<PAGE> 1
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED DECEMBER 10, 1996
$250,000,000
MBNA CAPITAL A
8.278% CAPITAL SECURITIES, SERIES A
(LIQUIDATION AMOUNT $1,000 PER CAPITAL SECURITY)
FULLY AND UNCONDITIONALLY GUARANTEED, AS DESCRIBED HEREIN, BY
MBNA CORPORATION
------------------------
The 8.278% Capital Securities, Series A (the "Series A Capital
Securities"), offered hereby represent beneficial ownership interests in MBNA
Capital A, a statutory business trust created under the laws of the State of
Delaware (the "Series A Issuer"). MBNA Corporation, a Maryland corporation (the
"Corporation"), will be the owner of all the beneficial ownership interests
represented by common securities of the Series A Issuer ("Series A Common
Securities" and, collectively with the Series A Capital Securities, the "Series
A Securities"). The Bank of New York is the Property Trustee of the Series A
Issuer. The Series A Issuer exists for the sole purpose of issuing the Series A
Capital Securities and the Series A Common Securities and investing the proceeds
thereof in $257,732,000 aggregate principal amount of 8.278% Junior Subordinated
Deferrable Interest Debentures, Series A (the "Series A Subordinated
Debentures"), to be issued by the Corporation. The Series A Subordinated
Debentures will mature on December 1, 2026 (the "Stated Maturity"). The Series A
Capital Securities will have a preference under certain circumstances with
respect to cash distributions and amounts payable on liquidation or redemption
over the Series A Common Securities. See "Description of Preferred
Securities -- Subordination of Common Securities" in the accompanying
Prospectus. (Continued on next page)
SEE "RISK FACTORS" BEGINNING ON PAGE S-4 HEREOF FOR CERTAIN INFORMATION
RELEVANT TO AN INVESTMENT IN THE SERIES A CAPITAL SECURITIES.
------------------------
THESE SECURITIES ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF A BANK AND ARE NOT
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENTAL
AGENCY.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS SUPPLEMENT OR THE PROSPECTUS TO WHICH IT
RELATES. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------
<TABLE>
<CAPTION>
INITIAL PUBLIC PROCEEDS TO
OFFERING UNDERWRITING THE SERIES A
PRICE(1) COMMISSION(2) ISSUER(1)(3)(4)
-------------- ------------- --------------
<S> <C> <C> <C>
Per Series A Capital Security................. $1,000 (3) $1,000
Total......................................... $250,000,000 (3) $250,000,000
</TABLE>
- ---------------
(1) Plus accrued distributions, if any, from the date of original issuance.
(2) The Series A Issuer and the Corporation have each agreed to indemnify the
several Underwriters against certain liabilities, including liabilities
under the Securities Act of 1933, as amended. See "Underwriting."
(3) In view of the fact that the proceeds of the sale of the Series A Capital
Securities will be invested in the Series A Subordinated Debentures, the
Corporation has agreed to pay to the Underwriters as compensation
("Underwriters' Compensation") for their arranging the investment therein of
such proceeds $10 per Series A Capital Security (or $2,500,000 in the
aggregate). See "Underwriting."
(4) Expenses of the offering which are payable by the Corporation are estimated
to be $450,000.
------------------------
The Series A Capital Securities offered hereby are offered severally by the
Underwriters, as specified herein, subject to receipt and acceptance by them and
subject to their right to reject any order in whole or in part. It is expected
that the Series A Capital Securities will be ready for delivery in book-entry
form only through the facilities of The Depository Trust Company in New York,
New York, on or about December 18, 1996, against payment therefor in immediately
available funds.
GOLDMAN, SACHS & CO.
BEAR, STEARNS & CO. INC.
LEHMAN BROTHERS
MERRILL LYNCH & CO.
SALOMON BROTHERS INC
------------------------
The date of this Prospectus Supplement is December 11, 1996.
<PAGE> 2
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SERIES A
CAPITAL SECURITIES AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE
OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE OR
OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
------------------------
(cover page continued)
Holders of the Series A Capital Securities will be entitled to receive
cumulative cash distributions accruing from the date of original issuance and
payable semi-annually in arrears on the first day of June and December of each
year, commencing June 1, 1997, at the annual rate of 8.278% of the Liquidation
Amount (as defined in the accompanying Prospectus) of $1,000 per Series A
Capital Security ("Distributions"). Subject to certain exceptions, as described
herein, the Corporation has the right to defer payment of interest on the Series
A Subordinated Debentures at any time or from time to time for a period not
exceeding 10 consecutive semi-annual periods with respect to each deferral
period (each, an "Extension Period"), provided that no Extension Period may
extend beyond the Stated Maturity of the Series A Subordinated Debentures. Upon
the termination of any such Extension Period and the payment of all interest
then accrued and unpaid (together with interest thereon at the rate of 8.278%,
compounded semi-annually, to the extent permitted by applicable law), the
Corporation may elect to begin a new Extension Period subject to the
requirements set forth herein. If interest payments on the Series A Subordinated
Debentures are so deferred, Distributions on the Series A Capital Securities
will also be deferred and the Corporation will not be permitted, subject to
certain exceptions described herein, to declare or pay any cash distributions
with respect to the Corporation's capital stock or debt securities that rank
pari passu with or junior to the Series A Subordinated Debentures. During an
Extension Period, interest on the Series A Subordinated Debentures will continue
to accrue (and the amount of Distributions to which holders of the Series A
Capital Securities are entitled will accumulate) at the rate of 8.278% per
annum, compounded semi-annually, to the extent permitted by applicable law, from
the relevant payment date for such interest, and holders of Series A Capital
Securities will be required to accrue interest income for United States federal
income tax purposes. See "Certain Terms of Series A Subordinated
Debentures -- Option to Defer Interest Payments" and "Certain Federal Income Tax
Consequences -- Interest Income and Original Issue Discount."
The Series A Subordinated Debentures are unsecured and subordinated to all
Senior Debt (as defined in the accompanying Prospectus). Substantially all of
the Corporation's existing indebtedness constitutes Senior Debt. Because the
Corporation is a holding company, the right of the Corporation to participate in
any distribution of assets of any subsidiary, including MBNA America Bank,
National Association, upon such subsidiary's liquidation or reorganization or
otherwise, is subject to the prior claims of creditors of that subsidiary,
except to the extent that the Corporation may itself be recognized as a creditor
of that subsidiary. Accordingly, the Series A Subordinated Debentures (and
therefore the Series A Capital Securities) will be effectively subordinated to
all existing and future liabilities of the Corporation's subsidiaries, and
holders thereof should only look to the assets of the Corporation for payments
on the Series A Subordinated Debentures. See "Description of Junior Subordinated
Debentures -- Subordination" in the accompanying Prospectus.
The Corporation has, through the Series A Guarantee, the Trust Agreement,
the Series A Subordinated Debentures and the Indenture (each as defined herein),
taken together, fully, irrevocably and unconditionally guaranteed all of the
Series A Issuer's obligations under the Series A Capital Securities. See
"Relationship Among the Preferred Securities, the Corresponding Junior
Subordinated Debentures and the Guarantees -- Full and Unconditional Guarantee"
in the accompanying Prospectus. The Series A Guarantee of the Corporation
guarantees the payment of Distributions and payments on liquidation of the
Series A Issuer or redemption of the Series A
S-2
<PAGE> 3
(cover page continued)
Securities, but only in each case to the extent of funds held by the Series A
Issuer, as described herein (the "Series A Guarantee"). See "Description of
Guarantees" in the accompanying Prospectus. If the Corporation does not make
interest payments on the Series A Subordinated Debentures held by the Series A
Issuer, the Series A Issuer will have insufficient funds to pay Distributions on
the Series A Capital Securities. The Series A Guarantee does not cover payment
of Distributions when the Series A Issuer has insufficient funds to pay such
Distributions. In such event, a holder of Series A Capital Securities may
institute a legal proceeding directly against the Corporation pursuant to the
terms of the Indenture to enforce payment of amounts equal to such Distributions
to such holder. See "Description of Junior Subordinated
Debentures -- Enforcement of Certain Rights By Holders of Preferred Securities"
in the accompanying Prospectus. The obligations of the Corporation under the
Series A Guarantee and the Indenture are subordinate and junior in right of
payment to all Senior Debt of the Corporation.
The Series A Capital Securities are subject to mandatory redemption, in
whole or in part, upon repayment of Series A Subordinated Debentures at their
Stated Maturity or their earlier redemption. Subject to the Corporation having
received prior approval of the Board of Governors of the Federal Reserve System
(the "Federal Reserve") to do so, if then required under applicable capital
guidelines or policies, the Series A Subordinated Debentures are redeemable
prior to their Stated Maturity at the option of the Corporation (i) on or after
December 1, 2006, in whole at any time or in part from time to time, or (ii)
prior to December 1, 2006, in whole (but not in part), within 90 days following
the occurrence of a Tax Event or a Capital Treatment Event (each as defined
herein). For a description of the redemption prices for the Series A Capital
Securities pursuant to clause (i) or (ii) above, see "Certain Terms of Series A
Capital Securities -- Redemption" and "Certain Terms of Series A Subordinated
Debentures -- Redemption."
The Corporation will have the right at any time to terminate the Series A
Issuer, subject to the Corporation having received prior approval of the Federal
Reserve to do so if then required under applicable capital guidelines or
policies. See "Certain Terms of Series A Capital Securities -- Liquidation of
Series A Issuer and Distribution of Series A Subordinated Debentures to
Holders." In the event of the termination of the Series A Issuer, after
satisfaction of liabilities to creditors of the Series A Issuer as required by
applicable law, the holders of the Series A Capital Securities will be entitled
to receive a Liquidation Amount of $1,000 per Series A Capital Security plus
accumulated and unpaid Distributions thereon to the date of payment, which may
be in the form of a distribution of such amount in Series A Subordinated
Debentures in exchange therefor, subject to certain exceptions. See "Description
of Preferred Securities -- Liquidation Distribution Upon Termination" in the
accompanying Prospectus.
Application has been made to list the Series A Capital Securities on the
New York Stock Exchange under the symbol "KRBCA 26." If Series A Subordinated
Debentures are distributed to the holders of Series A Capital Securities in
exchange therefor upon the liquidation of the Series A Issuer, the Corporation
will use its best efforts to list the Series A Subordinated Debentures on the
New York Stock Exchange or such other stock exchanges or automated quotation
systems, if any, on which the Series A Capital Securities are then listed or
traded.
The Series A Capital Securities will be represented by global certificates
registered in the name of The Depository Trust Company ("DTC") or its nominee.
Beneficial interests in the Series A Capital Securities will be shown on, and
transfers thereof will be effected only through, records maintained by
participants in DTC. Except as described below and in the accompanying
Prospectus, Series A Capital Securities in certificated form will not be issued
in exchange for the global certificates. See "Certain Terms of Series A Capital
Securities -- Registration of Series A Capital Securities."
S-3
<PAGE> 4
The information in this Prospectus Supplement supplements, and should be
read in conjunction with, the information contained in the accompanying
Prospectus. As used herein, (i) the "Indenture" means the Junior Subordinated
Indenture, as amended and supplemented from time to time, between the
Corporation and The Bank of New York, as trustee (the "Debenture Trustee"), and
(ii) the "Trust Agreement" means the Amended and Restated Trust Agreement
relating to the Series A Issuer among the Corporation, as Depositor, The Bank of
New York, as Property Trustee (the "Property Trustee"), The Bank of New York
(Delaware), as Delaware Trustee (the "Delaware Trustee"), and the Administrative
Trustees named therein (collectively, with the Property Trustee and Delaware
Trustee, the "Issuer Trustees"). Each of the other capitalized terms used in
this Prospectus Supplement and not otherwise defined in this Prospectus
Supplement has the meaning set forth in the accompanying Prospectus.
RISK FACTORS
Prospective purchasers of the Series A Capital Securities should carefully
review the information contained elsewhere in this Prospectus Supplement and in
the accompanying Prospectus and should particularly consider the following
matters. In addition, because holders of Series A Capital Securities may receive
Series A Subordinated Debentures in exchange therefor upon liquidation of the
Series A Issuer, prospective purchasers of Series A Capital Securities are also
making an investment decision with regard to the Series A Subordinated
Debentures and should carefully review all the information regarding the Series
A Subordinated Debentures contained herein and in the accompanying Prospectus.
RANKING OF SUBORDINATED OBLIGATIONS UNDER THE SERIES A GUARANTEE AND THE SERIES
A SUBORDINATED DEBENTURES
The obligations of the Corporation under the Series A Guarantee issued by
the Corporation for the benefit of the holders of Series A Securities and under
the Series A Subordinated Debentures are unsecured and rank subordinate and
junior in right of payment to all Senior Debt of the Corporation. Substantially
all of the Corporation's indebtedness constitutes Senior Debt. Because the
Corporation is a holding company, the right of the Corporation to participate in
any distribution of the assets of any subsidiary, including MBNA America Bank,
National Association, upon such subsidiary's liquidation or reorganization or
otherwise is subject to the prior claims of creditors of that subsidiary, except
to the extent that the Corporation may itself be recognized as a creditor of
that subsidiary. There are various legal limitations on the extent to which
certain of the Corporation's subsidiaries may extend credit, pay dividends or
otherwise supply funds to, or engage in transactions with, the Corporation or
certain of its other subsidiaries. Accordingly, the Series A Subordinated
Debentures will be effectively subordinated to all existing and future
liabilities of the Corporation's subsidiaries, and holders of Series A
Subordinated Debentures should look only to the assets of the Corporation for
payments on the Series A Subordinated Debentures. See "MBNA Corporation." None
of the Indenture, the Series A Guarantee or the Trust Agreement places any
limitation on the amount of secured or unsecured debt, including Senior Debt,
that may be incurred by the Corporation. See "Description of
Guarantees -- Status of the Guarantees" and "Description of Junior Subordinated
Debentures -- Subordination" in the accompanying Prospectus.
The ability of the Series A Issuer to pay amounts due on the Series A
Capital Securities is solely dependent upon the Corporation making payments on
the Series A Subordinated Debentures as and when required.
OPTION TO DEFER INTEREST PAYMENT; TAX CONSEQUENCES; MARKET PRICE CONSEQUENCES
So long as no event of default under the Indenture has occurred or is
continuing, the Corporation has the right under the Indenture to defer payment
of interest on the Series A Subordinated Debentures at any time or from time to
time for a period not exceeding 10 consecutive
S-4
<PAGE> 5
semi-annual periods with respect to each Extension Period, provided that no
Extension Period may extend beyond the Stated Maturity of the Series A
Subordinated Debentures. As a consequence of any such deferral, semi-annual
Distributions on the Series A Capital Securities by the Series A Issuer will
also be deferred (and the amount of Distributions to which holders of the Series
A Capital Securities are entitled will accumulate additional Distributions
thereon at the rate of 8.278% per annum, compounded semi-annually from the
relevant payment date for such Distributions) during any such Extension Period.
During any such Extension Period, the Corporation may not, and may not permit
any subsidiary of the Corporation to, (i) declare or pay any dividends or
distributions on, or redeem, purchase, acquire or make a liquidation payment
with respect to, any of the Corporation's capital stock, (ii) make any payment
of principal, interest or premium, if any, on or repay, repurchase or redeem any
debt securities of the Corporation (including other series of Junior
Subordinated Debentures) that rank pari passu with or junior in interest to the
Series A Subordinated Debentures or (iii) make any guarantee payments with
respect to any guarantee by the Corporation of the debt securities of any
subsidiary of the Corporation if such guarantee ranks pari passu with or junior
in interest to the Series A Subordinated Debentures (other than (a) dividends or
distributions in capital stock of the Corporation, (b) any declaration of a
dividend in connection with the implementation of a stockholders' rights plan or
the redemption or repurchase of any such rights pursuant thereto, (c) payments
under the Series A Guarantee and (d) purchases of common stock related to the
issuance of common stock or rights under any of the Corporation's benefit plans
for its directors, officers or employees, related to the issuance of common
stock or rights under a dividend reinvestment and stock purchase plan, or
related to the issuance of common stock (or securities convertible into or
exchangeable for common stock) as consideration in an acquisition transaction
that was entered into prior to the commencement of such Extension Period). Prior
to the termination of any such Extension Period, the Corporation may further
defer the payment of interest, provided that no Extension Period may exceed 10
consecutive semi-annual periods or extend beyond the Stated Maturity of the
Series A Subordinated Debentures. Upon the termination of any Extension Period
and the payment of all interest then accrued and unpaid (together with interest
thereon at the annual rate of 8.278%, compounded semi-annually from the interest
payment date for such interest, to the extent permitted by applicable law), the
Corporation may elect to begin a new Extension Period subject to the above
requirements. There is no limitation on the number of times that the Corporation
may elect to begin an Extension Period. See "Certain Terms of Series A Capital
Securities -- Distributions" and "Certain Terms of Series A Subordinated
Debentures -- Option to Defer Interest Payments."
Should an Extension Period occur, a holder of Series A Capital Securities
will be required to accrue income (in the form of original issue discount) in
respect of its pro rata share of the Series A Subordinated Debentures held by
the Series A Issuer for United States federal income tax purposes. As a result,
a holder of Series A Capital Securities will be required to include such
interest income in gross income for United States federal income tax purposes in
advance of the receipt of cash attributable to such income, and will not receive
the cash related to such income from the Series A Issuer if the holder disposes
of the Series A Capital Securities prior to the record date for the payment of
Distributions. See "Certain Federal Income Tax Consequences -- Interest Income
and Original Issue Discount" and "--Sales or Redemption of Series A Capital
Securities."
The Corporation has no current intention of exercising its right to defer
payments of interest on the Series A Subordinated Debentures. However, should
the Corporation elect to exercise such right in the future, the market price of
the Series A Capital Securities is likely to be affected. A holder that disposes
of its Series A Capital Securities during an Extension Period, therefore, might
not receive the same return on its investment as a holder that continues to hold
its Series A Capital Securities.
S-5
<PAGE> 6
TAX EVENT OR CAPITAL TREATMENT EVENT -- REDEMPTION
Upon the occurrence and continuation of a Tax Event or Capital Treatment
Event prior to December 1, 2006, the Corporation has the right to redeem the
Series A Subordinated Debentures in whole (but not in part) within 90 days
following the occurrence of such Tax Event or Capital Treatment Event and
thereby cause a mandatory redemption of the Series A Capital Securities. Any
such redemption shall be at a price equal to the Make-Whole Amount (as defined
in "Certain Terms of Series A Capital Securities -- Redemption") together with
accrued interest to but excluding the date fixed for redemption. The exercise of
such right is subject to the Corporation having received prior approval of the
Federal Reserve to do so if then required under applicable capital guidelines or
policies.
A "Tax Event" means the receipt by the Series A Issuer or the Corporation
of an opinion of counsel experienced in such matters to the effect that, as a
result of any amendment to, or change (including any announced proposed change)
in, the laws (or any regulations thereunder) of the United States or any
political subdivision or taxing authority thereof or therein, or as a result of
any official administrative pronouncement or judicial decision interpreting or
applying such laws or regulations, which amendment or change is effective, or
which proposed change, pronouncement or decision is announced, on or after the
date of issuance of the Series A Capital Securities under the Trust Agreement,
there is more than an insubstantial risk that (i) the Series A Issuer is, or
will be within 90 days of the date of such opinion, subject to United States
federal income tax with respect to income received or accrued on the Series A
Subordinated Debentures, (ii) interest payable by the Corporation on the Series
A Subordinated Debentures is not, or within 90 days of the date of such opinion,
will not be, deductible by the Corporation, in whole or in part, for United
States federal income tax purposes or (iii) the Series A Issuer is, or will be
within 90 days of the date of the opinion, subject to more than a de minimis
amount of other taxes, duties or other governmental charges.
A "Capital Treatment Event" means the reasonable determination by the
Corporation that, as a result of any amendment to, or change (including any
proposed change) in, the laws (or any regulations thereunder) of the United
States or any political subdivision thereof or therein, or as a result of any
official or administrative pronouncement or action or judicial decision
interpreting or applying such laws or regulations, which amendment or change is
effective, or which proposed change, pronouncement, action or decision is
announced, on or after the date of issuance of the Series A Capital Securities
under the Trust Agreement, there is more than an insubstantial risk that the
Corporation will not be entitled to treat an amount equal to the Liquidation
Amount of the Series A Capital Securities as "Tier 1 Capital" (or the then
equivalent thereof) for purposes of the capital adequacy guidelines of the
Federal Reserve, as then in effect and applicable to the Corporation.
See "Risk Factors -- Possible Tax Law Changes" for a discussion of certain
legislative proposals that, if adopted, could give rise to a Tax Event, that may
permit the Corporation to cause a redemption of the Series A Capital Securities
prior to December 1, 2006.
EXCHANGE OF SERIES A CAPITAL SECURITIES FOR SERIES A SUBORDINATED DEBENTURES
The Corporation will have the right at any time to terminate the Series A
Issuer and, after satisfaction of liabilities to creditors of the Series A
Issuer as required by applicable law, cause the Series A Subordinated Debentures
to be distributed to the holders of the Series A Capital Securities in exchange
therefor upon liquidation of the Series A Issuer. The exercise of such right is
subject to the Corporation having received prior approval of the Federal Reserve
if then required under applicable capital guidelines or policies. See "Certain
Terms of Series A Capital Securities -- Liquidation of Series A Issuer and
Distribution of Series A Subordinated Debentures to Holders."
Under current United States federal income tax law and interpretations and
assuming, as expected, the Series A Issuer is classified as a grantor trust for
such purposes, a distribution of the
S-6
<PAGE> 7
Series A Subordinated Debentures upon a liquidation of the Series A Issuer would
not be a taxable event to holders of the Series A Capital Securities. However,
if a Tax Event were to occur which would cause the Series A Issuer to be subject
to United States federal income tax with respect to income received or accrued
on the Series A Subordinated Debentures, a distribution of the Series A
Subordinated Debentures by the Series A Issuer could be a taxable event to the
Series A Issuer and the holders of the Series A Capital Securities. See "Certain
Federal Income Tax Consequences -- Distribution of the Series A Subordinated
Debentures to Holders of Series A Capital Securities."
MARKET PRICES
There can be no assurance as to the market prices for Series A Capital
Securities or Series A Subordinated Debentures that may be distributed in
exchange for Series A Capital Securities upon liquidation of the Series A
Issuer. Accordingly, the Series A Capital Securities that an investor may
purchase, whether pursuant to the offer made hereby or in the secondary market,
or the Series A Subordinated Debentures that a holder of Series A Capital
Securities may receive on liquidation of the Series A Issuer, may trade at a
discount to the price that the investor paid to purchase the Series A Capital
Securities offered hereby. As a result of the existence of the Corporation's
right to defer interest payments, the market price of the Series A Capital
Securities (which represent beneficial ownership interests in the Series A
Issuer) may be more volatile than the market prices of other securities that are
not subject to such optional deferrals. See "Certain Terms of Series A
Subordinated Debentures" and "Description of Junior Subordinated
Debentures -- Corresponding Junior Subordinated Debentures" in the accompanying
Prospectus.
RIGHTS UNDER THE SERIES A GUARANTEE
The Series A Guarantee guarantees to the holders of the Series A Securities
the following payments, to the extent not paid by the Series A Issuer: (i) any
accumulated and unpaid Distributions required to be paid on the Series A
Securities, to the extent that the Series A Issuer has funds on hand available
therefor at such time, (ii) the redemption price with respect to any Series A
Securities called for redemption, to the extent that the Series A Issuer has
funds on hand available therefor at such time, and (iii) upon a voluntary or
involuntary dissolution, winding up or liquidation of the Series A Issuer
(unless the Series A Subordinated Debentures are distributed to holders of the
Series A Securities), the lesser of (a) the aggregate of the Liquidation Amount
and all accumulated and unpaid Distributions to the date of payment, to the
extent that the Series A Issuer has funds on hand available therefor at such
time, and (b) the amount of assets of the Series A Issuer remaining available
for distribution to holders of the Series A Securities after satisfaction of the
liabilities to creditors of the Series A Issuer as required by applicable law.
The Series A Guarantee will be qualified as an indenture under the Trust
Indenture Act of 1939, as amended (the "Trust Indenture Act"). The Bank of New
York will act as the indenture trustee under the Series A Guarantee (the
"Guarantee Trustee") for the purpose of compliance with the Trust Indenture Act
and will hold the Series A Guarantee for the benefit of the holders of the
Series A Securities. The Bank of New York will also act as Debenture Trustee for
the Series A Subordinated Debentures and as Property Trustee under the Trust
Agreement and The Bank of New York (Delaware) will act as Delaware Trustee under
the Trust Agreement.
The Series A Guarantee is subordinate as described under "--Ranking of
Subordinated Obligations Under the Series A Guarantee and the Series A
Subordinated Debentures."
The holders of not less than a majority in aggregate Liquidation Amount of
the Series A Securities have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Guarantee Trustee in
respect of the Series A Guarantee or to direct the exercise of any trust power
conferred upon the Guarantee Trustee under the Series A Guarantee. Any holder of
the Series A Securities may institute a legal proceeding directly against the
Corporation to enforce its rights under the Series A Guarantee without first
instituting a legal proceeding against the Series A Issuer, the Guarantee
Trustee or any other person or entity. If the
S-7
<PAGE> 8
Corporation were to default on its obligation to pay amounts payable under the
Series A Subordinated Debentures, the Series A Issuer would lack funds for the
payment of Distributions or amounts payable on redemption of the Series A
Securities or otherwise, and, in such event, holders of the Series A Securities
would not be able to rely upon the Series A Guarantee for payment of such
amounts. Instead, if an event of default under the Indenture shall have occurred
and be continuing and such event is attributable to the failure of the
Corporation to pay interest or premium, if any, on or principal of the Series A
Subordinated Debentures on the applicable payment date, then a holder of Series
A Capital Securities may institute a legal proceeding directly against the
Corporation pursuant to the terms of the Indenture for enforcement of payment to
such holder of the principal of or interest or premium, if any, on such Series A
Subordinated Debentures having a principal amount equal to the aggregate
Liquidation Amount of the Series A Securities of such holder (a "Direct
Action"). In connection with such Direct Action, the Corporation will have a
right of set-off under the Indenture to the extent of any payment made by the
Corporation to such holder of Series A Capital Securities in the Direct Action.
Except as described herein, holders of Series A Capital Securities will not be
able to exercise directly any other remedy available to the holders of the
Series A Subordinated Debentures or assert directly any other rights in respect
of the Series A Subordinated Debentures. See "Description of Junior Subordinated
Debentures -- Enforcement of Certain Rights by Holders of Preferred Securities,"
"--Debenture Events of Default" and "Description of Guarantees" in the
accompanying Prospectus. The Trust Agreement provides that each holder of Series
A Securities by acceptance thereof agrees to the provisions of the Series A
Guarantee and the Indenture.
LIMITED VOTING RIGHTS
Holders of Series A Capital Securities generally will have limited voting
rights relating only to the modification of the Series A Capital Securities and
the Series A Guarantee and the exercise of the Series A Issuer's rights as
holder of Series A Subordinated Debentures and the Series A Guarantee. Holders
of Series A Capital Securities will not be entitled to vote to appoint, remove
or replace the Property Trustee, the Delaware Trustee or any Administrative
Trustee, and such voting rights are vested exclusively in the holder of the
Series A Common Securities except, with respect to the Property Trustee and the
Delaware Trustee, upon the occurrence of certain events described in the
accompanying Prospectus. The Property Trustee, the Delaware Trustee, the
Administrative Trustees and the Corporation may amend the Trust Agreement
without the consent of holders of Series A Capital Securities to ensure that the
Series A Issuer will be classified for United States federal income tax purposes
as a grantor trust unless such action materially and adversely affects the
interests of such holders. See "Description of Preferred Securities -- Voting
Rights; Amendment of Each Trust Agreement" and "-- Removal of Issuer Trustees"
in the accompanying Prospectus.
POSSIBLE TAX LAW CHANGES
On March 19, 1996, the Revenue Reconciliation Bill of 1996 (the "Bill") was
introduced in the 104th Congress which would have, among other things, generally
denied interest deductions for interest on an instrument issued by a corporation
that has a maximum term of more than 20 years and that is not shown as
indebtedness on the separate balance sheet of the issuer or, where the
instrument is issued to a related party (other than a corporation), where the
holder or some other related party issues a related instrument that is not shown
as indebtedness on the issuer's consolidated balance sheet. The above-described
provision was proposed to be effective generally for instruments issued on or
after December 7, 1995. If this provision were to apply to the Series A
Subordinated Debentures, the Corporation would not be able to deduct interest on
the Series A Subordinated Debentures. However, on March 29, 1996, the Chairmen
of the Senate Finance and House Ways and Means Committees issued a joint
statement (the "Joint Statement") to the effect that it was their intention that
the effective date of the Bill, if enacted, would be no earlier than the date of
appropriate Congressional action. In addition, subsequent to the publication of
the Joint Statement, Senator Daniel Patrick Moynihan and Representatives Sam M.
Gibbons and Charles B.
S-8
<PAGE> 9
Rangel wrote letters to Treasury Department officials concurring with the view
expressed in the Joint Statement (the "Democrat Letters"). The 104th Congress
adjourned without enacting the Bill. Moreover, if the principles contained in
the Joint Statement and the Democrat Letters were followed any similar
legislation in this area that is subsequently proposed would not apply to the
Series A Subordinated Debentures. Although the 104th Congress adjourned without
enacting the Bill, there can be no assurance that current or future legislative
proposals or final legislation will not adversely affect the ability of the
Corporation to deduct interest on the Series A Subordinated Debentures or
otherwise affect the tax treatment of the transaction described herein. If
enacted such a change could give rise to a Tax Event, which would permit the
Corporation, upon approval of the Federal Reserve if then required under
applicable capital guidelines or policies, to cause a redemption of the Series A
Capital Securities, as described more fully in the accompanying Prospectus under
"Description of Preferred Securities -- Redemption or Exchange."
MBNA CAPITAL A
MBNA Capital A (the "Series A Issuer") is a statutory business trust
created under Delaware law pursuant to the filing of a certificate of trust with
the Delaware Secretary of State on November 6, 1996 and will be governed by the
Trust Agreement executed by the Corporation, as Depositor, The Bank of New York,
as Property Trustee, The Bank of New York (Delaware), as Delaware Trustee, and
the Administrative Trustees named therein. The Series A Issuer's business and
affairs are conducted by the Issuer Trustees: The Bank of New York, as Property
Trustee, and The Bank of New York (Delaware), as Delaware Trustee, and two
individual Administrative Trustees who are employees or officers of or
affiliated with the Corporation. The Series A Issuer exists for the exclusive
purposes of (i) issuing and selling the Series A Capital Securities and Series A
Common Securities, (ii) using the proceeds from the sale of Series A Capital
Securities and Series A Common Securities to acquire Series A Subordinated
Debentures issued by the Corporation and (iii) engaging in only those other
activities necessary or incidental thereto (such as registering the transfer of
the Series A Securities). Accordingly, the Series A Subordinated Debentures will
be the sole assets of the Series A Issuer, and payments under the Series A
Subordinated Debentures will be the sole revenue of the Series A Issuer. All of
the Series A Common Securities will be owned by the Corporation. The Series A
Common Securities will rank pari passu, and payments will be made thereon pro
rata, with the Series A Capital Securities, except that upon the occurrence and
continuance of an event of default under the Trust Agreement resulting from an
event of default under the Indenture, the rights of the Corporation as holder of
the Series A Common Securities to payment in respect of Distributions and
payments upon liquidation, redemption or otherwise will be subordinated to the
rights of the holders of the Series A Capital Securities. See "Description of
Preferred Securities -- Subordination of Common Securities" in the accompanying
Prospectus. The Corporation will acquire Series A Common Securities in an
aggregate Liquidation Amount equal to 3% of the total capital of the Series A
Issuer. The Series A Issuer has a term of 55 years, but may terminate earlier as
provided in the Trust Agreement. The principal executive office of the Series A
Issuer is Wilmington, Delaware 19884, and its telephone number is (800)
362-6255. See "The Issuers" in the accompanying Prospectus.
It is anticipated that the Series A Issuer will not be subject to the
reporting requirements under the Securities Exchange Act of 1934, as amended
(the "Exchange Act").
MBNA CORPORATION
The Corporation 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.
As of September 30, 1996, the Corporation had consolidated assets of $15.6
billion, consolidated deposits of $9.6 billion and stockholders' equity of $1.6
billion. The principal asset of the
S-9
<PAGE> 10
Corporation is its equity interest in the Bank. As of September 30, 1996, the
Bank and its subsidiaries constituted approximately 92.5% of the consolidated
assets of the Corporation.
Through the Bank, the Corporation is one of the world's largest bank credit
card lenders and is the leading issuer of affinity credit cards marketed
primarily to members of associations and customers of financial institutions. In
addition to its credit card lending, the Corporation also offers other consumer
loans and various deposit products.
The Corporation generates interest and other income through finance charges
assessed on outstanding loan receivables, interchange income, merchant discount
fees, credit card fees, loan servicing fees, processing fees, and interest
earned on investment securities and money market instruments. The Corporation's
primary costs are the costs of funding its loan receivables and investment
securities, which include interest paid on deposits, short-term borrowings, and
long-term debt and bank notes; credit losses; royalties paid to affinity groups
and financial institutions; business development and operating expenses; and
income taxes.
The Corporation's principal executive offices are located in Wilmington,
Delaware 19884, and its telephone number is (800) 362-6255.
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<PAGE> 11
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 Corporation 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 YEAR ENDED DECEMBER 31,
SEPTEMBER 30, --------------------------------------
1996* 1995 1994 1993** 1992 1991
------------- ---- ---- ------ ---- ----
<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 each 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
Corporation's preferred stock outstanding. The Corporation 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.
USE OF PROCEEDS
All of the proceeds from the sale of the Series A Capital Securities will
be invested by the Series A Issuer in Series A Subordinated Debentures. The
Corporation intends that the proceeds
- ---------------
* MasterCard(R) and Visa(R) are federally registered servicemarks of MasterCard
International Inc. and Visa U.S.A., Inc., respectively.
S-11
<PAGE> 12
from the sale of the Series A Subordinated Debentures will be added to its
general corporate funds and will be used for general corporate purposes.
The Corporation is required by the Federal Reserve to maintain certain
levels of capital for bank regulatory purposes. On October 21, 1996, the Federal
Reserve announced that cumulative preferred securities having the
characteristics of the Series A Capital Securities could be included as Tier 1
capital for bank holding companies. Such Tier 1 capital treatment, together with
the Corporation's ability to deduct, for income tax purposes, interest payable
on the Series A Subordinated Debentures, will provide the Corporation with
greater financial flexibility and more cost-effective regulatory capital.
CAPITALIZATION
The following table sets forth the consolidated capitalization of the
Corporation and its subsidiaries as of September 30, 1996 and as adjusted to
give effect to the consummation of the offering of the Series A Capital
Securities. The following data should be read in conjunction with the
consolidated financial statements and notes thereto of the Corporation and its
subsidiaries incorporated herein by reference.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
-------------------------
ACTUAL AS ADJUSTED
---------- -----------
(IN THOUSANDS)
<S> <C> <C>
Total Long-Term Debt and Bank Notes................................ $3,382,469 $ 3,382,469
Guaranteed Preferred Beneficial Interests in Corporation's Junior
Subordinated Deferrable Interest Debentures(a)................... -- 250,000
Stockholders' Equity
Preferred Stock............................................... 120 120
Common Stock.................................................. 2,228 2,228
Additional Paid-In Capital.................................... 621,839 621,839
Retained Earnings............................................. 980,876 980,876
---------- -----------
Total Stockholders' Equity............................... 1,605,063 1,605,063
---------- -----------
Total Capitalization.......................................... $4,987,532 $ 5,237,532
========== ===========
</TABLE>
- ---------------
(a) As described herein, the sole assets of the Series A Issuer will be
approximately $257,732,000 principal amount of Series A Subordinated
Debentures issued by the Corporation to the Series A Issuer. The Series A
Subordinated Debentures will bear interest at the rate of 8.278% per annum
and will mature on December 1, 2026. The Corporation will own all of the
Series A Common Securities of the Series A Issuer.
It is anticipated that the Series A Issuer will not be subject to the
reporting requirements under the Exchange Act.
ACCOUNTING TREATMENT
For financial reporting purposes, the Series A Issuer will be treated as a
subsidiary of the Corporation and, accordingly, the accounts of the Series A
Issuer will be included in the consolidated financial statements of the
Corporation. The Series A Capital Securities will be presented as a separate
line item in the consolidated balance sheets of the Corporation under the
caption "Guaranteed Preferred Beneficial Interests in Corporation's Junior
Subordinated Deferrable Interest Debentures" and appropriate disclosures about
the Series A Capital Securities, the Series A Guarantee and the Series A
Subordinated Debentures will be included in the notes to the consolidated
financial statements. For financial reporting purposes, the Corporation will
record Distributions payable on the Series A Capital Securities as an expense in
the consolidated statements of income.
S-12
<PAGE> 13
The Corporation has agreed that future financial reports of the Corporation
will: (i) present the Preferred Securities issued by other trusts created by the
Corporation on the Corporation's balance sheet as a separate line term entitled
"Guaranteed Preferred Beneficial Interests in Corporation's Junior Subordinated
Deferrable Interest Debentures"; (ii) include in a note to the consolidated
financial statements disclosure that the sole assets of the trusts are the
Junior Subordinated Debentures (specifying as to each trust the principal
amount, interest rate and maturity date of Junior Subordinated Debentures held);
and (iii) disclose, in a note to the consolidated financial statements, that (a)
the trusts are wholly owned, (b) the sole assets of the trusts are the Junior
Subordinated Debentures (specifying as to each trust the principal amount,
interest rate and maturity date of the Junior Subordinated Debentures held), and
(c) the obligations of the Corporation under the relevant Junior Subordinated
Debentures, indenture, trust agreement and guarantee, in the aggregate,
constitute a full and unconditional guarantee by the Corporation of such trusts'
obligations under the Preferred Securities issued by such trust.
CERTAIN TERMS OF SERIES A CAPITAL SECURITIES
GENERAL
The following summary of certain terms and provisions of the Series A
Capital Securities supplements the description of the terms and provisions of
the Capital Securities set forth in the accompanying Prospectus under the
heading "Description of Preferred Securities," to which description reference is
hereby made. This summary of certain terms and provisions of the Series A
Capital Securities, which describes the material provisions thereof, does not
purport to be complete and is subject to, and is qualified in its entirety by
reference to, the Trust Agreement, to which reference is hereby made. The form
of the Trust Agreement has been filed as an exhibit to the Registration
Statement of which this Prospectus Supplement and accompanying Prospectus form a
part.
DISTRIBUTIONS
The Series A Capital Securities represent beneficial ownership interests in
the assets of the Series A Issuer, and Distributions on each Series A Capital
Security will be payable at the annual rate of 8.278% of the stated Liquidation
Amount of $1,000 payable semi-annually in arrears on June 1 and December 1 of
each year, to the holders of the Series A Capital Securities on the relevant
record dates. The record dates for the Series A Capital Securities will be, for
so long as the Series A Capital Securities remain in book-entry form, one
Business Day (as defined in the accompanying Prospectus) prior to the relevant
Distribution payment date and, in the event the Series A Capital Securities are
not in book-entry form, the 15th day of the month preceding the month in which
the relevant Distribution payment date occurs. Distributions will accumulate
from the date of original issuance. The first Distribution payment date for the
Series A Capital Securities will be June 1, 1997. The amount of Distributions
payable for any period less than a full distribution period will be computed on
the basis of a 360-day year of twelve 30-day months. In the event that any date
on which Distributions are payable on the Series A Capital Securities is not a
Business Day, then payment of the Distributions payable on such date will be
made on the next succeeding day that is a Business Day (and without any
additional Distributions or other payment in respect of any such delay), except
that, if such Business Day is in the next succeeding calendar year, such payment
shall be made on the immediately preceding Business Day, in each case with the
same force and effect as if made on the date such payment was originally
payable. See "Description of Preferred Securities -- Distributions" in the
accompanying Prospectus.
So long as no event of default under the Indenture has occurred and is
continuing, the Corporation has the right under the Indenture to defer payment
of interest on the Series A Subordinated Debentures at any time or from time to
time for a period not exceeding 10 consecutive semi-annual periods with respect
to each Extension Period, provided that no Extension Period may
S-13
<PAGE> 14
extend beyond the Stated Maturity of the Series A Subordinated Debentures. As a
consequence of any such deferral of interest payments by the Corporation,
semi-annual Distributions on the Series A Capital Securities by the Series A
Issuer will also be deferred during any such Extension Period. Distributions to
which holders of the Series A Capital Securities are entitled will accumulate
additional Distributions thereon at the rate per annum of 8.278% thereof,
compounded semi-annually from the relevant payment date for such Distributions.
The term "Distributions" as used herein shall include any such additional
Distributions. During any such Extension Period, the Corporation may not, and
may not permit any subsidiary of the Corporation to, (i) declare or pay any
dividends or distributions on, or redeem, purchase, acquire or make a
liquidation payment with respect to, any of the Corporation's capital stock,
(ii) make any payment of principal, interest or premium, if any, on or repay,
repurchase or redeem any debt securities of the Corporation (including other
series of Junior Subordinated Debentures) that rank pari passu with or junior in
interest to the Series A Subordinated Debentures or (iii) make any guarantee
payments with respect to any guarantee by the Corporation of the debt securities
of any subsidiary of the Corporation if such guarantee ranks pari passu with or
junior in interest to the Series A Subordinated Debentures (other than (a)
dividends or distributions in capital stock of the Corporation, (b) any
declaration of a dividend in connection with the implementation of a
stockholders' rights plan or the redemption or repurchase of any such rights
pursuant thereto, (c) payments under the Series A Guarantee and (d) purchases of
common stock related to the issuance of common stock or rights under any of the
Corporation's benefit plans for its directors, officers or employees, related to
the issuance of common stock or rights under a dividend reinvestment and stock
purchase plan, or related to the issuance of common stock (or securities
convertible into or exchangeable for common stock) as consideration in an
acquisition transaction that was entered into prior to the commencement of such
Extension Period). Prior to the termination of any such Extension Period, the
Corporation may further defer the payment of interest on the Series A
Subordinated Debentures, provided that no Extension Period may exceed 10
consecutive semi-annual periods or extend beyond the Stated Maturity of the
Series A Subordinated Debentures. Upon the termination of any such Extension
Period and the payment of all interest then accrued and unpaid (together with
interest thereon at the rate of 8.278%, compounded semi-annually, to the extent
permitted by applicable law), the Corporation may elect to begin a new Extension
Period. There is no limitation on the number of times that the Corporation may
elect to begin an Extension Period. See "Certain Terms of Series A Subordinated
Debentures -- Option to Defer Interest Payments" and "Certain Federal Income Tax
Consequences -- Interest Income and Original Issue Discount."
The Corporation has no current intention of exercising its right to defer
payments of interest by extending the interest payment period on the Series A
Subordinated Debentures.
REDEMPTION
Upon the repayment or redemption, in whole or in part, of the Series A
Subordinated Debentures, whether at Stated Maturity or upon earlier redemption
as provided in the Indenture, the proceeds from such repayment or redemption
shall be applied by the Property Trustee to redeem a Like Amount (as defined in
the accompanying Prospectus) of the Series A Securities, upon not less than 30
nor more than 60 days notice prior to the date fixed for redemption, at a
redemption price, with respect to the Series A Capital Securities (the
"Redemption Price"), equal to the aggregate Liquidation Amount of such Series A
Capital Securities plus accumulated and unpaid Distributions thereon to the date
of redemption (the "Redemption Date") and the related amount of the premium, if
any, paid by the Corporation upon the concurrent redemption of such Series A
Subordinated Debentures. See "Description of Series A Subordinated
Debentures -- Redemption". If less than all of the Series A Subordinated
Debentures are to be repaid or redeemed on a Redemption Date, then the proceeds
from such repayment or redemption shall be allocated to the redemption pro rata
of the Series A Capital Securities and the Series A Common Securities. The
amount of premium if any, paid by the Corporation upon the redemption of all or
any part of Series A Subordinated Debentures
S-14
<PAGE> 15
to be repaid or redeemed on a Redemption Date shall be allocated to the
redemption pro rata of the Series A Capital Securities and the Series A Common
Securities.
The Corporation has the right to redeem the Series A Subordinated
Debentures (i) on or after December 1, 2006, in whole at any time or in part
from time to time, or (ii) prior to December 1, 2006, in whole (but not in part)
within 90 days following the occurrence of a Tax Event or Capital Treatment
Event. A redemption of the Series A Subordinated Debentures would cause a
mandatory redemption of Series A Capital Securities and Series A Common
Securities.
The Redemption Price, in the case of a redemption under (i) above, shall
equal the following prices expressed in percentages of the Liquidation Amount
together with accrued Distributions to but excluding the Redemption Date. If
redeemed during the 12-month period beginning on December 1:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
-------------------------------------------------------- ----------
<S> <C>
2006.................................................... 104.1390%
2007.................................................... 103.7251
2008.................................................... 103.3112
2009.................................................... 102.8973
2010.................................................... 102.4834
2011.................................................... 102.0695
2012.................................................... 101.6556
2013.................................................... 101.2417
2014.................................................... 100.8278
2015.................................................... 100.4139
</TABLE>
and at 100% on or after December 1, 2016.
The Redemption Price, in the case of a redemption following a Tax Event or
Capital Treatment Event as described under (ii) above, shall equal for each
Series A Capital Security the Make-Whole Amount for a corresponding $1,000
principal amount of Series A Subordinated Debentures together with accrued
Distributions to but excluding the Redemption Date. The "Make-Whole Amount"
shall be equal to the greater of (i) 100% of the principal amount of such Series
A Subordinated Debentures or (ii) as determined by a Quotation Agent (as defined
below), the sum of the present values of the principal amount and premium
payable as part of the Redemption Price with respect to an optional redemption
of such Series A Subordinated Debentures on December 1, 2006, together with
scheduled payments of interest from the Redemption Date to December 1, 2006 (the
"Remaining Life"), in each case discounted to the Redemption Date on a
semi-annual basis (assuming a 360-day year consisting of 30-day months) at the
Adjusted Treasury Rate (as defined below).
"Adjusted Treasury Rate" means, with respect to any Redemption Date, the
Treasury Rate (as defined below) plus (i) 1.35% if such Redemption Date occurs
on or before December 1, 1997 or (ii) 0.50% if such Redemption Date occurs after
December 1, 1997.
"Treasury Rate" means (i) the yield, under the heading which represents the
average for the immediately prior week, appearing in the most recently published
statistical release designated "H.15(519)" or any successor publication which is
published weekly by the Federal Reserve and which establishes yields on actively
traded United States Treasury securities adjusted to constant maturity under the
caption "Treasury Constant Maturities," for the maturity corresponding to the
Remaining Life (if no maturity is within three months before or after the
Remaining Life, yields for the two published maturities most closely
corresponding to the Remaining Life shall be determined and the Treasury Rate
shall be interpolated or extrapolated from such yields on a straight-line basis,
rounding to the nearest month) or (ii) if such release (or any successor
release) is not published during the week preceding the calculation date or does
not contain such yields, the rate per annum equal to the semi-annual equivalent
yield to maturity of the Comparable Treasury Issue (as defined
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<PAGE> 16
below), calculated using a price for the Comparable Treasury Issue (expressed as
a percentage of its principal amount) equal to the Comparable Treasury Price (as
defined below) for such Redemption Date. The Treasury Rate shall be calculated
on the third Business Day preceding the Redemption Date.
"Comparable Treasury Issue" means, with respect to any Redemption Date, the
United States Treasury security selected by the Quotation Agent as having a
maturity comparable to the Remaining Life that would be utilized, at the time of
selection and in accordance with customary financial practice, in pricing new
issues of corporate debt securities of comparable maturity to the Remaining
Life. If no United States Treasury security has a maturity which is within a
period from three months before to three months after December 1, 2006, the two
most closely corresponding United States Treasury securities shall be used as
the Comparable Treasury Issue, and the Treasury Rate shall be interpolated or
extrapolated on a straight-line basis, rounding to the nearest month using such
securities.
"Quotation Agent" means Goldman, Sachs & Co. and their successors;
provided, however, that if the foregoing shall cease to be a primary U.S.
Government securities dealer in New York City (a "Primary Treasury Dealer"), the
Corporation shall substitute therefor another Primary Treasury Dealer.
"Reference Treasury Dealer" means (i) the Quotation Agent and (ii) any
other Primary Treasury Dealer selected by the Debenture Trustee after
consultation with the Corporation.
"Comparable Treasury Price" means (A) the average of five Reference
Treasury Dealer Quotations for such Redemption Date, after excluding the highest
and lowest such Reference Treasury Dealer Quotations, or (B) if the Debenture
Trustee obtains fewer than three such Reference Treasury Dealer Quotations, the
average of all such Quotations.
"Reference Treasury Dealer Quotations" means, with respect to each
Reference Treasury Dealer and any Redemption Date, the average, as determined by
the Debenture Trustee, of the bid and asked prices for the Comparable Treasury
Issue (expressed in each case as a percentage of its principal amount) quoted in
writing to the Debenture Trustee by such Reference Treasury Dealer at 5:00 p.m.,
New York City time, on the third Business Day preceding such Redemption Date.
LIQUIDATION OF SERIES A ISSUER AND DISTRIBUTION OF SERIES A SUBORDINATED
DEBENTURES TO HOLDERS
The Corporation will have the right at any time to terminate the Series A
Issuer and, after satisfaction of the liabilities to creditors of the Series A
Issuer as required by applicable law, cause the Series A Subordinated Debentures
to be distributed to the holders of the Series A Capital Securities in exchange
therefor upon liquidation of the Series A Issuer. Such right is subject to the
Corporation having received prior approval of the Federal Reserve if then
required under applicable capital guidelines or policies.
Under current United States federal income tax law and interpretations and
assuming, as expected, the Series A Issuer is treated as a grantor trust, a
distribution of Series A Subordinated Debentures in exchange for the Series A
Capital Securities would not be a taxable event to holders of the Series A
Capital Securities. Should there be a change in law, a change in legal
interpretation, a Tax Event or other circumstances, however, the distribution
could be a taxable event to holders of the Series A Capital Securities. See
"Certain Federal Income Tax Consequences -- Distribution of Series A
Subordinated Debentures to Holders of Series A Capital Securities." If the
Corporation elects neither to redeem the Series A Subordinated Debentures prior
to maturity nor to liquidate the Series A Issuer and distribute the Series A
Subordinated Debentures to holders of the Series A Capital Securities in
exchange therefor the Series A Capital Securities will remain outstanding until
the Stated Maturity of the Series A Subordinated Debentures.
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<PAGE> 17
LIQUIDATION VALUE
The amount payable on the Series A Capital Securities in the event of any
liquidation of the Series A Issuer is $1,000 per Series A Capital Securities
plus accumulated and unpaid Distributions, which amount may be paid in the form
of a distribution of a Like Amount in Series A Subordinated Debentures, subject
to certain exceptions. See "Description of Preferred Securities -- Liquidation
Distribution Upon Termination" in the accompanying Prospectus.
REGISTRATION OF SERIES A CAPITAL SECURITIES
The Series A Capital Securities will be represented by global certificates
registered in the name of DTC or its nominee. Beneficial interests in the Series
A Capital Securities will be shown on, and transfers thereof will be effected
only through, records maintained by participants in DTC. Except as described
below and in the accompanying Prospectus, Series A Capital Securities in
certificated form will not be issued in exchange for the global certificates.
See "Book-Entry Issuance" in the accompanying Prospectus.
A global security shall be exchangeable for Series A Capital Securities
registered in the names of persons other than DTC or its nominee only if (i) the
Corporation or DTC notifies the Series A Issuer that DTC is unwilling or unable
to continue as a depositary for such global security and no successor depositary
shall have been appointed, or if at any time DTC ceases to be a clearing agency
registered under the Exchange Act at a time when DTC is required to be so
registered to act as such depositary, (ii) the Series A Issuer in its sole
discretion determines that such global security shall be so exchangeable or
(iii) there shall have occurred and be continuing an event of default under the
Indenture with respect to the Series A Subordinated Debentures. Any global
security that is exchangeable pursuant to the preceding sentence shall be
exchangeable for definitive certificates registered in such names as DTC shall
direct. It is expected that such instructions will be based upon directions
received by DTC from its Participants (as defined in the accompanying
Prospectus) with respect to ownership of beneficial interests in such global
security. In the event that Series A Capital Securities are issued in definitive
form, such Series A Capital Securities will be in denominations of $1,000 and
integral multiples thereof and may be transferred or exchanged at the offices
described below.
Payments on Series A Capital Securities represented by a global security
will be made to DTC, as the depositary for the Series A Capital Securities. In
the event Series A Capital Securities are issued in certificated form, the
Liquidation Amount and Distributions will be payable, the transfer of the Series
A Capital Securities will be registrable, and Series A Capital Securities will
be exchangeable for Series A Capital Securities of other denominations of a like
aggregate Liquidation Amount, at the corporate office of the Property Trustee in
New York, New York, or at the offices of any paying agent or transfer agent
appointed by the Administrative Trustees, provided that payment of any
Distribution may be made at the option of the Administrative Trustees by check
mailed to the address of the persons entitled thereto or by wire transfer. In
addition, if the Series A Capital Securities are issued in certificated form,
the record dates for payment of Distributions will be the 15th day of the month
preceding the month in which the relevant Distribution payment is scheduled to
be paid. For a description of DTC and the terms of the depositary arrangements
relating to payments, transfers, voting rights, redemptions and other notices
and other matters, see "Book-Entry Issuance" in the accompanying Prospectus.
CERTAIN TERMS OF SERIES A SUBORDINATED DEBENTURES
GENERAL
The following summary of certain terms and provisions of the Series A
Subordinated Debentures supplements the description of the terms and provisions
of the Corresponding Junior Subordinated Debentures (as defined in the
Prospectus) set forth in the accompanying Prospectus
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<PAGE> 18
under the heading "Description of Junior Subordinated Debentures," to which
description reference is hereby made. The summary of certain terms and
provisions of the Series A Subordinated Debentures set forth below, which
describes the material provisions thereof, does not purport to be complete and
is subject to, and is qualified in its entirety by reference to, the Indenture,
to which reference is hereby made. The form of Indenture has been filed as an
exhibit to the Registration Statement of which this Prospectus Supplement and
accompanying Prospectus form a part.
Concurrently with the issuance of the Series A Capital Securities, the
Series A Issuer will invest the proceeds thereof, together with the
consideration paid by the Corporation for the Series A Common Securities, in the
Series A Subordinated Debentures issued by the Corporation. The Series A
Subordinated Debentures will bear interest at the annual rate of 8.278% of the
principal amount thereof, payable semi-annually in arrears on June 1 and
December 1 of each year (each, an "Interest Payment Date"), commencing June 1,
1997, to the person in whose name each Series A Subordinated Debenture is
registered, subject to certain exceptions, at the close of business on the
Business Day next preceding such Interest Payment Date. It is anticipated that,
until the liquidation, if any, of the Series A Issuer, each Series A
Subordinated Debenture will be held by the Property Trustee in trust for the
benefit of the holders of the Series A Securities. The amount of interest
payable for any period will be computed on the basis of a 360-day year of twelve
30-day months. In the event that any date on which interest is payable on the
Series A Subordinated Debentures is not a Business Day, then payment of the
interest payable on such date will be made on the next succeeding day that is a
Business Day (and without any interest or other payment in respect of any such
delay), except that, if such Business Day is in the next succeeding calendar
year, such payment shall be made on the immediately preceding Business Day, in
each case with the same force and effect as if made on the date such payment was
originally payable. Accrued interest that is not paid on the applicable Interest
Payment Date will bear additional interest on the amount thereof (to the extent
permitted by law) at the rate per annum of 8.278% thereof, compounded semi-
annually from the relevant Interest Payment Date. The term "interest" as used
herein shall include semi-annual interest payments and interest on semi-annual
interest payments not paid on the applicable Interest Payment Date, as
applicable.
The Series A Subordinated Debentures will be issued as a series of junior
subordinated deferrable interest debentures under the Indenture.
The Series A Subordinated Debentures will mature on December 1, 2026.
The Series A Subordinated Debentures will be unsecured and will rank junior
and be subordinate in right of payment to all Senior Debt of the Corporation.
See "Description of Junior Subordinated Debentures -- Subordination" in the
accompanying Prospectus. Substantially all of the Corporation's existing
indebtedness constitutes Senior Debt. Because the Corporation is a holding
company, the right of the Corporation to participate in any distribution of
assets of any subsidiary, including the Bank, upon such subsidiary's liquidation
or reorganization or otherwise is subject to the prior claims of creditors of
that subsidiary, except to the extent that the Corporation may itself be
recognized as a creditor of that subsidiary. There are various legal limitations
on the extent to which certain of the Corporation's subsidiaries may extend
credit, pay dividends or otherwise supply funds to, or engage in transactions
with, the Corporation or certain of its other subsidiaries. Accordingly, the
Series A Subordinated Debentures will be effectively subordinated to all
existing and future liabilities of the Corporation's subsidiaries, and holders
of Series A Subordinated Debentures should look only to the assets of the
Corporation for payments on the Series A Subordinated Debentures. The Indenture
does not limit the incurrence or issuance of other secured or unsecured debt of
the Corporation, including Senior Debt, whether under the Indenture, any
existing indenture or any other indenture that the Corporation may enter into in
the future or otherwise. See "Description of Junior Subordinated
Debentures -- Subordination" in the accompanying Prospectus.
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<PAGE> 19
OPTION TO DEFER INTEREST PAYMENTS
So long as no event of default under the Indenture has occurred and is
continuing, the Corporation has the right under the Indenture at any time or
from time to time during the term of the Series A Subordinated Debentures to
defer payment of interest on the Series A Subordinated Debentures for a period
not exceeding 10 consecutive semi-annual periods with respect to each Extension
Period, provided that no Extension Period may extend beyond the Stated Maturity
of the Series A Subordinated Debentures. At the end of such Extension Period,
the Corporation must pay all interest then accrued and unpaid on the Series A
Subordinated Debentures (together with interest on such unpaid interest at the
annual rate of 8.278%, compounded semi-annually from the relevant Interest
Payment Date, to the extent permitted by applicable law). During an Extension
Period, interest will accrue and holders of Series A Subordinated Debentures (or
holders of Series A Capital Securities while such series is outstanding) will be
required to accrue interest income for United States federal income tax
purposes. See "Certain Federal Income Tax Consequences -- Interest Income and
Original Issue Discount."
During any such Extension Period, the Corporation may not, and may not
permit any subsidiary of the Corporation to, (i) declare or pay any dividends or
distributions on, or redeem, purchase, acquire or make a liquidation payment
with respect to, any of the Corporation's capital stock, (ii) make any payment
of principal, interest or premium, if any, on or repay, repurchase or redeem any
debt securities of the Corporation (including other series of Junior
Subordinated Debentures) that rank pari passu with or junior in interest to the
Series A Subordinated Debentures or (iii) make any guarantee payments with
respect to any guarantee by the Corporation of the debt securities of any
subsidiary of the Corporation if such guarantee ranks pari passu with or junior
in interest to the Series A Subordinated Debentures (other than (a) dividends or
distributions in capital stock of the Corporation, (b) any declaration of a
dividend in connection with the implementation of a stockholders' rights plan,
or the redemption or repurchase of any such rights pursuant thereto, (c)
payments under the Series A Guarantee, and (d) purchases of common stock related
to the issuance of common stock or rights under any of the Corporation's benefit
plans for its directors, officers or employees, related to the issuance of
common stock or rights under a dividend reinvestment and stock purchase plan, or
related to the issuance of common stock (or securities convertible into or
exchangeable for common stock) as consideration in an acquisition transaction
that was entered into prior to the commencement of such Extension Period). Prior
to the termination of any such Extension Period, the Corporation may further
defer the payment of interest on the Series A Subordinated Debentures, provided
that no Extension Period may exceed 10 consecutive semi-annual periods or extend
beyond the Stated Maturity of the Series A Subordinated Debentures. Upon the
termination of any such Extension Period and the payment of all interest then
accrued and unpaid (together with interest thereon at the rate of 8.278%,
compounded semi-annually, to the extent permitted by applicable law), the
Corporation may elect to begin a new Extension Period subject to the above
requirements. No interest shall be due and payable during an Extension Period,
except at the end thereof. The Corporation must give the Property Trustee, the
Administrative Trustees and the Debenture Trustee notice of its election to
begin such Extension Period at least one Business Day prior to the earlier of
(i) the date Distributions on the Series A Securities would have been payable
except for the election to begin such Extension Period, (ii) the date the
Administrative Trustees are required to give notice to the New York Stock
Exchange, the NASDAQ National Market or other applicable stock exchange or
automated quotation system on which the Series A Capital Securities are then
listed or quoted or to holders of Series A Subordinated Debentures of the record
date for such Distributions or (iii) the date such Distributions are payable,
but in any event not less than one Business Day prior to such record date. The
Debenture Trustee shall give notice of the Corporation's election to begin a new
Extension Period to the holders of the Series A Subordinated Debentures. There
is no limitation on the number of times that the Corporation may elect to begin
an Extension Period. See "Description of Junior Subordinated
Debentures -- Option to Defer Interest Payments" in the accompanying Prospectus.
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<PAGE> 20
TRUST EXPENSES AND TAXES
In the Indenture, the Corporation, as borrower, has agreed to pay to the
Series A Issuer all debts and other obligations (other than with respect to the
Series A Securities) and all costs and expenses of the Series A Issuer
(including costs and expenses relating to the organization of the Series A
Issuer, the fees and expenses of the Series A Issuer's Trustees and the costs
and expenses relating to the operation of the Series A Issuer) and to pay any
and all taxes and all costs and expenses with respect thereto (other than United
States withholding taxes) to which the Series A Issuer might become subject. See
"Description of the Junior Subordinated Debentures -- Trust Expenses and Taxes"
in the accompanying Prospectus.
REDEMPTION
Subject to the Corporation having received prior approval of the Federal
Reserve if then required under applicable capital guidelines or policies, the
Series A Subordinated Debentures are redeemable prior to maturity at the option
of the Corporation (i) on or after December 1, 2006, in whole at any time or in
part from time to time or (ii) prior to December 1, 2006, in whole (but not in
part) within 90 days following the occurrence of a Tax Event or Capital
Treatment Event (each as defined under "Risk Factors -- Tax Event or Capital
Treatment Event -- Redemption"), in each case at the Redemption Price described
below. The proceeds of any such redemption will be used by the Series A Issuer
to redeem the Series A Securities.
The Redemption Price in the case of a redemption under (i) above shall
equal the following prices, expressed in percentages of the principal amount,
together with accrued interest to but excluding the Redemption Date. If redeemed
during the 12-month period beginning on December 1:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
-------------------------------------------------------- ----------
<S> <C>
2006.................................................... 104.1390%
2007.................................................... 103.7251
2008.................................................... 103.3112
2009.................................................... 102.8973
2010.................................................... 102.4834
2011.................................................... 102.0695
2012.................................................... 101.6556
2013.................................................... 101.2417
2014.................................................... 100.8278
2015.................................................... 100.4139
</TABLE>
and at 100% on or after December 1, 2016.
The Redemption Price, in the case of a redemption following a Tax Event or
Capital Treatment Event as described under (ii) above, shall equal the
Make-Whole Amount (as defined under "Certain Terms of Series A Capital
Securities -- Redemption"), together with accrued interest to but excluding the
Redemption Date.
DISTRIBUTION OF SERIES A SUBORDINATED DEBENTURES
As described under "Certain Terms of Series A Capital
Securities -- Liquidation of Series A Issuer and Distribution of Series A
Subordinated Debentures to Holders," under certain circumstances involving the
termination of the Series A Issuer, Series A Subordinated Debentures may be
distributed to the holders of the Series A Capital Securities in exchange
therefor upon liquidation of the Series A Issuer after satisfaction of
liabilities to creditors of the Series A Issuer as provided by applicable law.
If distributed to holders of Series A Capital Securities, the Series A
Subordinated Debentures will initially be issued in the form of one or more
global securities and DTC, or any successor depositary for the Series A Capital
Securities, will act as depositary for the Series A
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<PAGE> 21
Subordinated Debentures. It is anticipated that the depositary arrangements for
the Series A Subordinated Debentures would be substantially identical to those
in effect for the Series A Capital Securities. If Series A Subordinated
Debentures are distributed to the holders of Series A Capital Securities in
exchange therefor upon the liquidation of the Series A Issuer, the Corporation
will use its best efforts to list the Series A Subordinated Debentures on the
New York Stock Exchange or such other stock exchanges or automated quotation
system, if any, on which the Series A Capital Securities are then listed or
quoted. There can be no assurance as to the market price of any Series A
Subordinated Debentures that may be distributed to the holders of Series A
Capital Securities.
REGISTRATION OF SERIES A SUBORDINATED DEBENTURES
The Series A Subordinated Debentures will be registered in the name of the
Series A Issuer. In the event that the Series A Subordinated Debentures are
distributed to holders of Series A Capital Securities, it is anticipated that
the depositary and other arrangements for the Series A Subordinated Debentures
will be substantially identical to those in effect for the Series A Capital
Securities as applicable. See "Certain Terms of Series A Capital
Securities -- Registration of Series A Capital Securities."
CERTAIN TERMS OF SERIES A GUARANTEE
The Series A Guarantee guarantees to the holders of the Series A Securities
the following payments, to the extent not paid by the Series A Issuer: (i) any
accumulated and unpaid Distributions required to be paid on the Series A
Securities, to the extent that the Series A Issuer has funds on hand available
therefor at such time, (ii) the Redemption Price with respect to any Series A
Securities called for redemption, to the extent that the Series A Issuer has
funds on hand available therefor at such time, and (iii) upon a voluntary or
involuntary dissolution, winding-up or liquidation of the Series A Issuer
(unless the Series A Subordinated Debentures are distributed to holders of the
Series A Securities), the lesser of (a) the aggregate of the Liquidation Amount
and all accumulated and unpaid Distributions to the date of payment, to the
extent that the Series A Issuer has funds on hand available therefor at such
time, and (b) the amount of assets of the Series A Issuer remaining available
for distribution to holders of the Series A Securities after satisfaction of the
liabilities to creditors of the Series A Issuer as required by applicable law.
The Series A Guarantee will be qualified as an indenture under the Trust
Indenture Act. The Bank of New York will act as the Guarantee Trustee for the
purposes of compliance with the Trust Indenture Act and will hold the Series A
Guarantee for the benefit of the holders of the Series A Securities. The Bank of
New York will also act as Debenture Trustee for the Series A Subordinated
Debentures and as Property Trustee.
The holders of not less than a majority in aggregate Liquidation Amount of
the Series A Securities have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Guarantee Trustee in
respect of the Series A Guarantee or to direct the exercise of any trust power
conferred upon the Guarantee Trustee under the Series A Guarantee. Any holder of
the Series A Securities may institute a legal proceeding directly against the
Corporation to enforce its rights under the Series A Guarantee without first
instituting a legal proceeding against the Series A Issuer, the Guarantee
Trustee or any other person or entity. If the Corporation were to default on its
obligation to pay amounts payable under the Series A Subordinated Debentures,
the Series A Issuer would lack funds for the payment of Distributions or amounts
payable on redemption of the Series A Securities or otherwise, and, in such
event, holders of the Series A Securities would not be able to rely upon the
Series A Guarantee for payment of such amounts. Instead, if an event of default
under the Indenture shall have occurred and be continuing and such event is
attributable to the failure of the Corporation to pay interest or premium, if
any, on or principal of the Series A Subordinated Debentures on the applicable
payment date, then a holder of Series A Capital Securities may institute a
Direct Action against the Corporation pursuant to the
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<PAGE> 22
terms of the Indenture for enforcement of payment to such holder of the
principal of or interest or premium, if any, on such Series A Subordinated
Debentures having a principal amount equal to the aggregate Liquidation Amount
of the Series A Securities of such holder. In connection with such Direct
Action, the Corporation will have a right of set-off under the Indenture to the
extent of any payment made by the Corporation to such holder of Series A
Securities in the Direct Action. Except as described herein, holders of Series A
Capital Securities will not be able to exercise directly any other remedy
available to the holders of the Series A Subordinated Debentures or assert
directly any other rights in respect of the Series A Subordinated Debentures.
See "Description of Guarantees" in the accompanying Prospectus. The Trust
Agreement provides that each holder of Series A Securities by acceptance thereof
agrees to the provisions of the Series A Guarantee and the Indenture.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
GENERAL
In the opinion of Simpson Thacher & Bartlett, special counsel to the
Corporation and the Series A Issuer ("Tax Counsel"), the following summary
accurately describes the material United States federal income tax consequences
that may be relevant to the purchase, ownership and disposition of Series A
Capital Securities. Unless otherwise stated, this summary deals only with Series
A Capital Securities held as capital assets by United States Persons (defined
below) who purchase the Series A Capital Securities upon original issuance at
their original issue price. As used herein, a "United States Person" means a
person that is (i) a citizen or resident of the United States, (ii) a
corporation, partnership or other entity created or organized in or under the
laws of the United States or any political subdivision thereof, (iii) an estate
the income of which is subject to United States federal income taxation
regardless of its source, or (iv) a trust the income of which is subject to
United States federal income taxation regardless of its source; provided,
however, that for taxable years beginning after December 31, 1996 (or, if a
trustee so elects, for taxable years ending after August 20, 1996), a "United
States Person" shall include any trust if a court is able to exercise primary
supervision over the administration of such trust and one or more United States
fiduciaries have the authority to control all substantial decisions of such
trust. The tax treatment of a holder may vary depending on his, her or its
particular situation. This summary does not address all the tax consequences
that may be relevant to a particular holder or to holders who may be subject to
special tax treatment, such as banks, real estate investment trusts, regulated
investment companies, insurance companies, dealers in securities or currencies,
tax-exempt investors, or foreign investors. In addition, this summary does not
include any description of the alternative minimum tax consequences or the tax
laws of any state, local or foreign government that may be applicable to a
holder of Series A Capital Securities. This summary is based on the Internal
Revenue Code of 1986, as amended (the "Code"), the Treasury regulations
promulgated thereunder and administrative and judicial interpretations thereof,
as of the date hereof, all of which are subject to change, possibly on a
retroactive basis.
The authorities on which this summary is based are subject to various
interpretations and the opinions of Tax Counsel are not binding on the Internal
Revenue Service ("IRS") or the courts, either of which could take a contrary
position. Moreover, no rulings have been or will be sought from the IRS with
respect to the transactions described herein. Accordingly, there can be no
assurance that the IRS will not challenge the opinions expressed herein or that
a court would not sustain such a challenge. Nevertheless, Tax Counsel has
advised that it is of the view that, if challenged, the opinions expressed
herein would be sustained by a court with jurisdiction in a properly presented
case.
HOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO THE TAX
CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE SERIES A
CAPITAL SECURITIES, INCLUDING THE TAX CONSEQUENCES UNDER STATE,
S-22
<PAGE> 23
LOCAL, FOREIGN, AND OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN UNITED
STATES FEDERAL OR OTHER TAX LAWS. FOR A DISCUSSION OF THE POSSIBLE REDEMPTION OF
THE SERIES A CAPITAL SECURITIES UPON THE OCCURRENCE OF CERTAIN TAX EVENTS SEE
"CERTAIN TERMS OF SERIES A CAPITAL SECURITIES -- REDEMPTION."
CLASSIFICATION OF THE SERIES A ISSUER
In connection with the issuance of the Series A Capital Securities, Tax
Counsel is of the opinion that, under current law and assuming compliance with
the terms of the Trust Agreement, and based on certain facts and assumptions
contained in such opinion, the Series A Issuer will be classified as a grantor
trust and not as an association taxable as a corporation for United States
federal income tax purposes. As a result, each beneficial owner of Series A
Capital Securities (a "Securityholder") will be treated as owning an undivided
beneficial interest in the Series A Subordinated Debentures. Accordingly, each
Securityholder will be required to include in its gross income its pro rata
share of the interest income or original issue discount accrued on the Series A
Subordinated Debentures. See "-- Interest Income and Original Issue Discount."
CLASSIFICATION OF THE SERIES A SUBORDINATED DEBENTURES
The Corporation, the Series A Issuer and the holders of the Series A
Securities (by acceptance of a beneficial interest in a Series A Security) will
agree to treat the Series A Subordinated Debentures as indebtedness for all
United States tax purposes. In connection with the issuance of the Series A
Subordinated Debentures, Tax Counsel is of the opinion that, under current law,
and based on certain representations, facts and assumptions set forth in such
opinion, the Series A Subordinated Debentures will be classified as indebtedness
for United States federal income tax purposes.
INTEREST INCOME AND ORIGINAL ISSUE DISCOUNT
Except as set forth below, stated interest on the Series A Subordinated
Debentures generally will be included in income by a Securityholder at the time
such interest income is paid or accrued in accordance with such Securityholder's
regular method of tax accounting.
The Corporation believes that, under the applicable Treasury regulations,
the Series A Subordinated Debentures will not be considered to have been issued
with "original issue discount" ("OID") within the meaning of Section 1273(a) of
the Code. If, however, the Corporation exercises its right to defer payments of
interest on the Series A Subordinated Debentures, the Series A Subordinated
Debentures will become OID instruments at such time and all Securityholders will
be required to accrue the stated interest on the Series A Subordinated
Debentures on a daily basis during the Extension Period, even though the
Corporation will not pay such interest until the end of the Extension Period,
and even though some Securityholders may use the cash method of tax accounting.
Moreover, thereafter the Series A Subordinated Debentures will be taxed as OID
instruments for as long as they remain outstanding. Thus, even after the end of
the Extension Period, all Securityholders would be required to continue to
include the stated interest on the Series A Subordinated Debentures in income on
a daily economic accrual basis, regardless of their method of tax accounting and
in advance of receipt of the cash attributable to such interest income. Under
the OID economic accrual rules, a Securityholder would accrue an amount of
interest income each year that approximates the stated interest payments called
for under the terms of the Series A Subordinated Debentures, and actual cash
payments of interest on the Series A Subordinated Debentures would not be
reported separately as taxable income. Any amount of OID included in a
Securityholder's gross income (whether or not during an Extension Period) will
increase such Securityholder's tax basis in its Series A Capital Securities, and
the amount of Distributions received by a Securityholder with respect to such
Series A Capital Securities will reduce the tax basis of such Series A Capital
Securities.
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<PAGE> 24
The Treasury regulations described above have not been addressed in any
rulings or other interpretations by the IRS, and it is possible that the IRS
could take a contrary position. If the IRS were to assert successfully that the
stated interest on the Series A Subordinated Debentures was OID regardless of
whether the Corporation exercises its right to defer payments of interest on
such debentures, all Securityholders would be required to include such stated
interest in income on a daily economic accrual basis as described above.
Corporate Securityholders will not be entitled to dividends-received
deductions with respect to any income recognized with respect to the Series A
Capital Securities.
DISTRIBUTION OF SERIES A SUBORDINATED DEBENTURES TO HOLDERS OF SERIES A CAPITAL
SECURITIES
Under current law, a distribution by the Series A Issuer of the Series A
Subordinated Debentures as described under the caption "Certain Terms of Series
A Capital Securities -- Liquidation of Series A Issuer and Distribution of
Series A Subordinated Debentures to Holders" will be non-taxable and will result
in the Securityholder receiving directly its pro rata share of the Series A
Subordinated Debentures previously held indirectly through the Series A Issuer,
with a holding period and aggregate tax basis equal to the holding period and
aggregate tax basis such Securityholder had in its Series A Capital Securities
before such distribution. If, however, the liquidation of the Series A Issuer
were to occur because the Series A Issuer is subject to United States federal
income tax with respect to income accrued or received on the Series A
Subordinated Debentures, the distribution of Series A Subordinated Debentures to
Securityholders by the Series A Issuer would be a taxable event to the Series A
Issuer and each Securityholder, and a Securityholder would recognize gain or
loss as if the Securityholder had exchanged its Series A Capital Securities for
the Series A Subordinated Debentures it received upon the liquidation of the
Series A Issuer. A Securityholder will accrue interest in respect of Series A
Subordinated Debentures received from the Series A Issuer in the manner
described above under "-- Interest Income and Original Issue Discount."
SALES OR REDEMPTION OF SERIES A CAPITAL SECURITIES
Gain or loss will be recognized by a Securityholder on a sale of Series A
Capital Securities (including a redemption for cash) in an amount equal to the
difference between the amount realized by the Securityholder on the sale or
redemption of the Series A Capital Securities (except to the extent that such
amount realized is characterized as a payment in respect of accrued but unpaid
interest on such Securityholder's allocable share of the Series A Subordinated
Debentures that such Securityholder has not included in gross income previously)
and the Securityholder's adjusted tax basis in the Series A Capital Securities
sold or redeemed. Such gain or loss generally will be taxable as long-term
capital gain or loss if the Securityholder held the Series A Capital Securities
that it sold or redeemed for more than one year. Subject to certain limited
exceptions, capital losses cannot be applied to offset ordinary income for
United States federal income tax purposes.
NON-UNITED STATES HOLDERS
As used herein, the term "Non-United States Holder" means any
Securityholder that is not a United States Person. As discussed above, the
Series A Capital Securities will be treated as evidence of an undivided
beneficial ownership interest in the Series A Subordinated Debentures. See
"-- Classification of the Series A Issuer." Thus under present United States
federal income tax law, and subject to the discussion below concerning backup
withholding:
(a) no withholding of United States federal income tax will be
required with respect to the payment by the Series A Issuer or the
Corporation (or any paying agent of either the Series A Issuer or the
Corporation (a "Paying Agent")) of principal or interest (which for
purposes of this discussion includes any OID) on the Series A Capital
Securities or the Series A Subordinated Debentures, as the case may be, to
a Non-United States Holder, provided (i) that the
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<PAGE> 25
beneficial owner of the Series A Capital Securities ("Beneficial Owner")
does not actually or constructively own 10% or more of the total combined
voting power of all classes of stock of the Corporation entitled to vote
within the meaning of section 871(h)(3) of the Code and the regulations
thereunder, (ii) the Beneficial Owner is not a controlled foreign
corporation that is related to the Corporation through stock ownership,
(iii) the Beneficial Owner is not a bank whose receipt of interest on the
Series A Subordinated Debentures is described in section 881(c)(3)(A) of
the Code and (iv) the Beneficial Owner satisfies the statement requirement
(described generally below) set forth in section 871(h) and section 881(c)
of the Code and the regulations thereunder; and
(b) no withholding of United States federal income tax will be
required with respect to any gain realized by a Non-United States Holder
upon the sale or other disposition of the Series A Capital Securities (or
the Series A Subordinated Debentures).
To satisfy the requirement referred to in (a)(iv) above, the Beneficial
Owner, or a financial institution holding the Series A Capital Securities on
behalf of such owner, must provide, in accordance with specified procedures, to
the Series A Issuer or its paying agent, a statement to the effect that the
Beneficial Owner is not a United States Person. Pursuant to current temporary
Treasury regulations, these requirements will be met if (1) the Beneficial Owner
provides his name and address, and certifies, under penalties of perjury, that
it is not a United States Person (which certification may be made on an IRS Form
W-8 (or successor form)) or (2) a financial institution holding the Series A
Capital Securities on behalf of the Beneficial Owner certifies, under penalties
of perjury, that such statement has been received by it and furnishes a paying
agent with a copy thereof.
If a Non-United States Holder cannot satisfy the requirements of the
"portfolio interest" exception described in (a) above, payments of interest made
to such Non-United States Holder will be subject to a 30% withholding tax unless
the Beneficial Owner provides the Series A Issuer (or the Corporation or a
Paying Agent, as the case may be), with a properly executed (1) IRS Form 1001
(or successor form) claiming an exemption from, or a reduction of, such
withholding tax under the benefit of a tax treaty or (2) IRS Form 4224 (or
successor form) stating that interest paid on the Series A Subordinated
Debentures is not subject to withholding tax because it is effectively connected
with the Beneficial Owner's conduct of a trade or business in the United States.
If a Non-United States Holder is engaged in a trade or business in the
United States and interest on the Series A Subordinated Debentures is
effectively connected with the conduct of such trade or business, the Non-United
States Holder, although exempt from the withholding tax discussed above, will be
subject to United States federal income tax on such interest on a net income
basis in the same manner as if it were a United States Holder. In addition, if
such Non-United States Holder is a foreign corporation, it may be subject to a
branch profits tax equal to 30% of its effectively connected earnings and
profits for the taxable year, subject to adjustments. For this purpose, such
interest income would be included in such foreign corporation's earnings and
profits.
Any gain realized upon the sale or other disposition of the Series A
Capital Securities (or the Series A Subordinated Debentures) generally will not
be subject to United States federal income tax unless (i) such gain is
effectively connected with a trade or business carried on in the United States
by the Non-United States Holder, (ii) in the case of a Non-United States Holder
who is an individual, such individual is present in the United States for 183
days or more in the taxable year of such sale, exchange or retirement, and
certain other conditions are met, and (iii) in the case of any gain representing
accrued interest on the Series A Subordinated Debentures, the requirements
described above are not satisfied.
BACKUP WITHHOLDING TAX AND INFORMATION REPORTING
The amount of interest (or OID, if any) accrued on the Series A Capital
Securities held of record by United States Persons (other than corporations and
other exempt Securityholders) will be
S-25
<PAGE> 26
reported to the Internal Revenue Service. "Backup" withholding at a rate of 31%
will apply to payments of interest (or OID, if any) to nonexempt United States
Persons unless the Securityholder furnishes its taxpayer identification number
in the manner prescribed in applicable Treasury Regulations, certifies that such
number is correct, certifies as to no loss of exemption from backup withholding
and meets certain other conditions.
Payment of the proceeds from the disposition of Series A Capital Securities
to or through the United States office of a broker is subject to information
reporting and backup withholding unless the holder or beneficial owner
establishes an exemption from information reporting and backup withholding.
Any amounts withheld from a Securityholder under the backup withholding
rules will be allowed as a refund or a credit against such Securityholder's
United States federal income tax liability, provided the required information is
furnished to the Internal Revenue Service.
It is anticipated that income on the Series A Capital Securities will be
reported to holders on Form 1099 and mailed to holders of the Series A Capital
Securities by January 31 following each calendar year.
POSSIBLE TAX LAW CHANGES
On March 19, 1996, the Revenue Reconciliation Bill of 1996 (the "Bill") was
introduced in the 104th Congress which would have, among other things, generally
denied interest deductions for interest on an instrument issued by a corporation
that has a maximum term of more than 20 years and that is not shown as
indebtedness on the separate balance sheet of the issuer or, where the
instrument is issued to a related party (other than a corporation), where the
holder or some other related party issues a related instrument that is not shown
as indebtedness on the issuer's consolidated balance sheet. The above-described
provision was proposed to be effective generally for instruments issued on or
after December 7, 1995. If this provision were to apply to the Series A
Subordinated Debentures, the Corporation would not be able to deduct interest on
the Series A Subordinated Debentures. However, on March 29, 1996, the Chairmen
of the Senate Finance and House Ways and Means Committees issued the Joint
Statement to the effect that it was their intention that the effective date of
the Bill, if enacted, would be no earlier than the date of appropriate
Congressional action. In addition, subsequent to the publication of the Joint
Statement, Senator Daniel Patrick Moynihan and Representatives Sam M. Gibbons
and Charles B. Rangel wrote the Democrat Letters to Treasury Department
officials concurring with the view expressed in the Joint Statement. The 104th
Congress adjourned without enacting the Bill. Moreover, if the principles
contained in the Joint Statement and the Democrat Letters were followed any
similar legislation in this area that is subsequently proposed would not apply
to the Series A Subordinated Debentures. Although the 104th Congress adjourned
without enacting the Bill, there can be no assurance that current or future
legislative proposals or final legislation will not adversely affect the ability
of the Corporation to deduct interest on the Series A Subordinated Debentures or
otherwise affect the tax treatment of the transaction described herein.
Moreover, such a change could give rise to a Tax Event, which would permit the
Corporation, upon approval of the Federal Reserve if then required under
applicable capital guidelines or policies, to cause a redemption of the Series A
Capital Securities, as described more fully in the accompanying Prospectus under
"Description of Preferred Securities -- Redemption or Exchange -- Tax Event or
Capital Event Redemption."
S-26
<PAGE> 27
ERISA CONSIDERATIONS
A fiduciary of a pension, profit-sharing or other employee benefit plan
subject to ERISA should consider the fiduciary standards of ERISA in the context
of the plan's particular circumstances before authorizing an investment in the
Series A Capital Securities. Among other factors, the fiduciary should consider
whether such an investment is in accordance with the documents governing the
plan and whether an investment is appropriate for the plan in view of its
overall investment policy and the composition and diversification of its
portfolio. Other provisions of ERISA and the Code prohibit an employee benefit
plan from engaging in certain transactions involving "plan assets" with parties
which are "parties in interest" under ERISA or "disqualified persons" under the
Code with respect to the plan. Therefore, a fiduciary of an employee benefit
plan should also consider whether an investment in the Series A Capital
Securities might constitute or give rise to a prohibited transaction under ERISA
and the Code.
If the assets of the Series A Issuer were deemed to be plan assets of
employee benefit plans that are holders of the Series A Capital Securities, the
plan's investments in the Series A Capital Securities might be deemed to
constitute a delegation under ERISA of the duty to manage plan assets by a
fiduciary investing in Series A Capital Securities, and certain transactions
involving the operation of the Series A Issuer might be deemed to constitute
prohibited transactions under ERISA and the Code.
The U.S. Department of Labor (the "DOL") has issued a final regulation with
regard to whether the underlying assets of an entity in which employee benefit
plans acquire equity interests would be deemed to be plan assets. The regulation
provides that the underlying assets of an entity will not be considered to be
plan assets if the equity interests acquired by employee benefit plans are
"publicly-offered securities" -- that is, they are (1) widely held (i.e., owned
by more than 100 investors independent of the Corporation and of each other),
(2) freely transferable and (3) sold as part of an offering pursuant to an
effective registration statement under the Securities Act and then timely
registered under Section 12(b) or 12(g) of the Exchange Act. It is expected that
the Series A Capital Securities will meet the criteria of "publicly-offered
securities" above. The Underwriters expect (although no assurances can be given)
that the Series A Capital Securities will be held by at least 100 independent
investors at the conclusion of the offering; there are no restrictions imposed
on the transfer of the Series A Capital Securities and the Series A Capital
Securities will be sold as part of an offering pursuant to an effective
registration statement under the Securities Act of 1933, as amended, and then
will be timely registered under the Exchange Act.
Even if the Series A Issuer were deemed to be "plan assets" of employee
benefit plans that are holders of the Series A Capital Securities of the Series
A Issuer, there are five class exemptions issued by the DOL which would apply to
exempt certain transactions involving assets of the Series A Issuer from the
prohibited transaction provisions of ERISA and the Code -- Prohibited
Transaction Exemption 84-14, for certain transactions determined by qualified
professional asset managers, Prohibited Transaction Exemption 90-1, for certain
transactions involving insurance company pooled separate accounts, Prohibited
Transaction Exemption 91-38, for certain transactions involving bank collective
investment funds, Prohibited Transaction Exemption 95-60 for certain
transactions involving insurance company general accounts, and Prohibited
Transaction Exemption 96-23, for certain transactions determined by in-house
asset managers.
The Corporation and certain of its affiliates might be considered parties
in interest or disqualified persons with respect to certain employee benefit
plans, such as plans for which the Corporation serves as trustee. Special
caution should be exercised before such an employee plan benefit purchases
Series A Capital Securities in such circumstances.
Due to the complexity of these rules and the penalties imposed upon persons
involved in prohibited transactions, it is important that an employee benefit
plan considering the purchase of Series A Capital Securities consult with its
counsel regarding the consequences under ERISA of the acquisition and ownership
of Series A Capital Securities. Employee benefit plans which are
S-27
<PAGE> 28
governmental plans (as defined in Section 3(32) of ERISA) and certain church
plans (as defined in Section 3(33) of ERISA) generally are not subject to ERISA
requirements.
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting
Agreement, the Corporation and the Series A Issuer have agreed that the Series A
Issuer will sell to each of the Underwriters named below, and each of such
Underwriters has severally agreed to purchase from the Series A Issuer, the
respective number of Series A Capital Securities set forth opposite their names
below.
<TABLE>
<CAPTION>
NUMBER OF
SERIES A
CAPITAL
UNDERWRITER SECURITIES
------------------------------------------------------------------------- ---------
<S> <C>
Goldman, Sachs & Co. .................................................... 50,000
Bear, Stearns & Co. Inc. ................................................ 50,000
Lehman Brothers Inc. .................................................... 50,000
Merrill Lynch, Pierce, Fenner & Smith
Incorporated................................................ 50,000
Salomon Brothers Inc..................................................... 50,000
---------
Total............................................................... 250,000
========
</TABLE>
Under the terms of the Underwriting Agreement, the Underwriters are
committed to take and pay for all of the Series A Capital Securities, if any are
taken.
The Underwriters propose to offer the Series A Capital Securities to the
public at the public offering price set forth on the cover page of this
Prospectus Supplement and to certain dealers at such price less a concession not
in excess of $6.00 per Series A Capital Security. The Underwriters may allow,
and such dealers may reallow, a concession not in excess of $2.50 per Series A
Capital Security to certain brokers and dealers. After the initial public
offering, the public offering price, concession and discount may be changed.
In view of the fact that the proceeds from the sale of the Series A Capital
Securities will be used to purchase the Series A Subordinated Debentures issued
by the Corporation, the Underwriting Agreement provides that the Corporation
will pay as Underwriters' compensation for the Underwriters' arranging the
investment therein of such proceeds an amount of $10.00 per Series A Capital
Securities for the accounts of the several Underwriters.
The Corporation and the Series A Issuer have agreed that, during the period
beginning from the date of the Underwriting Agreement and continuing to and
including the closing date, they will not offer, sell, contract to sell or
otherwise dispose of any Series A Capital Securities, any other beneficial
interests in the assets of the Series A Issuer, or any preferred securities or
any other securities of the Series A Issuer or the Corporation which are
substantially similar to the Series A Capital Securities, including any
guarantee of such securities, without the prior written consent of the
Underwriters, except for the Series A Capital Securities offered in connection
with this offering.
Prior to this offering, there has been no public market for the Series A
Capital Securities. Application has been made to list the Series A Capital
Securities on the New York Stock Exchange. Trading of the Series A Capital
Securities on the New York Stock Exchange is expected to commence within a
30-day period after the initial delivery of the Series A Capital Securities. The
Underwriters have advised the Corporation that they intend to make a market in
the Series A Capital Securities prior to commencement of trading on the New York
Stock Exchange, but are not obligated to do so and may discontinue market making
at any time without notice. No assurance can be given as to the liquidity of the
trading market for the Series A Capital Securities.
S-28
<PAGE> 29
The Corporation and the Series A Issuer have agreed to indemnify the
several Underwriters against certain liabilities, including liabilities under
the Securities Act of 1933, as amended.
Goldman, Sachs & Co. will serve as Quotation Agent with respect to the
Series A Capital Securities and in certain instances will calculate the
Redemption Price thereof.
Certain of the Underwriters or their affiliates have provided from time to
time, and expect to provide in the future, investment or commercial banking
services to the Corporation and its affiliates, for which such Underwriters or
their affiliates have received or will receive customary fees and commissions.
VALIDITY OF SECURITIES
Certain matters of Delaware law relating to the validity of the Series A
Capital Securities, the enforceability of the Trust Agreement and the formation
of the Series A Issuer will be passed upon by Richards, Layton & Finger, special
Delaware counsel to the Corporation and the Series A Issuer. The validity of the
Series A Guarantee and the Series A Subordinated Debentures will be passed upon
for the Corporation by Simpson Thacher & Bartlett (a partnership which includes
professional corporations) and for the Underwriters by Sullivan & Cromwell.
Simpson Thacher & Bartlett and Sullivan & Cromwell will rely on the opinion of
John W. Scheflen, Executive Vice President, General Counsel and Secretary of the
Corporation as to matters of Maryland law and the opinion of Richards, Layton &
Finger as to matters of Delaware law. Certain matters relating to United States
federal income tax considerations described in this Prospectus Supplement will
be passed upon for the Corporation by Simpson Thacher & Bartlett. Mr. Scheflen
owns beneficially 225,624 shares of common stock of the Corporation, including
options exercisable within sixty days under the Corporation's 1991 Long Term
Incentive Plan. Sullivan & Cromwell and Richards, Layton & Finger regularly
perform legal services for the Corporation and its subsidiaries.
S-29
<PAGE> 30
$750,000,000
MBNA CORPORATION
JUNIOR SUBORDINATED DEFERRABLE
INTEREST DEBENTURES
MBNA CAPITAL A
MBNA CAPITAL B
MBNA CAPITAL C
MBNA CAPITAL D
MBNA CAPITAL E
PREFERRED SECURITIES FULLY AND UNCONDITIONALLY
GUARANTEED, AS DESCRIBED HEREIN, BY
MBNA CORPORATION
MBNA Corporation, a Maryland corporation (the "Corporation"), may from time
to time offer in one or more series or issuances its junior subordinated
deferrable interest debentures (the "Junior Subordinated Debentures"). The
Junior Subordinated Debentures will be unsecured and subordinate and junior in
right of payment to Senior Debt (as defined in "Description of Junior
Subordinated Debentures -- Subordination") of the Corporation. If provided in an
accompanying Prospectus Supplement, the Corporation will have the right to defer
payments of interest on any series of Junior Subordinated Debentures by
extending the interest payment period thereon at any time or from time to time
for up to such number of consecutive interest payment periods (which shall not
extend beyond the Stated Maturity (as defined herein) of the Junior Subordinated
Debentures) with respect to each deferral period as may be specified in such
Prospectus Supplement (each, an "Extension Period"). In such circumstance,
however, the Corporation would not be permitted, subject to certain exceptions
set forth herein, to declare or pay any dividends, distributions or other
payments with respect to, or repay, repurchase, redeem or otherwise acquire, the
Corporation's capital stock or debt securities that rank pari passu with or
junior to such series of Junior Subordinated Debentures. See "Description of
Junior Subordinated Debentures -- Option to Defer Interest Payment Date" and
"-- Restrictions on Certain Payments."
MBNA Capital A, MBNA Capital B, MBNA Capital C, MBNA Capital D and MBNA
Capital E, each a trust created under the laws of the State of Delaware (each,
an "Issuer," and collectively, the "Issuers"), may severally offer, from time to
time, preferred securities (the "Preferred Securities") representing beneficial
ownership interests in such Issuer. The Corporation will be the owner of the
common securities (the "Common Securities" and, together with the Preferred
Securities, the "Trust Securities") representing beneficial ownership interests
in such Issuer. Holders of the Preferred Securities will be entitled to receive
cumulative cash distributions ("Distributions") accumulating from the date of
original issuance and payable periodically as specified in an accompanying
Prospectus Supplement.
Concurrently with the issuance by an Issuer of its Preferred Securities,
such Issuer will invest the proceeds thereof and of contributions received in
respect of the Common Securities in a corresponding series of the Corporation's
Junior Subordinated Debentures (the "Corresponding Junior Subordinated
Debentures") with terms corresponding to the terms of that Issuer's Preferred
Securities (the "Related Preferred Securities"). Accordingly, if, as provided in
an accompanying Prospectus Supplement, the Corporation has the right to defer
payment of interest on a series of Corresponding Junior Subordinated Debentures,
then, if interest payments are so deferred, Distributions on the Related
Preferred Securities would also be deferred, but would continue to accumulate at
the rate per annum set forth in the related Prospectus Supplement. See
"Description of Preferred Securities -- Distributions."
---------------------
THESE SECURITIES ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF A BANK AND ARE
NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION
OR ANY OTHER GOVERNMENTAL AGENCY.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE 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 December 10, 1996.
<PAGE> 31
Taken together, the Corporation's obligations under each series of
Corresponding Junior Subordinated Debentures, the Indenture and the related
Trust Agreement and the related Guarantee (each, as defined herein), in the
aggregate, provide a full, irrevocable and unconditional guarantee of payments
of Distributions and other amounts due on the Related Preferred Securities. See
"Relationship Among the Preferred Securities, the Corresponding Junior
Subordinated Debentures and the Guarantees -- Full and Unconditional Guarantee."
The payment of Distributions with respect to the Preferred Securities of each
Issuer and payments on liquidation of such Issuer or redemption of such
Preferred Securities, in each case out of funds held by such Issuer, are each
irrevocably guaranteed by the Corporation to the extent described herein (each a
"Guarantee"). See "Description of Guarantees." The obligations of the
Corporation under each Guarantee will be unsecured and subordinate and junior in
right of payment to all Senior Debt of the Corporation.
The Corresponding Junior Subordinated Debentures will be the sole assets of
each Issuer and payments under the Corresponding Junior Subordinated Debentures
will be the only revenue of each Issuer. If so provided in an accompanying
Prospectus Supplement, the Corporation may, upon receipt of approval of the
Federal Reserve (if such approval is then required under the applicable capital
guidelines or policies), redeem the Corresponding Junior Subordinated Debentures
(and thereby cause the redemption of the Trust Securities) or may terminate each
Issuer and, after satisfaction of liabilities to the creditors of such Issuer as
required by applicable law, cause the Corresponding Junior Subordinated
Debentures to be distributed to the holders of Preferred Securities in exchange
therefor upon liquidation of their interests in such Issuer. See "Description of
Preferred Securities -- Liquidation Distribution Upon Termination."
The Junior Subordinated Debentures and Preferred Securities may be offered
in amounts, at prices and on terms to be determined at the time of offering;
provided, however, the aggregate initial public offering price of all Junior
Subordinated Debentures (other than Corresponding Junior Subordinated
Debentures) and Preferred Securities (including the Corresponding Junior
Subordinated Debentures) issued pursuant to the Registration Statement of which
this Prospectus forms a part shall not exceed $750,000,000. Certain specific
terms of the Junior Subordinated Debentures or Preferred Securities in respect
of which this Prospectus is being delivered will be described in an accompanying
Prospectus Supplement, including without limitation and where applicable and to
the extent not set forth herein, (a) in the case of Junior Subordinated
Debentures, the specific designation, aggregate principal amount, denominations,
Stated Maturity (including any provisions for the shortening or extension
thereof), interest payment dates, interest rate (which may be fixed or variable)
or method of calculating interest, if any, applicable Extension Period or
interest deferral terms, if any, place or places where principal, premium, if
any, and interest, if any, will be payable, any terms of redemption, any sinking
fund provisions, terms for any conversion or exchange into other securities,
initial offering or purchase price, methods of distribution and any other
special terms, and (b) in the case of Preferred Securities, the identity of the
Issuer, specific title, aggregate stated liquidation amount, number of
securities, Distribution rate or method of calculating such rate, Distribution
payment dates, applicable Distribution deferral terms, if any, place or places
where Distributions will be payable, any terms of redemption, exchange, initial
offering or purchase price, methods of distribution and any other special terms.
The Prospectus Supplement also will contain information, as applicable,
about certain United States federal income tax consequences relating to the
Junior Subordinated Debentures and Preferred Securities.
The Junior Subordinated Debentures and Preferred Securities may be sold to
or through underwriters, dealers or agents or directly to purchasers. See "Plan
of Distribution." The names of any underwriters, dealers or agents involved in
the sale of Junior Subordinated Debentures or Preferred Securities in respect of
which this Prospectus is being delivered and any applicable fee, commission or
discount arrangements with them will be set forth in a Prospectus Supplement.
The Prospectus Supplement will state whether the Junior Subordinated Debentures
or Preferred Securities will be listed on any national securities exchange or
automated quotation system. If the Junior Subordinated Debentures or Preferred
Securities are not listed on any national securities exchange or automated
quotation system, there can be no assurance that there will be a secondary
market for the Junior Subordinated Debentures or Preferred Securities.
This Prospectus may not be used to consummate sales of Junior Subordinated
Debentures or Preferred Securities unless accompanied by a Prospectus
Supplement.
------------------------
2
<PAGE> 32
AVAILABLE INFORMATION
The Corporation 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 Corporation and the Issuers have filed with the Commission a
Registration Statement on Form S-3 (together with all amendments and exhibits
thereto, 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 the information set forth in the
Registration Statement, certain portions of which have been omitted as permitted
by the rules and regulations of the Commission. For further information with
respect to the Corporation and the securities offered hereby, reference is made
to the Registration Statement and the exhibits and the financial statements,
notes and schedules filed as a part thereof or incorporated by reference
therein, which may be inspected at the public reference facilities of the
Commission at the addresses set forth above or through the Commission's homepage
on the Internet. Statements made in this Prospectus concerning the contents of
any documents referred to herein are not necessarily complete, and in each
instance are qualified in all respects by reference to the copy of such document
filed as an exhibit to the Registration Statement.
No separate financial statements of any Issuer have been included herein.
The Corporation and the Issuers do not consider that such financial statements
would be material to holders of the Preferred Securities because each Issuer is
a newly formed special purpose entity, has no operating history or independent
operations and is not engaged in and does not propose to engage in any activity
other than holding as trust assets the Corresponding Junior Subordinated
Debentures of the Corporation and issuing the Trust Securities. Furthermore,
taken together, the Corporation's obligations under each series of Corresponding
Junior Subordinated Debentures, the Indenture, the related Trust Agreement (as
defined herein) and the related Guarantee provide, in the aggregate, a full,
irrevocable and unconditional guarantee of payments of Distributions and other
amounts due on the Related Preferred Securities of an Issuer. See "The Issuers,"
"Description of Preferred Securities," "Description of Junior Subordinated
Debentures -- Corresponding Junior Subordinated Debentures" and "Description of
Guarantees." In addition, the Corporation does not expect that any of the
Issuers will be filing reports under the Exchange Act with the Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Corporation with the Commission are
incorporated into this Prospectus by reference:
1. The Corporation'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 Corporation's Quarterly Reports on Form 10-Q for the quarters
ended March 31, 1996, June 30, 1996 and September 30, 1996.
3. The Corporation's Current Reports on Form 8-K dated November 26,
1996, December 3, 1996 and December 5, 1996.
3
<PAGE> 33
Each document or report filed by the Corporation pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act after the date hereof and prior to the
termination of any offering of securities made by this Prospectus shall be
deemed to be incorporated by reference into this Prospectus and to be a part of
this Prospectus from the date of filing of such document. Any statement
contained herein, or in a document all or a portion of which is incorporated or
deemed to be incorporated by reference herein, shall be deemed to be modified or
superseded for purposes of the Registration Statement and this Prospectus to the
extent that a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of the Registration Statement or this Prospectus.
The Corporation will provide without charge to any person to whom this
Prospectus is delivered, on the written or oral request of such person, a copy
of any or all of the foregoing documents incorporated by reference herein (other
than exhibits not specifically incorporated by reference into the texts of such
documents). Requests for such documents should be directed to: MBNA Corporation,
Wilmington, Delaware 19884, Attention: Investor Relations, (800) 362-6255.
MBNA CORPORATION
MBNA Corporation 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, a national bank organized in January 1991, as the
successor to a national bank organized in 1982.
The Corporation's principal executive offices are located in Wilmington,
Delaware 19884, and its telephone number is (800) 362-6255.
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 Corporation 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 YEARS ENDED DECEMBER 31,
30, --------------------------------------
1996* 1995 1994 1993** 1992 1991
------------ ---- ---- ------ ---- ----
<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 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 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 each been 2.9 and 9.9, respectively.
4
<PAGE> 34
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
Corporation's preferred stock outstanding. The Corporation 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.
THE ISSUERS
Each Issuer is a statutory business trust created under Delaware law
pursuant to (i) a trust agreement executed by the Corporation, as Depositor of
the Issuer, and an Administrative Trustee (as defined herein) of such Issuer and
(ii) the filing of a certificate of trust with the Delaware Secretary of State.
Each trust agreement will be amended and restated in its entirety (each, as so
amended and restated, a "Trust Agreement") substantially in the form filed as an
exhibit to the Registration Statement of which this Prospectus forms a part.
Each Trust Agreement will be qualified as an indenture under the Trust Indenture
Act of 1939, as amended (the "Trust Indenture Act"). Each Issuer exists for the
exclusive purposes of (i) issuing and selling its Trust Securities, (ii) using
the proceeds from the sale of such Trust Securities to acquire a series of
Corresponding Junior Subordinated Debentures issued by the Corporation, and
(iii) engaging in only those other activities necessary or incidental thereto
(such as registering the transfer of Trust Securities). Accordingly, the
Corresponding Junior Subordinated Debentures will be the sole assets of each
Issuer, and payments under the Corresponding Junior Subordinated Debentures will
be the sole revenue of each Issuer.
All of the Common Securities of each Issuer will be owned by the
Corporation. The Common Securities of an Issuer will rank pari passu, and
payments will be made thereon pro rata, with the Preferred Securities of such
Issuer, except that upon the occurrence and continuance of an event of default
under a Trust Agreement resulting from an event of default under the Indenture,
the rights of the Corporation as holder of the Common Securities to payment in
respect of Distributions and payments upon liquidation or redemption will be
subordinated to the rights of the holders of the Preferred Securities of such
Issuer. See "Description of Preferred Securities -- Subordination of Common
Securities." The Corporation will acquire Common Securities in an aggregate
Liquidation Amount (as defined herein) equal to not less than 3% of the total
capital of each Issuer.
Unless otherwise specified in the applicable Prospectus Supplement, each
Issuer has a term of approximately 55 years, but may terminate earlier as
provided in the applicable Trust Agreement. Each Issuer's business and affairs
are conducted by its trustees, each appointed by the Corporation as holder of
the Common Securities. The trustees for each Issuer will be The Bank of New
York, as the Property Trustee (the "Property Trustee"), The Bank of New York
(Delaware), as the Delaware Trustee (the "Delaware Trustee"), and two individual
trustees (the "Administrative Trustees") who are employees or officers of or
affiliated with the Corporation (collectively, the "Issuer Trustees"). The Bank
of New York, as Property Trustee, will act as sole trustee under each Trust
Agreement for purposes of compliance with the Trust Indenture Act. The Bank of
New York will also act as trustee under the Guarantees and the Indenture. See
"Description of Guarantees" and "Description of Junior Subordinated Debentures."
The holder of the Common Securities of an Issuer, or the holders of a majority
in Liquidation Amount of the Related Preferred Securities if an event of default
under the Trust Agreement for such Issuer has occurred and is continuing, will
be entitled to appoint, remove or replace the Property Trustee and/or the
Delaware Trustee for such Issuer. In no event will the holders of the Preferred
Securities have the right to vote to appoint, remove or replace the
Administrative Trustees; such voting rights are vested exclusively in the holder
of the Common Securities. The duties and obligations of each Issuer Trustee are
governed by the applicable Trust Agreement. The
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Corporation will pay all fees and expenses related to each Issuer and the
offering of the Preferred Securities and will pay, directly or indirectly, all
ongoing costs, expenses and liabilities of each Issuer.
The principal executive office of each Issuer is Wilmington, Delaware 19884
and its telephone number is (800) 362-6255.
USE OF PROCEEDS
Except as otherwise set forth in the applicable Prospectus Supplement, the
Corporation intends to use the proceeds from the sale of its Junior Subordinated
Debentures (including Corresponding Junior Subordinated Debentures issued to the
Issuers in connection with the investment by the Issuers of all of the proceeds
from the sale of Trust Securities) for general corporate purposes, including
working capital, capital expenditures, investments in or loans to subsidiaries,
refinancing of debt, redemption or repurchase of shares of its outstanding
common and preferred stock, the satisfaction of other obligations or for such
other purposes as may be specified in the applicable Prospectus Supplement.
DESCRIPTION OF JUNIOR SUBORDINATED DEBENTURES
The Junior Subordinated Debentures are to be issued in one or more series
under a Junior Subordinated Indenture, as supplemented from time to time (as so
supplemented, the "Indenture"), between the Corporation and The Bank of New York
as trustee (the "Debenture Trustee"). This summary of certain terms and
provisions of the Junior Subordinated Debentures, Corresponding Junior
Subordinated Debentures and the Indenture, which summarizes the material
provisions thereof, does not purport to be complete and is subject to, and is
qualified in its entirety by reference to, the Indenture, the form of which is
filed as an exhibit to the Registration Statement of which this Prospectus forms
a part, and to the Trust Indenture Act, to each of which reference is hereby
made. The Indenture is qualified under the Trust Indenture Act. Whenever
particular defined terms of the Indenture (as supplemented or amended from time
to time) are referred to herein or in a Prospectus Supplement, such defined
terms are incorporated herein or therein by reference.
GENERAL
Each series of Junior Subordinated Debentures will rank pari passu with all
other series of Junior Subordinated Debentures and will be unsecured and
subordinate and junior in right of payment to the extent and in the manner set
forth in the Indenture to all Senior Debt as defined below) of the Corporation.
See "-- Subordination." Because the Corporation is a holding company, the right
of the Corporation to participate in any distribution of assets of any
subsidiary, including the Bank, upon such subsidiary's liquidation or
reorganization or otherwise is subject to the prior claims of creditors of the
subsidiary, except to the extent the Corporation may itself be recognized as a
creditor of that subsidiary. Accordingly, the Junior Subordinated Debentures
will be effectively subordinated to all existing and future liabilities of the
Corporation's subsidiaries, and holders of Junior Subordinated Debentures should
look only to the assets of the Corporation for payments on the Junior
Subordinated Debentures. Except as otherwise provided in the applicable
Prospectus Supplement, the Indenture does not limit the incurrence or issuance
of other secured or unsecured debt of the Corporation, including Senior Debt,
whether under the Indenture, any other existing indenture or any other indenture
that the Corporation may enter into in the future or otherwise. See
"-- Subordination" and the applicable Prospectus Supplement relating to any
offering of Preferred Securities or Junior Subordinated Debentures.
The Junior Subordinated Debentures will be issuable in one or more series
pursuant to an indenture supplement to the Indenture or a resolution of the
Corporation's Board of Directors or a committee thereof.
The applicable Prospectus Supplement will describe the following terms of
the Junior Subordinated Debentures: (1) the title of the Junior Subordinated
Debentures; (2) any limit upon the aggregate principal amount of the Junior
Subordinated Debentures; (3) the date or dates on which the principal of the
Junior Subordinated Debentures is payable (the "Stated Maturity") or the method
of determination thereof; (4) the rate or rates, if any, at which the Junior
Subordinated Debentures shall bear interest, the dates on which any
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such interest shall be payable (the "Interest Payment Dates"), the right, if
any, of the Corporation to defer or extend an Interest Payment Date, and the
record date for any interest payable on any Interest Payment Date (the "Regular
Record Dates") or the method by which any of the foregoing shall be determined;
(5) the place or places where, subject to the terms of the Indenture as
described below under "-- Payment and Paying Agents," the principal of and
premium, if any, and interest on the Junior Subordinated Debentures will be
payable and where, subject to the terms of the Indenture as described below
under "-- Denominations, Registration and Transfer," the Junior Subordinated
Debentures may be presented for registration of transfer or exchange and the
place or places where notices and demands to or upon the Corporation in respect
of the Junior Subordinated Debentures and the Indentures may be made ("Place of
Payment"); (6) any period or periods within which, or date or dates on which,
the price or prices at which and the terms and conditions upon which Junior
Subordinated Debentures may be redeemed, in whole or in part, at the option of
the Corporation or a holder thereof; (7) the obligation or the right, if any, of
the Corporation or a holder thereof to redeem, purchase or repay the Junior
Subordinated Debentures and the period or periods within which, the price or
prices at which, the currency or currencies (including currency unit or units)
in which and the other terms and conditions upon which the Junior Subordinated
Debentures shall be redeemed, repaid or purchased, in whole or in part, pursuant
to such obligation; (8) the denominations in which any Junior Subordinated
Debentures shall be issuable if other than denominations of $25 and any integral
multiple thereof; (9) if other than in U.S. Dollars, the currency or currencies
(including currency unit or units) in which the principal of and premium, if
any, and interest on the Junior Subordinated Debentures shall be payable, or in
which the Junior Subordinated Debentures shall be denominated; (10) any
additions, modifications or deletions in the events of default under the
Indenture or covenants of the Corporation specified in the Indenture with
respect to the Junior Subordinated Debentures; (11) if other than the principal
amount thereof, the portion of the principal amount of Junior Subordinated
Debentures that shall be payable upon declaration of acceleration of the
maturity thereof; (12) any additions or changes to the Indenture with respect to
a series of Junior Subordinated Debentures as shall be necessary to permit or
facilitate the issuance of such series in bearer form, registrable or not
registrable as to principal, and with or without interest coupons; (13) any
index or indices used to determine the amount of payments of principal of and
premium, if any, on the Junior Subordinated Debentures and the manner in which
such amounts will be determined; (14) the terms and conditions relating to the
issuance of a temporary Global Security representing all of the Junior
Subordinated Debentures of such series and the exchange of such temporary Global
Security for definitive Junior Subordinated Debentures of such series; (15)
subject to the terms described herein under "-- Global Junior Subordinated
Debentures," whether the Junior Subordinated Debentures of the series shall be
issued in whole or in part in the form of one or more Global Securities and, in
such case, the depositary for such Global Securities, which depositary shall be
a clearing agency registered under the Exchange Act; (16) the appointment of any
paying agent or agents; (17) the terms and conditions of any obligation or right
of the Corporation or a holder to convert or exchange the Junior Subordinated
Debentures into Preferred Securities; (18) the form of Trust Agreement and
Guarantee Agreement, if applicable; (19) the relative degree, if any, to which
such Junior Subordinated Debentures of the series shall be senior to or be
subordinated to other series of such Junior Subordinated Debentures or other
indebtedness of the Corporation in right of payment, whether such other series
of Junior Subordinated Debentures or other indebtedness are outstanding or not;
and (20) any other terms of the Junior Subordinated Debentures not inconsistent
with the provisions of the Indenture.
Junior Subordinated Debentures may be sold at a substantial discount below
their stated principal amount, bearing no interest or interest at a rate which
at the time of issuance is below market rates. Certain United States federal
income tax consequences and special considerations applicable to any such Junior
Subordinated Debentures will be described in the applicable Prospectus
Supplement.
If the purchase price of any of the Junior Subordinated Debentures is
payable in one or more foreign currencies or currency units or if any Junior
Subordinated Debentures are denominated in one or more foreign currencies or
currency units or if the principal of, premium, if any, or interest, on any
Junior Subordinated Debentures is payable in one or more foreign currencies or
currency units, the restrictions, elections, certain United States federal
income tax consequences, specific terms and other information with respect to
such
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series of Junior Subordinated Debentures and such foreign currency or currency
units will be set forth in the applicable Prospectus Supplement.
If any index is used to determine the amount of payments of principal of,
premium, if any, or interest on any series of Junior Subordinated Debentures,
special United States federal income tax, accounting and other considerations
applicable thereto will be described in the applicable Prospectus Supplement.
DENOMINATIONS, REGISTRATION AND TRANSFER
Unless otherwise specified in the applicable Prospectus Supplement, the
Junior Subordinated Debentures will be issuable only in registered form without
coupons in denominations of $25 and any integral multiple thereof. Junior
Subordinated Debentures of any series will be exchangeable for other Junior
Subordinated Debentures of the same issue and series, of any authorized
denominations, of a like aggregate principal amount, of the same original issue
date and stated maturity and bearing the same interest rate.
Junior Subordinated Debentures may be presented for exchange as provided
above, and may be presented for registration of transfer (with the form of
transfer endorsed thereon, or a satisfactory written instrument of transfer,
duly executed), at the office of the appropriate securities registrar or at the
office of any transfer agent designated by the Corporation for such purpose with
respect to any series of Junior Subordinated Debentures and referred to in the
applicable Prospectus Supplement, without service charge and upon payment of any
taxes and other governmental charges as described in the Indenture. The
Corporation will appoint the Debenture Trustee as securities registrar under the
Indenture. If the applicable Prospectus Supplement refers to any transfer agents
(in addition to the securities registrar) initially designated by the
Corporation with respect to any series of Junior Subordinated Debentures, the
Corporation may at any time rescind the designation of any such transfer agent
or approve a change in the location through which any such transfer agent acts,
provided that the Corporation maintains a transfer agent in each place of
payment for such series. The Corporation may at any time designate additional
transfer agents with respect to any series of Junior Subordinated Debentures.
In the event of any redemption, neither the Corporation nor the Debenture
Trustee shall be required to (i) issue, register the transfer of or exchange
Junior Subordinated Debentures of any series during a period beginning at the
opening of business 15 days before the day of selection for redemption of Junior
Subordinated Debentures of that series and ending at the close of business on
the day of mailing of the relevant notice of redemption or (ii) transfer or
exchange any Junior Subordinated Debentures so selected for redemption, except,
in the case of any Junior Subordinated Debentures being redeemed in part, any
portion thereof not to be redeemed.
GLOBAL JUNIOR SUBORDINATED DEBENTURES
The Junior Subordinated Debentures of a series may be issued in whole or in
part in the form of one or more Global Junior Subordinated Debentures that will
be deposited with, or on behalf of, a depositary (the "Depositary") identified
in the Prospectus Supplement relating to such series. Global Junior Subordinated
Debentures may be issued only in fully registered form and in either temporary
or permanent form. Unless and until it is exchanged in whole or in part for the
individual Junior Subordinated Debentures represented thereby, a Global Junior
Subordinated Debenture may not be transferred except as a whole by the
Depositary for such Global Junior Subordinated Debenture to a nominee of such
Depositary or by a nominee of such Depositary to such Depositary or another
nominee of such Depositary or by the Depositary or any nominee to a successor
Depositary or any nominee of such successor.
The specific terms of the depositary arrangement with respect to a series
of Junior Subordinated Debentures will be described in the Prospectus Supplement
relating to such series. The Corporation anticipates that the following
provisions will generally apply to depositary arrangements.
Upon the issuance of a Global Junior Subordinated Debenture, and the
deposit of such Global Junior Subordinated Debenture with or on behalf of the
Depositary, the Depositary for such Global Junior Subordinated Debenture or its
nominee will credit, on its book-entry registration and transfer system, the
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respective principal amounts of the individual Junior Subordinated Debentures
represented by such Global Junior Subordinated Debenture to the accounts of
persons that have accounts with such Depositary ("Participants"). Such accounts
shall be designated by the dealers, underwriters or agents with respect to such
Junior Subordinated Debentures or by the Corporation if such Junior Subordinated
Debentures are offered and sold directly by the Corporation. Ownership of
beneficial interests in a Global Junior Subordinated Debenture will be limited
to Participants or persons that may hold interests through Participants.
Ownership of beneficial interests in such Global Junior Subordinated Debenture
will be shown on, and the transfer of that ownership will be effected only
through, records maintained by the applicable Depositary or its nominee (with
respect to interests of Participants) and the records of Participants (with
respect to interests of persons who hold through Participants). The laws of some
states require that certain purchasers of securities take physical delivery of
such securities in definitive form. Such limits and such laws may impair the
ability to transfer beneficial interests in a Global Junior Subordinated
Debenture.
So long as the Depositary for a Global Junior Subordinated Debenture, or
its nominee, is the registered owner of such Global Junior Subordinated
Debenture, such Depositary or such nominee, as the case may be, will be
considered the sole owner or holder of the Junior Subordinated Debentures
represented by such Global Junior Subordinated Debenture for all purposes under
the Indenture governing such Junior Subordinated Debentures. Except as provided
below, owners of beneficial interests in a Global Junior Subordinated Debenture
will not be entitled to have any of the individual Junior Subordinated
Debentures of the series represented by such Global Junior Subordinated
Debenture registered in their names, will not receive or be entitled to receive
physical delivery of any such Junior Subordinated Debentures of such series in
definitive form and will not be considered the owners or holders thereof under
the Indenture.
Payments of principal of and premium, if any, and interest on individual
Junior Subordinated Debentures represented by a Global Junior Subordinated
Debenture registered in the name of a Depositary or its nominee will be made to
the Depositary or its nominee, as the case may be, as the registered owner of
the Global Junior Subordinated Debenture representing such Junior Subordinated
Debentures. None of the Corporation, the Debenture Trustee, any Paying Agent, or
the Securities Registrar for such Junior Subordinated Debentures will have any
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests of the Global Junior
Subordinated Debenture representing such Junior Subordinated Debentures or for
maintaining, supervising or reviewing any records relating to such beneficial
ownership interests.
The Corporation expects that the Depositary for a series of Junior
Subordinated Debentures or its nominee, upon receipt of any payment of
principal, premium, if any, or interest in respect of a permanent Global Junior
Subordinated Debenture representing any of such Junior Subordinated Debentures,
immediately will credit Participants' accounts with payments in amounts
proportionate to their respective beneficial interest in the principal amount of
such Global Junior Subordinated Debenture for such Junior Subordinated
Debentures as shown on the records of such Depositary or its nominee. The
Corporation also expects that payments by Participants to owners of beneficial
interests in such Global Junior Subordinated Debenture held through such
Participants will be governed by standing instructions and customary practices,
as is now the case with securities held for the accounts of customers in bearer
form or registered in "street name." Such payments will be the responsibility of
such Participants.
Unless otherwise specified in the applicable Prospectus Supplement, if a
Depositary for a series of Junior Subordinated Debentures is at any time
unwilling, unable or ineligible to continue as depositary and a successor
depositary is not appointed by the Corporation within 90 days, the Corporation
will issue individual Junior Subordinated Debentures of such series in exchange
for the Global Junior Subordinated Debenture representing such series of Junior
Subordinated Debentures. In addition, the Corporation may at any time and in its
sole discretion, subject to any limitations described in the Prospectus
Supplement relating to such Junior Subordinated Debentures, determine not to
have any Junior Subordinated Debentures of such series represented by one or
more Global Junior Subordinated Debentures and, in such event, will issue
certificated Junior Subordinated Debentures of such series in exchange for the
Global Junior Subordinated Debenture or Securities. Further, if the Corporation
so specifies with respect to the Junior Subordinated Debentures of a series, an
owner of a beneficial interest in a Global Junior Subordinated Debenture
representing Junior
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Subordinated Debentures of such series may, on terms acceptable to the
Corporation, the Debenture Trustee and the Depositary for such Global Junior
Subordinated Debenture, receive certificated Junior Subordinated Debentures of
such series in exchange for such beneficial interests, subject to any
limitations described in the Prospectus Supplement relating to such Junior
Subordinated Debentures. In any such instance, an owner of a beneficial interest
in a Global Junior Subordinated Debenture will be entitled to physical delivery
of certificated Junior Subordinated Debentures of the series represented by such
Global Junior Subordinated Debenture equal in principal amount to such
beneficial interest and to have such Junior Subordinated Debentures registered
in its name. Individual Junior Subordinated Debentures of such series so issued
will be issued in denominations, unless otherwise specified by the Corporation,
of $25 and integral multiples thereof.
PAYMENT AND PAYING AGENTS
Unless otherwise indicated in the applicable Prospectus Supplement, payment
of principal of and premium, if any, and any interest on Junior Subordinated
Debentures will be made at the office of the Debenture Trustee in the City of
New York or at the office of such paying agent or paying agents as the
Corporation may designate from time to time in the applicable Prospectus
Supplement, except that at the option of the Corporation payment of any interest
may be made (i) except in the case of Global Junior Subordinated Debentures, by
check mailed to the address of the person entitled thereto as such address shall
appear in the securities register or (ii) by transfer to an account maintained
by the person entitled thereto as specified in the securities register, provided
that proper transfer instructions have been received by the Regular Record Date.
Unless otherwise indicated in the applicable Prospectus Supplement, payment of
any interest on Junior Subordinated Debentures will be made to the person in
whose name such Junior Subordinated Debenture is registered at the close of
business on the Regular Record Date for such interest, except in the case of
defaulted interest. The Corporation may at any time designate additional paying
agents or rescind the designation of any paying agent; however the Corporation
will at all times be required to maintain a paying agent in each place of
payment for each series of Junior Subordinated Debentures.
Any moneys deposited with the Debenture Trustee or any paying agent, or
then held by the Corporation in trust, for the payment of the principal of and
premium, if any, or interest on any Junior Subordinated Debenture and remaining
unclaimed for two years after such principal and premium, if any, or interest
has become due and payable shall, at the request of the Corporation, be repaid
to the Corporation and the holder of such Junior Subordinated Debenture shall
thereafter look, as a general unsecured creditor, only to the Corporation for
payment thereof.
OPTION TO DEFER INTEREST PAYMENTS
If provided in the applicable Prospectus Supplement, the Corporation will
have the right at any time and from time to time during the term of any series
of Junior Subordinated Debentures to defer payment of interest for up to such
number of consecutive interest payment periods as may be specified in the
applicable Prospectus Supplement (each, an "Extension Period"), subject to the
terms, conditions and covenants, if any, specified in such Prospectus
Supplement, provided that such Extension Period may not extend beyond the Stated
Maturity of such series of Junior Subordinated Debentures. Certain United States
federal income tax consequences and special considerations applicable to any
such Junior Subordinated Debentures will be described in the applicable
Prospectus Supplement.
REDEMPTION
Unless otherwise indicated in the applicable Prospectus Supplement, Junior
Subordinated Debentures will not be subject to any sinking fund.
Unless otherwise indicated in the applicable Prospectus Supplement, the
Corporation may, at its option and subject to receipt of prior approval by the
Board of Governors of the Federal Reserve System (the "Federal Reserve") if then
required under applicable capital guidelines or policies, redeem the Junior
Subordinated Debentures of any series in whole at any time or in part from time
to time. If the Junior Subordinated Debentures of any series are so redeemable
only on or after a specified date or upon the
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satisfaction of additional conditions, the applicable Prospectus Supplement will
specify such date or describe such conditions. Junior Subordinated Debentures in
denominations larger than $25 may be redeemed in part but only in integral
multiples of $25. Except as otherwise specified in the applicable Prospectus
Supplement, the redemption price for any Junior Subordinated Debenture so
redeemed shall equal any accrued and unpaid interest thereon to the redemption
date, plus 100% of the principal amount thereof.
Except as otherwise specified in the applicable Prospectus Supplement, if a
Debenture Tax Event (as defined below) in respect of a series of Junior
Subordinated Debentures or a Capital Treatment Event (as defined below) shall
occur and be continuing, the Corporation may, at its option and subject to
receipt of prior approval by the Federal Reserve if then required under
applicable capital guidelines or policies, redeem such series of Junior
Subordinated Debentures in whole (but not in part) at any time within 90 days
following the occurrence of such Debenture Tax Event or Capital Treatment Event,
at a redemption price equal to 100% of the principal amount of such Junior
Subordinated Debentures then outstanding plus accrued and unpaid interest to the
date fixed for redemption.
"Debenture Tax Event" means the receipt by the Corporation of an opinion of
counsel experienced in such matters to the effect that, as a result of any
amendment to, or change (including any announced proposed change) in, the laws
(or any regulations thereunder) of the United States or any political
subdivision or taxing authority thereof or therein, or as a result of any
official administrative pronouncement or judicial decision interpreting or
applying such laws or regulations, which amendment or change is effective or
which proposed change, pronouncement or decision is announced on or after the
date of issuance of the applicable series of Junior Subordinated Debentures
under the Indenture, there is more than an insubstantial risk that interest
payable by the Corporation on such series of Junior Subordinated Debentures is
not, or within 90 days of the date of such opinion will not be, deductible by
the Corporation, in whole or in part, for United States federal income tax
purposes.
A "Capital Treatment Event" means the reasonable determination by the
Corporation that, as a result of any amendment to, or change (including any
proposed change) in, the laws (or any regulations thereunder) of the United
States or any political subdivision thereof or therein, or as a result of any
official or administrative pronouncement or action or judicial decision
interpreting or applying such laws or regulations, which amendment or change is
effective or such proposed change, pronouncement, action or decision is
announced on or after the date of issuance of the applicable Preferred
Securities under the applicable Trust Agreement, there is more than an
insubstantial risk that the Corporation will not be entitled to treat an amount
equal to the Liquidation Amount of the applicable Preferred Securities as "Tier
1 Capital" (or the then equivalent thereof) for purposes of the capital adequacy
guidelines of the Federal Reserve, as then in effect and applicable to the
Corporation.
Notice of any redemption will be mailed at least 30 days but not more than
60 days before the redemption date to each holder of Junior Subordinated
Debentures to be redeemed at its registered address. Unless the Corporation
defaults in payment of the redemption price, on and after the redemption date
interest ceases to accrue on such Junior Subordinated Debentures or portions
thereof called for redemption.
RESTRICTIONS ON CERTAIN PAYMENTS
The Corporation will covenant, as to each series of Junior Subordinated
Debentures, that it will not, and will not permit any subsidiary of the
Corporation to, (i) declare or pay any dividends or distributions on, or redeem,
purchase, acquire or make a liquidation payment with respect to, any of the
Corporation's capital stock, (ii) make any payment of principal, interest or
premium, if any, on or repay or repurchase or redeem any debt securities of the
Corporation (including other series of Junior Subordinated Debentures) that rank
pari passu with or junior in interest to the Junior Subordinated Debentures or
(iii) make any guarantee payments with respect to any guarantee by the
Corporation of the debt securities of any subsidiary of the Corporation if such
guarantee ranks pari passu with or junior in interest to the Junior Subordinated
Debentures (other than (a) dividends or distributions in capital stock of the
Corporation, (b) any declaration of a dividend in connection with the
implementation of a stockholders' rights plan, or the redemption or repurchase
of any such rights pursuant thereto, (c) payments under any Guarantee with
respect to the series
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of related Preferred Securities and (d) purchases of common stock related to the
issuance of common stock or rights under any of the Corporation's benefit plans
for its directors, officers or employees, related to the issuance of common
stock or rights under a dividend reinvestment and stock purchase plan, or
related to the issuance of common stock (or securities convertible into or
exchangeable for common stock) as consideration in an acquisition transaction
that was entered into prior to the commencement of such Extension Period) if at
such time (i) there shall have occurred any event of which the Corporation has
actual knowledge (a) that with the giving of notice or the lapse of time, or
both, would constitute an "Event of Default" under the Indenture with respect to
the Junior Subordinated Debentures of such series and (b) in respect of which
the Corporation shall not have taken reasonable steps to cure, (ii) if such
Junior Subordinated Debentures are held by an Issuer of a series of Related
Preferred Securities, the Corporation shall be in default with respect to its
payment of any obligations under the Guarantee relating to such Related
Preferred Securities or (iii) the Corporation shall have given notice of its
selection of an Extension Period as provided in the Indenture with respect to
the Junior Subordinated Debentures of such series and shall not have rescinded
such notice, or such Extension Period, or any extension thereof, shall be
continuing.
MODIFICATION OF INDENTURE
From time to time the Corporation and the Debenture Trustee may, without
the consent of the holders of any series of Junior Subordinated Debentures,
amend, waive or supplement the Indenture for specified purposes, including,
among other things, curing ambiguities, defects or inconsistencies (provided
that any such action does not materially adversely affect the interest of the
holders of any series of Junior Subordinated Debentures or, in the case of
Corresponding Junior Subordinated Debentures, the holders of the Related
Preferred Securities so long as they remain outstanding) and qualifying, or
maintaining the qualification of, the Indenture under the Trust Indenture Act.
The Indenture contains provisions permitting the Corporation and the Debenture
Trustee, with the consent of the holders of not less than a majority in
principal amount of each outstanding series of Junior Subordinated Debentures
affected, to modify the Indenture in a manner adversely affecting the rights of
the holders of such series of the Junior Subordinated Debentures in any material
respect; provided, that no such modification may, without the consent of the
holder of each outstanding Junior Subordinated Debenture so affected, (i) change
the Stated Maturity of any series of Junior Subordinated Debentures (except as
otherwise specified in the applicable Prospectus Supplement), or reduce the
principal amount thereof, or reduce the rate or extend the time of payment of
interest thereon or (ii) reduce the percentage of principal amount of Junior
Subordinated Debentures of any series, the holders of which are required to
consent to any such modification of the Indenture, provided further that, in the
case of Corresponding Junior Subordinated Debentures, so long as any Related
Preferred Securities remain outstanding, (a) no such modification may be made
that adversely affects the holders of such Preferred Securities in any material
respect, and no termination of the Indenture may occur, and no waiver of any
event of default or compliance with any covenant under the Indenture may be
effective, without the prior consent of the holders of at least a majority of
the aggregate Liquidation Amount of all Related Preferred Securities affected
unless and until the principal of the Corresponding Junior Subordinated
Debentures and all accrued and unpaid interest thereon have been paid in full
and certain other conditions have been satisfied, and (b) where a consent under
the Indenture would require the consent of each holder of Corresponding Junior
Subordinated Debentures, no such consent shall be given by the Property Trustee
without the prior consent of each holder of Related Preferred Securities.
In addition, the Corporation and the Debenture Trustee may execute, without
the consent of any holder of Junior Subordinated Debentures, any supplemental
Indenture for the purpose of creating any new series of Junior Subordinated
Debentures.
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DEBENTURE EVENTS OF DEFAULT
The Indenture provides that any one or more of the following described
events with respect to a series of Junior Subordinated Debentures that has
occurred and is continuing constitutes a "Debenture Event of Default" with
respect to such series of Junior Subordinated Debentures:
(i) failure for 30 days to pay any interest on such series of Junior
Subordinated Debentures when due (subject to the deferral of any interest
payment in the case of an Extension Period); or
(ii) failure to pay any principal or premium, if any, on such series
of Junior Subordinated Debentures when due, whether at maturity or upon
redemption; or
(iii) failure to observe or perform in any material respect certain
other covenants contained in the Indenture for 90 days after written notice
to the Corporation from the Debenture Trustee or the holders of at least
25% in aggregate outstanding principal amount of such affected series of
outstanding Junior Subordinated Debentures; or
(iv) certain events in bankruptcy, insolvency or reorganization of the
Corporation.
The holders of a majority in aggregate outstanding principal amount of
Junior Subordinated Debentures of each series affected have the right to direct
the time, method and place of conducting any proceeding for any remedy available
to the Debenture Trustee. The Debenture Trustee or the holders of not less than
25% in aggregate outstanding principal amount of Junior Subordinated Debentures
of each series affected may declare the principal due and payable immediately
upon a Debenture Event of Default with respect to such series, and, in the case
of Corresponding Junior Subordinated Debentures, should the Debenture Trustee or
such holders of such Corresponding Junior Subordinated Debentures fail to make
such declaration, the holders of at least 25% in aggregate Liquidation Amount of
the Related Preferred Securities shall have such right. The holders of a
majority in aggregate outstanding principal amount of Junior Subordinated
Debentures of each series affected may annul such declaration with respect to
such series. In the case of Corresponding Junior Subordinated Debentures of any
series, should the holders of such Corresponding Junior Subordinated Debentures
fail to annul such declaration, the holders of a majority in aggregate
Liquidation Amount of the series of Related Preferred Securities affected shall
have such right.
The holders of a majority in aggregate outstanding principal amount of each
series of the Junior Subordinated Debentures affected thereby may, on behalf of
the holders of all the Junior Subordinated Debentures of such series, waive any
default, except a default in the payment of principal or interest (unless such
default has been cured and a sum sufficient to pay all matured installments of
interest, premium (if any) and principal due with respect to such series
otherwise than by acceleration has been deposited with the Debenture Trustee) or
a default in respect of a covenant or provision which under the Indenture cannot
be modified or amended without the consent of the holder of each outstanding
Junior Subordinated Debenture of such series. In the case of Corresponding
Junior Subordinated Debentures of a series, should the holders of such
Corresponding Junior Subordinated Debentures fail to annul such declaration and
waive such default, the holders of a majority in aggregate Liquidation Amount of
the series of Related Preferred Securities affected shall have such right. The
Corporation is required to file annually with the Debenture Trustee a
certificate as to whether or not the Corporation is in compliance with all the
conditions and covenants applicable to it under the Indenture.
In case a Debenture Event of Default shall occur and be continuing as to a
series of Corresponding Junior Subordinated Debentures, the Property Trustee
will have the right to declare the principal of and the interest on such
Corresponding Junior Subordinated Debentures, and any other amounts payable
under the Indenture, to be forthwith due and payable and to enforce its other
rights as a creditor with respect to such Corresponding Junior Subordinated
Debentures.
ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF PREFERRED SECURITIES
If a Debenture Event of Default with respect to a series of Corresponding
Junior Subordinated Debentures has occurred and is continuing and such event is
attributable to the failure of the Corporation to
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pay interest, premium (if any) or principal on such Corresponding Junior
Subordinated Debentures on the date such interest, premium (if any) or principal
is due and payable, a holder of Preferred Securities may institute a legal
proceeding directly against the Corporation for enforcement of payment to such
holder of the principal of or interest or premium (if any) on such Corresponding
Junior Subordinated Debentures having a principal amount equal to the aggregate
Liquidation Amount of the Related Preferred Securities of such holder (a "Direct
Action"). The Corporation may not amend the Indenture to remove the foregoing
right to bring a Direct Action without the prior written consent of the holders
of all of the Preferred Securities outstanding. If the right to bring a Direct
Action is removed, the applicable Issuer may become subject to the reporting
obligations under the Exchange Act. The Corporation shall have the right under
the Indenture to set-off any payment made to such holder of Preferred Securities
by the Corporation in connection with a Direct Action.
The holders of the Preferred Securities will not be able to exercise
directly any remedies other than those set forth in the preceding paragraph
available to the holders of the Junior Subordinated Debentures unless there
shall have been an event of default under the Trust Agreement. See "Description
of Preferred Securities -- Events of Default; Notice."
CONSOLIDATION, MERGER, SALE OF ASSETS AND OTHER TRANSACTIONS
The Indenture provides that the Corporation may consolidate with or merge
into any other person or convey, transfer or lease its properties and assets
substantially as an entirety to any person, provided that (i) in case the
Corporation consolidates with or merges into another person or conveys or
transfers its properties and assets substantially as an entirety to any person,
the successor person is organized under the laws of the United States or any
state or the District of Columbia, and such successor person expressly assumes
the Corporation's obligations on the Junior Subordinated Debentures issued under
the Indenture; (ii) immediately after giving effect thereto, no Debenture Event
of Default, and no event which, after notice or lapse of time or both, would
become a Debenture Event of Default, shall have occurred and be continuing;
(iii) in the case of Corresponding Junior Subordinated Debentures, such
transaction is permitted under the related Trust Agreement and Guarantee and
does not give rise to any breach or violation of the related Trust Agreement or
Guarantee, and (iv) certain other conditions as prescribed by the Indenture are
met.
The general provisions of the Indenture do not afford holders of the Junior
Subordinated Debentures protection in the event of a highly leveraged or other
transaction involving the Corporation that may adversely affect holders of the
Junior Subordinated Debentures.
SATISFACTION AND DISCHARGE
The Indenture provides that when, among other things, all Junior
Subordinated Debentures not previously delivered to the Debenture Trustee for
cancellation (i) have become due and payable or (ii) will become due and payable
at their Stated Maturity within one year, and the Corporation deposits or causes
to be deposited with the Debenture Trustee funds, in trust, for the purpose and
in an amount in the currency or currencies in which the Junior Subordinated
Debentures are payable sufficient to pay and discharge the entire indebtedness
on the Junior Subordinated Debentures not previously delivered to the Debenture
Trustee for cancellation, for the principal (and premium, if any) and interest
to the date of the deposit or to the Stated Maturity, as the case may be, then
the Indenture will cease to be of further effect (except as to the Corporation's
obligations to pay all other sums due pursuant to the Indenture and to provide
the officers' certificates and opinions of counsel described therein), and the
Corporation will be deemed to have satisfied and discharged the Indenture.
CONVERSION OR EXCHANGE
If and to the extent indicated in the applicable Prospectus Supplement, the
Junior Subordinated Debentures of any series may be convertible or exchangeable
into Junior Subordinated Debentures of another series or into Preferred
Securities of another series. The specific terms on which Junior Subordinated
Debentures of any series may be so converted or exchanged will be set forth in
the applicable Prospectus
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Supplement. Such terms may include provisions for conversion or exchange, either
mandatory, at the option of the holder, or at the option of the Corporation, in
which case the number of shares of Preferred Securities or other securities to
be received by the holders of Junior Subordinated Debentures being converted or
exchanged would be calculated as of a time and in the manner stated in the
applicable Prospectus Supplement.
SUBORDINATION
In the Indenture, the Corporation has covenanted and agreed that any Junior
Subordinated Debentures issued thereunder will be subordinate and junior in
right of payment to all Senior Debt to the extent provided in the Indenture.
Upon any payment or distribution of assets of the Corporation upon any
liquidation, dissolution, winding up, reorganization, assignment for the benefit
of creditors, marshaling of assets or any bankruptcy, insolvency, debt
restructuring or similar proceedings in connection with any insolvency or
bankruptcy proceeding of the Corporation, the holders of Senior Debt will first
be entitled to receive payment in full of principal of (and premium, if any) and
interest, if any, on such Senior Debt before the holders of Junior Subordinated
Debentures or, in the case of Corresponding Junior Subordinated Debentures, the
Property Trustee on behalf of the holders of Trust Securities, will be entitled
to receive or retain any payment in respect of the principal of (and premium, if
any) or interest, if any, on the Junior Subordinated Debentures; provided,
however, that holders of Senior Debt shall not be entitled to receive payment of
any such amounts to the extent that such holders would be required by the
subordination provisions of such Senior Debt to pay such amounts over to the
obligees on trade accounts payable or other liabilities arising in the ordinary
course of the Corporation's business.
In the event of the acceleration of the maturity of any Junior Subordinated
Debentures, the holders of all Senior Debt outstanding at the time of such
acceleration will first be entitled to receive payment in full of all amounts
due thereon (including any amounts due upon acceleration) before the holders of
Junior Subordinated Debentures will be entitled to receive or retain any payment
in respect of the principal of or premium, if any, or interest, if any, on the
Junior Subordinated Debentures; provided, however, that holders of Senior Debt
shall not be entitled to receive payment of any such amounts to the extent that
such holders would be required by the subordination provisions of such Senior
Debt to pay such amounts over to the obligees on trade accounts payable or other
liabilities arising in the ordinary course of the Corporation's business.
No payments on account of principal or premium, if any, or interest in
respect of the Junior Subordinated Debentures may be made if there shall have
occurred and be continuing a default in any payment with respect to Senior Debt
or an event of default with respect to any Senior Debt resulting in the
acceleration of the maturity thereof, or if any judicial proceeding shall be
pending with respect to any such default.
"Debt" means with respect to any person, whether recourse is to all or a
portion of the assets of such person and whether or not contingent, (i) every
obligation of such person for money borrowed; (ii) every obligation of such
person evidenced by bonds, debentures, notes or other similar instruments,
including obligations incurred in connection with the acquisition of property,
assets or businesses; (iii) every reimbursement obligation of such person with
respect to letters of credit, bankers' acceptances or similar facilities issued
for the account of such person; (iv) every obligation of such person issued or
assumed as the deferred purchase price of property or services (but excluding
trade accounts payable or accrued liabilities arising in the ordinary course of
business); (v) every capital lease obligation of such person; (vi) every
obligation of such person for claims in respect of derivative products such as
interest and foreign exchange rate contracts, commodity contracts and similar
arrangements; and (vii) and every obligation of the type referred to in clauses
(i) through (vi) of another person and all dividends of another person the
payment of which, in either case, such person has guaranteed or is responsible
or liable, directly or indirectly, as obligor or otherwise.
"Senior Debt" means the principal of and premium, if any, and interest, if
any (including interest accruing on or after the filing of any petition in
bankruptcy or for reorganization relating to the Corporation whether or not such
claim for post-petition interest is allowed in such proceeding), on Debt,
whether incurred on or prior to the date of the Indenture or thereafter
incurred, unless, in the instrument creating or evidencing the same or pursuant
to which the same is outstanding, it is provided that such obligations are not
superior in
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right of payment to the Junior Subordinated Debentures or to other Debt which is
pari passu with, or subordinated to, the Junior Subordinated Debentures;
provided, however, that Senior Debt shall not be deemed to include (i) any Debt
of the Corporation which when incurred and without respect to any election under
Section 1111(b) of the United States Bankruptcy Code of 1978, as amended, was
without recourse to the Corporation, (ii) any Debt of the Corporation to any of
its subsidiaries, (iii) Debt to any employee of the Corporation, (iv) Debt which
by its terms is subordinated to trade accounts payable or accrued liabilities
arising in the ordinary course of business to the extent that payments made to
the holders of such Debt by the holders of the Junior Subordinated Debentures as
a result of the subordination provisions of the Indenture would be greater than
such payments otherwise would have been as a result of any obligation of such
holders of such Debt to pay amounts over to the obligees on such trade accounts
payable or accrued liabilities arising in the ordinary course of business as a
result of subordination provisions to which such Debt is subject, and (v) any
other debt securities issued pursuant to the Indenture.
The Indenture places no limitation on the amount of Senior Debt that may be
incurred by the Corporation. The Corporation expects from time to time to incur
additional indebtedness and other obligations constituting Senior Debt.
The Indenture provides that the foregoing subordination provisions, insofar
as they relate to any particular issue of Junior Subordinated Debentures, may be
changed prior to such issuance. Any such change would be described in the
applicable Prospectus Supplement.
TRUST EXPENSES AND TAXES
In the Indenture, the Corporation, as borrower, has agreed to pay to each
Issuer all debts and other obligations (other than with respect to the Trust
Securities) and all costs and expenses of such Issuer (including costs and
expenses relating to the organization of such Issuer, the fees and expenses of
the related Issuer Trustees and the costs and expenses relating to the operation
of such Issuer) and the offering of the Preferred Securities, and to pay any and
all taxes, duties, assessments or other similar governmental charges (other than
United States withholding taxes), and all costs and expenses with respect to the
foregoing, to which such Issuer might become subject (any such payment of taxes,
duties, assessments or other governmental charges being referred to as
"Additional Sums").
GOVERNING LAW
The Indenture and the Junior Subordinated Debentures will be governed by
and construed in accordance with the laws of the State of New York.
INFORMATION CONCERNING THE DEBENTURE TRUSTEE
The Debenture Trustee shall have and be subject to all the duties and
responsibilities specified with respect to an indenture trustee under the Trust
Indenture Act. Subject to such provisions, the Debenture Trustee is under no
obligation to exercise any of the powers vested in it by the Indenture at the
request of any holder of Junior Subordinated Debentures, unless offered
reasonable indemnity by such holder against the costs, expenses and liabilities
which might be incurred thereby. The Debenture Trustee is not required to expend
or risk its own funds or otherwise incur personal financial liability in the
performance of its duties if the Debenture Trustee reasonably believes that
repayment or adequate indemnity is not reasonably assured to it.
CORRESPONDING JUNIOR SUBORDINATED DEBENTURES
The Corresponding Junior Subordinated Debentures may be issued in one or
more series of Junior Subordinated Debentures under the Indenture with terms
corresponding to the terms of a series of Related Preferred Securities. In that
event, concurrently with the issuance of each Issuer's Preferred Securities,
such Issuer will invest the proceeds thereof and the consideration paid by the
Corporation for the Common Securities of such Issuer in such series of
Corresponding Junior Subordinated Debentures issued by the Corporation to such
Issuer. Each series of Corresponding Junior Subordinated Debentures will be in
the principal amount equal to the aggregate stated Liquidation Amount of the
Related Preferred Securities and
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the Common Securities of such Issuer and will rank pari passu with all other
series of Junior Subordinated Debentures. Holders of the Related Preferred
Securities for a series of Corresponding Junior Subordinated Debentures will
have the rights, in connection with modifications to the Indenture or upon
occurrence of Debenture Events of Default, as described under "-- Modification
of Indenture" and "-- Debenture Events of Default," unless provided otherwise in
the Prospectus Supplement for such Related Preferred Securities.
Unless otherwise specified in the applicable Prospectus Supplement, if a
Tax Event (as defined herein) in respect of an Issuer of Related Preferred
Securities shall occur and be continuing, the Corporation may, at its option and
subject to prior approval of the Federal Reserve if then so required under
applicable capital guidelines or policies, redeem the Corresponding Junior
Subordinated Debentures at any time within 90 days of the occurrence of such Tax
Event, in whole but not in part, subject to the provisions of the Indenture, and
whether or not such Corresponding Junior Subordinated Debentures are then
otherwise redeemable at the option of the Corporation. The redemption price for
any Corresponding Junior Subordinated Debentures shall be equal to 100% of the
principal amount of such Corresponding Junior Subordinated Debentures then
outstanding plus accrued and unpaid interest to the date fixed for redemption.
For so long as the applicable Issuer is the holder of all the outstanding
Corresponding Junior Subordinated Debentures of such series, the proceeds of any
such redemption will be used by the Issuer to redeem the corresponding Trust
Securities in accordance with their terms. The Corporation may not redeem a
series of Corresponding Junior Subordinated Debentures in part unless all
accrued and unpaid interest has been paid in full on all outstanding
Corresponding Junior Subordinated Debentures of such series for all interest
periods terminating on or prior to the Redemption Date.
The Corporation will covenant, as to each series of Corresponding Junior
Subordinated Debentures, (i) to maintain directly or indirectly 100% ownership
of the Common Securities of the Issuer to which such Corresponding Junior
Subordinated Debentures have been issued, provided that certain successors which
are permitted pursuant to the Indenture may succeed to the Corporation's
ownership of the Common Securities, (ii) not to voluntarily terminate, wind up
or liquidate any Issuer, except (a) in connection with a distribution of
Corresponding Junior Subordinated Debentures to the holders of the Preferred
Securities in exchange therefor upon liquidation of such Issuer, or (b) in
connection with certain mergers, consolidations or amalgamations permitted by
the related Trust Agreement, in either such case, if so specified in the
applicable Prospectus Supplement upon prior approval of the Federal Reserve if
then so required under applicable capital guidelines on policies, and (iii) to
use its reasonable efforts, consistent with the terms and provisions of the
related Trust Agreement, to cause such Issuer to remain classified as a grantor
trust and not as an association taxable as a corporation for United States
federal income tax purposes.
DESCRIPTION OF PREFERRED SECURITIES
Pursuant to the terms of the Trust Agreement for each Issuer, the Issuer
Trustees on behalf of such Issuer will issue the Preferred Securities and the
Common Securities. The Preferred Securities of a particular issue will represent
beneficial ownership interests in the Issuer and the holders thereof will be
entitled to a preference in certain circumstances with respect to Distributions
and amounts payable on redemption or liquidation over the Common Securities of
such Issuer, as well as other benefits as described in the corresponding Trust
Agreement. This summary of certain provisions of the Preferred Securities and
each Trust Agreement, which summarizes the material terms thereof, does not
purport to be complete and is subject to, and is qualified in its entirety by
reference to, all the provisions of each Trust Agreement, including the
definitions therein of certain terms, and the Trust Indenture Act, to each of
which reference is hereby made. Wherever particular defined terms of a Trust
Agreement (as amended or supplemented from time to time) are referred to herein
or in a Prospectus Supplement, such defined terms are incorporated herein or
therein by reference. The form of the Trust Agreement has been filed as an
exhibit to the Registration Statement of which this Prospectus forms a part.
Each of the Issuers is a legally separate entity and the assets of one are not
available to satisfy the obligations of any of the others.
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GENERAL
The Preferred Securities of an Issuer will rank pari passu, and payments
will be made thereon pro rata, with the Common Securities of that Issuer except
as described under "-- Subordination of Common Securities." Legal title to the
Corresponding Junior Subordinated Debentures will be held by the Property
Trustee in trust for the benefit of the holders of the related Preferred
Securities and Common Securities. Each guarantee agreement executed by the
Corporation for the benefit of the holders of an Issuer's Trust Securities (the
"Guarantee") will be a guarantee on a subordinated basis with respect to the
related Trust Securities but will not guarantee payment of Distributions or
amounts payable on redemption or liquidation of such Trust Securities when the
related Issuer does not have funds on hand available to make such payments. See
"Description of Guarantees."
DISTRIBUTIONS
Distributions on the Preferred Securities will be cumulative, will
accumulate from the date of original issuance and will be payable on such dates
as specified in the applicable Prospectus Supplement. In the event that any date
on which Distributions are payable on the Preferred Securities is not a Business
Day (as defined below), payment of the Distribution payable on such date will be
made on the next succeeding day that is a Business Day (and without any interest
or other payment in respect to any such delay) except that, if such Business Day
is in the next succeeding calendar year, payment of such Distribution shall be
made on the immediately preceding Business Day, in either case with the same
force and effect as if made on such date (each date on which Distributions are
payable in accordance with the foregoing, a "Distribution Date"). A "Business
Day" shall mean any day other than a Saturday or a Sunday, or a day on which
banking institutions in the City of New York are authorized or required by law
or executive order to remain closed or a day on which the corporate trust office
of the Property Trustee or the Debenture Trustee is closed for business.
Each Issuer's Preferred Securities represent beneficial ownership interests
in the applicable Issuer, and the Distributions on each Preferred Security will
be payable at a rate specified in the applicable Prospectus Supplement for such
Preferred Securities. The amount of Distributions payable for any period will be
computed on the basis of a 360-day year of twelve 30-day months unless otherwise
specified in the applicable Prospectus Supplement. Distributions to which
holders of Preferred Securities are entitled will accumulate additional
Distributions at the rate per annum if and as specified in the applicable
Prospectus Supplement. The term "Distributions" as used herein includes any such
additional Distributions unless otherwise stated.
If provided in the applicable Prospectus Supplement, the Corporation has
the right under the Indenture to defer the payment of interest at any time or
from time to time on any series of the Corresponding Junior Subordinated
Debentures for up to such number of consecutive interest payment periods, which
will be specified in such Prospectus Supplement relating to such series (each,
an "Extension Period"), provided that no Extension Period may extend beyond the
Stated Maturity of the Corresponding Junior Subordinated Debentures. As a
consequence of any such deferral, Distributions on the Related Preferred
Securities would be deferred (but would continue to accumulate additional
Distributions thereon at the rate per annum set forth in the Prospectus
Supplement for such Preferred Securities) by the Issuer of such Preferred
Securities during any such Extension Period. During such Extension Period, the
Corporation may not, and may not permit any subsidiary of the Corporation to,
(i) declare or pay any dividends or distributions on, or redeem, purchase,
acquire or make a liquidation payment with respect to, any of the Corporation's
capital stock, (ii) make any payment of principal, interest or premium, if any,
on or repay, repurchase or redeem any debt securities of the Corporation that
rank pari passu with or junior in interest to the Corresponding Junior
Subordinated Debentures or (iii) make any guarantee payments with respect to any
guarantee by the Corporation of debt securities of any subsidiary of the
Corporation if such guarantee ranks pari passu with or junior in interest to the
Corresponding Junior Subordinated Debentures (other than (a) dividends or
distributions in capital stock of the Corporation, (b) any declaration of a
dividend in connection with the implementation of a stockholders' rights plan,
or the issuance of stock under any such plan in the future or the redemption or
repurchase of any such rights pursuant thereto, (c) payments under the Guarantee
with respect to such Preferred Securities and (d) purchases of common stock
related to the issuance of common stock or rights under any of the Corporation's
benefit plans for its directors, officers or employees related to the
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issuance of common stock or rights under a dividend reinvestment and stock
purchase plan, or related to the issuance of common stock (or securities
convertible into or exchangeable for common stock) as consideration in an
acquisition transaction that was entered into prior to the commencement of such
Extension Period).
The revenue of each Issuer available for distribution to holders of its
Preferred Securities will be limited to payments under the Corresponding Junior
Subordinated Debentures in which the Issuer will invest the proceeds from the
issuance and sale of its Trust Securities. See "Description of Junior
Subordinated Debentures -- Corresponding Junior Subordinated Debentures." If the
Corporation does not make interest payments on such Corresponding Junior
Subordinated Debentures, the Property Trustee will not have funds available to
pay Distributions on the Related Preferred Securities. The payment of
Distributions (if and to the extent the Issuer has funds legally available for
the payment of such Distributions and cash sufficient to make such payments) is
guaranteed by the Corporation on the basis set forth herein under "Description
of Guarantees."
Distributions on the Preferred Securities will be payable to the holders
thereof as they appear on the register of such Issuer on the relevant record
dates, which, as long as the Preferred Securities remain in book-entry form,
will be one Business Day prior to the relevant Distribution Date. Subject to any
applicable laws and regulations and the provisions of the applicable Trust
Agreement, each such payment will be made as described under "Book -- Entry
Issuance." In the event any Preferred Securities are not in book-entry form, the
relevant record date for such Preferred Securities shall be the date at least 15
days prior to the relevant Distribution Date, as specified in the applicable
Prospectus Supplement.
REDEMPTION OR EXCHANGE
Mandatory Redemption. Upon the repayment or redemption, in whole or in
part, of any Corresponding Junior Subordinated Debentures, whether at maturity
or upon earlier redemption as provided in the Indenture, the proceeds from such
repayment or redemption shall be applied by the Property Trustee to redeem a
Like Amount (as defined below) of the Trust Securities, upon not less than 30
nor more than 60 days notice, at a redemption price (the "Redemption Price")
equal to the aggregate Liquidation Amount of such Trust Securities plus
accumulated but unpaid Distributions thereon to the date of redemption (the
"Redemption Date") and the related amount of the premium, if any, paid by the
Corporation upon the concurrent redemption of such Corresponding Junior
Subordinated Debentures. See "Description of Junior Subordinated
Debentures -- Redemption." If less than all of any series of Corresponding
Junior Subordinated Debentures are to be repaid or redeemed on a Redemption
Date, then the proceeds from such repayment or redemption shall be allocated to
the redemption pro rata of the Related Preferred Securities and the Common
Securities. The amount of premium, if any, paid by the Corporation upon the
redemption of all or any part of any series of any Corresponding Junior
Subordinated Debentures to be repaid or redeemed on a Redemption Date shall be
allocated to the redemption pro rata of the Related Preferred Securities and the
Common Securities.
The Corporation will have the right to redeem any series of Corresponding
Junior Subordinated Debentures (i) on or after such date as may be specified in
the applicable Prospectus Supplement, in whole at any time or in part from time
to time or (ii) at any time, in whole (but not in part), upon the occurrence of
a Tax Event or Capital Treatment Event, in either case subject to receipt of
prior approval by the Federal Reserve if then required under applicable capital
guidelines or policies.
Distribution of Corresponding Junior Subordinated Debentures. Subject to
the Corporation having received prior approval of the Federal Reserve to do so
if then required under applicable capital guidelines or policies of the Federal
Reserve, the Corporation has the right at any time to liquidate the related
Issuer and, after satisfaction of the liabilities of creditors of such Issuer as
provided by applicable law, cause such Corresponding Junior Subordinated
Debentures in respect of the Preferred Securities and Common Securities issued
by such Issuer to be distributed to the holders of such Preferred Securities and
Common Securities in exchange therefor upon liquidation of the Issuer.
Tax Event or Capital Treatment Event Redemption. If a Tax Event or Capital
Treatment Event in respect of a series of Preferred Securities and Common
Securities shall occur and be continuing, the Corporation has the right to
redeem the Corresponding Junior Subordinated Debentures in whole (but not in
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part) and thereby cause a mandatory redemption of such Preferred Securities and
Common Securities in whole (but not in part) at the Redemption Price within 90
days following the occurrence of such Tax Event or Capital Treatment Event. In
the event a Tax Event or Capital Treatment Event in respect of a series of
Preferred Securities and Common Securities has occurred and is continuing and
the Corporation does not elect to redeem the Corresponding Junior Subordinated
Debentures and thereby cause a mandatory redemption of such Preferred Securities
and Common Securities or to liquidate the related Issuer and cause the
Corresponding Junior Subordinated Debentures to be distributed to holders of
such Preferred Securities and Common Securities in exchange therefor upon
liquidation of the Issuer as described above, such Preferred Securities will
remain outstanding.
Possible Tax Law Changes. On March 19, 1996, the Revenue Reconciliation
Bill of 1996 (the "Bill"), was introduced in the 104th Congress which would
have, among other things, generally denied interest deductions for interest on
an instrument issued by a corporation that has a maximum weighted average
maturity of more than 40 years. The Bill also would have generally denied
interest deductions for interest on an instrument issued by a corporation that
has a maximum term of more than 20 years and that is not shown as indebtedness
on the separate balance sheet of the issuer or, where the instrument is issued
to a related party (other than a corporation), where the holder or some other
related party issues a related instrument that is not shown as indebtedness on
the issuer's consolidated balance sheet. For purposes of determining the
weighted average maturity or the term of an instrument, any right to extend
would be treated as exercised. The above-described provisions of the Bill were
proposed to be effective generally for instruments issued on or after December
7, 1995. If either provision were to apply to the Corresponding Junior
Subordinated Debentures, the Corporation would not be able to deduct interest on
the Corresponding Junior Subordinated Debentures. However, on March 29, 1996,
the Chairmen of the Senate Finance and House Ways and Means Committees issued a
joint statement (the "Joint Statement") to the effect that it was their
intention that the effective date of the Bill, if enacted, would be no earlier
than the date of appropriate Congressional action. In addition, subsequent to
the publication of the Joint Statement, Senator Daniel Patrick Moynihan and
Representatives Sam M. Gibbons and Charles B. Rangel wrote letters to Treasury
Department officials concurring with the view expressed in the Joint Statement
(the "Democrat Letters"). The 104th Congress adjourned without enacting the
Bill. Moreover, if the principles contained in the Joint Statement and the
Democrat Letters were followed, any similar legislation in this area that is
subsequently proposed would not apply to any Corresponding Junior Subordinated
Debentures issued prior to the effective date of such legislation. Although the
104th Congress adjourned without enacting the Bill, there can be no assurance
that current or future legislative proposals or final legislation will not
adversely affect the ability of the Corporation to deduct interest on the
Corresponding Junior Subordinated Debentures or otherwise affect the tax
treatment of the transaction described herein. If enacted, such a change could
give rise to a Tax Event, which may permit the Corporation to cause a redemption
of the Related Preferred Securities.
"Like Amount" means (i) with respect to a redemption of any series of Trust
Securities, Trust Securities of such series having a Liquidation Amount (as
defined below) equal to that portion of the principal amount of Corresponding
Junior Subordinated Debentures to be contemporaneously redeemed in accordance
with the Indenture, allocated to the Common Securities and to the Preferred
Securities pro rata based upon the relative Liquidation Amounts of such classes
and the proceeds of which will be used to pay the Redemption Price of such Trust
Securities, and (ii) with respect to a distribution of Corresponding Junior
Subordinated Debentures to holders of any series of Trust Securities in exchange
therefor in connection with a dissolution or liquidation of the related Issuer,
Corresponding Junior Subordinated Debentures having a principal amount equal to
the Liquidation Amount of the Trust Securities of the holder to whom such
Corresponding Junior Subordinated Debentures would be distributed.
"Liquidation Amount" means the stated amount of $25 per Trust Security.
"Tax Event" with respect to an Issuer means the receipt by the Issuer of a
series of Preferred Securities or the Corporation of an opinion of counsel
experienced in such matters to the effect that, as a result of any amendment to,
or change (including any announced proposed change) in, the laws (or any
regulations thereunder) of the United States or any political subdivision or
taxing authority thereof or therein, or as a result of any official
administrative pronouncement or judicial decision interpreting or applying such
laws or
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regulations, which amendment or change is effective or which proposed change,
pronouncement or decision is announced on or after the date of issuance of such
Preferred Securities under the Trust Agreement, there is more than an
insubstantial risk that (i) such Issuer is, or will be within 90 days of the
date of such opinion, subject to United States federal income tax with respect
to income received or accrued on the corresponding series of Corresponding
Junior Subordinated Debentures, (ii) interest payable by the Corporation on such
series of Corresponding Junior Subordinated Debentures is not, or within 90 days
of the date of such opinion, will not be, deductible by the Corporation, in
whole or in part, for United States federal income tax purposes, or (iii) such
Issuer is, or will be within 90 days of the date of such opinion, subject to
more than a de minimis amount of other taxes, duties or other governmental
charges.
After the liquidation date fixed for any distribution of Corresponding
Junior Subordinated Debentures for any series of Preferred Securities (i) such
series of Preferred Securities will no longer be deemed to be outstanding, (ii)
the depositary or its nominee, as the record holder of such series of Preferred
Securities, will receive a registered global certificate or certificates
representing the Corresponding Junior Subordinated Debentures to be delivered
upon such distribution and (iii) any certificates representing such series of
Preferred Securities not held by the Depositary or its nominee will be deemed to
represent the Corresponding Junior Subordinated Debentures having a principal
amount equal to the stated Liquidation Amount of such series of Preferred
Securities, and bearing accrued and unpaid interest in an amount equal to the
accrued and unpaid Distributions on such series of Preferred Securities until
such certificates are presented to the Administrative Trustees or their agent
for transfer or reissuance.
There can be no assurance as to the market prices for the Preferred
Securities or the Corresponding Junior Subordinated Debentures that may be
distributed in exchange for Preferred Securities if a dissolution and
liquidation of an Issuer were to occur. Accordingly, the Preferred Securities
that an investor may purchase, or the Corresponding Junior Subordinated
Debentures that the investor may receive on dissolution and liquidation of an
Issuer, may trade at a discount to the price that the investor paid to purchase
the Preferred Securities offered hereby.
REDEMPTION PROCEDURES
Preferred Securities redeemed on each Redemption Date shall be redeemed at
the Redemption Price with the applicable proceeds from the contemporaneous
redemption of the Corresponding Junior Subordinated Debentures. Redemptions of
the Preferred Securities shall be made and the Redemption Price shall be payable
on each Redemption Date only to the extent that the related Issuer has funds on
hand available for the payment of such Redemption Price. See also
"-- Subordination of Common Securities."
If an Issuer gives a notice of redemption in respect of its Preferred
Securities, then, by 12:00 noon, New York City time, on the Redemption Date, to
the extent funds are available, the Property Trustee will deposit irrevocably
with the depositary funds sufficient to pay the applicable Redemption Price and
will give the Depositary irrevocable instructions and authority to pay the
Redemption Price to the holders of such Preferred Securities. See "-- Book-Entry
Issuance." If such Preferred Securities are no longer in book-entry form, the
Property Trustee, to the extent funds are available, will irrevocably deposit
with the paying agent for such Preferred Securities funds sufficient to pay the
applicable Redemption Price and will give such paying agent irrevocable
instructions and authority to pay the Redemption Price to the holders thereof
upon surrender of their certificates evidencing such Preferred Securities.
Notwithstanding the foregoing, Distributions payable on or prior to the
Redemption Date for any Preferred Securities called for redemption shall be
payable to the holders of such Preferred Securities on the relevant record dates
for the related Distribution Dates. If notice of redemption shall have been
given and funds deposited as required, then upon the date of such deposit, all
rights of the holders of such Preferred Securities so called for redemption will
cease, except the right of the holders of such Preferred Securities to receive
the Redemption Price, but without interest on such Redemption Price, and such
Preferred Securities will cease to be outstanding. In the event that any date
fixed for redemption of Preferred Securities is not a Business Day, then payment
of the Redemption Price payable on such date will be made on the next succeeding
day which is a Business Day (and without any interest or other payment in
respect of any such delay), except that, if such Business Day falls in the next
calendar year, such payment will be made on the immediately preceding Business
Day. In the event that payment of the
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Redemption Price in respect of Preferred Securities called for redemption is
improperly withheld or refused and not paid either by the Issuer or by the
Corporation pursuant to the Guarantee as described under "Description of
Guarantees," Distributions on such Preferred Securities will continue to accrue
at the then applicable rate, from the Redemption Date originally established by
the Issuer for such Preferred Securities to the date such Redemption Price is
actually paid, in which case the actual payment date will be the date fixed for
redemption for purposes of calculating the Redemption Price.
Subject to applicable law (including, without limitation, United States
federal securities law), the Corporation or its subsidiaries may at any time and
from time to time purchase outstanding Preferred Securities by tender, in the
open market or by private agreement.
Payment of the Redemption Price on the Preferred Securities and any
distribution of Corresponding Junior Subordinated Debentures to holders of
Preferred Securities shall be made to the applicable recordholders thereof as
they appear on the register for such Preferred Securities on the relevant record
date, which shall be one Business Day prior to the relevant Redemption Date or
liquidation date, as applicable; provided, however, that in the event that any
Preferred Securities are not in book-entry form, the relevant record date for
such Preferred Securities shall be a date at least 15 days prior to the
Redemption Date or liquidation date, as applicable, as specified in the
applicable Prospectus Supplement.
If less than all of the Preferred Securities and Common Securities issued
by an Issuer are to be redeemed on a Redemption Date, then the aggregate
Liquidation Amount of such Preferred Securities and Common Securities to be
redeemed shall be allocated pro rata to the Preferred Securities and the Common
Securities based upon the relative Liquidation Amounts of such classes. The
particular Preferred Securities to be redeemed shall be selected on a pro rata
basis not more than 60 days prior to the Redemption Date by the Property Trustee
from the outstanding Preferred Securities not previously called for redemption,
by such method as the Property Trustee shall deem fair and appropriate and which
may provide for the selection for redemption of portions (equal to $25 or an
integral multiple of $25 in excess thereof) of the Liquidation Amount of
Preferred Securities of a denomination larger than $25. The Property Trustee
shall promptly notify the trust registrar in writing of the Preferred Securities
selected for redemption and, in the case of any Preferred Securities selected
for partial redemption, the Liquidation Amount thereof to be redeemed. For all
purposes of each Trust Agreement, unless the context otherwise requires, all
provisions relating to the redemption of Preferred Securities shall relate, in
the case of any Preferred Securities redeemed or to be redeemed only in part, to
the portion of the aggregate Liquidation Amount of Preferred Securities which
has been or is to be redeemed. Unless the Issuer defaults in payment of the
Redemption Price, on and after the Redemption Date additional Distributions will
cease to accumulate on such Preferred Securities or portions thereof called for
redemption.
Notice of any redemption will be mailed at least 30 days but not more than
60 days before the Redemption Date to each holder of Trust Securities to be
redeemed at its registered address.
SUBORDINATION OF COMMON SECURITIES
Payment of Distributions on, and the Redemption Price of, each Issuer's
Preferred Securities and Common Securities, as applicable, shall be made pro
rata based on the Liquidation Amount of such Preferred Securities and Common
Securities; provided, however, that if on any Distribution Date or Redemption
Date a Debenture Event of Default shall have occurred and be continuing, no
payment of any Distribution on, or Redemption Price of, any of the Issuer's
Common Securities, and no other payment on account of the redemption,
liquidation or other acquisition of such Common Securities shall be made unless
payment in full in cash of all accumulated and unpaid Distributions on all of
the Issuer's outstanding Preferred Securities for all Distribution periods
terminating on or prior thereto or in the case of payment of the Redemption
Price the full amount of such Redemption Price on all of the Issuer's
outstanding Preferred Securities then called for redemption shall have been made
or provided for, and all funds available to the Property Trustee shall first be
applied to the payment in full in cash of all Distributions on, or Redemption
Price of, the Issuer's Preferred Securities then due and payable.
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In the case of any event of default under the applicable Trust Agreement
resulting from a Debenture Event of Default, the Corporation as holder of such
Issuer's Common Securities will be deemed to have waived any right to act with
respect to any such event of default under the applicable Trust Agreement until
the effect of all such events of default with respect to such Preferred
Securities have been cured, waived or otherwise eliminated. Until all such
events of default under the applicable Trust Agreement with respect to the
Preferred Securities have been so cured, waived or otherwise eliminated, the
Property Trustee shall act solely on behalf of the holders of such Preferred
Securities and not on behalf of the Corporation as holder of the Issuer's Common
Securities, and only the holders of such Preferred Securities will have the
right to direct the Property Trustee to act on their behalf.
LIQUIDATION DISTRIBUTION UPON TERMINATION
Pursuant to each Trust Agreement, each Issuer shall automatically terminate
upon expiration of its term and shall terminate on the first to occur of: (i)
certain events of bankruptcy, dissolution or liquidation of the Corporation;
(ii) the distribution of a Like Amount of the Corresponding Junior Subordinated
Debentures to the holders of its Trust Securities, if the Corporation, as
Depositor, has given written direction to the Property Trustee to terminate such
Issuer (subject to the Corporation having received prior approval of the Federal
Reserve if so required under applicable capital guidelines or policies); (iii)
redemption of all of the Issuer's Preferred Securities as described under
"-- Redemption or Exchange -- Mandatory Redemption"; and (iv) the entry of an
order for the dissolution of the Issuer by a court of competent jurisdiction.
If an early termination occurs as described in clause (i), (ii) or (iv)
above, the Issuer shall be liquidated by the Issuer Trustees as expeditiously as
the Issuer Trustees determine to be possible by distributing, after satisfaction
of liabilities to creditors of such Issuer as provided by applicable law, to the
holders of such Trust Securities in exchange therefor a Like Amount of the
Corresponding Junior Subordinated Debentures, unless such distribution is
determined by the Property Trustee not to be practical, in which event such
holders will be entitled to receive out of the assets of the Issuer available
for distribution to holders, after satisfaction of liabilities to creditors of
such Issuer as provided by applicable law, an amount equal to, in the case of
holders of Preferred Securities, the aggregate of the Liquidation Amount plus
accrued and unpaid Distributions thereon to the date of payment (such amount
being the "Liquidation Distribution"). If such Liquidation Distribution can be
paid only in part because such Issuer has insufficient assets available to pay
in full the aggregate Liquidation Distribution, then the amounts payable
directly by such Issuer on its Preferred Securities shall be paid on a pro rata
basis. The holder(s) of such Issuer's Common Securities will be entitled to
receive distributions upon any such liquidation pro rata with the holders of its
Preferred Securities, except that if a Debenture Event of Default has occurred
and is continuing, the Preferred Securities shall have a priority over the
Common Securities.
EVENTS OF DEFAULT; NOTICE
Any one of the following events constitutes an "Event of Default" under
each Trust Agreement with respect to the Preferred Securities issued thereunder
(whatever the reason for such Event of Default and whether it shall be voluntary
or involuntary or be effected by operation of law or pursuant to any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body):
(i) the occurrence of a Debenture Event of Default under the Indenture
(see "Description of Junior Subordinated Debentures -- Debenture Events of
Default"); or
(ii) default by the Property Trustee in the payment of any
Distribution when it becomes due and payable, and continuation of such
default for a period of 30 days; or
(iii) default by the Property Trustee in the payment of any Redemption
Price of any Trust Security when it becomes due and payable; or
(iv) default in the performance, or breach, in any material respect,
of any covenant or warranty of the Issuer Trustees in such Trust Agreement
(other than a covenant or warranty a default in the performance of which or
the breach of which is dealt with in clause (ii) or (iii) above), and
continuation
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of such default or breach for a period of 90 days after there has been
given, by registered or certified mail, to the defaulting Issuer Trustee or
Trustees by the holders of at least 25% in aggregate Liquidation Amount of
the outstanding Preferred Securities of the applicable Issuer, a written
notice specifying such default or breach and requiring it to be remedied
and stating that such notice is a "Notice of Default" under such Trust
Agreement; or
(v) the occurrence of certain events of bankruptcy or insolvency with
respect to the Property Trustee and the failure by the Corporation to
appoint a successor Property Trustee within 90 days thereof.
Within five Business Days after the occurrence of any Event of Default
actually known to the Property Trustee, the Property Trustee shall transmit
notice of such Event of Default to the holders of such Issuer's Preferred
Securities, the Administrative Trustees and the Corporation, as Depositor,
unless such Event of Default shall have been cured or waived. The Corporation,
as Depositor, and the Administrative Trustees are required to file annually with
the Property Trustee a certificate as to whether or not they are in compliance
with all the conditions and covenants applicable to them under each Trust
Agreement.
If a Debenture Event of Default has occurred and is continuing, the
Preferred Securities shall have a preference over the Common Securities as
described above. See "-- Subordination of Common Securities" and "-- Liquidation
Distribution Upon Termination." The existence of an Event of Default does not
entitle the holders of Preferred Securities to accelerate the maturity thereof.
REMOVAL OF ISSUER TRUSTEES
Unless a Debenture Event of Default shall have occurred and be continuing,
any Issuer Trustee may be removed at any time by the holder of the Common
Securities. If a Debenture Event of Default has occurred and is continuing, the
Property Trustee and the Delaware Trustee may be removed at such time by the
holders of a majority in Liquidation Amount of the outstanding Preferred
Securities. In no event will the holders of the Preferred Securities have the
right to vote to appoint, remove or replace the Administrative Trustees, which
voting rights are vested exclusively in the Corporation as the holder of the
Common Securities. No resignation or removal of an Issuer Trustee and no
appointment of a successor trustee shall be effective until the acceptance of
appointment by the successor trustee in accordance with the provisions of the
applicable Trust Agreement.
CO-TRUSTEES AND SEPARATE PROPERTY TRUSTEE
Unless an Event of Default shall have occurred and be continuing, at any
time or from time to time, for the purpose of meeting the legal requirements of
the Trust Indenture Act or of any jurisdiction in which any part of the trust
property may at the time be located, the Corporation, as the holder of the
Common Securities, and the Administrative Trustees shall have power to appoint
one or more persons either to act as a co-trustee, jointly with the Property
Trustee, of all or any part of such trust property, or to act as separate
trustee of any such property, in either case with such powers as may be provided
in the instrument of appointment, and to vest in such person or persons in such
capacity any property, title, right or power deemed necessary or desirable,
subject to the provisions of the applicable Trust Agreement. In case a Debenture
Event of Default has occurred and is continuing, the Property Trustee alone
shall have power to make such appointment.
MERGER OR CONSOLIDATION OF ISSUER TRUSTEES
Any person into which the Property Trustee, the Delaware Trustee or any
Administrative Trustee that is not a natural person may be merged or converted
or with which it may be consolidated, or any person resulting from any merger,
conversion or consolidation to which such Trustee shall be a party, or any
person succeeding to all or substantially all the corporate trust business of
such Trustee, shall be the successor of such Trustee under each Trust Agreement,
provided such person shall be otherwise qualified and eligible.
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MERGERS, CONSOLIDATIONS, AMALGAMATIONS OR REPLACEMENTS OF THE ISSUERS
An Issuer may not merge with or into, consolidate, amalgamate, or be
replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to any corporation or other person, except as
described below. An Issuer may, at the request of the Corporation, with the
consent of the Administrative Trustees and without the consent of the holders of
the Preferred Securities, merge with or into, consolidate, amalgamate, or be
replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to, a trust organized as such under the laws of any
State; provided, that (i) such successor entity either (a) expressly assumes all
of the obligations of such Issuer with respect to the Preferred Securities or
(b) substitutes for the Preferred Securities other securities having
substantially the same terms as the Preferred Securities (the "Successor
Securities") so long as the Successor Securities rank the same as the Preferred
Securities in priority with respect to distributions and payments upon
liquidation, redemption and otherwise, (ii) the Corporation expressly appoints a
trustee of such successor entity possessing the same powers and duties as the
Property Trustee as the holder of the Corresponding Junior Subordinated
Debentures, (iii) the Successor Securities are listed, or any Successor
Securities will be listed upon notification of issuance, on any national
securities exchange or other organization on which the Preferred Securities are
then listed, if any, (iv) such merger, consolidation, amalgamation, replacement,
conveyance, transfer or lease does not cause the Preferred Securities to be
downgraded by any nationally recognized statistical rating organization which
gives ratings on the Preferred Securities, (v) such merger, consolidation,
amalgamation, replacement, conveyance, transfer or lease does not adversely
affect the rights, preferences and privileges of the holders of the Preferred
Securities (including any Successor Securities) in any material respect, (vi)
such successor entity has a purpose identical to that of the Issuer, (vii) prior
to such merger, consolidation, amalgamation, replacement, conveyance, transfer
or lease, the Corporation has received an opinion from independent counsel to
the Issuer experienced in such matters to the effect that (a) such merger,
consolidation, amalgamation, replacement, conveyance, transfer or lease does not
adversely affect the rights, preferences and privileges of the holders of the
Preferred Securities (including any Successor Securities) in any material
respect, and (b) following such merger, consolidation, amalgamation,
replacement, conveyance, transfer or lease, neither the Issuer nor such
successor entity will be required to register as an investment company under the
Investment Company Act of 1940, as amended (the "Investment Company Act"), and
(viii) the Corporation or any permitted successor or assignee owns all of the
Common Securities of such successor entity and guarantees the obligations of
such successor entity under the Successor Securities at least to the extent
provided by the Guarantee. Notwithstanding the foregoing, an Issuer shall not,
except with the consent of holders of 100% in Liquidation Amount of the
Preferred Securities, consolidate, amalgamate, merge with or into, or be
replaced by or convey, transfer or lease its properties and assets substantially
as an entirety to any other entity or permit any other entity to consolidate,
amalgamate, merge with or into, or replace it if such consolidation,
amalgamation, merger, replacement, conveyance, transfer or lease would cause the
Issuer or the successor entity to be classified as other than a grantor trust
for United States federal income tax purposes.
VOTING RIGHTS; AMENDMENT OF EACH TRUST AGREEMENT
Except as provided below and under "Description of Guarantees -- Amendments
and Assignment" and as otherwise required by law and the applicable Trust
Agreement, the holders of the Preferred Securities will have no voting rights.
Each Trust Agreement may be amended from time to time by the Corporation,
the Property Trustee, the Delaware Trustee and the Administrative Trustees,
without the consent of the holders of the Preferred Securities (i) to cure any
ambiguity, correct or supplement any provisions in such Trust Agreement that may
be inconsistent with any other provision, or to make any other provisions with
respect to matters or questions arising under such Trust Agreement, which shall
not be inconsistent with the other provisions of such Trust Agreement, or (ii)
to modify, eliminate or add to any provisions of such Trust Agreement to such
extent as shall be necessary to ensure that the Issuer will be classified for
United States federal income tax purposes as a grantor trust at all times that
any Trust Securities are outstanding or to ensure that the Issuer will not be
required to register as an "investment company" under the Investment Company
Act; provided, however, that
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in the case of either clause (i) or clause (ii), such action shall not adversely
affect in any material respect the interests of any holder of Preferred
Securities, and any amendments of such Trust Agreement shall become effective
when notice thereof is given to the holders of Trust Securities. Each Trust
Agreement may be amended by the Issuer Trustees and the Corporation with (i) the
consent of holders representing not less than a majority (based upon Liquidation
Amounts) of the outstanding Trust Securities, and (ii) receipt by the Issuer
Trustees of an opinion of counsel to the effect that such amendment or the
exercise of any power granted to the Issuer Trustees in accordance with such
amendment will not affect the Issuer's status as a grantor trust for United
States federal income tax purposes or the Issuer's exemption from status as an
"investment company" under the Investment Company Act, provided that without the
consent of each holder of Trust Securities, such Trust Agreement may not be
amended to (i) change the amount or timing of any Distribution on the Trust
Securities or otherwise adversely affect the amount of any Distribution required
to be made in respect of the Trust Securities as of a specified date or (ii)
restrict the right of a holder of Trust Securities to institute suit for the
enforcement of any such payment on or after such date.
So long as any Corresponding Junior Subordinated Debentures are held by the
Property Trustee, the Issuer Trustees shall not (i) direct the time, method and
place of conducting any proceeding for any remedy available to the Debenture
Trustee, or executing any trust or power conferred on the Property Trustee with
respect to such Corresponding Junior Subordinated Debentures, (ii) waive any
past default that is waivable under the Indenture, (iii) exercise any right to
rescind or annul a declaration that the principal of all the Junior Subordinated
Debentures shall be due and payable or (iv) consent to any amendment,
modification or termination of the Indenture or such Corresponding Junior
Subordinated Debentures, where such consent shall be required, without, in each
case, obtaining the prior approval of the holders of a majority in aggregate
Liquidation Amount of all outstanding Preferred Securities; provided, however,
that where a consent under the Indenture would require the consent of each
holder of Corresponding Junior Subordinated Debentures affected thereby, no such
consent shall be given by the Property Trustee without the prior consent of each
holder of the corresponding Preferred Securities. The Issuer Trustees shall not
revoke any action previously authorized or approved by a vote of the holders of
the Preferred Securities except by subsequent vote of the holders of the
Preferred Securities. The Property Trustee shall notify each holder of Preferred
Securities of any notice of default with respect to the Corresponding Junior
Subordinated Debentures. In addition to obtaining the foregoing approvals of the
holders of the Preferred Securities, prior to taking any of the foregoing
actions, the Issuer Trustees shall obtain an opinion of counsel experienced in
such matters to the effect that such action would not cause the Issuer to be
classified as other than a grantor trust for United States federal income tax
purposes.
Any required approval of holders of Preferred Securities may be given at a
meeting of holders of Preferred Securities convened for such purpose or pursuant
to written consent. The Property Trustee will cause a notice of any meeting at
which holders of Preferred Securities are entitled to vote, or of any matter
upon which action by written consent of such holders is to be taken, to be given
to each holder of record of Preferred Securities in the manner set forth in each
Trust Agreement.
No vote or consent of the holders of Preferred Securities will be required
for an Issuer to redeem and cancel its Preferred Securities in accordance with
the applicable Trust Agreement.
Notwithstanding that holders of Preferred Securities are entitled to vote
or consent under any of the circumstances described above, any of the Preferred
Securities that are owned by the Corporation, the Issuer Trustees or any
affiliate of the Corporation or any Issuer Trustees, shall, for purposes of such
vote or consent, be treated as if they were not outstanding.
GLOBAL PREFERRED SECURITIES
The Preferred Securities of a series may be issued in whole or in part in
the form of one or more Global Preferred Securities that will be deposited with,
or on behalf of, the Depositary identified in the Prospectus Supplement relating
to such series. Unless otherwise indicated in the applicable Prospectus
Supplement for such series, the Depositary will be The Depository Trust Company
("DTC"). Global Preferred Securities may be issued only in fully registered form
and in either temporary or permanent form. Unless and until it is
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exchanged in whole or in part for the individual Preferred Securities
represented thereby, a Global Preferred Security may not be transferred except
as a whole by the Depositary for such Global Preferred Security to a nominee of
such Depositary or by a nominee of such Depositary to such Depositary or another
nominee of such Depositary or by the Depositary or any nominee to a successor
Depositary or any nominee of such successor.
The specific terms of the depositary arrangement with respect to a series
of Preferred Securities will be described in the Prospectus Supplement relating
to such series. The Corporation anticipates that the following provisions will
generally apply to depositary arrangements.
Upon the issuance of a Global Preferred Security, and the deposit of such
Global Preferred Security with or on behalf of the Depositary, the Depositary
for such Global Preferred Security or its nominee will credit, on its book-entry
registration and transfer system, the respective aggregate Liquidation Amounts
of the individual Preferred Securities represented by such Global Preferred
Securities to the accounts of Participants. Such accounts shall be designated by
the dealers, underwriters or agents with respect to such Preferred Securities or
by the Corporation if such Preferred Securities are offered and sold directly by
the Corporation. Ownership of beneficial interests in a Global Preferred
Security will be limited to Participants or persons that may hold interests
through Participants. Ownership of beneficial interests in such Global Preferred
Security will be shown on, and the transfer of that ownership will be effected
only through, records maintained by the applicable Depositary or its nominee
(with respect to interests of Participants) and the records of Participants
(with respect to interests of persons who hold through Participants). The laws
of some states require that certain purchasers of securities take physical
delivery of such securities in definitive form. Such limits and such laws may
impair the ability to transfer beneficial interests in a Global Preferred
Security.
So long as the Depositary for a Global Preferred Security, or its nominee,
is the registered owner of such Global Preferred Security, such Depositary or
such nominee, as the case may be, will be considered the sole owner or holder of
the Preferred Securities represented by such Global Preferred Security for all
purposes under the applicable Trust Agreement governing such Preferred
Securities. Except as provided below, owners of beneficial interests in a Global
Preferred Security will not be entitled to have any of the individual Preferred
Securities of the series represented by such Global Preferred Security
registered in their names, will not receive or be entitled to receive physical
delivery of any such Preferred Securities of such series in definitive form and
will not be considered the owners or holders thereof under the applicable Trust
Agreement.
Payments of principal of (and premium, if any) and interest on individual
Preferred Securities represented by a Global Preferred Security registered in
the name of a Depositary or its nominee will be made to the Depositary or its
nominee, as the case may be, as the registered owner of the Global Preferred
Security representing such Preferred Securities. None of the Corporation, the
Issuer Trustees, any Paying Agent, or the Securities Registrar for such
Preferred Securities will have any responsibility or liability for any aspect of
the records relating to or payments made on account of beneficial ownership
interests of the Global Preferred Security representing such Preferred
Securities or for maintaining, supervising or reviewing any records relating to
such beneficial ownership interests.
The Corporation expects that the Depositary for a series of Preferred
Securities or its nominee, upon receipt of any payment of Liquidation Amount,
Redemption Price, premium or Distributions in respect of a permanent Global
Preferred Security representing any of such Preferred Securities, immediately
will credit Participants' accounts with payments in amounts proportionate to
their respective beneficial interest in the aggregate Liquidation Amount of such
Global Preferred Security for such Preferred Securities as shown on the records
of such Depositary or its nominee. The Corporation also expects that payments by
Participants to owners of beneficial interests in such Global Preferred Security
held through such Participants will be governed by standing instructions and
customary practices, as is now the case with securities held for the accounts of
customers in bearer form or registered in "street name." Such payments will be
the responsibility of such Participants.
Unless otherwise specified in the applicable Prospectus Supplement, if a
Depositary for a series of Preferred Securities is at any time unwilling, unable
or ineligible to continue as depositary and a successor depositary cannot be
appointed by the Issuer, the Issuer will issue individual Preferred Securities
of such
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series in exchange for the Global Preferred Security representing such series of
Preferred Securities. In addition, the Issuer may at any time and in its sole
discretion, subject to any limitations described in the Prospectus Supplement
relating to such Preferred Securities, determine not to have any Preferred
Securities of such series represented by one or more Global Preferred Securities
and, in such event, will issue individual Preferred Securities of such series in
exchange for the Global Preferred Security or Securities representing such
series of Preferred Securities. Further, if the Issuer so specifies with respect
to the Preferred Securities of a series, an owner of a beneficial interest in a
Global Preferred Security representing Preferred Securities of such series may,
on terms acceptable to the Issuer, the Property Trustee and the Depositary for
such Global Preferred Security, receive individual Preferred Securities of such
series in exchange for such beneficial interests, subject to any limitations
described in the Prospectus Supplement relating to such Preferred Securities. In
any such instance, an owner of a beneficial interest in a Global Preferred
Security will be entitled to physical delivery of individual Preferred
Securities of the series represented by such Global Preferred Security equal in
principal amount to such beneficial interest and to have such Preferred
Securities registered in its name. Individual Preferred Securities of such
series so issued will be issued in denominations, unless otherwise specified by
the Issuer, of $25 and integral multiples thereof.
PAYMENT AND PAYING AGENCY
Payments in respect of the Preferred Securities shall be made to the
Depositary, which shall credit the relevant accounts at the Depositary on the
applicable Distribution Dates or, if any Issuer's Preferred Securities are not
held by the Depositary, such payments shall be made by check mailed to the
address of the holder entitled thereto as such address shall appear on the
Register. Unless otherwise specified in the applicable Prospectus Supplement,
the paying agent (the "Paying Agent") shall initially be the Property Trustee
and any co-paying agent chosen by the Property Trustee and acceptable to the
Administrative Trustees and the Corporation. The Paying Agent shall be permitted
to resign as Paying Agent upon 30 days' written notice to the Property Trustee
and the Corporation. In the event that the Property Trustee shall no longer be
the Paying Agent, the Administrative Trustees shall appoint a successor (which
shall be a bank or trust company acceptable to the Administrative Trustees and
the Corporation) to act as Paying Agent.
REGISTRAR AND TRANSFER AGENT
Unless otherwise specified in the applicable Prospectus Supplement, the
Property Trustee will act as registrar and transfer agent for the Preferred
Securities.
Registration of transfers of Preferred Securities will be effected without
charge by or on behalf of each Issuer, but upon payment of any tax or other
governmental charges that may be imposed in connection with any transfer or
exchange. The Issuers will not be required to register or cause to be registered
the transfer of their Preferred Securities after such Preferred Securities have
been called for redemption.
INFORMATION CONCERNING THE PROPERTY TRUSTEE
The Property Trustee, other than during the occurrence and continuance of
an Event of Default, undertakes to perform only such duties as are specifically
set forth in each Trust Agreement and, after such Event of Default, must
exercise the same degree of care and skill as a prudent person would exercise or
use in the conduct of his or her own affairs. Subject to this provision, the
Property Trustee is under no obligation to exercise any of the powers vested in
it by the applicable Trust Agreement at the request of any holder of Preferred
Securities unless it is offered reasonable indemnity against the costs, expenses
and liabilities that might be incurred thereby. If no Event of Default has
occurred and is continuing and the Property Trustee is required to decide
between alternative causes of action, construe ambiguous provisions in the
applicable Trust Agreement or is unsure of the application of any provision of
the applicable Trust Agreement, and the matter is not one on which holders of
Preferred Securities are entitled under such Trust Agreement to vote, then the
Property Trustee shall take such action as is directed by the Corporation and if
not so directed, shall take such action as it deems advisable and in the best
interests of the holders of the Trust Securities and will have no liability
except for its own bad faith, negligence or willful misconduct.
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MISCELLANEOUS
The Administrative Trustees are authorized and directed to conduct the
affairs of and to operate the Issuers in such a way that no Issuer will be
deemed to be an "investment company" required to be registered under the
Investment Company Act or classified as other than a grantor trust for United
States federal income tax purposes and so that the Corresponding Junior
Subordinated Debentures will be treated as indebtedness of the Corporation for
United States federal income tax purposes. In this connection, the Corporation
and the Administrative Trustees are authorized to take any action, not
inconsistent with applicable law, the certificate of trust of each Issuer or
each Trust Agreement, that the Corporation and the Administrative Trustees
determine in their discretion to be necessary or desirable for such purposes, as
long as such action does not materially adversely affect the interests of the
holders of the Related Preferred Securities.
Holders of the Preferred Securities have no preemptive or similar rights.
No Issuer may borrow money or issue debt or mortgage or pledge any of its
assets.
BOOK-ENTRY ISSUANCE
DTC will act as securities depositary for all of the Preferred Securities
and the Junior Subordinated Debentures, unless otherwise referred to in the
Prospectus Supplement relating to an offering of Preferred Securities or Junior
Subordinated Debentures. The Preferred Securities and the Junior Subordinated
Debentures will be issued only as fully-registered securities registered in the
name of Cede & Co. (DTC's nominee). One or more fully-registered global
certificates will be issued for the Preferred Securities of each Issuer and the
Junior Subordinated Debentures, representing in the aggregate the total number
of such Issuer's Preferred Securities or aggregate principal balance of Junior
Subordinated Debentures, respectively, and will be deposited with DTC or held by
the Property Trustee or Debenture Trustee, respectively, as custodian for DTC.
DTC is a limited purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. DTC
holds securities that its Participants deposit with DTC. DTC also facilitates
the settlement among Participants of securities transactions, such as transfers
and pledges, in deposited securities through electronic computerized book-entry
changes in Participants' accounts, thereby eliminating the need for physical
movement of securities certificates. "Direct Participants" include securities
brokers and dealers, banks, trust companies, clearing corporations and certain
other organizations. DTC is owned by a number of its Direct Participants and by
the New York Stock Exchange, Inc., the American Stock Exchange, Inc. and the
National Association of Securities Dealers, Inc. Access to the DTC system is
also available to others such as securities brokers and dealers, banks and trust
companies that clear through or maintain custodial relationships with Direct
Participants, either directly or indirectly ("Indirect Participants"). The rules
applicable to DTC and its Participants are on file with the Commission.
Purchases of Preferred Securities or Junior Subordinated Debentures within
the DTC system must be made by or through Direct Participants, which will
receive a credit for the Preferred Securities or Junior Subordinated Debentures
on DTC's records. The ownership interest of each actual purchaser of each
Preferred Security and each Junior Subordinated Debenture ("Beneficial Owner")
is in turn to be recorded on the Direct and Indirect Participants' records.
Beneficial Owners will not receive written confirmation from DTC of their
purchases, but Beneficial Owners are expected to receive written confirmations
providing details of the transactions, as well as periodic statements of their
holdings, from the Direct or Indirect Participants through which the Beneficial
Owners purchased Preferred Securities or Junior Subordinated Debentures.
Transfers of ownership interests in the Preferred Securities or Junior
Subordinated Debentures are to be accomplished by entries made on the books of
Participants acting on behalf of Beneficial Owners. Beneficial Owners will not
receive certificates representing their ownership interests in Preferred
Securities or Junior
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Subordinated Debentures, except in the event that use of the book-entry system
for the Preferred Securities of such issuer or Junior Subordinated Debentures is
discontinued.
DTC has no knowledge of the actual Beneficial Owners of the Preferred
Securities or Junior Subordinated Debentures; DTC's records reflect only the
identity of the Direct Participants to whose accounts such Preferred Securities
or Junior Subordinated Debentures are credited, which may or may not be the
Beneficial Owners. The Participants will remain responsible for keeping account
of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to Beneficial Owners and the voting
rights of Direct Participants, Indirect Participants and Beneficial Owners will
be governed by arrangements among them, subject to any statutory or regulatory
requirements as may be in effect from time to time.
Redemption notices will be sent to Cede & Co. as the registered holder of
the Preferred Securities or Junior Subordinated Debentures. If less than all of
an Issuer's Preferred Securities or the Junior Subordinated Debentures are being
redeemed, DTC's current practice is to determine by lot the amount of the
interest of each Direct Participant to be redeemed.
Although voting with respect to the Preferred Securities or the Junior
Subordinated Debentures is limited to the holders of record of the Preferred
Securities or Junior Subordinated Debentures, in those instances in which a vote
is required, neither DTC nor Cede & Co. will itself consent or vote with respect
to Preferred Securities or Junior Subordinated Debentures. Under its usual
procedures, DTC would mail an omnibus proxy (the "Omnibus Proxy") to the
relevant Trustee as soon as possible after the record date. The Omnibus Proxy
assigns Cede & Co.'s consenting or voting rights to those Direct Participants to
whose accounts such Preferred Securities or Junior Subordinated Debentures are
credited on the record date (identified in a listing attached to the Omnibus
Proxy).
Distribution payments on the Preferred Securities or the Junior
Subordinated Debentures will be made by the relevant Trustee to DTC. DTC's
practice is to credit Direct Participants' accounts on the relevant payment date
in accordance with their respective holdings shown on DTC's records unless DTC
has reason to believe that it will not receive payments on such payment date.
Payments by Participants to Beneficial Owners will be governed by standing
instructions and customary practices and will be the responsibility of such
Participant and not of DTC, the relevant Trustee, the issuer thereof or the
Corporation, subject to any statutory or regulatory requirements as may be in
effect from time to time. Payment of Distributions to DTC is the responsibility
of the relevant Trustee, disbursement of such payments to Direct Participants is
the responsibility of DTC, and disbursements of such payments to the Beneficial
Owners is the responsibility of Direct and Indirect Participants.
DTC may discontinue providing its services as securities depositary with
respect to any of the Preferred Securities or the Junior Subordinated Debentures
at any time by giving reasonable notice to the relevant Trustee and the
Corporation. In the event that a successor securities depositary is not
obtained, definitive Preferred Security or Junior Subordinated Debenture
certificates representing such Preferred Securities or Junior Subordinated
Debentures are required to be printed and delivered. The Corporation, at its
option, may decide to discontinue use of the system of book-entry transfers
through DTC (or a successor depositary). After a Debenture Event of Default, the
holders of a majority in liquidation preference of Preferred Securities or
aggregate principal amount of Junior Subordinated Debentures may determine to
discontinue the system of book-entry transfers through DTC. In any such event,
definitive certificates for such Preferred Securities or Junior Subordinated
Debentures will be printed and delivered.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that the Issuers and the Corporation believe to
be accurate, but the Issuers and the Corporation assume no responsibility for
the accuracy thereof. Neither the Issuers nor the Corporation has any
responsibility for the performance by DTC or its Participants of their
respective obligations as described herein or under the rules and procedures
governing their respective operations.
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DESCRIPTION OF GUARANTEES
A Guarantee will be executed and delivered by the Corporation concurrently
with the issuance by each Issuer of its Trust Securities for the benefit of the
holders from time to time of such Trust Securities. The Bank of New York will
act as trustee ("Guarantee Trustee") under each Guarantee for the purposes of
compliance with the Trust Indenture Act and each Guarantee will be qualified as
an indenture under the Trust Indenture Act. This summary of certain provisions
of the Guarantees which summarizes the material terms thereof does not purport
to be complete and is subject to, and qualified in its entirety by reference to,
all of the provisions of each Guarantee, including the definitions therein of
certain terms, and the Trust Indenture Act, to each of which reference is hereby
made. The form of the Guarantee has been filed as an exhibit to the Registration
Statement of which this Prospectus forms a part. Reference in this summary to
Trust Securities means that Issuer's Trust Securities to which a Guarantee
relates. The Guarantee Trustee will hold each Guarantee for the benefit of the
holders of the related Issuer's Trust Securities.
GENERAL
The Corporation will irrevocably agree to pay in full on a subordinated
basis, to the extent set forth herein, the Guarantee Payments (as defined below)
to the holders of an Issuer's Trust Securities, as and when due, regardless of
any defense, right of set-off or counterclaim that such Issuer may have or
assert other than the defense of payment. The following payments with respect to
the Trust Securities, to the extent not paid by or on behalf of the related
Issuer (the "Guarantee Payments"), will be subject to the Guarantee: (i) any
accumulated and unpaid Distributions required to be paid on Trust Securities, to
the extent that such Issuer has funds on hand available therefor at such time,
(ii) the Redemption Price with respect to any Trust Securities called for
redemption to the extent that such Issuer has funds on hand available therefor
at such time, or (iii) upon a voluntary or involuntary dissolution, winding up
or liquidation of such Issuer (unless the Corresponding Junior Subordinated
Debentures are distributed to holders of such Trust Securities in exchange
therefor), the lesser of (a) the Liquidation Distribution and (b) the amount of
assets of such Issuer remaining available for distribution to holders of Trust
Securities after satisfaction of liabilities to creditors of such Issuer as
required by applicable law. The Corporation's obligation to make a Guarantee
Payment may be satisfied by direct payment of the required amounts by the
Corporation to the holders of the applicable Trust Securities or by causing the
Issuer to pay such amounts to such holders.
Each Guarantee will be an irrevocable guarantee on a subordinated basis of
the related Issuer's obligations under the Trust Securities, but will apply only
to the extent that such related Issuer has funds sufficient to make such
payments, and is not a guarantee of collection.
If the Corporation does not make interest payments on the Corresponding
Junior Subordinated Debentures held by the Issuer, the Issuer will not be able
to pay Distributions on the Trust Securities and will not have funds legally
available therefor. Each Guarantee will rank subordinate and junior in right of
payment to all Senior Debt of the Corporation. See "-- Status of the
Guarantees." Because the Corporation is a holding company, the right of the
Corporation to participate in any distribution of assets of any subsidiary upon
such subsidiary's liquidation or reorganization or otherwise, is subject to the
prior claims of creditors of that subsidiary, except to the extent the
Corporation may itself be recognized as a creditor of that subsidiary.
Accordingly, the Corporation's obligations under the Guarantees will be
effectively subordinated to all existing and future liabilities of the
Corporation's subsidiaries, and claimants should look only to the assets of the
Corporation for payments thereunder. Except as otherwise provided in the
applicable Prospectus Supplement, the Guarantees do not limit the incurrence or
issuance of other secured or unsecured debt of the Corporation, including Senior
Debt, whether under the Indenture, any other existing indenture or any other
indenture that the Corporation may enter into in the future or otherwise.
The Corporation has, through the applicable Guarantee, the applicable Trust
Agreement, the applicable series of Corresponding Junior Subordinated Debentures
and the Indenture taken together, fully, irrevocably and unconditionally
guaranteed all of the Issuer's obligations under the Preferred Securities. No
single document standing alone or operating in conjunction with fewer than all
of the other documents constitutes such guarantee. It is only the combined
operation of these documents that has the effect of providing a full,
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irrevocable and unconditional guarantee of the Issuer's obligations under the
Preferred Securities. See "Relationship Among the Preferred Securities, the
Corresponding Junior Subordinated Debentures and the Guarantees."
STATUS OF THE GUARANTEES
Each Guarantee will constitute an unsecured obligation of the Corporation
and will rank subordinate and junior in right of payment to all Senior Debt of
the Corporation in the same manner as the Junior Subordinated Debentures.
Each Guarantee will rank pari passu with all other Guarantees issued by the
Corporation. Each Guarantee will constitute a guarantee of payment and not of
collection (i.e., the guaranteed party may institute a legal proceeding directly
against the Guarantor to enforce its rights under the Guarantee without first
instituting a legal proceeding against any other person or entity). Each
Guarantee will be held for the benefit of the holders of the related Preferred
Securities. Each Guarantee will not be discharged except by payment of the
Guarantee Payments in full to the extent not paid by the Issuer or upon
distribution to the holders of the Preferred Securities of the Corresponding
Junior Subordinated Debentures. None of the Guarantees places a limitation on
the amount of additional Senior Debt that may be incurred by the Corporation.
The Corporation expects from time to time to incur additional indebtedness
constituting Senior Debt.
AMENDMENTS AND ASSIGNMENT
Except with respect to any changes which do not materially adversely affect
the rights of holders of the related Preferred Securities (in which case no vote
will be required), no Guarantee may be amended without the prior approval of the
holders of not less than a majority of the aggregate Liquidation Amount of such
outstanding related Preferred Securities. The manner of obtaining any such
approval will be as set forth under "Description of Preferred
Securities -- Voting Rights; Amendment of Each Trust Agreement." All guarantees
and agreements contained in each Guarantee shall bind the successors, assigns,
receivers, trustees and representatives of the Corporation and shall inure to
the benefit of the holders of the related Preferred Securities then outstanding.
EVENTS OF DEFAULT
An event of default under each Guarantee will occur upon the failure of the
Corporation to perform any of its payment or other obligations thereunder. The
holders of not less than a majority in aggregate Liquidation Amount of the
related Preferred Securities have the right to direct the time, method and place
of conducting any proceeding for any remedy available to the Guarantee Trustee
in respect of such Guarantee or to direct the exercise of any trust or power
conferred upon the Guarantee Trustee under such Guarantee.
Any holder of the related Preferred Securities may institute a legal
proceeding directly against the Corporation to enforce its rights under such
Guarantee without first instituting a legal proceeding against the Issuer, the
Guarantee Trustee or any other person or entity.
The Corporation, as guarantor, is required to file annually with the
Guarantee Trustee a certificate as to whether or not the Corporation is in
compliance with all the conditions and covenants applicable to it under the
Guarantee.
INFORMATION CONCERNING THE GUARANTEE TRUSTEE
The Guarantee Trustee, other than during the occurrence and continuance of
a default by the Corporation in performance of any Guarantee, undertakes to
perform only such duties as are specifically set forth in each Guarantee and,
after default with respect to any Guarantee, must exercise the same degree of
care and skill as a prudent person would exercise or use in the conduct of his
or her own affairs. Subject to this provision, the Guarantee Trustee is under no
obligation to exercise any of the powers vested in it by any
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Guarantee at the request of any holder of any Preferred Securities unless it is
offered reasonable indemnity against the costs, expenses and liabilities that
might be incurred thereby.
TERMINATION OF THE GUARANTEES
Each Guarantee will terminate and be of no further force and effect upon
full payment of the Redemption Price of the related Preferred Securities, upon
full payment of the amounts payable upon liquidation of the related Issuer or
upon distribution of Corresponding Junior Subordinated Debentures to the holders
of the related Preferred Securities in exchange therefor. Each Guarantee will
continue to be effective or will be reinstated, as the case may be, if at any
time any holder of the related Preferred Securities must restore payment of any
sums paid under such Preferred Securities or such Guarantee.
GOVERNING LAW
Each Guarantee will be governed by and construed in accordance with the
laws of the State of New York.
RELATIONSHIP AMONG THE PREFERRED SECURITIES,
THE CORRESPONDING JUNIOR SUBORDINATED DEBENTURES
AND THE GUARANTEES
FULL AND UNCONDITIONAL GUARANTEE
Payments of Distributions and other amounts due on the Preferred Securities
(to the extent the Issuer has funds available for the payment of such
Distributions) are irrevocably guaranteed by the Corporation as and to the
extent set forth under "Description of Guarantees." Taken together, the
Corporation's obligations under each series of Corresponding Junior Subordinated
Debentures, the Indenture, the related Trust Agreement, and the related
Guarantee provide, in the aggregate, a full, irrevocable and unconditional
guarantee of payments of distributions and other amounts due on the Related
Preferred Securities. No single document standing alone or operating in
conjunction with fewer than all of the other documents constitutes such
guarantee. It is only the combined operation of these documents that has the
effect of providing a full, irrevocable and unconditional guarantee of the
Issuer's obligations under the Related Preferred Securities. If and to the
extent that the Corporation does not make payments on any series of
Corresponding Junior Subordinated Debentures, such Issuer will not pay
Distributions or other amounts due on the Related Preferred Securities. The
Guarantees do not cover payment of Distributions when the related Issuer does
not have sufficient funds to pay such Distributions. In such event, the remedy
of a holder of a series of Preferred Securities is to institute a legal
proceeding directly against the Corporation pursuant to the terms of the
Indenture for enforcement of payment of amounts equal to such Distributions to
such holder. The obligations of the Corporation under each Guarantee are
subordinate and junior in right of payment to all Senior Debt of the
Corporation.
SUFFICIENCY OF PAYMENTS
As long as payments of interest and other payments are made when due on
each series of Corresponding Junior Subordinated Debentures, such payments will
be sufficient to cover Distributions and other payments due on the Related
Preferred Securities, primarily because (i) the aggregate principal amount of
each series of Corresponding Junior Subordinated Debentures will be equal to the
sum of the aggregate stated Liquidation Amount of the Related Preferred
Securities and related Common Securities; (ii) the interest rate and interest
and other payment dates on each series of Corresponding Junior Subordinated
Debentures will match the Distribution rate and Distribution and other payment
dates for the Related Preferred Securities; (iii) the Corporation shall pay for
all and any costs, expenses and liabilities of such Issuer except the Issuer's
obligations to holders of its Preferred Securities or other similar interests on
the Issuer under such Preferred Securities or such other similar interests, as
the case may be; and (iv) each Trust Agreement further provides that the Issuer
will not engage in any activity that is not consistent with the limited purposes
of such Issuer.
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Notwithstanding anything to the contrary in the Indenture, the Corporation
has the right to setoff any payment it is otherwise required to make thereunder
with and to the extent the Corporation has theretofore made, or is concurrently
on the date of such payment making, a payment under the related Guarantee.
ENFORCEMENT RIGHTS OF HOLDERS OF PREFERRED SECURITIES
A holder of any Related Preferred Security may institute a legal proceeding
directly against the Corporation to enforce its rights under the related
Guarantee without first instituting a legal proceeding against the Guarantee
Trustee, the related Issuer or any other person or entity.
A default or event of default under any Senior Debt of the Corporation
would not constitute a default or Event of Default under the Indenture. However,
in the event of payment defaults under, or acceleration of, Senior Debt of the
Corporation, the subordination provisions of the Indenture provide that no
payments may be made in respect of the Corresponding Junior Subordinated
Debentures until such Senior Debt has been paid in full or any payment default
thereunder has been cured or waived. Failure to make required payments on any
series of Corresponding Junior Subordinated Debentures would constitute an Event
of Default under the Indenture.
LIMITED PURPOSE OF ISSUERS
Each Issuer's Preferred Securities evidence a beneficial ownership interest
in such Issuer, and each Issuer exists for the sole purpose of issuing its
Preferred Securities and Common Securities and investing the proceeds thereof in
Corresponding Junior Subordinated Debentures. Taken together, the Corporation's
obligations under each series of Corresponding Junior Subordinated Debentures,
the Indenture, the related Trust Agreement and the related Guarantee provide, in
the aggregate, a full, irrevocable and unconditional guarantee of payments of
Distributions and other amounts due on the Related Preferred Securities. See
"-- Full and Unconditional Guarantee." A principal difference between the rights
of a holder of a Preferred Security and a holder of a Corresponding Junior
Subordinated Debenture is that a holder of a Corresponding Junior Subordinated
Debenture is entitled to receive from the Corporation the principal amount of
and interest accrued on Corresponding Junior Subordinated Debentures held, while
a holder of Preferred Securities is entitled to receive Distributions from such
Issuer (or from the Corporation under the applicable Guarantee) if and to the
extent such Issuer has funds available for the payment of such Distributions.
RIGHTS UPON TERMINATION
Upon any voluntary or involuntary termination, winding-up or liquidation of
any Issuer involving the liquidation of the Corresponding Junior Subordinated
Debentures, the holders of the related Preferred Securities will be entitled to
receive, out of the assets held by such Issuer, the Liquidation Distribution in
cash. See "Description of Preferred Securities -- Liquidation Distribution Upon
Termination." Upon any voluntary or involuntary liquidation or bankruptcy of the
Corporation, the Property Trustee, as holder of the Corresponding Junior
Subordinated Debentures, would be a subordinated creditor of the Corporation,
subordinated in right of payment to all Senior Debt as set forth in the
Indenture, but entitled to receive payment in full of principal and interest,
before any stockholders of the Corporation receive payments or distributions.
Since the Corporation is the guarantor under each Guarantee and has agreed to
pay for all costs, expenses and liabilities of each Issuer (other than the
Issuer's obligations to the holders of its Preferred Securities), the positions
of a holder of such Preferred Securities and a holder of such Corresponding
Junior Subordinated Debentures relative to other creditors and to stockholders
of the Corporation in the event of liquidation or bankruptcy of the Corporation
are expected to be substantially the same.
PLAN OF DISTRIBUTION
The Junior Subordinated Debentures or the Preferred Securities may be sold
in a public offering to or through underwriters or dealers designated from time
to time or directly to purchasers. The Corporation and each Issuer may sell its
Junior Subordinated Debentures or Preferred Securities as soon as practicable
after the effectiveness of the Registration Statement of which this Prospectus
forms a part. The names of any
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underwriters or dealers involved in the sale of the Junior Subordinated
Debentures or Preferred Securities in respect of which this Prospectus is
delivered, the amount or number of Junior Subordinated Debentures and Preferred
Securities to be purchased by any such underwriters and any applicable
commissions or discounts will be set forth in the applicable Prospectus
Supplement.
Underwriters may offer and sell Junior Subordinated Debentures or Preferred
Securities at a fixed price or prices, which may be changed, or from time to
time 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
Preferred Securities, underwriters may be deemed to have received compensation
from the Corporation and/or the applicable Issuer in the form of underwriting
discounts or commissions. Underwriters may sell Junior Subordinated Debentures
or Preferred Securities to or through dealers, and such dealers may receive
compensation in the form of discounts, concessions or commissions from the
underwriters.
Any underwriting compensation paid by the Corporation and/or the applicable
Issuer to underwriters in connection with the offering of Junior Subordinated
Debentures or Preferred Securities, and any discounts, concessions or
commissions allowed by such underwriters to participating dealers, will be
described in an accompanying Prospectus Supplement. Underwriters and dealers
participating in the distribution of Junior Subordinated Debentures or Preferred
Securities may be deemed to be underwriters, and any discounts and commissions
received by them and any profit realized by them on resale of such Junior
Subordinated Debentures or Preferred Securities may be deemed to be underwriting
discounts and commissions, under the Securities Act. Underwriters and dealers
may be entitled, under agreement with the Corporation and the applicable Issuer,
to indemnification against and contribution toward certain civil liabilities,
including liabilities under the Securities Act, and to reimbursement by the
Corporation for certain expenses.
In connection with the offering of the Preferred Securities of any Issuer,
such Issuer may grant to the underwriters an option to purchase additional
Preferred Securities to cover over-allotments, if any, at the initial public
offering price (with an additional underwriting commission), as may be set forth
in the accompanying Prospectus Supplement. If such Issuer grants any
over-allotment option, the terms of such over-allotment option will be set forth
in the Prospectus Supplement for such Preferred Securities.
Underwriters and dealers may engage in transactions with, or perform
services for, the Corporation and/ or the applicable Issuer and/or any of their
affiliates in the ordinary course of business.
The Junior Subordinated Debentures and the Preferred Securities will be new
issues of securities and will have no established trading market. Any
underwriters to whom Junior Subordinated Debentures or Preferred Securities are
sold for public offering and sale may make a market in such Junior Subordinated
Debentures and Preferred Securities, but such underwriters will not be obligated
to do so and may discontinue any market making at any time without notice. Such
Junior Subordinated Debentures or Preferred Securities may or may not be listed
on a national securities exchange or the Nasdaq National Market. No assurance
can be given as to the liquidity of or the existence of trading markets for any
Junior Subordinated Debentures or Preferred Securities.
VALIDITY OF SECURITIES
Unless otherwise indicated in the applicable Prospectus Supplement, certain
legal matters will be passed upon for the Corporation and the Issuers by John W.
Scheflen, Executive Vice President, General Counsel and Secretary of the
Corporation and for the Issuers by Richards, Layton & Finger, special Delaware
counsel to the Issuers and the Corporation. The validity of the Guarantees and
the Junior Subordinated Debentures will be passed upon for the Underwriters by
Simpson Thacher & Bartlett (a partnership which includes professional
corporations). Simpson Thacher & Bartlett will rely on the opinion of Mr.
Scheflen as to matters of Maryland law and the opinion of Richards, Layton &
Finger as to matters of Delaware law. 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 Corporation, including
options exercisable within sixty days under the Corporation's 1991 Long Term
Incentive Plan. Simpson Thacher & Bartlett and Richards, Layton & Finger
regularly perform legal services for the Corporation and its subsidiaries.
35
<PAGE> 65
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.
36
<PAGE> 66
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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS SUPPLEMENT OR THE
PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS PROSPECTUS SUPPLEMENT AND THE
PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO
BUY ANY SECURITIES OTHER THAN THE SECURITIES DESCRIBED IN THIS PROSPECTUS
SUPPLEMENT OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH
SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL.
NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS NOR ANY
SALE MADE HEREUNDER OR THEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE CORPORATION OR
THE SERIES A ISSUER SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED
HEREIN OR THEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE OF SUCH
INFORMATION.
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TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Risk Factors................................. S- 4
MBNA Capital A............................... S- 9
MBNA Corporation............................. S- 9
Ratio of Earnings to Fixed Charges and Ratio
of Earnings to Combined Fixed Charges and
Preferred Stock Dividend Requirements...... S-11
Use of Proceeds.............................. S-11
Capitalization............................... S-12
Accounting Treatment......................... S-12
Certain Terms of Series A Capital
Securities................................. S-13
Certain Terms of Series A Subordinated
Debentures................................. S-17
Certain Terms of Series A Guarantee.......... S-21
Certain Federal Income Tax Consequences...... S-22
Erisa Considerations......................... S-27
Underwriting................................. S-28
Validity of Securities....................... S-29
PROSPECTUS
Available Information........................ 3
Incorporation of Certain Documents by
Reference.................................. 3
MBNA Corporation............................. 4
Ratio of Earnings to Fixed Charges and Ratio
of Earnings to Combined Fixed Charges and
Preferred Stock Dividend Requirements...... 4
The Issuers.................................. 5
Use of Proceeds.............................. 6
Description of Junior Subordinated
Debentures................................. 6
Description of Preferred Securities.......... 17
Book-Entry Issuance.......................... 29
Description of Guarantees.................... 31
Relationship Among the Preferred Securities,
the Corresponding Junior Subordinated
Debentures and the Guarantees.............. 33
Plan of Distribution......................... 34
Validity of Securities....................... 35
Experts...................................... 36
</TABLE>
$250,000,000
MBNA CAPITAL A
8.278% CAPITAL SECURITIES, SERIES A
FULLY AND UNCONDITIONALLY GUARANTEED,
AS DESCRIBED HEREIN, BY
MBNA CORPORATION
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PROSPECTUS SUPPLEMENT
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GOLDMAN, SACHS & CO.
BEAR, STEARNS & CO. INC.
LEHMAN BROTHERS
MERRILL LYNCH & CO.
SALOMON BROTHERS INC
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