
Securities and Exchange Commission).
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<PAGE> 23
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made
of the securities registered hereby, 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;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement;
provided, however, that paragraphs (1) (i) and (1) (ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed 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.
(4) 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 Section 15 (d) of the Securities Exchange Act of 1934 that
is incorporated by reference in this 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.
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,
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> 24
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, the Registrant 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 December 3, 1996.
MBNA CORPORATION
By: /s/ Vernon H.C. Wright
---------------------------------------------
Name: Vernon H.C. Wright
Title: Executive Vice President and
Chief Corporate Finance Officer
The undersigned Directors and Officers of MBNA Corporation hereby appoint
Vernon H.C. Wright and John W. Scheflen, and each of them, as
attorneys-in-fact for the undersigned, with full power of substitution and
resubstitution, for, and in the name, place and stead of the undersigned, to
sign and file with the Securities and Exchange Commission under the Securities
Act of 1933, as amended, any and all amendments (including post-effective
amendments) and exhibits to this Registration Statement and any and all
applications and other documents to be filed with the Securities and Exchange
Commission pertaining to the registration of the securities covered hereby,
with full power and authority to do and perform each and every act and thing
requisite and necessary or desirable, hereby ratifying and confirming all that
said attorneys-in-fact, or either of them, or their substitute or substitutes,
may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed on December 3, 1996 by the following
persons in the capacities indicated.
<TABLE>
<CAPTION>
Signature Title
--------- -----
<S> <C>
/s/ Alfred Lerner
- -------------------------------- Chairman and Chief Executive Officer (principal
Alfred Lerner executive officer) and Director
/s/ Charles M. Cawley
- -------------------------------- President and Director
Charles M. Cawley
/s/ M. Scot Kaufman
- -------------------------------- Executive Vice President, Chief Financial Officer
M. Scot Kaufman and Chief Accounting Officer and Treasurer
(principal financial and accounting officer)
/s/ James H. Berick, Esq.
- --------------------------------
James H. Berick, Esq. Director
/s/ Benjamin R. Civiletti, Esq.
- --------------------------------
Benjamin R. Civiletti, Esq. Director
/s/ Randolph D. Lerner, Esq.
- --------------------------------
Randolph D. Lerner, Esq. Director
/s/ Stuart L. Markowitz, M.D.
- --------------------------------
Stuart L. Markowitz, M.D. Director
/s/ Michael Rosenthal, Ph.D.
- --------------------------------
Michael Rosenthal, Ph.D. Director
</TABLE>
II-4
<PAGE> 1
EXHIBIT (1)(e)
September 13, 1995
Lehman Brothers Inc.
Three World Financial Center
New York, New York 10285
Bear, Stearns & Co. Inc.
245 Park Avenue
New York, New York 10167
CS First Boston Corporation
55 East 52nd Street
New York, New York 10055
Goldman, Sachs & Co.
85 Broad Street
New York, New York 10004
Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner &
Smith Incorporated
World Financial Center
North Tower
New York, New York 10281-1310
J.P. Morgan Securities Inc.
60 Wall Street
New York, New York 10260
Gentlemen:
Reference is hereby made to the Distribution Agreement, dated April 11,
1994, as amended as of May 1, 1995 (the "Distribution Agreement"), between MBNA
Corporation, a Maryland corporation ("MBNA"), and you. The parties to the
Distribution Agreement hereby acknowledge that a Registration Statement of MBNA
on Form S-3 (No. 33-95600) relating to $750,000,000 aggregate principal amount
of debt securities, preferred stock and depositary shares representing
preferred stock (the "First Registration Statement"), which first Registration
Statement also constitutes Post-Effective Amendment No. 1 to MBNA's
<PAGE> 2
Registration Statement on Form S-3 (No. 33-76278) (the "Second Registration
Statement"; the "First Registration Statement" and the "Second Registration
Statement" are herein collectively referred as the "Registration Statement"),
was declared effective by the Securities and Exchange Commission on September
5, 1995. The parties to the Distribution Agreement hereby further acknowledge
that the Treasury Committee of the Board of Directors of MBNA, in connection
with the Registration Statement, adopted on September 12, 1995 a resolution
(the "Resolution") that authorized the issuance of up to $300,000,000 in
aggregate principal amount of Senior Medium-Term Notes, Series B and
Subordinated Medium-Term Notes, Series B under the Registration Statement (or
the U.S. dollar equivalent in certain specified foreign currencies or currency
units) which may be issued from time to time pursuant to the Distribution
Agreement. A copy of the Resolution is enclosed.
In order to implement the Resolution, the parties hereby agree that the
Distribution Agreement be amended so that all references contained therein to
Senior Medium-Term Notes be deemed to also be references to Senior Medium-Term
Notes, Series B and all references contained therein to Subordinated Medium-
Term Notes be deemed to also be references to Subordinated Medium-Term Notes,
Series B. In addition, all references in the Distribution Agreement to
$500,000,000 shall be changed to "$300,000,000".
-2-
<PAGE> 3
Please confirm your agreement to this amendment by signing and
returning the enclosed copy of this letter.
MBNA CORPORATION
By: /s/ Vernon H.C. Wright
-------------------------------
Name: Vernon H.C. Wright
Title: Executive Vice President
Agreed to and accepted this
13th day of September, 1995.
LEHMAN BROTHERS INC.
By: /s/ Robert H. Swindell
---------------------------
BEAR, STEARNS & CO. INC.
By: /s/ Timothy A. O'Neill
---------------------------
CS FIRST BOSTON CORPORATION
By: /s/ Martha D. Bailey
---------------------------
GOLDMAN, SACHS, & CO.
By: /s/ Goldman, Sachs & Co.
---------------------------
MERRILL LYNCH, PIERCE, FENNER &
SMITH INCORPORATED
By: /s/ Scott Gavin
---------------------------
J.P. MORGAN SECURITIES INC.
By: /s/ Thomas Hagerstrom
---------------------------
-3-
<PAGE> 1
EXHIBIT 5
December 3, 1996
MBNA Corporation
1100 North King Street
Wilmington, Delaware 19801
Ladies and Gentlemen:
In connection with the registration under the Securities Act of 1993 (the
"Act") of $600,000,000 aggregate initial offering price of debt securities (the
"Debt Securities") and preferred stock, par value $.01 per share ("Preferred
Stock"), which may be issued in the form of depository shares ("Depository
Shares") evidenced by depository receipts ("Depository Receipts"), of MBNA
Corporation, a Maryland corporation (the "Company"), I, as Executive Vice
President, Secretary and General Counsel of the Company, have examined such
corporate records, certificates and other documents, and such questions of law,
as I have considered necessary or appropriate for purposes of this opinion.
Each capitalized term used herein, unless otherwise defined herein, has the
meaning ascribed to it in the Registration Statement filed with the Securities
and Exchange Commission as of the date hereof (the "Registration Statement").
I am admitted to the Bar of the State of Maryland and express no opinion as to
the law of any jurisdiction other than the laws of the United States of America
and the State of Maryland.
Upon the basis of such examination, it is my opinion that:
(i) when the Registration Statement has become effective under the
Act, the terms of the Debt Securities and of their issuance
and sale have been duly established in conformity with the
applicable indenture, and the Debt Securities have been duly
executed and authenticated in accordance with such indenture
and issued and sold as contemplated in the Registration
Statement, the Debt Securities will constitute valid and
legally binding obligations of the Company, enforceable in
accordance with their terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium
and similar laws of general applicability relating to or
affecting creditors' rights and to general equity principles;
(ii) when the Registration Statement has become effective under the
Act, the terms of the Preferred Stock and of their issue and
sale have been duly established by the Board of Directors in
conformity with the Company's
<PAGE> 2
MBNA Corporation
December 3, 1996
Page 2
charter and applicable law, articles supplementary with
respect to the Preferred Stock have been filed and accepted
for record by the State Department of Taxation and Assessment
of Maryland and the Preferred Stock has been duly issued and
sold as contemplated by the Registration Statement, the
Preferred Stock will be duly authorized, validly issued, fully
paid and nonassessable; and
(iii) when the Registration Statement has become effective under the
Act, the terms of the Depository Shares and of their issue and
sale have been duly established in conformity with applicable
law, the Deposit Agreement relating to the Depository Shares
has been duly executed and delivered, and the Preferred Stock
which is represented by Depository Shares has been duly issued
and delivered to the Depository as contemplated in (ii) above,
and Depository Receipts evidencing the Depository Shares have
been duly issued against the deposit of Preferred Stock in
accordance with the Deposit Agreement, the Depository Receipts
will be validly issued.
I consent to the filing of this opinion as an exhibit to the Registration
Statement and to the references to me under the heading "Validity of
Securities" in the Prospectus. In giving such consent, I do not thereby admit
that I am in the category of persons whose consent is required under Section 7
of the Act.
Very truly yours,
/s/ John W. Scheflen
--------------------
<PAGE> 1
EXHIBIT 12
Computation of Ratios
a. Ratio of Earnings to Fixed Charges
(dollars in thousands)
<TABLE>
<CAPTION>
Nine Months
Ended Year Ended December 31,
September 30, -------------------------------------------------------
1996* 1995 1994 1993** 1992 1991
------------- ---------- -------- -------- -------- --------
(unaudited)
<S> <C> <C> <C> <C> <C> <C>
INCLUDING INTEREST ON DEPOSITS:
EARNINGS:
Income before income taxes.............. $ 483,893 $ 584,601 $441,101 $190,624 $272,019 $234,549
Fixed charges........................... 544,141 609,742 316,647 183,148 250,027 366,956
Interest capitalized during period,
net of amortization of previously
capitalized interest................... (2,032) (3,409) (683) (1,146) (440) -
------------- ---------- -------- -------- -------- --------
Earnings, for computation purposes...... $ 1,026,002 $1,190,934 $757,065 $372,626 $521,606 $601,505
============= ========== ======== ======== ======== ========
FIXED CHARGES:
Interest on deposits, short-term
borrowings, and long-term debt and bank
notes, expensed or capitalized......... $ 535,815 $ 600,047 $308,242 $179,647 $237,287 $353,896
Portion of rents representative of the
interest factor........................ 8,326 9,695 8,405 3,501 12,740 13,060
------------- ---------- -------- -------- -------- --------
Fixed charges, including interest on
deposits, for computation purposes..... $ 544,141 $ 609,742 $316,647 $183,148 $250,027 $366,956
============= ========== ======== ======== ======== ========
Ratio of earnings to fixed charges...... 1.89 1.95 2.39 2.03 2.09 1.64
EXCLUDING INTEREST ON DEPOSITS:
EARNINGS:
Income before income taxes.............. $ 483,893 $ 584,601 $441,101 $190,624 $272,019 $234,549
Fixed charges........................... 162,884 171,585 94,495 38,100 18,526 19,723
Interest capitalized during period,
net of amortization of previously
capitalized interest................... (2,048) (3,430) - (760) - -
------------- ---------- -------- -------- -------- --------
Earnings, for computation purposes...... $ 644,729 $ 752,756 $535,596 $227,964 $290,545 $254,272
============= ========== ======== ======== ======== ========
FIXED CHARGES:
Interest on short-term borrowings and
long-term debt and bank notes,
expensed or capitalized................ $ 154,558 $ 161,890 $ 86,090 $ 34,599 $ 5,786 $ 6,663
Portion of rents representative of the
interest factor........................ 8,326 9,695 8,405 3,501 12,740 13,060
------------- ---------- -------- -------- -------- --------
Fixed charges, excluding interest on
deposits, for computation purposes..... $ 162,884 $ 171,585 $ 94,495 $ 38,100 $ 18,526 $ 19,723
============= ========== ======== ======== ======== ========
Ratio of earnings to fixed charges,
excluding interest on deposits......... 3.96 4.39 5.67 5.98 15.68 12.89
</TABLE>
*Income before income taxes for the nine months ended September 30, 1996,
includes a charge of $54.3 million related to the launch of the MBNA Platinum
Plus Visa and MasterCard program. Without the charge, the ratio of earnings to
fixed charges, including and excluding interest on deposits, would have been 2.0
and 4.3, respectively.
**Income before income taxes for 1993 includes a charge of $150.0 million for
the termination of a marketing agreement with an independent third-party
marketing organization. Without the charge, the ratio of earnings to fixed
charges, including and excluding interest on deposits, would have each been 2.9
and 9.9, respectively.
<PAGE> 2
Computation of Ratios
b. Ratio of Earnings to Fixed Charges and Preferred Stock Dividends
(dollars in thousands)
<TABLE>
<CAPTION>
Nine Months
Ended Year Ended December 31,
September 30, --------------------------------------------------------
1996* 1995 1994 1993** 1992 1991
------------- ---------- -------- -------- -------- --------
(unaudited)
<S> <C> <C> <C> <C> <C> <C>
INCLUDING INTEREST ON DEPOSITS:
EARNINGS:
Income before income taxes.............. $ 483,893 $ 584,601 $441,101 $190,624 $272,019 $234,549
Fixed charges........................... 544,141 609,742 316,647 183,148 250,027 366,956
Interest capitalized during period,
net of amortization of previously
capitalized interest................... (2,032) (3,409) (683) (1,146) (440) -
------------- ---------- -------- -------- -------- --------
Earnings, for computation purposes...... $ 1,026,002 $1,190,934 $757,065 $372,626 $521,606 $601,505
============= ========== ======== ======== ======== ========
FIXED CHARGES AND PREFERRED STOCK
DIVIDENDS:
Interest on deposits, short-term
borrowings, and long-term debt and
bank notes, expensed or capitalized.... $ 535,815 $ 600,047 $308,242 $179,647 $237,287 $353,896
Portion of rents representative of the
interest factor........................ 8,326 9,695 8,405 3,501 12,740 13,060
------------- ---------- -------- -------- -------- --------
Fixed charges........................... 544,141 609,742 316,647 183,148 250,027 366,956
Preferred stock dividend
requirements (a)....................... 14,356 2,432 - - - -
------------- ---------- -------- -------- -------- --------
Fixed charges and preferred stock
dividends, including interest on
deposits, for computation purposes..... $ 558,497 $ 612,174 $316,647 $183,148 $250,027 $366,956
============= ========== ======== ======== ======== ========
Ratio of earnings to fixed charges and
preferred stock dividends, including
interest on deposits................... 1.84 1.95 2.39 2.03 2.09 1.64
EXCLUDING INTEREST ON DEPOSITS:
EARNINGS:
Income before income taxes.............. $ 483,893 $ 584,601 $441,101 $190,624 $272,019 $234,549
Fixed charges........................... 162,884 171,585 94,495 38,100 18,526 19,723
Interest capitalized during period,
net of amortization of previously
capitalized interest................... (2,048) (3,430) - (760) - -
------------- ---------- -------- -------- -------- --------
Earnings, for computation purposes...... $ 644,729 $ 752,756 $535,596 $227,964 $290,545 $254,272
============= ========== ======== ======== ======== ========
FIXED CHARGES AND PREFERRED STOCK
DIVIDENDS:
Interest on short-term borrowings and
long-term debt and bank notes,
expensed or capitalized................ $ 154,558 $ 161,890 $ 86,090 $ 34,599 $ 5,786 $ 6,663
Portion of rents representative of the
interest factor........................ 8,326 9,695 8,405 3,501 12,740 13,060
------------- ---------- -------- -------- -------- --------
Fixed charges........................... 162,884 171,585 94,495 38,100 18,526 19,723
Preferred stock dividend
requirements (a)....................... 14,356 2,432 - - - -
------------- ---------- -------- -------- -------- --------
Fixed charges and preferred stock
dividends, excluding interest on
deposits, for computation purposes..... $ 177,240 $ 174,017 $ 94,495 $ 38,100 $ 18,526 $ 19,723
============= ========== ======== ======== ======== ========
Ratio of earnings to fixed charges and
preferred stock dividends, excluding
interest on deposits................... 3.64 4.33 5.67 5.98 15.68 12.89
</TABLE>
(a) Preferred Stock dividend requirements are tax affected
*Income before income taxes for the nine months ended September 30, 1996,
includes a charge of $54.3 million related to the launch of the MBNA Platinum
Plus Visa and MasterCard program. Without the charge, the ratio of earnings to
combined fixed charges and preferred stock dividend requirements, including and
excluding interest on deposits, would have been 1.9 and 3.9, respectively.
**Income before income taxes for 1993 includes a charge of $150.0 million for
the termination of a marketing agreement with an independent third-party
marketing organization. Without the charge, the ratio of earnings to combined
fixed charges and preferred stock dividend requirements, including and excluding
interest on deposits, would have each been 2.9 and 9.9, respectively.
<PAGE> 1
EXHIBIT 23(a)
Consent of Ernst & Young LLP
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement on Form S-3 and related Prospectus of MBNA Corporation
for the registration of $600,000,000 of Debt Securities and Preferred Stock and
to the incorporation by reference therein of our report dated January 17, 1996
with respect to the consolidated financial statements of MBNA Corporation
incorporated by reference in its Annual Report (Form 10-K) for the year ended
December 31, 1995, filed with the Securities and Exchange Commission.
Baltimore, Maryland
November 27, 1996
/s/ Ernst & Young LLP
---------------------
