<PAGE> 1
================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ______________ TO ______________
COMMISSION FILE NUMBER 1-10683
MBNA CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
MARYLAND 52-1713008
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
WILMINGTON, DE 19884
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
</TABLE>
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (800) 362-6255
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
<TABLE>
<CAPTION>
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
- - ----------------------------------------------------- -----------------------------------------
<S> <C>
Common Stock, $.01 par value New York Stock Exchange
6 7/8% Senior Notes due October 1, 1999 New York Stock Exchange
7 1/2% Cumulative Preferred Stock, Series A New York Stock Exchange
Adjustable Rate Cumulative Preferred Stock, Series B New York Stock Exchange
MBNA Capital A 8.278% Capital Securities, Series A, New York Stock Exchange
guaranteed by MBNA Corporation to the extent
described therein
MBNA Capital B Floating Rate Capital Securities, New York Stock Exchange
Series B, guaranteed by MBNA Corporation to the
extent described therein
</TABLE>
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: None
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or such shorter period that the Registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in the definitive proxy or information
statement incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
As of March 13, 1997, the aggregate market value of the voting stock held
by non-affiliates of the Registrant calculated by reference to the closing price
of the Registrant's Common Stock as reported on the New York Stock Exchange was
$9,384,248,477. As of March 13, 1997, there were outstanding 334,125,000 shares
of Common Stock, par value $.01 per share, which stock is the only class of
Registrant's common stock.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the 1996 Annual Report to Stockholders for the year ended
December 31, 1996 are incorporated by reference into Parts I, II and IV.
Portions of the definitive Proxy Statement for the Annual Meeting of
Stockholders to be held April 21, 1997 are incorporated by reference into Part
III.
================================================================================
<PAGE> 2
MBNA CORPORATION
1996 ANNUAL REPORT ON FORM 10-K
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
PART I
ITEM 1. Business................................................................. 1
ITEM 2. Properties............................................................... 7
ITEM 3. Legal Proceedings........................................................ 8
ITEM 4. Submission of Matters to a Vote of Security Holders...................... 8
Executive Officers of the Registrant..................................... 8
PART II
ITEM 5. Market for the Registrant's Common Stock and Related Stockholder
Matters................................................................ 10
ITEM 6. Selected Financial Data.................................................. 10
ITEM 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations.......................................................... 10
ITEM 8. Financial Statements and Supplementary Data.............................. 10
ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure............................................................. 10
PART III
ITEM 10. Directors and Executive Officers of the Registrant....................... 11
ITEM 11. Executive Compensation................................................... 11
ITEM 12. Security Ownership of Certain Beneficial Owners and Management........... 11
ITEM 13. Certain Relationships and Related Transactions........................... 11
PART IV
ITEM 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K......... 12
Signatures........................................................................... 15
</TABLE>
<PAGE> 3
PART I
ITEM 1. BUSINESS
MBNA Corporation (the "Corporation"), a registered bank holding company,
was incorporated under the laws of Maryland on December 6, 1990. It is the
parent company of MBNA America Bank, N.A. (the "Bank"), a national bank
organized in January 1991 as the successor to a national bank formed in 1982.
Through the Bank, the Corporation is one of the world's largest lenders through
bank credit cards. The Corporation is the leading issuer of affinity credit
cards, marketed primarily through endorsements of membership associations and
financial institutions. In addition to its credit card lending, the Corporation
makes other consumer loans and offers deposit and insurance products.
PRODUCTS
Credit Cards
The Corporation offers two general types of credit cards, premium and
standard, issued under either the MasterCard(R) or Visa(R) name.* The
Corporation markets standard and premium cards to new Customers and it markets
premium cards to qualifying standard card Customers. Premium cards include Gold
and Platinum Plus cards. Premium card usage and average account balances are
generally higher than those of standard card Customers.
Other Consumer Loans
The Corporation's consumer finance products include unsecured lines of
credit accessed by check and unsecured installment loans. These products are
marketed by the Bank to existing credit card Customers, as well as others, and
are used by Customers primarily for large purchases or consolidation of other
consumer debt.
The Corporation also offers secured loans to individuals, including home
equity loans and, beginning in 1996, airplane loans, through a subsidiary, MBNA
Consumer Services, Inc. The subsidiary is currently licensed in 42 states and
the District of Columbia.
Deposits
The Corporation offers money market deposit accounts and certificates of
deposit. Money market deposit accounts provide Customers with liquidity and
convenience of service, as well as insurance up to $100,000 per depositor by the
Federal Deposit Insurance Corporation ("FDIC"). Certificates of deposit are
traditional fixed term investments with maturities that typically range from six
to sixty months. They are also insured by the FDIC up to $100,000. Deposit
products are offered to members of the Corporation's endorsing associations, to
existing credit card Customers and to others.
Insurance
The Corporation offers credit insurance to its credit card Customers. In
late 1996 it began offering property and casualty insurance, initially
automobile insurance, to Customers. It plans to offer life insurance to
Customers in 1997. The Bank is currently licensed to sell property and casualty
insurance in 30 states.
MARKETING
The Corporation directs its marketing efforts primarily to members of
endorsing groups, to customers of financial institutions, and to targeted lists
of people with a strong common interest. As of December 31, 1996, the
Corporation's products were endorsed by more than 4,400 organizations and
financial institutions.
- - ---------------
* MasterCard(R) is a federally registered servicemark of MasterCard
International Inc.; Visa(R) is a federally registered servicemark of Visa
U.S.A., Inc.
1
<PAGE> 4
Credit cards issued to affinity group members or financial institution
customers usually carry custom graphics and the name and logo of the endorsing
organization. The Corporation develops a customized marketing program for each
endorsing organization or financial institution. In addition to servicing the
credit cards, the Corporation offers economic incentives to the endorsing groups
and financial institutions.
The Corporation's affinity marketing approach includes created personal
interest and regional affinity programs for people with strong common interests
but without a specific group affiliation. Personal interest programs are offered
to people with common interests through purchased targeted lists. Regional
programs include state and city series cards that bear images of regional or
local scenes.
The Corporation also offers co-branded cards through relationships with
commercial firms, including professional sports teams. These programs typically
include arrangements for incentives to Customers to purchase services or
merchandise from the co-branding firm.
The Corporation primarily uses direct mail, telemarketing and
person-to-person marketing to market its credit cards and other products.
Thousands of different marketing campaigns are developed each year, generating
millions of direct mail pieces designed to add accounts and stimulate use. The
Corporation customizes its marketing approach for each program. The
Corporation's in-house advertising agency designs custom graphics for credit
cards and prepares direct mail programs and advertisements. In addition, the
Corporation's marketing activities include efforts to retain profitable
accounts, and programs designed to activate new accounts and stimulate usage of
existing accounts, primarily through balance transfer programs.
The Corporation conducts marketing activities primarily in the United
States through MBNA Marketing Systems, Inc., a subsidiary of the Bank. In 1993,
the Corporation organized MBNA International Bank Limited as a subsidiary of the
Bank to market credit cards in the United Kingdom.
MBNA Marketing Systems, Inc. has regional centers in Maine, Ohio, Texas,
Maryland and Florida and sales offices in New York City, Chicago, Washington,
D.C., and San Francisco. MBNA International Bank Limited has its headquarters in
Chester, England and a sales and marketing office in London. These regional
centers and sales offices assist the Corporation to obtain endorsements,
increase its familiarity with local markets, better understand the needs and
motivations of Customers and keep in close touch with what competitors are
doing. MBNA Marketing Systems plans to open an additional regional center on the
West Coast.
MBNA Marketing Systems, Inc. has 11 telemarketing facilities in 8 states.
As of December 31, 1996, it employed approximately 3,000 people in
telemarketing, the majority of whom worked part time. The telemarketing
organization generates new accounts by calling prospects obtained from
membership lists of endorsing organizations and other prospects lists. Other
consumer loan, deposit and credit insurance products are made available to
existing Customers.
CREDIT
The Corporation makes credit decisions by combining sophisticated
technology and highly predictive models with the insight of a credit analyst.
Approved credit applications are reviewed individually by a credit analyst, who
assigns a credit line based on a review of the potential Customer's financial
history and capacity to repay. Credit analysts review credit reports obtained
through an independent credit reporting agency, and use a delinquency
probability model to assist them in reaching a credit decision for each
applicant. Credit analysts also review and verify other information, such as
employment and income, when necessary to make a credit decision. Further levels
of review are automatically triggered, depending upon the level of risk
indicated by the delinquency probability model. Credit analysts review
applications obtained through pre-approved offers to ensure adherence to credit
standards and that the appropriate credit limit is assigned. Credit lines for
existing Customers are regularly reviewed for credit line increases, and when
appropriate, credit line decreases. The Corporation's Loan Review Department
independently reviews selected applications to ensure quality and consistency.
Less than half of the credit applications received by the Corporation in 1996
were approved. The Corporation's losses have been consistently below the Visa
and MasterCard industry average.
2
<PAGE> 5
COLLECTION
The Corporation's collection philosophy, based on a persistent yet
professional approach, is to work with each past due Customer at an early stage
of delinquency. The Corporation employs several computerized systems to assist
in the collection of past due accounts. Initially, the Predictive Management
System analyzes each Customer's purchase and repayment habits, and selects
accounts for initial contact with the objective of contacting the highest risk
accounts first. Subsequently, the accounts selected are queued to the
Corporation's proprietary Collection Tracking and Analysis system (CTA) and
Outbound Call Management System (OCMS). OCMS sorts accounts by a number of
factors, including time zone, degree of delinquency and dollar amount due. OCMS
automatically dials delinquent accounts in order of priority. Representatives
are automatically linked to the Customer's account information and voice line
when a contact is established.
CTA is used to work accounts continually, by market sector, at each stage
of delinquency through the 180-day past due level. As an account enters the
180-day delinquency level, it is classified as a potential charge-off. Accounts
failing to make a payment during the 180-day cycle are written off. Managers may
defer charge-off of an account for another month, pending continued payment
activity or other special circumstances. Senior manager approval is required on
all exceptions to charge-off.
A Customer account may be reaged to remove existing delinquency. Generally,
to qualify for reaging, the account must have been open for at least one year
and cannot have been reaged during the preceding 365 days. The Customer must
have made payments equal to a total of three minimum payments in the last 90
days, including one full minimum payment during the last 30 days. All account
reages are approved by a manager. Collection reages are reviewed by the Loan
Review Department.
OPERATIONS
Credit card processing services performed by MBNA Hallmark Information
Services, Inc. ("Information Services"), a wholly-owned subsidiary of the Bank,
include data processing, payment processing, statement rendering, card
production and network services. Information Services' data network provides an
interface to MasterCard and Visa for performing authorizations and settlement
funds transfers. Most data processing and network functions are performed at
Information Services' facilities in Dallas, Texas, and Newark, Delaware. The
Corporation, using Information Services as its service bureau, generates and
mails to Customers monthly statements summarizing account activity, and
processes Customer monthly payments.
TECHNOLOGY
The Corporation uses sophisticated systems and technology in all aspects of
its business operations to enhance Customer service and improve efficiency.
These systems include marketing databases, advanced telecommunications networks
to support Customer service and telemarketing, a credit decisioning system which
processes credit card applications with on-line credit bureaus to support
credit, neural networks to identify and prevent fraud, and selective statement
insertion for customizing communications with Customers. These systems enable
the Corporation to implement customized marketing and service strategies for
endorsed organizations. The Corporation relies primarily on internal development
of technology solutions to ensure the flexibility, quality and responsiveness of
computer and telecommunication systems needed in its business.
TERMS AND CONDITIONS
Each credit card Customer and the Corporation enter into an agreement which
governs the terms and conditions of the Customer's MasterCard or Visa account.
The Corporation reserves the right to add or change any terms, conditions,
services or features of its MasterCard or Visa accounts at any time, including
increasing or decreasing periodic finance charges, other charges or minimum
payment terms. The agreement with each Customer provides that the Corporation
may apply such changes, when applicable, to current outstanding balances as well
as to future transactions. The Customer can avoid certain changes by notice to
the Corporation and by not using the account.
3
<PAGE> 6
A Customer may use a credit card for purchases and cash advances. Monthly
periodic finance charges are calculated by multiplying the applicable average
daily balances on the account by the applicable daily periodic rates. Finance
charges are calculated on purchases from the date of the purchase or the first
day of the billing cycle in which the purchase posts to the account, whichever
is later, and are not assessed in most circumstances on purchases if the closing
balances shown on each billing statement are paid in full by the payment due
date, which is generally 3 days before the next billing date. Finance charges on
cash advances are calculated from the date of the transaction. Customers are
required to make a minimum monthly payment equal to the greater of $15 or 2% of
the outstanding balance on the account.
The Corporation offers fixed and variable rates on credit card accounts and
also offers temporary promotional rates. Variable rates are offered at a
percentage rate tied to the U.S. prime rate published in The Wall Street Journal
and are adjusted, if applicable, quarterly.
The Corporation assesses an annual fee on some Customer accounts. Annual
fees, when assessed, are generally waived for the first year on new accounts and
thereafter may be waived or rebated. The Corporation assesses cash advance
transaction, certain purchase, late, overlimit and returned check fees on
Customer accounts in accordance with agreements with Customers.
REGULATORY MATTERS
General
As a bank holding company, the Corporation is subject to regulation under
the Bank Holding Company Act of 1956 (the "BHCA") and to the BHCA's examination
and reporting requirements. Under the BHCA, bank holding companies may not
directly or indirectly acquire the ownership or control of more than five
percent of the voting shares or substantially all of the assets of any company,
including a bank, without the prior approval of the Board of Governors of the
Federal Reserve System (the "Federal Reserve Board"). In addition, bank holding
companies generally are prohibited under the BHCA from engaging in non-banking
activities, subject to certain exceptions.
The earnings of the Bank and the Corporation are affected by general
economic conditions, monetary policies and the actions of various regulatory
authorities, including the Federal Reserve Board, the Federal Deposit Insurance
Corporation (the "FDIC") and the Office of the Comptroller of the Currency (the
"OCC"). In addition, there are numerous governmental requirements and
regulations which affect the activities of the Corporation.
The Bank is subject to supervision and examination by the OCC, the Bank's
primary regulator. The Bank is insured by, and therefore also is subject to the
regulations of, the FDIC, and is also subject to requirements and restrictions
under federal and state law, including requirements to maintain reserves against
deposits, restrictions on the types and amounts of loans that may be granted and
the interest that may be charged thereon, and limitations on the types of
investments that may be made and the types of services that may be offered.
Dividends
The principal source of funds to the Corporation to pay dividends, interest
and principal on debt securities and to meet other obligations is dividends from
the Bank. The Bank is subject to limitations on the dividends it may pay to the
Corporation. The Corporation may also be subject to limitations on the payment
of dividends to stockholders. See "Capital Adequacy" on page 34 of the 1996
Annual Report to Stockholders, which is incorporated herein by reference. In
addition, both the Corporation and the Bank are subject to various regulatory
policies and requirements relating to the payment of dividends, including
requirements to maintain capital above regulatory minimums. The appropriate
federal regulatory authority is authorized to determine under certain
circumstances relating to the financial condition of a bank or bank holding
company that the payment of dividends would be an unsafe or unsound practice and
to prohibit payment thereof. The OCC and the Federal Reserve Board have each
indicated that banking organizations should generally pay dividends only out of
current operating earnings.
4
<PAGE> 7
Borrowings by the Corporation
There are various legal restrictions on the extent to which the Corporation
may borrow or otherwise obtain credit from, or engage in certain other
transactions with, the Bank. In general, these restrictions require that any
such extensions of credit must be secured by designated amounts of specified
collateral and are limited, as to any one of the Corporation or its non-bank
subsidiaries, to 10 percent of the Bank's capital stock and surplus, and as to
the Corporation and all such non-bank subsidiaries in the aggregate, to 20
percent of the Bank's capital stock and surplus.
Extensions of credit and other transactions between the Bank and the
Corporation must be on terms and under circumstances, including credit
standards, that are substantially the same or at least as favorable to the Bank
as those prevailing at the time for comparable transactions with non-affiliated
companies.
Capital Requirements
The Corporation is subject to risk-based capital guidelines adopted by the
Federal Reserve Board for bank holding companies. The Bank is subject to similar
risk-based capital requirements adopted by the OCC. The guidelines require a
minimum ratio of total capital to risk-weighted assets (including certain
off-balance sheet items, such as interest rate swaps) of 8%. At least half of
the total capital may be comprised of common stockholders' equity,
non-cumulative perpetual preferred stock and a limited amount of cumulative
perpetual preferred stock, less goodwill and certain other intangible assets
("Tier 1 risk-based capital"). The remainder ("Total risk-based capital") may
consist of mandatory convertible debt securities, a limited amount of
subordinated debt, other preferred stock and a limited amount of reserves for
possible credit losses. In addition, the Federal Reserve Board has adopted a
minimum leverage ratio (Tier 1 risk-based capital to average total assets less
goodwill and certain other intangible assets) of 3% for bank holding companies
that meet certain specified criteria, including that they have the agency's
highest supervisory rating. Under the guidelines, holding companies that do not
satisfy the criteria for the lowest requirement and holding companies
undertaking expansion programs must maintain a leverage ratio at least 100 basis
points to 200 basis points higher than the 3% minimum ratio. At December 31,
1996 regulatory capital ratios for the Corporation were: Tier 1 risk-based
capital, 10.89%; Total risk-based capital, 13.22%; and leverage, 11.21%. The
Bank's ratios at December 31, 1996 were: Tier 1 risk-based capital, 10.01%;
Total risk-based capital, 12.31%; and leverage, 9.24%. Holding companies and
banks may be subject to higher risk-based and leverage capital ratios depending
on other specific factors, such as interest rate risk, concentrations of credit
risk, and the conduct of non-traditional activities. As required by the Federal
Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA"), the federal
bank regulatory agencies have proposed guidelines to require additional capital
related to an institution's interest rate risk.
Corporation Support of Bank
Under the National Bank Act, if the capital stock of a national bank is
impaired by losses or otherwise, the OCC is authorized to require payment of the
deficiency by assessment upon the bank's stockholders and, if any such
assessment is not paid, to sell the stock to make good the deficiency. Under
Federal Reserve Board policy, the Corporation is expected to act as a source of
financial strength to the Bank and to commit resources to support it. Any
capital loans by the Corporation to the Bank are subordinate in right of payment
to deposits and to certain other indebtedness of the Bank.
FDICIA and FDIC Insurance
FDICIA provided increased funding for the Bank Insurance Fund ("BIF") of
the FDIC and provided for expanded regulation of banks and bank holding
companies. The regulation includes expanded federal banking agency examinations
and increased powers of federal banking agencies to take corrective action to
resolve the problems of insured depository institutions with capital
deficiencies. These powers vary depending on which of several levels of
capitalization a particular institution meets.
FDIC regulations adopted under FDICIA prohibit a bank from accepting
brokered deposits unless (i) it is well capitalized or (ii) it is adequately
capitalized and receives a waiver from the FDIC. A bank that is
5
<PAGE> 8
adequately capitalized and that accepts brokered deposits under a waiver from
the FDIC may not pay an interest rate on any deposit in excess of 75 basis
points over certain prevailing market rates; there are no such restrictions on a
bank that is well capitalized. As of December 31, 1996 the Bank met the FDIC's
definition of a well capitalized institution for purposes of accepting brokered
deposits. For the purposes of the brokered deposit rules, a bank is defined to
be "well capitalized" if it maintains a ratio of Tier 1 risk-based capital to
risk-adjusted assets of at least 6%, a ratio of total risk-based capital to
risk-adjusted assets of at least 10% and a leverage ratio of at least 5% and is
not subject to any order, direction or written agreement to maintain specific
capital levels. Under the regulatory definition of brokered deposits, as of
December 31, 1996, the Bank had brokered deposits of $2.3 billion.
The Bank is subject to FDIC deposit insurance assessments for the BIF. Each
financial institution is assigned to one of three capital groups -- well
capitalized, adequately capitalized or undercapitalized -- and further assigned
to one of three subgroups within a capital group, on the basis of supervisory
evaluations by the institution's primary federal and, if applicable, state
supervisors and other information relevant to the institution's financial
condition and the risk posed to the applicable insurance fund. The assessment
rate applicable to the Bank in the future will depend in part upon the risk
assessment classification assigned to the Bank by the FDIC and in part on the
BIF assessment schedule adopted by the FDIC. The Deposit Insurance Funds Act of
1996 ("DIFA") provides that premiums related to deposits assessed by the BIF are
to be assessed at a rate of between 0 cents and 27 cents per $100 of deposits.
DIFA also separated, effective January 1, 1997, the Financing Corporation
("FICO") assessment to service the interest on its bond obligations from the BIF
and the Savings Association Insurance Fund ("SAIF") assessments. The amount
assessed on individual institutions by the FICO will be in addition to the
amount, if any, paid for deposit insurance according to the FDIC's risk-related
assessment rate schedules. FICO assessment rates for the first semiannual period
of 1997 were set at 1.30 basis points annually for BIF-assessable deposits. (The
rate may be adjusted quarterly to reflect a change in assessment base for the
BIF. By law, the FICO rate on BIF-assessable deposits must be one-fifth the rate
on SAIF-assessable deposits until the insurance funds are merged or until
January 1, 2000, whichever occurs first.)
Regulation of the Credit Card Business
The relationship between the Corporation and its Customers is extensively
regulated by federal and state consumer protection laws. The Truth in Lending
Act requires credit card issuers to make certain disclosures along with their
applications and solicitations, upon opening an account and with each periodic
statement. The Act also imposes certain substantive requirements and
restrictions on credit card issuers and provides Customers with certain rights
to dispute unauthorized charges and to have their billing errors corrected
promptly. Customers are also given the right to have their payments promptly
credited to their accounts.
The Equal Credit Opportunity Act prohibits lenders from discriminating in
extending credit on certain criteria such as an applicant's sex, race and
marital status. In order to protect borrowers from such discrimination, the Act
requires credit card issuers to disclose the reasons they took adverse action
against an applicant or a Customer.
The Fair Credit Reporting Act generally regulates credit reporting
agencies, but also imposes some duties on credit card issuers as users of
consumer credit reports. For instance, the Act prohibits the use of a consumer
credit report by a credit card issuer except in connection with a proposed
business transaction with the consumer. The Act also requires that credit card
issuers notify consumers when they take adverse action based upon information
obtained from credit reporting agencies.
The federal regulators are authorized to impose penalties for violations of
these statutes and, in certain cases, to order the Corporation to pay
restitution to injured Customers. Customers may bring actions for damages for
certain violations. In addition, a Customer may be entitled to assert a
violation of these consumer protection laws by way of set-off against the
Customer's obligation to pay the outstanding credit card balance.
The National Bank Act, which governs the activities of national banks,
authorizes national banks to use various alternative interest rates when they
make loans, including the highest interest rate authorized for state
6
<PAGE> 9
chartered lenders located in the state where the national bank is located. This
ability to "export" rates, as provided for in the Act, is relied upon by the
Bank to charge Customers the interest rates and fees permitted by Delaware law
regardless of an inconsistent law of the state in which the Customer is located,
thereby facilitating the Bank's nationwide credit card lending activities.
Interstate Banking
The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994
permits bank holding companies, with Federal Reserve Board approval, to acquire
banks located in states other than the holding company's home state without
regard to whether the transaction is prohibited under state law. In addition,
commencing June 1, 1997, national and state banks with different home states
will be permitted to merge across state lines, with approval of the appropriate
federal banking agency, unless the home state of a participating bank passes
legislation prior to this date expressly prohibiting interstate bank mergers.
Insurance
Section 92 of the National Bank Act authorizes the Bank to engage in the
business of insurance as an agency. In order to conduct an agency business the
Bank must obtain licensing approval in each state in which it intends to operate
and is subject to state regulation on agency and agent licensing, disclosure
requirements, policy delivery and other matters. State requirements which are so
burdensome or onerous as to preclude a national bank from exercising the powers
granted to it under Section 92 are preempted. There are differences among
federal and state regulators as to the extent of federal preemption of state
insurance agency regulation which have not been resolved.
COMPETITION
The Corporation's business is highly competitive. The Corporation competes
with numerous national, regional and local institutions. Significant new
competitors in recent years have included non-bank competitors and co-branded
credit cards. Strategies used by the Corporation's competitors include targeted
marketing, low introductory rates, no annual fee credit cards, balance transfers
and discounts on products and services. The Corporation also uses these
strategies and, in addition, relies on its strategy of marketing to people with
a strong common interest and its superior Customer service to compete with its
competitors.
EMPLOYEES
As of December 31, 1996, the Corporation had approximately 15,000
employees.
ITEM 2. PROPERTIES
The Corporation has approximately 2.5 million square feet of administrative
offices and credit card facilities in five office complexes that it owns in
Delaware. The majority of these facilities were designed and built expressly for
the Corporation's credit card operations. These complexes include space for
future expansion. The Corporation is constructing additional office space in two
of these complexes.
MBNA Hallmark Information Services, Inc. conducts its processing services
from an approximately 300,000 square foot facility in Dallas, Texas as well as
from approximately 100,000 square feet of office space at the Bank's facilities
in Newark, Delaware. The Corporation is constructing additional office space in
its Texas facility.
MBNA Marketing Systems, Inc. has the following regional offices:
approximately 200,000 square feet of space in Camden, Maine and approximately
130,000 square feet of space in Belfast, Maine; approximately 300,000 square
feet of space in Cleveland, Ohio; approximately 30,000 square feet of space in
Information Services' Dallas facility; and approximately 70,000 square feet of
space in Boca Raton, Florida. These facilities are owned by the Corporation. The
Corporation expects to open a regional office facility in Maryland in 1997. The
Corporation is constructing additional office space in Maine, Florida and Ohio.
7
<PAGE> 10
MBNA Marketing Systems, Inc. has leased sales offices in New York City,
Chicago, San Francisco and Washington, D.C. The leases are for 10-year terms and
contain renewal options which, if exercised, would extend the leases for up to
five additional years in New York City and San Francisco, and 10 additional
years in Chicago and Washington, D.C. Marketing Systems leases or owns
telemarketing offices in Delaware, Georgia, Maine, Maryland, Ohio and
Pennsylvania.
MBNA International Bank Limited's credit card operations are located in
approximately 160,000 square feet of space in Chester, England, which it
purchased in 1994. It maintains a sales office of approximately 4,500 square
feet of leased space in London.
ITEM 3. LEGAL PROCEEDINGS
In May 1996, Andrew B. Spark filed a lawsuit against the Corporation, the
Bank and certain of its officers and its subsidiary MBNA Marketing Systems, Inc.
in the United States District Court for the Middle District of Florida. This
suit is a purported class action. The plaintiff alleges that the Bank's
advertising of its cash promotional annual percentage rate program was
fraudulent and deceptive. The plaintiff seeks unspecified damages including
actual, treble and punitive damages and attorneys fees for an alleged breach of
contract, and violation of the Delaware Deceptive Trade Practices Act and the
federal Racketeer Influenced and Corrupt Organizations Act. In October 1996,
this case was transferred to the United States District Court for the District
of Delaware. The defendants have filed a motion for summary judgment which is
pending. The Corporation believes that its advertising practices are proper
under applicable federal and state law and intends to defend vigorously against
the action.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the fourth quarter of 1996, no matters were submitted to a vote of
security holders of the Corporation.
------------------------------
EXECUTIVE OFFICERS OF THE REGISTRANT
Information concerning the Corporation's executive officers is set forth
below.
Alfred Lerner (63) has been Chairman and Chief Executive Officer of the
Corporation since its inception in January 1991 and a director of the Bank since
December 1991. He served as Chairman of the Board and Chief Executive Officer of
MNC Financial, Inc. ("MNC Financial") from September 1990 to July 1991 and as
Chairman of the Board from July 1991 to October 1993. Mr. Lerner served as
Chairman of the Board of Equitable Bancorporation from July 1983 until it merged
with MNC Financial in January 1990. He has been Chairman and Chief Executive
Officer of The Town and Country Trust since August 1993. He was Chairman of the
Board of The Progressive Corporation, an insurance holding company, from 1988 to
April 1993. He is a member of the Boards of Trustees of Columbia University, of
the Cleveland Clinic Foundation and of Case Western Reserve University. He is
also President of the Cleveland Clinic Foundation.
Charles M. Cawley (56) has been President and a director of the Corporation
and Chairman and Chief Executive Officer of the Bank since January 1991. He was
the senior operating executive that formed the Bank in 1982. He has served as
Chief Executive Officer of the Bank since 1990, and as President since 1985. He
has been a director of the Bank since 1982. He serves on the boards of
Georgetown University, the University of Delaware, the Eisenhower Exchange
Fellowships, and the American Architectural Foundation. He is Chairman of the
Board of the Grand Opera House in Wilmington, Delaware, and is a member of the
Board and executive committee of MasterCard International.
John R. Cochran III (45) has been an Executive Vice President of the
Corporation since January 1991. He has served as Vice Chairman of the Bank and
as its Chief Marketing Officer since April 1991. He was Executive Vice President
from 1987 to 1991, Senior Vice President from 1985 to 1987, and Chief
8
<PAGE> 11
Administrative Officer from 1990 to February 1993. He has been a director of the
Bank since 1986 and has been a director of the United States Board of Directors
of MasterCard International since 1994.
Bruce L. Hammonds (48) has been an Executive Vice President of the
Corporation since January 1991. He has served as Vice Chairman of the Bank since
April 1991 and as its Chief Operating Officer since 1990. He was Executive Vice
President from 1987 to 1991 and Senior Vice President from 1986 to 1987. He has
been a director of the Bank since 1986. He is Chairman of the Board of the
Delaware State Chamber of Commerce and is a director of the Delaware Banker's
Association and the Delaware Housing Partnership.
M. Scot Kaufman (47) has been an Executive Vice President and Treasurer of
the Corporation since January 1991 and Chief Accounting Officer since July 1991.
He was Chief Financial Officer of the Corporation from January 1991 to July 1991
and since July 1992. He has served as Vice Chairman of the Bank since November
1992 and as its Chief Financial Officer since 1985. He was Senior Executive Vice
President from July 1991 to November 1992, Executive Vice President from 1989 to
1991 and Senior Vice President of the Bank from 1985 to 1989. He has been a
director of the Bank since 1986.
David W. Spartin (39) has been a Vice Chairman and a director of the Bank
since March 1997 and served as Senior Executive Vice President of the Bank from
September 1993 to March 1997. He was Executive Vice President of the Bank from
January 1993 to September 1993 and Senior Vice President of the Bank from May
1991 to January 1993.
Lance L. Weaver (42) has been an Executive Vice President of the
Corporation since April 1994 and Vice Chairman and Chief Administrative Officer
of the Bank since February 1993. Prior to joining the Corporation, he served as
Senior Vice President of Citicorp/Citibank from 1985 to 1991. He has been a
director of the Bank since February 1993.
Ronald W. Davies (55) has been an Executive Vice President of the
Corporation since October 1991 and Vice Chairman and Chief Technology Officer of
the Bank since April 1991 and has been Group Head of Technology Management since
January 1996. He has served as Chairman and Chief Executive Officer of MBNA
Hallmark Information Services, Inc. since August 1991. Prior to joining the
Corporation, he served as Senior Executive Vice President of Maryland National
Bank from 1986 to 1991. He has been a director of the Bank since April 1991.
Richard K. Struthers (41) has been Vice Chairman and a director of the Bank
since January 1997 and Group President of the Bank since January 1996. He was
Vice Chairman of the Bank from July 1995 to January 1996. He was a Senior
Executive Vice President of the Bank from June 1992 to July 1995 and was
Executive Vice President of the Bank from October 1986 to June 1992.
Vernon H. C. Wright (54) has been an Executive Vice President and Chief
Corporate Finance Officer of the Corporation and Chief Corporate Finance Officer
of the Bank since July 1992. He has been Vice Chairman of the Bank since
September 1995 and Group Head of Treasury for the Bank since January 1996. He
served as Senior Executive Vice President of the Bank from July 1992 to
September 1995 and as Executive Vice President from February 1991 to July 1992.
Prior to joining the Corporation in February 1991 he was Senior Vice President
and Chief Corporate Finance Officer at MNC Financial, Inc. and Maryland National
Bank. He has been a director of the Bank since November 1992.
Kenneth F. Boehl (42) has been Senior Executive Vice President of the Bank
since November 1992 and has been the Senior Control Officer of the Bank since
April 1992. Mr. Boehl served as Executive Vice President of the Bank from
January 1992 to November 1992 and Senior Vice President from November 1988 to
January 1992.
John W. Scheflen (50) has been an Executive Vice President, General Counsel
and Secretary of the Corporation since March 1992. He has served as a Senior
Executive Vice President of the Bank since January 1993, Executive Vice
President of the Bank from March 1992 to January 1993 and Secretary and Cashier
of the Bank since March 1992. Prior to joining the Corporation he was a partner
with Venable, Baetjer and Howard from 1984 to March 1992.
9
<PAGE> 12
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS
"Common Stock Price Range and Dividends" on page 62 and Notes G and M to
the Notes to the Consolidated Financial Statements on pages 46, 47 and 52 of the
1996 Annual Report to Stockholders are incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA
"Ten-Year Statistical Summary" on pages 20 and 21 of the 1996 Annual Report
to Stockholders is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" on pages 23 through 35 of the 1996 Annual Report to Stockholders is
incorporated herein by reference.
The following table presents the maturity distribution of domestic
certificates of deposit in amounts of $100,000 or more for the most recent three
years.
<TABLE>
<CAPTION>
DECEMBER 31
----------------------------------------------------------
1996 1995 1994
------------------ ------------------ ----------------
AMOUNT % AMOUNT % AMOUNT %
---------- ----- ---------- ----- -------- -----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Three months or less..................... $ 486,008 33.2 $ 271,560 23.4 $ 69,253 15.8
Over three through six months............ 226,810 15.5 331,383 28.6 62,887 14.3
Over six through twelve months........... 279,976 19.1 198,613 17.2 85,251 19.4
Over twelve months....................... 470,704 32.2 356,474 30.8 221,759 50.5
---------- ----- ---------- ----- -------- -----
Total.......................... $1,463,498 100.0 $1,158,030 100.0 $439,150 100.0
========== ===== ========== ===== ======== =====
</TABLE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Consolidated Financial Statements and Notes to the Consolidated
Financial Statements, the "Report of Independent Auditors" and the "Summary of
Consolidated Quarterly Financial Information" on pages 38 through 61 of the 1996
Annual Report to Stockholders are incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
10
<PAGE> 13
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
"Election of Directors" on pages 4 to 5 in the Definitive Proxy Statement
is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
"Election of Directors" on pages 4 to 5, "Executive Compensation" on pages
6 to 9 and "Compensation Committee Interlocks and Insider Participation" on page
11 in the Definitive Proxy Statement are incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
"Security Ownership of Management and Certain Beneficial Owners" on pages 2
to 3 in the Definitive Proxy Statement is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
"Compensation Committee Interlocks and Insider Participation" and "Certain
Relationships" on page 11 in the Definitive Proxy Statement are incorporated
herein by reference.
11
<PAGE> 14
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) INDEX TO FINANCIAL STATEMENTS:
1. The following consolidated financial statements of MBNA Corporation and
subsidiaries are incorporated herein by reference from the pages designated in
the 1996 Annual Report to Stockholders:
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Consolidated Statements of Financial Condition, December 31,
1996 and 1995..................................................... 38
Consolidated Statements of Income for the years ended December 31,
1996, 1995 and 1994............................................... 39
Consolidated Statements of Changes in Stockholders' Equity for the
years ended December 31, 1996, 1995 and 1994...................... 40
Consolidated Statements of Cash Flows for the years ended December
31, 1996, 1995 and 1994........................................... 41
Notes to the Consolidated Financial Statements...................... 42-59
Report of Independent Auditors...................................... 60
</TABLE>
2. Financial Statement Schedules
No Financial Statement Schedules are required to be filed.
3. Exhibits:
The following exhibits are incorporated by reference or filed herewith.
References to the 1990 Form S-1 are to the Registrant's Registration Statement
on Form S-1 effective January 22, 1991, Registration No. 33-38125. References to
the 1997 Form S-4 are to Amendment No. 1 of the Registrant's Registration
Statement on Form S-4, Registration No. 333-21181, filed on February 25, 1997.
References to the 1991 Form 10-K, the 1992 Form 10-K, the 1993 Form 10-K, the
1994 Form 10-K, and the 1995 Form 10-K are to the Registrant's Annual Reports on
Form 10-K for the years ended December 31, 1991, 1992, 1993, 1994 and 1995,
respectively.
<TABLE>
<S> <C>
Exhibit 3.1 Articles of Incorporation, as amended and supplemented.
Exhibit 3.2 By-laws, as amended (incorporated by reference to Exhibit 3.2 of 1991 Form
10-K).
Exhibit 4.1* Senior Indenture dated as of September 29, 1992, between the Registrant and
Bankers Trust Company, as Trustee.
Exhibit 4.2* Subordinated Indenture, dated as of November 24, 1992, between the Registrant
and Harris Trust and Savings Bank, as Trustee.
Exhibit 4.3* Fiscal and Paying Agency Agreement, dated September 21, 1992, between MBNA
America Bank, N.A. and Harris Bank and Trust Company, as Fiscal and Paying
Agent, for the 7.25% Subordinated Notes due 2002.
Exhibit 4.4* Issuing and Paying Agency Agreement dated as of December 10, 1991, and
amended as of August 11, 1993, December 21, 1994 and May 6, 1996 between MBNA
America Bank, N.A. and First Trust of New York, National Association.
Exhibit 4.5 Junior Subordinated Indenture between the Registrant and The Bank of New
York, as Debenture Trustee (incorporated by reference to Exhibit 4(c) of 1997
Form S- 4).
Exhibit 4.6 Amended and Restated Trust Agreement, dated as of December 18, 1996, between
the Registrant and The Bank of New York.
</TABLE>
12
<PAGE> 15
<TABLE>
<S> <C>
Exhibit 4.7 Guarantee Agreement, dated as of December 18, 1996, between the Registrant
and the Bank of New York.
Exhibit 4.8 Amended and Restated Trust Agreement, dated as of January 23, 1997, between
the Registrant and the Bank of New York.
Exhibit 4.9 Guarantee Agreement, dated as of January 23, 1997, between the Registrant and
the Bank of New York.
Exhibit 10.1 Tax Sharing and Indemnity Agreement with MNC Financial (incorporated by
reference to Exhibit 10.2 of 1990 Form S-1).
Exhibit 10.2 License Agreement with MasterCard (incorporated by reference to Exhibit 10.3
of 1990 Form S-1).
Exhibit 10.3 License Agreement with VISA (incorporated by reference to Exhibit 10.4 of
1990 Form S-1).
Exhibit 10.4 Share Purchase Agreement with Alfred Lerner (including Registration Rights
Agreement) (incorporated by reference to Exhibit 10.10 of 1990 Form S-1).
Exhibit 10.5 Amended and Restated Competitive Advance and Revolving Credit Facility
Agreement, dated as of January 15, 1997, among MBNA America Bank, N.A.,
certain lenders and Chase Manhattan Bank, as Agent.
Exhibit 10.6 Second Amendment dated April 10, 1996 and Third Amendment dated February 27,
1997 to the Credit Agreement dated as of April 13, 1994, between the
Registrant and Bank of America National Trust and Savings Association
(Original agreement incorporated by reference to Exhibit 10.7 of 1994 Form
10-K and First Amendment dated April 7, 1995 incorporated by reference to
Exhibit 10.6 of 1995 Form 10-K).
Exhibit 10.7 Amendment dated October 2, 1996 and amendment dated June 28, 1996 to the
Credit Agreement, dated as of October 5, 1994, between Registrant and The
Bank of New York (Original Agreement incorporated by reference to Exhibit
10.8 of 1994 Form 10-K and Amendment dated October 4, 1995 incorporated by
reference to Exhibit 10.7 of 1995 Form 10-K).
Exhibit 10.8** 1991 Long Term Incentive Plan, as amended (incorporated by reference to
Exhibit 10.8 of 1995 Form 10-K), and forms of Stock Option Agreements (1993
agreement incorporated by reference to Exhibit 10.12 of 1993 Form 10-K and
1995 agreements incorporated by reference to Exhibit 10.8 of 1995 Form 10-K).
Exhibit 10.9** Form of Restricted Stock Agreement (incorporated by reference to Exhibit 10.9
of 1995 Form 10-K).
Exhibit 10.10** MBNA Corporation Supplemental Executive Retirement Plan, as amended and
restated November 12, 1996.
Exhibit 10.11** Assumed Deferred Compensation Plans (1989 Deferred Compensation Plan
incorporated by reference to Exhibit 10.12 of 1991 Form 10-K and 1988
Deferred Compensation Plan incorporated by reference to Exhibit 10.14 of 1993
Form 10-K).
Exhibit 10.12** MBNA Corporation Senior Executive Performance Plan (incorporated by reference
to Exhibit 10.12 of 1995 Form 10-K).
Exhibit 10.13** Form of Split Dollar Agreement (incorporated by reference to Exhibit 10.18 of
1992 Form 10-K).
Exhibit 10.14** Deferred Compensation Plan and form of Agreement, as amended and restated
effective April 1, 1995 (incorporated by reference to Exhibit 10.16 of 1994
Form 10-K).
Exhibit 11 Computation of Earnings Per Common Share.
Exhibit 12 Computation of Ratio of Earnings to Combined Fixed Charges and Preferred
Stock Dividends.
Exhibit 13 1996 Annual Report to Stockholders.
</TABLE>
13
<PAGE> 16
<TABLE>
<S> <C>
Exhibit 21 Subsidiaries of the Corporation.
Exhibit 23 Consent of Independent Auditors.
Exhibit 27 Financial Data Schedule.
</TABLE>
- - ---------------
* The Registrant agrees to furnish a copy to the Securities and Exchange
Commission on request.
** Management contract or compensatory plan or arrangement required to be filed
as an exhibit pursuant to Item 14(c) of Form 10-K.
(b) REPORTS ON FORM 8-K
1. Report dated October 15, 1996, reporting MBNA Corporation's
earnings release for the third quarter of 1996.
2. Report dated October 24, 1996, reporting the securitization of
approximately $1.0 billion of credit card receivables by MBNA America Bank,
N.A.
3. Report dated October 31, 1996, reporting the net credit losses and
loan delinquencies for MBNA America Bank, N.A., for its net loan portfolio
and managed loan portfolio for October 1996.
4. Report dated November 26, 1996, reporting the securitization of
approximately $500.0 million of credit card receivables by MBNA America
Bank, N.A.
5. Report dated November 30, 1996, reporting the net credit losses and
loan delinquencies for MBNA America Bank, N.A., for its net loan portfolio
and managed loan portfolio for November 1996.
6. Report dated December 3, 1996, reporting the securitization of
approximately $500.0 million of credit card receivables by MBNA America
Bank, N.A.
7. Report dated December 5, 1996, reporting the securitization of
approximately 250.0 million pounds sterling of credit card receivables by
MBNA International Bank Limited.
8. Report dated December 31, 1996, reporting the net credit losses and
loan delinquencies for MBNA America Bank, N.A., for its net loan portfolio
and managed loan portfolio for December 1996.
9. Report dated January 14, 1997, reporting MBNA Corporation's
earnings release for the fourth quarter of 1996.
10. Report dated January 31, 1997, reporting the net credit losses and
loan delinquencies for MBNA America Bank, N.A., for its net loan portfolio
and managed loan portfolio for January 1997.
11. Report dated February 27, 1997, reporting the securitization of
approximately $1.0 billion of credit card receivables by MBNA America Bank,
N.A.
14
<PAGE> 17
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
MBNA CORPORATION
By: /s/ ALFRED LERNER
------------------------------------
Alfred Lerner
Chairman and Chief Executive Officer
March 21, 1997
Pursuant to the requirement of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- - ------------------------------------------ -------------------------------- ---------------
<C> <S> <C>
/s/ ALFRED LERNER Chairman, Chief Executive March 21, 1997
- - ------------------------------------------ Officer and Director
Alfred Lerner (principal executive officer)
/s/ CHARLES M. CAWLEY President and Director March 21, 1997
- - ------------------------------------------
Charles M. Cawley
/s/ M. SCOT KAUFMAN Executive Vice President and March 21, 1997
- - ------------------------------------------ Treasurer (principal financial
M. Scot Kaufman and accounting officer)
/s/ JAMES H. BERICK Director March 21, 1997
- - ------------------------------------------
James H. Berick, Esq.
/s/ BENJAMIN R. CIVILETTI, ESQ. Director March 21, 1997
- - ------------------------------------------
Benjamin R. Civiletti, Esq.
/s/ RANDOLPH D. LERNER, ESQ. Director March 21, 1997
- - ------------------------------------------
Randolph D. Lerner, Esq.
/s/ STUART L. MARKOWITZ Director March 21, 1997
- - ------------------------------------------
Stuart L. Markowitz, M.D.
/s/ MICHAEL ROSENTHAL Director March 21, 1997
- - ------------------------------------------
Michael Rosenthal, Ph.D.
</TABLE>
15
<PAGE> 18
EXHIBIT INDEX
The following exhibits are filed with the MBNA Corporation annual report on
Form 10-K for the fiscal year ended December 31, 1996:
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE NO.
- - ----------- ------------------------------------------------------------------------- --------
<C> <S> <C>
3.1 Articles of Incorporation, as amended and supplemented...................
4.6 Amended and Restated Trust Agreement, dated as of December 18, 1996,
between the Registrant and the Bank of New York..........................
4.7 Guarantee Agreement, dated as of December 18, 1996, between the
Registrant and the Bank of New York......................................
4.8 Amended and Restated Trust Agreement, dated as of January 23, 1997,
between the Registrant and the Bank of New York..........................
4.9 Guarantee Agreement, dated as of January 23, 1997, between the Registrant
and the Bank of New York.................................................
10.5 Amended and Restated Competitive Advance and Revolving Credit Facility
Agreement, dated as of January 15, 1997, among MBNA America Bank, N.A.,
certain lenders and Chase Manhattan Bank, as Agent.......................
10.6 Second Amendment dated April 10, 1996 and Third Amendment dated February
27, 1997 to the Credit Agreement dated as of April 13, 1994, between the
Registrant and Bank of America National Trust and Savings Association....
10.7 Amendment dated October 2, 1996 and amendment dated June 28, 1996 to the
Credit Agreement, dated as of October 5, 1994, between Registrant and The
Bank of New York.........................................................
10.8 Forms of Stock Option Agreements.........................................
10.10 MBNA Corporation Supplemental Executive Retirement Plan, as amended and
restated November 12, 1996. .............................................
11 Computation of Earnings Per Common Share.................................
12 Computation of Ratio of Earnings to Combined Fixed Charges and Preferred
Stock Dividends..........................................................
13 1996 Annual Report to Stockholders.......................................
21 Subsidiaries of the Corporation..........................................
23 Consent of Independent Auditors..........................................
27 Financial Data Schedule..................................................
</TABLE>
<PAGE> 1
MBNA CORPORATION
COMPOSITE ARTICLES OF INCORPORATION
(AS AMENDED AND SUPPLEMENTED THROUGH SEPTEMBER 18, 1996)
ARTICLE I - NAME
The name of the corporation (hereinafter called the "Corporation") is
MBNA Corporation.
ARTICLE II - PURPOSE
The Corporation is formed to engage in the business of banking and
finance, directly and through subsidiaries. It may engage in any other business
permitted by law.
ARTICLE III - PRINCIPAL OFFICE AND RESIDENT AGENT
The address of the principal office of the Corporation in the State of
Maryland is c/o The Corporation Trust Incorporated, 32 South Street, Baltimore,
Maryland 21202. The resident agent of the Corporation in the State of Maryland
is The Corporation Trust Incorporated, 32 South Street, Baltimore, Maryland
21202. The resident agent is a Maryland corporation.
ARTICLE IV - CAPITAL STOCK
(a) The total number of shares of stock of all classes which the
Corporation has authority to issue is 720,000,000 shares, of which 700,000,000
shares are classified as Common Stock, par value $.01 per share, and 20,000,000
shares are classified as Preferred Stock, par value $.01 per share. The
aggregate par value of all shares of all classes which the Corporation is
authorized to issue is $7,200,000.
(b) The Preferred Stock may be issued in series. Prior to issuance, the
Board of Directors shall set the terms of the Preferred Stock, including the
preferences, conversion and other rights, voting powers, restrictions,
limitations as to dividends, qualifications and terms and conditions of
redemption.
(c) The Board of Directors shall have the power to classify or
reclassify any unissued stock, whether now or hereafter authorized, by setting
or changing the preferences, conversion or other rights, voting powers,
restrictions, limitations as to dividends, qualifications, or terms or
conditions of redemption of such stock.
(d) Unless otherwise provided by the Board of Directors, no holder of
stock of any class shall be entitled to preemptive rights to subscribe for or
purchase or receive any stock of any class or securities convertible into stock
of any class of the Corporation.
<PAGE> 2
ARTICLE V - BOARD OF DIRECTORS
(a) The Corporation shall initially have four directors. The initial
directors, who shall act as such until the first annual meeting or until their
successors are duly elected and qualify shall be Charles M. Cawley, John R.
Cochran, Bruce L. Hammonds and M. Scot Kaufman. The number of directors may be
increased or decreased as provided in the By-Laws of the Corporation.
(b) The Board of Directors may authorize the issuance from time to time
of stock of the Corporation of any class, now or hereafter authorized, and
securities convertible into stock of the Corporation of any class, now or
hereafter authorized, for such consideration and on such other terms as the
Board of Directors may deem advisable, without stockholder approval.
ARTICLE VI - VOTING
Notwithstanding any provision of law requiring any action to be taken
or authorized by the affirmative vote of the holders of a greater proportion of
the votes of all classes or of any class of stock of the Corporation, such
action shall be effective and valid if taken or authorized by the affirmative
vote of a majority of the total number of votes entitled to be cast thereon,
except as otherwise provided in the charter.
ARTICLE VII - LIABILITY AND INDEMNIFICATION
(a) To the fullest extent that limitations on the liability of
directors and officers are permitted by the Maryland General Corporation Law, no
director or officer of the Association shall have any liability to the
Corporation or its stockholders for damages. This limitation on liability
applies to events occurring at the time a person serves as director or officer
of the Corporation whether or not such person is a director or officer at the
time of any proceeding in which liability is asserted.
(b) To the fullest extent permitted by the Maryland General Corporation
Law, the Corporation shall indemnify and advance expenses to its currently
acting and its former directors. The Corporation shall indemnify and advance
expenses to its officers to the same extent as its directors, and may do so to
such further extent as is consistent with law. The Board of Directors may by
bylaw, resolution or agreement make further provision for indemnification of
directors, officers, employees and agents to the fullest extent permitted by the
Maryland General Corporation Law.
(c) References to the Maryland General Corporation Law in this Article
are to that law as from time to time amended. No amendment to the charter of the
Corporation shall affect any right of any person under this Article based on any
event, omission or proceeding prior to the amendment.
<PAGE> 3
ARTICLE VIII - CONTROL SHARE ACQUISITION STATUTE EXEMPTIONS
Any acquisition of shares of the Corporation on or after January 21,
1991 by Alfred Lerner (or his successor in interest) ("Lerner") or by The
Progressive Corporation (or its successors in interest) ("Progressive"), or by
any present or future affiliate or associate thereof so long as such affiliate
or associate is at the time in question such an affiliate or associate (or any
person acting in concert or in a group with any of the foregoing) is, pursuant
to Section 3-702(b) of the Maryland General Corporation Law (the "MGCL") (or any
successor or replacement provision or statute), hereby approved for purposes of
and exempted from the provisions of, Subtitle 7 of Title 3 of the MGCL (or any
successor or replacement provision or statute), with the result that any shares
acquired by any such person shall have all voting rights otherwise appurtenant
thereto, notwithstanding Subtitle 7 of Title 3 of the MGCL (or any successor or
replacement provision or statute).
Notwithstanding anything in the Charter or bylaws of the Corporation
(as each may be amended from time to time) to the contrary, this ARTICLE may not
be amended, altered or repealed except with the unanimous approval of all of the
members of the Board of Directors and the written consent of all persons or
entities then in existence and specified above that may be adversely affected,
or that may lose any privilege or right, as a result of such amendment,
alteration or repeal.
ARTICLE IX - AMENDMENTS
Except as set forth in this Article, The Corporation reserves the right
to make, from time to time, any amendments of its charter which may now or
hereafter be authorized by law, including any amendments which alter the
contract rights of any class of outstanding stock as expressly set forth in the
charter.
<PAGE> 4
MBNA CORPORATION
ARTICLES SUPPLEMENTARY
(Filed November 9, 1995)
FIRST: 10,000,000 shares of authorized but unissued common
stock, par value $.01 per share, of the Corporation, have been
reclassified as additional shares of Preferred Stock, par value $.01
per share, and 6,000,000 shares of authorized but unissued Preferred
Stock of the Corporation have been classified as 7-1/2% Cumulative
Preferred Stock, Series A, $.01 par value, of the Corporation (the
"Series") with the preferences, conversion and other rights, voting
powers, restrictions, limitations as to dividends, qualifications, and
terms and conditions of redemption, as follows:
1. Dividends. (a) Dividends shall be payable on the shares of
this Series: (i) for the period (the "Initial Dividend Period") from
the date of original issue of shares of this Series to and including
January 14, 1996 and (ii) for each quarterly dividend period thereafter
(the Initial Dividend Period and each quarterly dividend period
thereafter being hereinafter individually referred to as a "Dividend
Period" and collectively referred to as "Dividend Periods"), which
quarterly Dividend Periods shall commence on January 15, April 15, July
15 and October 15 in each year, commencing January 15, 1996, and shall
end on and include the day next preceding the first day of the next
Dividend Period, in an amount equal to $.46875 per share per quarterly
Dividend Period. Dividends shall be cumulative from such date of
original issue and shall be payable, when, as and if declared by the
Board of Directors, on April 15, July 15, October 15 and January 15 of
each year (each, a "Dividend Payment Date"), commencing on January 15,
1996. Each dividend on the shares of this Series will be payable to the
holders of record of the shares of this Series as they appear on the
stock books of the Corporation on such record date as may be fixed by
the Board of Directors of the Corporation, which record date will not
be more than sixty (60) days prior to the applicable Dividend Payment
Date.
(b) Dividends payable on this Series for any period greater or
less than a full Dividend Period, including the Initial Dividend
Period, shall be computed on the basis of a 360-day year consisting of
twelve 30-day months and the actual number of days included in the
Dividend Period.
(c) Holders of shares of this Series shall not be entitled to
any dividend, whether payable in cash, property or stock, in excess of
full cumulative dividends, as herein provided, on this Series. No
interest, or sum of money in lieu of interest, shall be payable in
respect of any dividend payment or payments on this Series which may be
in arrears.
(d) No full dividends shall be declared or paid or set apart
for payment on any series stock ranking, as to dividends, on a parity
with this Series for any period unless full cumulative dividends have
been or contemporaneously are declared and paid or declared
<PAGE> 5
and a sum sufficient for the payment thereof set apart for such payment
on this Series for all Dividend Periods terminating on or prior to the
date of payment of such full cumulative dividends. When dividends are
not paid in full, as aforesaid, upon the shares of this Series and any
other stock ranking on a parity as to dividends with this Series, all
dividends declared upon shares of this Series and any other series of
stock ranking on a parity as to dividends with this Series shall be
declared pro rata so that the amount of dividends declared per share on
this Series and such other stock shall in all cases bear to each other
the same ratio that accrued and unpaid dividends per share on the
shares of this Series and such other stock bear to each other.
(e) So long as any shares of this Series are outstanding, no
dividend (other than a dividend payable in common stock or in any other
stock ranking junior to this Series as to dividends and upon
liquidation) shall be declared or paid or set aside for payment or
other distribution declared or made upon the common stock or upon any
other stock ranking junior to this Series as to dividends or upon
liquidation, nor shall any common stock or any other stock of the
Corporation ranking junior to this Series as to dividends or upon
liquidation be redeemed, purchased or otherwise acquired for any
consideration (or any moneys be paid to or made available for a sinking
fund for the redemption of any shares of any such stock) by the
Corporation (except by conversion into or exchange for stock of the
Corporation ranking junior to this Series as to dividends and upon
liquidation) unless, in each case, the full cumulative dividends on all
outstanding shares of this Series shall have been paid or declared and
set aside for payment for all past Dividend Periods.
2. Redemption. (a) The holders of the shares of this Series
may not require the Corporation to redeem any shares of this Series.
The Corporation, at its option, may redeem shares of this Series, as a
whole or in part, at any time on or after January 15, 2001, at a
redemption price of $25 per share, plus accrued and unpaid dividends
thereon to the date fixed for redemption.
(b) In the event that fewer than all the outstanding shares of
this Series are to be redeemed, the number of shares to be redeemed
shall be determined by lot or pro rata as may be determined by the
Corporation or by any other method as may be determined by the Board of
Directors of the Corporation in its sole discretion to be equitable,
provided that such method satisfies any applicable requirements of any
securities exchange on which this Series is listed.
(c) In the event the Corporation shall redeem shares of this
Series, notice of such redemption shall be given by first class mail,
postage prepaid, mailed not less than 30 or more than 60 days prior to
the redemption date, to each holder of record of the shares to be
redeemed, at such holder's address as the same appears on the stock
register of the Corporation. Each such notice shall state: (i) the
redemption date; (ii) the number of shares of this Series to be
redeemed and, if fewer than all the shares held by such holder are to
be redeemed, the number of such shares to be redeemed from such holder;
(iii) the redemption price; (iv) the place or places where certificates
for such shares are to be surrendered for payment of the redemption
price; and (v) that dividends on the shares to be redeemed cease to
accrue on the redemption date.
<PAGE> 6
(d) Notice having been mailed as aforesaid, from and after the
redemption date (unless default shall be made by the Corporation in
providing money for the payment of the redemption price) dividends on
the shares of this Series so called for redemption shall cease to
accrue, and said shares shall no longer be deemed to be outstanding,
and all rights of the holders thereof as stockholders of the
Corporation (except the right to receive from the Corporation the
redemption price) shall cease. Upon surrender in accordance with said
notice of the certificates for any shares so redeemed (properly
endorsed or assigned for transfer, if the Corporation shall so require
and the notice shall so state), such shares shall be redeemed by the
Corporation at the redemption price aforesaid. In case fewer than all
the shares represented by any such certificate are redeemed, a new
certificate shall be issued representing the unredeemed shares without
cost to the holder thereof.
(e) Any shares of this Series which shall at any time have
been redeemed shall, after such redemption, have the status of
authorized but unissued shares of Preferred Stock, without designation
as to series.
(f) Notwithstanding the foregoing provisions of this Section
2, if any dividends on this Series or any other series of cumulative
Preferred Stock ranking on a parity with this Series are in arrears, no
shares of this Series or any such parity series shall be redeemed
unless all outstanding shares of this Series or any such parity series
are simultaneously redeemed, and the Corporation shall not purchase or
otherwise acquire any shares of this Series or any such parity series;
provided, however, that the foregoing shall not prevent the purchase or
acquisition of shares of this Series or any such parity series pursuant
to a purchase or exchange offer made on the same terms to holders of
all outstanding shares of this Series.
3. Conversion. The holders of shares of this Series shall
not have any rights to convert such shares into shares of any other
class or series of capital stock of the Corporation.
4. Liquidation Rights. (a) Upon the voluntary or
involuntary dissolution, liquidation or winding up of the Corporation,
the holders of the shares of this Series shall be entitled to receive
and to be paid out of the assets of the Corporation available for
distribution to its stockholders, before any payment or distribution
shall be made on the common stock or on any other class of stock
ranking junior to this Series upon liquidation, the amount of $25 per
share, plus accrued and unpaid dividends thereon.
(b) After the payment to the holders of the shares of this
Series of the full preferential amounts provided for in this Section 4,
the holders of this Series as such shall have no right or claim to any
of the remaining assets of the Corporation.
<PAGE> 7
(c) If, upon any voluntary or involuntary dissolution,
liquidation, or winding up of the Corporation, the amounts payable with
respect to the shares of this Series and any other shares of stock of
the Corporation ranking as to any such distribution on a parity with
the shares of this Series are not paid in full, the holders of the
shares of this Series and of such other shares will share ratably in
any such distribution of assets of the Corporation in proportion to the
full preferential amounts to which they are entitled.
(d) Neither the sale of all or substantially all of the assets
of the Corporation, nor the merger or consolidation or share exchange
of the Corporation into or with any other corporation or the merger or
consolidation or share exchange of any other corporation into or with
the Corporation, shall be deemed to be a dissolution, liquidation or
winding up, voluntary or involuntary, for the purposes of this Section
4.
(e) Upon the dissolution, liquidation or winding up of the
Corporation, the holders of shares of this Series then outstanding
shall be entitled to be paid out of the assets of the Corporation
available for distribution to its stockholders all amounts to which
such holders are entitled pursuant to paragraph (a) of this Section 4
before any payment shall be made to the holder of any class of capital
stock of the Corporation ranking junior to this Series upon
liquidation.
5. Ranking. Any stock of any class or classes of the
Corporation shall be deemed to rank:
(a) prior to the shares of this Series, either as to dividends
or upon liquidation, if the holders of such class or classes shall be
entitled to the receipt of dividends or of amounts distributable upon
dissolution, liquidation or winding up of the Corporation, as the case
may be, in preference or priority to the holders of shares of this
Series;
(b) on a parity with shares of this Series, either as to
dividends or upon liquidation, whether or not the dividend rates,
dividend payment dates or redemption or liquidation prices per share or
sinking fund provisions, if any, be different from those of this
Series, if the holders of such stock shall be entitled to the receipt
of dividends or of amounts distributable upon dissolution, liquidation
or winding up of the Corporation, as the case may be, without
preference or priority, one over the other, as between the holders of
such stock and the holders of shares of this Series; and
(c) junior to shares of this Series, either as to dividends or
upon liquidation, if such class shall be common stock or if the holders
of shares of this Series shall be entitled to receipt of dividends or
of amounts distributable upon dissolution, liquidation or winding up of
the Corporation, as the case may be, in preference or priority to the
holders of shares of such class or classes.
6. Voting Rights. (a) Except as indicated below, the
shares of this Series shall not be entitled to vote on any matter
including, but not limited to:
<PAGE> 8
(i) Any merger, consolidation, share
exchange or sale of all or substantially all of the assets of
the Corporation except to the extent such action changes or
alters the preferences, conversion and other rights, voting
powers, restrictions, limitation as to dividends,
qualifications and terms and conditions of redemption of this
Series as expressly set forth herein in a manner adverse to
the holders of this Series, or,
(ii) An increase in the authorized amount
of this Series or the creation, authorization or issuance of
an additional series ranking on a parity with the shares of
this Series as to dividends or upon liquidation, or to
reclassify any authorized stock of the Corporation into any
such shares ranking on a parity with, or to authorize or issue
any obligation or security convertible into or evidencing the
right to purchase any such pari passu shares.
(b) Notwithstanding the foregoing:
(i) The affirmative vote of at least
two-thirds of the votes entitled to be cast by holders of
shares of this Series, shall be necessary for any amendment,
alteration or repeal, whether by merger, consolidation, share
exchange or otherwise, of the Charter of the Corporation, any
articles supplementary thereto or of the resolutions contained
in the articles supplementary thereto, which changes or alters
the preferences, conversion and other rights, voting powers,
restrictions, limitations as to dividends, qualifications and
terms and conditions of redemption of this Series as expressly
set forth herein in a manner adverse to the holders of this
Series;
(ii) The affirmative vote of at least
two-thirds of the votes entitled to be cast by the holders of
the shares of this Series and all other series of Preferred
Stock ranking on a parity with shares of this Series as to
dividends or upon liquidation upon which like voting rights
have been conferred and are exercisable, voting together as a
single class without regard to series, shall be necessary to
authorize or issue any shares of any class of stock of the
Corporation ranking prior to the shares of this Series as to
dividends or upon liquidation, or to reclassify any authorized
stock of the Corporation into any such prior shares, or
authorize or issue any obligation or security convertible into
or evidencing the right to purchase any such prior shares; and
(iii) If at the time of any annual meeting
of the Corporation's stockholders for the election of
directors there is a default in preference dividends (as
hereinafter defined) on this Series, the number of directors
constituting the Board of Directors of the Corporation shall
be increased by two, and the holders of the shares of this
Series (together with the holders of the Preferred Stock of
all other series upon which like voting rights have been
conferred and are exercisable), shall have the right at such
meeting, voting together as a single class without regard to
series, to the exclusion of the holders of common stock, to
elect two directors of the Corporation (each a "Preferred
Director") to fill such newly created directorships. Each
holder of shares of this Series will have one vote for
<PAGE> 9
each share of stock held and each holder of each other series
of Preferred Stock with like voting rights will have such
number of rights, if any, for each share of stock held as may
be granted to such holder. Such right shall continue until
there are no dividends in arrears upon this Series, subject to
re-vesting in the event of each and every subsequent default
in preference dividends on this Series. Any Preferred Director
may be removed with or without cause by the vote of the
holders of record of the outstanding shares of Preferred Stock
entitled to elect such Preferred Director, voting together as
a single class without regard to series, at a meeting of the
Corporation's stockholders, or of the holders of such shares
of Preferred Stock, called for the purpose. Any Preferred
Director may be removed for cause by the vote of the holders
of outstanding shares of stock of the Corporation entitled to
vote for the election of directors. So long as a default in
any preference dividends on this Series shall exist, (a) any
vacancy in the office of a Preferred Director may be filled
(except as provided in the following clause (b)) by an
instrument in writing signed by the remaining Preferred
Director and filed with the Corporation and (b) in the case of
the removal of any Preferred Director, the vacancy may be
filled by the vote of the holders of the outstanding shares of
Preferred Stock, voting together as a single class without
regard to series, at the same meeting at which such removal
shall be voted. Each director appointed as aforesaid by the
remaining Preferred Director shall be deemed, for all purposes
hereof, to be a Preferred Director. Whenever a default in
preference dividends shall no longer exist, subject to the
rights of the holders of any other series of Preferred Stock,
the number of directors constituting the Board of Directors of
the Corporation shall be reduced by two. For the purposes
hereof, a "default in preference dividends" on this Series
shall be deemed to have occurred whenever the amount of
accrued dividends upon this Series shall be equivalent to six
full quarterly dividends or more (whether or not consecutive),
and, having so occurred, such default shall be deemed to exist
thereafter until, but only until, all accrued dividends on all
shares of this Series shall have been paid to the end of the
last preceding dividend period.
SECOND: The shares of Common Stock have been reclassified as
Preferred Stock and the shares of this Series have been reclassified by
the Board of Directors of the Corporation under the authority contained
in the Charter of the Corporation. The terms of this Series have been
fixed by a committee of the Board of Directors pursuant to a general
formula adopted by the Board of Directors.
<PAGE> 10
MBNA CORPORATION
ARTICLES SUPPLEMENTARY
(Filed September 18, 1996)
FIRST: 6,000,000 shares of authorized but unissued Preferred
Stock of the Corporation have been classified as Adjustable Rate
Cumulative Preferred Stock, Series B, $.01 par value, of the
Corporation (the "Series") with the preferences, conversion and other
rights, voting powers, restrictions, limitations as to dividends,
qualifications, and terms and conditions of redemption, as follows:
Dividends. (a) Dividends shall be payable on the
shares of the Series for the period from September 23, 1996 to October
15, 1996 (the "Initial Dividend Period") at the rate of 7.0% per annum
($.1069 per share). For each quarterly dividend period after the
Initial Dividend Period (the Initial Dividend Period and each quarterly
dividend period thereafter being hereinafter individually referred to
as a "Dividend Period" and collectively referred to as "Dividend
Periods"), which Dividend Periods shall commence on January 15, April
15, July 15 and October 15 of each year, commencing October 15, 1996,
and shall end on and include the day next preceding the first day of
the next Dividend Period, dividends payable on the shares of the Series
shall be payable at a rate per annum of the stated value thereof equal
to the Applicable Rate (as defined in Section 2) in respect of such
Dividend Period, expressed as a percentage to the nearest ten
thousandth of a percentage point. The amount of dividends per share for
each Dividend Period shall be computed by dividing the Applicable Rate
for such quarterly Dividend Period by four and applying the resulting
rate to the stated value per share of the Series. Dividends shall be
fully cumulative from September 23, 1996 and shall be payable, as, if
and when declared by the Board of Directors, on January 15, April 15,
July 15 and October 15 of each year (each, a "Dividend Payment Date"),
commencing on October 15, 1996. If a Dividend Payment Date is not a
business day, dividends (if declared) on the shares of the Series will
be paid on the immediately succeeding business day, without interest.
Each dividend will be payable to holders of record as they appear on
the stock books of the Corporation on such record dates as shall be
fixed by the Board of Directors of the Corporation and shall be not
more than 60 days preceding the payment date of such dividend. The
right of the holders of the shares of the Series to receive dividends
is fully cumulative and, accordingly, all dividends not paid, whether
or not declared, will accumulate without interest until declared and
paid, which declaration and payment may be for all or part of the then
accumulated dividends. The Corporation's ability to pay dividends on
its Preferred Stock, including the Series, is subject to policies
established by the Federal Reserve Board.
<PAGE> 11
Dividends payable on the Series for any period
greater or less than a full Dividend Period, including the Initial
Dividend Period, shall be computed on the basis of a 360-day year
consisting of twelve 30-day months and the actual number of days
elapsed in any period less than one month.
Holders of shares of the Series shall not be entitled
to any dividend, whether payable in cash, property or stock, in excess
of full cumulative dividends, as herein provided, on the Series. No
interest, or sum of money in lieu of interest, shall be payable in
respect of any dividend payment or payments on the Series which may be
in arrears.
No full dividends shall be declared or paid or set
apart for payment on any stock ranking, as to dividends, on a parity
with the Series for any period unless full cumulative dividends have
been or contemporaneously are declared and paid or declared and a sum
sufficient for the payment thereof set apart for such payment on the
Series for all Dividend Periods terminating on or prior to the date of
payment of such full cumulative dividends. When dividends are not paid
in full, as aforesaid, upon the shares of the Series and any other
stock ranking on a parity as to dividends with the Series, all
dividends declared upon shares of the Series and any other series of
stock ranking on a parity as to dividends with the Series shall be
declared pro rata so that the amount of dividends declared per share on
the Series and such other stock shall in all cases bear to each other
the same ratio that accrued and unpaid dividends per share on the
shares of the Series and such other stock bear to each other.
So long as any shares of the Series are outstanding,
no dividend (other than a dividend payable in common stock or in any
other stock ranking junior to the Series as to dividends and upon
liquidation) shall be declared or paid or set aside for payment or
other distribution declared or made upon the common stock or upon any
other stock ranking junior to the Series as to dividends or upon
liquidation, nor shall any common stock or any other stock of the
Corporation ranking junior to the Series as to dividends or upon
liquidation be redeemed, purchased or otherwise acquired for any
consideration (or any moneys be paid to or made available for a sinking
fund for the redemption of any shares of any such stock) by the
Corporation (except by conversion into or exchange for stock of the
Corporation ranking junior to the Series as to dividends and upon
liquidation) unless, in each case, the full cumulative dividends on all
outstanding shares of the Series shall have been paid or declared and
set aside for payment for all past Dividend Periods.
<PAGE> 12
Definition of Applicable Rate, etc. (a) Except as
provided below in this paragraph, the "Applicable Rate" for any
Dividend Period (other than the Initial Dividend Period) will be equal
to 99.0% of the Effective Rate (as defined below), but not less than
5.5% per annum or more than 11.5% per annum. The "Effective Rate" for
any Dividend Period will be equal to the highest of the Treasury Bill
Rate, the Ten Year Constant Maturity Rate and the Thirty Year Constant
Maturity Rate (each as defined below) for such Dividend Period. In the
event that the Corporation determines in good faith that for any
reason:
any one of the Treasury Bill Rate, the Ten Year
Constant Maturity Rate or the Thirty Year Constant Maturity
Rate cannot be determined for any Dividend Period, the
Effective Rate for such Dividend Period will be equal to the
higher of whichever two of such rates can be so determined;
only one of the Treasury Bill Rate, the Ten Year
Constant Maturity Rate or the Thirty Year Constant Maturity
Rate can be determined for any Dividend Period, the Effective
Rate for such Dividend Period will be equal to whichever such
rate can be so determined; or
none of the Treasury Bill Rate, the Ten Year Constant
Maturity Rate or the Thirty Year Constant Maturity Rate can be
determined for any Dividend Period, the Effective Rate for the
preceding dividend period will be continued for such Dividend
Period.
Except as described below in this paragraph, the
"Treasury Bill Rate" for each Dividend Period will be the arithmetic
average of the two most recent weekly per annum market discount rates
(or the one weekly per annum market discount rate, if only one such
rate is published during the relevant Calendar Period (as defined
below)) for three-month U.S. Treasury bills, as published weekly by
the Federal Reserve Board (as defined below) during the Calendar
Period immediately preceding the last ten calendar days preceding the
Dividend Period for which the dividend rate on the Series is being
determined. In the event that the Federal Reserve Board does not
publish such a weekly per annum market discount rate during any such
Calendar Period, the Treasury Bill Rate for such Dividend Period will
be the arithmetic average of the two most
<PAGE> 13
recent weekly per annum market discount rates (or the one weekly per
annum market discount rate, if only one such rate is published during
the relevant Calendar Period) for three-month U.S. Treasury bills, as
published weekly during such Calendar Period by any Federal Reserve
Bank or by any U.S. Government department or agency selected by the
Corporation. In the event that a per annum market discount rate for
three-month U.S. Treasury bills is not published by the Federal Reserve
Board or by any Federal Reserve Bank or by any U.S. Government
department or agency during such Calendar Period, the Treasury Bill
Rate for such Dividend Period will be the arithmetic average of the two
most recent weekly per annum market discount rates (or the one weekly
per annum market discount rate, if only one such rate is published
during the relevant Calendar Period) for all of the U.S. Treasury bills
then having remaining maturities of not less than 80 nor more than 100
days, as published during such Calendar Period by the Federal Reserve
Board or, if the Federal Reserve Board does not publish such rates, by
any Federal Reserve Bank or by any U.S. Government department or agency
selected by the Corporation. In the event that the Corporation
determines in good faith that for any reason no such U.S. Treasury bill
rates are published as provided above during such Calendar Period, the
Treasury Bill Rate for such Dividend Period will be the arithmetic
average of the per annum market discount rates based upon the closing
bids during such Calendar Period for each of the issues of marketable
non-interest-bearing U.S. Treasury securities with a remaining maturity
of not less than 80 nor more than 100 days from the date of each such
quotation, as chosen and quoted daily for each business day in New York
City (or less frequently if daily quotations are not generally
available) to the Corporation by at least three recognized dealers in
U.S. Government securities selected by the Corporation. In the event
that the Corporation determines in good faith that for any reason the
Corporation cannot determine the Treasury Bill Rate for any Dividend
Period as provided above in this paragraph, the Treasury Bill Rate for
such Dividend Period will be the arithmetic average of the per annum
market discount rates based upon the closing bids during such Calendar
Period for each of the issues of marketable interest-bearing U.S.
Treasury securities with a remaining maturity of not less than 80 nor
more than 100 days from the date of each such quotation, as chosen and
quoted daily for each business day in New York City (or less frequently
if daily quotations are not generally available) to the Corporation by
at least three recognized dealers in U.S. Government securities
selected by the Corporation.
Except as described below in this paragraph, the "Ten
Year Constant Maturity Rate" for each Dividend Period will be the
arithmetic average of the two most recent weekly per annum Ten Year
Average Yields (as defined below) (or the one weekly per annum Ten Year
Average Yield, if only one such yield is published during the relevant
Calendar Period), as published weekly by the Federal Reserve Board
during the Calendar Period immediately preceding the last ten calendar
days preceding the Dividend Period for which the dividend rate on the
Series is being determined. In the event that the Federal Reserve Board
does not publish such a weekly per annum Ten Year Average Yield during
any such Calendar Period, the Ten Year Constant Maturity Rate for such
Dividend Period will be the arithmetic average of the two most recent
weekly per annum Ten Year Average Yields (or the one weekly per annum
Ten Year Average Yield, if only one such yield is published during the
relevant Calendar Period), as published weekly during such Calendar
Period by any Federal Reserve Bank or by any U.S. Government
<PAGE> 14
department or agency selected by the Corporation. In the event that a
per annum Ten Year Average Yield is not published by the Federal
Reserve Board or by any Federal Reserve Bank or by any U.S. Government
department or agency during such Calendar Period, the Ten Year Constant
Maturity Rate for such Dividend Period will be the arithmetic average
of the two most recent weekly per annum average yields to maturity (or
the one weekly per annum average yield to maturity, if only one such
yield is published during the relevant Calendar Period) for all of the
actively traded marketable U.S. Treasury fixed interest rate securities
(other than Special Securities (as defined below)) then having
remaining maturities of not less than eight nor more than twelve years,
as published during such Calendar Period by the Federal Reserve Board
or, if the Federal Reserve Board does not publish such yields, by any
Federal Reserve Bank or by any U.S. Government department or agency
selected by the Corporation. In the event that the Corporation
determines in good faith that for any reason the Corporation cannot
determine the Ten Year Constant Maturity Rate for any Dividend Period
as provided above in this paragraph, then the Ten Year Constant
Maturity Rate for such Dividend Period will be the arithmetic average
of the per annum average yields to maturity based upon the closing bids
during such Calendar Period for each of the issues of actively traded
marketable U.S. Treasury fixed interest rate securities (other than
Special Securities) with a final maturity date not less than eight nor
more than twelve years from the date of each such quotation, as chosen
and quoted daily for each business day in New York City (or less
frequently if daily quotations are not generally available) to the
Corporation by at least three recognized dealers in U.S. Government
securities selected by the Corporation.
Except as described below in this paragraph, the
"Thirty Year Constant Maturity Rate" for each Dividend Period will be
the arithmetic average of the two most recent weekly per annum Thirty
Year Average Yields (as defined below) (or the one weekly per annum
Thirty Year Average yield, if only one such yield is published during
the relevant Calendar Period), as published weekly by the Federal
Reserve Board during the Calendar Period immediately preceding the last
ten calendar days preceding the Dividend Period for which the dividend
rate on the Series is being determined. In the event that the Federal
Reserve Board does not publish such a weekly per annum Thirty Year
Average Yield during any such Calendar Period, the Thirty Year Constant
Maturity Rate for such Dividend Period will be the arithmetic average
of the two most recent weekly per annum Thirty Year Average Yields (or
the one weekly per annum Thirty Year Average Yield, if only one such
yield is published during the relevant Calendar Period), as published
weekly during such Calendar Period by any Federal Reserve Bank or by
any U.S. Government department or agency selected by the Corporation.
In the event that a per annum Thirty Year Average Yield is not
published by the Federal Reserve Board or by any Federal Reserve Bank
or by any U.S. Government department or agency during such Calendar
Period, the Thirty Year Constant Maturity Rate for such Dividend Period
will be the arithmetic average of the two most recent weekly per annum
average yields to maturity (or the one weekly per annum average yield
to maturity, if only one such yield is published during the relevant
Calendar Period) for all of the actively traded marketable U.S.
Treasury
<PAGE> 15
fixed interest rate securities (other than Special Securities) then
having remaining maturities of not less than 28 nor more than 30 years,
as published during such Calendar Period by the Federal Reserve Board
or, if the Federal Reserve Board does not publish such yields, by any
Federal Reserve Bank or by any U.S. Government department or agency
selected by the Corporation. In the event that the Corporation
determines in good faith that for any reason the Corporation cannot
determine the Thirty Year Constant Maturity Rate for any Dividend
Period as provided above in this paragraph, then the Thirty Year
Constant Maturity Rate for such Dividend Period will be the arithmetic
average of the per annum average yields to maturity based upon the
closing bids during such Calendar Period for each of the issues of
actively traded marketable U.S. Treasury fixed interest rate securities
(other than Special Securities) with a final maturity date not less
than 28 nor more than 30 years from the date of each such quotation, as
chosen and quoted daily for each business day in New York City (or less
frequently if daily quotations are not generally available) to the
Corporation by at least three recognized dealers in U.S. Government
securities selected by the Corporation.
The Treasury Bill Rate, the Ten Year Constant
Maturity Rate and the Thirty Year Constant Maturity Rate shall each be
rounded to the nearest five hundredths of a percent.
The Applicable Rate with respect to each Dividend
Period (other than the Initial Dividend Period) will be calculated as
promptly as practicable by the Corporation according to the appropriate
method described above. The Corporation will cause each Applicable Rate
to be published in a newspaper of general circulation in New York City
before the commencement of the Dividend Period to which it applies and
will cause notice of such Applicable Rate to be enclosed with the
dividend payment checks next mailed to the holders of the shares of the
Series.
For purposes of this Section,
"Calendar Period" means a period of fourteen calendar
days;
"Federal Reserve Board" means the Board of Governors
of the Federal Reserve System;
"Special Securities" means securities which can, at
the option of the holder, be surrendered at face value in
payment of any Federal estate tax or which provide tax
benefits to the holder and are priced to reflect such tax
benefits or which were originally issued at a deep or
substantial discount;
<PAGE> 16
"Ten Year Average Yield" means the average yield to
maturity for actively traded marketable U.S. Treasury fixed
interest rate securities (adjusted to constant maturities of
ten years); and
"Thirty Year Average Yield" means the average yield
to maturity for actively traded marketable U.S. Treasury fixed
interest rate securities (adjusted to constant maturities of
thirty years).
Changes in the Dividends-Received Percentage. (a) If
one or more amendments to the Internal Revenue Code of 1986, as amended
(the "Code") are enacted that reduce the percentage of the
dividends-received deduction (currently 70%) as specified in Section
243(a)(1) of the Code or any successor provision (the
"Dividends-Received Percentage"), certain adjustments may be made in
respect of the dividends payable by the Corporation and Post
Declaration Date Dividends (as defined below) may become payable, as
described below.
The amount of each dividend payable (if declared) per
share of the Series for dividend payments made on or after the
effective date of enactment of such change in the Code will be adjusted
by multiplying the amount of the dividend payable determined as
described in Section 1 above (before adjustment) by a factor which
shall be the number determined in accordance with the following formula
(the "DRD Formula"), and rounding the result to the nearest cent (with
one-half cent rounded up):
1-.35(1-.70)
------------
1-.35(1-DRP)
For the purposes of the DRD Formula, "DRP" means the
Dividends-Received Percentage (expressed as a decimal) applicable to
the dividend in question. No amendment to the Code, other than a change
in the percentage of the dividends-received deduction set forth in
Section 243(a)(1) of the Code or any successor provision thereto, will
give rise to an adjustment. Notwithstanding the foregoing provisions,
if, with respect to any such amendment, the Corporation receives either
an unqualified opinion of nationally recognized independent tax counsel
selected by the Corporation or a private letter ruling or similar form
of authorization from the Internal Revenue Service (the "IRS") to the
effect that such an amendment would not apply to a dividend payable on
the shares of the Series, then such amendment will not result in the
adjustment provided for pursuant to the DRD Formula with respect to
such dividend. The opinion referenced in the previous sentence shall be
based upon the legislation amending or establishing the DRP or upon a
published pronouncement of the IRS addressing such legislation. The
Corporation's calculation of the dividends payable as so adjusted shall
be final and not subject to review.
<PAGE> 17
Notwithstanding the foregoing, if any amendment to
the Code is enacted and effected after a dividend payable on a Dividend
Payment Date has been declared but not paid, the amount of the dividend
payable on such Dividend Payment Date will not be increased; instead,
additional dividends (the "Post Declaration Date Dividends"), equal to
the excess, if any, of (x) the product of the dividend paid by the
Corporation on such Dividend Payment Date and the DRD Formula over (y)
the dividend paid by the Corporation on such Dividend Payment Date,
will be payable (if declared) to holders of shares of the Series on the
record date applicable to the next succeeding Dividend Payment Date or,
if the Series is called for redemption prior to such record date, to
holders of shares of the Series on the applicable redemption date, as
the case may be, in addition to any other amounts payable on such date.
In the event that the amount of dividends payable per
share of the Series is adjusted pursuant to the DRD Formula and/or Post
Declaration Date Dividends are to be paid, the Corporation will give
notice of each such adjustment and, if applicable, any Post Declaration
Date Dividends to the holders of the shares of the Series.
Redemption. (a) The holders of the shares of the
Series may not require the Corporation to redeem any shares of the
Series. The Corporation, at its option, may redeem shares of the
Series, in whole or in part, at any time and from time to time, on or
after October 15, 2001, at a redemption price of $25 per share, plus
accrued and unpaid dividends thereon (whether or not declared) to the
date fixed for redemption.
In the event that fewer than all the outstanding
shares of the Series are to be redeemed, the number of shares to be
redeemed shall be determined by lot or pro rata as may be determined by
the Corporation or by any other method as may be determined by the
Corporation in its sole discretion to be equitable, provided that such
method satisfies any applicable requirements of any securities exchange
on which the Series is listed.
<PAGE> 18
In the event the Corporation shall redeem shares of
the Series, notice of such redemption shall be given by first class
mail, postage prepaid, mailed not less than 30 nor more than 60 days
prior to the redemption date, to each holder of record of the shares of
the Series to be redeemed, at such holder's address as the same appears
on the stock register of the Corporation. Each such notice shall state:
(i) the redemption date; (ii) the number of shares of the Series to be
redeemed and, if fewer than all the shares held by such holder are to
be redeemed, the number of such shares to be redeemed from such holder;
(iii) the redemption price; (iv) the place or places where certificates
for such shares are to be surrendered for payment of the redemption
price; and (v) that dividends on the shares of the Series to be
redeemed cease to accrue on the redemption date.
Notice having been mailed as aforesaid, from and
after the redemption date (unless default shall be made by the
Corporation in providing money for the payment of the redemption price)
dividends on the shares of the Series so called for redemption shall
cease to accrue, and said shares shall no longer be deemed to be
outstanding, and all rights of the holders thereof as stockholders of
the Corporation (except the right to receive from the Corporation the
redemption price) shall cease. Upon surrender in accordance with said
notice of the certificates for any shares so redeemed (properly
endorsed or assigned for transfer, if the Corporation shall so require
and the notice shall so state), such shares shall be redeemed by the
Corporation at the redemption price aforesaid. In case fewer than all
the shares represented by any such certificate are redeemed, a new
certificate shall be issued representing the unredeemed shares without
cost to the holder thereof.
Any shares of the Series which shall at any time have
been redeemed shall, after such redemption, have the status of
authorized but unissued shares of Preferred Stock, without designation
as to series.
Notwithstanding the foregoing provisions of this
Section 4, if any dividends on the shares of the Series or any other
series of cumulative Preferred Stock ranking on a parity with the
Series are in arrears, no shares of the Series or any such parity
series shall be redeemed unless all outstanding shares of the Series or
any such parity series are simultaneously redeemed, and the Corporation
shall not purchase or otherwise acquire any shares of the Series or any
such parity series; provided, however, that the foregoing shall not
prevent the purchase or acquisition of shares of the Series or any such
parity series pursuant to a purchase or exchange offer made on the same
terms to holders of all outstanding shares of the Series.
<PAGE> 19
Notwithstanding the foregoing provisions of this
Section 4, if the Dividends-Received Percentage is less than 50% and,
as a result, the amount of dividends on the Series payable on any
Dividend Payment Date will be or is adjusted upwards as described in
Section 3 above, the Corporation, at its option, may redeem all, but
not less than all, of the outstanding shares of the Series, provided,
that within 60 days of the date on which an amendment to the Code is
enacted which reduces the Dividends-Received Percentage to less than
50%, the Corporation sends notice to holders of the Series of such
redemption pursuant to paragraph (c) of this Section 4. Any redemption
of the Series pursuant to this paragraph will take place on the date
specified in the notice, which shall not be less than 30 nor more than
60 days from the date such notice is sent to holders of the Series. Any
redemption of the Series in accordance with this paragraph shall be on
notice as aforesaid at the applicable redemption price set forth in the
following table, in each case plus accrued and unpaid dividends
(whether or not declared) thereon to the date fixed for the redemption,
including any changes in dividends payable due to changes in the
Dividends-Received Percentage and Post Declaration Date Dividends, if
any:
<TABLE>
<CAPTION>
Redemption Period Redemption Price
- - ----------------- ----------------
<S> <C>
September 23, 1996 to October 14, 1997............. $26.25
October 15, 1997 to October 14, 1998............... $26.00
October 15, 1998 to October 14, 1999............... $25.75
October 15, 1999 to October 14, 2000............... $25.50
October 15, 2000 to October 14, 2001............... $25.25
On or after October 15, 2001....................... $25.00
</TABLE>
Conversion. The holders of shares of the Series shall
not have any rights to convert such shares into shares of any other
class or series of capital stock of the Corporation.
Liquidation Rights. (a) Upon the voluntary or
involuntary liquidation, dissolution or winding up of the Corporation,
the holders of the shares of the Series shall be entitled to receive
and to be paid out of the assets of the Corporation available for
distribution to its stockholders, before any payment or distribution
shall be made on the common stock or on any other class of stock
ranking junior to the Series, a liquidating distribution in the amount
of $25 per share plus an amount equal to accrued and unpaid dividends
thereon (whether or not declared).
<PAGE> 20
After the payment to the holders of the shares of the
Series of the full preferential amounts provided for in this Section 6,
the holders of the Series as such shall have no right or claim to any
of the remaining assets of the Corporation.
If, upon any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation, the amounts payable with
respect to the shares of the Series and any other shares of stock of
the Corporation ranking as to any such distribution on a parity with
the shares of the Series are not paid in full, the holders of the
shares of the Series and of such other shares will share ratably in any
such distribution of assets of the Corporation in proportion to the
full preferential amounts to which they are entitled.
Neither the sale of all or substantially all of the
assets of the Corporation, nor the merger or consolidation or share
exchange of the Corporation into or with any other corporation or the
merger or consolidation or share exchange of any other corporation into
or with the Corporation, shall be deemed to be a liquidation,
dissolution or winding up, voluntary or involuntary, for the purposes
of this Section 6.
Ranking. Any stock of any class or classes of the
Corporation shall be deemed to rank:
senior to the shares of the Series, either as to
dividends or upon liquidation, if the holders of such class or classes
shall be entitled to the receipt of dividends or of amounts
distributable upon liquidation, dissolution or winding up of the
Corporation, as the case may be, in preference or priority to the
holders of shares of the Series;
on a parity with shares of the Series, either as to
dividends or upon liquidation, whether or not the dividend rates,
dividend payment dates or redemption or liquidation prices per share or
sinking fund provisions, if any, be different from those of the Series,
if the holders of such stock shall be entitled to the receipt of
dividends or of amounts distributable upon liquidation, dissolution or
winding up of the Corporation, as the case may be, without preference
or priority, one over the other, as between the holders of such stock
and the holders of shares of the Series; and
junior to shares of the Series, either as to
dividends or upon liquidation, if such class shall be common stock or
if the holders of shares of the Series shall be entitled to receipt of
dividends or of amounts distributable upon liquidation, dissolution or
winding up of the Corporation, as the case may be, in preference or
priority to the holders of shares of such class or classes.
<PAGE> 21
Voting Rights. (a) Except as indicated below, the
shares of the Series shall not be entitled to vote on any matter
including, but not limited to:
Any merger, consolidation, share exchange or sale of
all or substantially all of the assets of the Corporation
except to the extent such action amends, alters or repeals the
preferences, conversion and other rights, voting powers,
restrictions, limitation as to dividends, qualifications and
terms and conditions of the redemption of the Series as
expressly set forth herein in a manner adverse to the holders
of the Series, or,
An increase in the authorized amount of the Series or
the creation, authorization or issuance of an additional
series ranking on a parity with the shares of the Series as to
dividends or upon liquidation, or to reclassify any authorized
stock of the Corporation into any such shares ranking on a
parity with, or to authorize or issue any obligation or
security convertible into or evidencing the right to purchase
any such pari passu shares.
Notwithstanding the foregoing:
The affirmative vote of at least two-thirds of the
votes entitled to be cast by holders of shares of the Series
and all other series of Preferred Stock ranking on a parity
with shares of the Series as to dividends or upon liquidation
upon which like voting rights have been conferred and are
exercisable, voting together as a single class without regard
to series, shall be necessary for any amendment, alteration or
repeal, whether by merger, consolidation, share exchange or
otherwise, of the Charter of the Corporation, including any
articles supplementary thereto, which adversely affects the
preferences, conversion and other rights, voting powers,
restrictions, limitations as to dividends, qualifications and
terms and conditions of the redemption of the Series as
expressly set forth herein in a manner adverse to the holders
of the Series;
The affirmative vote of at least two-thirds of the
votes entitled to be cast by the holders of the shares of the
Series and all other series of Preferred Stock ranking on a
parity with shares of the Series as to dividends or upon
liquidation upon which like voting rights have been conferred
and are exercisable, voting together as a single class without
regard to series, shall be necessary to authorize or issue any
shares of any class of stock of the Corporation ranking prior
to the shares of the Series as to dividends or upon
liquidation, or to reclassify any authorized stock
<PAGE> 22
of the Corporation into any such prior shares, or authorize or
issue any obligation or security convertible into or
evidencing the right to purchase any such prior shares; and
If at the time of any annual meeting of the
Corporation's stockholders for the election of directors there
is a default in preference dividends (as defined below) on the
Series, the number of directors constituting the Board of
Directors of the Corporation shall be increased by two, and
the holders of the shares of the Series (together with the
holders of the Preferred Stock of all other series upon which
like voting rights have been conferred and are exercisable),
shall have the right at such meeting, voting together as a
single class without regard to series, to the exclusion of the
holders of common stock, to elect two directors of the
Corporation (each a "Preferred Director") to fill such newly
created directorships. Each holder of shares of the Series
will have one vote for each share of stock held and each
holder of each other series of Preferred Stock with like
voting rights will have such number of rights, if any, for
each share of stock held as may be granted to such holder.
Such right shall continue until there are no dividends in
arrears upon the Series, subject to re-vesting in the event of
each and every subsequent default in preference dividends on
the Series. Any Preferred Director may be removed with or
without cause by the vote of the holders of record of the
outstanding shares of Preferred Stock entitled to elect such
Preferred Director, voting together as a single class without
regard to series, at a meeting of the Corporation's
stockholders, or of the holders of such shares of Preferred
Stock, called for that purpose. Any Preferred Director may be
removed for cause by the vote of the holders of outstanding
shares of stock of the Corporation entitled to vote for the
election of directors. So long as a default in any preference
dividends on the Series shall exist, (a) any vacancy in the
office of a Preferred Director may be filled (except as
provided in the following clause (b)) by an instrument in
writing signed by the remaining Preferred Director and filed
with the Corporation and (b) in the case of the removal of any
Preferred Director, the vacancy may be filled by the vote of
the holders of the outstanding shares of Preferred Stock,
voting together as a single class without regard to series, at
the same meeting at which such removal shall be voted. Each
director appointed as aforesaid by the remaining Preferred
Director shall be deemed, for all purposes hereof, to be a
Preferred Director. Whenever a default in preference dividends
shall no longer exist, subject to the rights of the holders of
any other series of Preferred Stock, the number of directors
constituting the Board of Directors of the Corporation
<PAGE> 23
shall be reduced by two. For the purposes hereof, a "default
in preference dividends" on the Series shall be deemed to have
occurred whenever the amount of accrued dividends upon the
Series shall be equivalent to six full quarterly dividends or
more (whether or not consecutive), and, having so occurred,
such default shall be deemed to exist thereafter until, but
only until, all accrued dividends on all shares of the Series
shall have been paid to the end of the last preceding dividend
period.
SECOND: The shares of the Series have been classified and the
terms of the Series have been fixed by a committee of the Board of
Directors pursuant to a general formula adopted by the Board of
Directors under authority set forth in the Charter of the Corporation.
<PAGE> 1
EXHIBIT 4.6
AMENDED AND RESTATED
TRUST AGREEMENT
among
MBNA 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 HEREIN
Dated as of December 18, 1996
MBNA CAPITAL A
<PAGE> 2
MBNA Capital A
Certain Sections of this Trust Agreement relating to Sections 310
through 318 of the Trust Indenture Act of 1939:
<TABLE>
<CAPTION>
Trust Indenture Trust Agreement
Act Section Section
- - ------------- --------------
<S> <C> <C>
(Section) 310 (a)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.7
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.7
(a)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.9
(a)(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.7(a)(ii)
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.8
(Section) 311 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.13
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.13
(Section) 312 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.7
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.7
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.7
(Section) 313 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.14(a)
(a)(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.14(b)
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.14(a)
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.10
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.14(b)
(Section) 314 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.15
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
(c)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.16
(c)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.16
(c)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.1, 8.16
(Section) 315 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.1(a), 8.3(a)
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.2, 10.10
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.1(a)
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.1, 8.3
(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
(Section) 316 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
(a)(1)(A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
(a)(1)(B) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.14
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.7
(Section) 317 (a)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.9
(Section) 318 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.11
</TABLE>
- - ------------
Note: This reconciliation and tie sheet shall not, for any
purpose, be deemed to be a part of the Trust Agreement.
<PAGE> 3
<TABLE>
<CAPTION>
Trust Indenture Trust Agreement
Act Section Section
------------- --------------
<S> <C>
Trust Agreement
</TABLE>
<PAGE> 4
<TABLE>
<S> <C> <C>
TABLE OF CONTENTS
ARTICLE I
Defined Terms . . . . . . . . . . . . . . . . . 1
Section 1.1 Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II
Continuation of the Trust . . . . . . . . . . . . . . 10
Section 2.1 Name. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 2.2 Office of the Delaware Trustee; Principal Place of Business. . . . . . . . . . . 10
Section 2.3 Initial Contribution of Trust Property; Organizational Expenses. . . . . . . . . 10
Section 2.4 Issuance of the Capital Securities. . . . . . . . . . . . . . . . . . . . . . . . 10
Section 2.5 Issuance of the Common Securities; Subscription and Purchase of Debentures. . . . 11
Section 2.6 Declaration of Trust. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 2.7 Authorization to Enter into Certain Transactions. . . . . . . . . . . . . . . . . 11
Section 2.8 Assets of Trust. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 2.9 Title to Trust Property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
ARTICLE III
Payment Account . . . . . . . . . . . . . . . . . 15
Section 3.1 Payment Account. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
ARTICLE IV
Distributions; Redemption . . . . . . . . . . . . . . 16
Section 4.1 Distributions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 4.2 Redemption. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 4.3 Subordination of Common Securities. . . . . . . . . . . . . . . . . . . . . . . . 19
Section 4.4 Payment Procedures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 4.5 Tax Returns and Reports. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 4.6 Payment of Expenses of the Trust. . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 4.7 Payments under Indenture or Pursuant to Direct Actions. . . . . . . . . . . . . . 20
ARTICLE V
Trust Securities Certificates . . . . . . . . . . . . . . 20
Section 5.1 Initial Ownership. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
</TABLE>
i
<PAGE> 5
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
Section 5.2 The Trust Securities Certificates. . . . . . . . . . . . . . . . . . . . . . . . 20
Section 5.3 Execution and Delivery of Trust Securities Certificates. . . . . . . . . . . . . 21
Section 5.4 Registration of Transfer and Exchange of Capital Securities Certificates. . . . . 21
Section 5.5 Mutilated, Destroyed, Lost or Stolen Trust Securities Certificates. . . . . . . . 22
Section 5.6 Persons Deemed Securityholders. . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 5.7 Access to List of Securityholders' Names and Addresses. . . . . . . . . . . . . . 23
Section 5.8 Maintenance of Office or Agency. . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 5.9 Appointment of Paying Agent. . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 5.10 Ownership of Common Securities by Depositor. . . . . . . . . . . . . . . . . . . 24
Section 5.11 Book-Entry Capital Securities Certificates; Common Securities Certificate. . . . 24
Section 5.12 Notices to Clearing Agency. . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 5.13 Definitive Capital Securities Certificates. . . . . . . . . . . . . . . . . . . . 25
Section 5.14 Rights of Securityholders. . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 5.15 CUSIP Numbers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
ARTICLE VI
Acts of Securityholders; Meetings; Voting . . . . . . . . . 28
Section 6.1 Limitations on Voting Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 6.2 Notice of Meetings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 6.3 Meetings of Capital Securityholders. . . . . . . . . . . . . . . . . . . . . . . 29
Section 6.4 Voting Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 6.5 Proxies, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 6.6 Securityholder Action by Written Consent. . . . . . . . . . . . . . . . . . . . . 31
Section 6.7 Record Date for Voting and Other Purposes. . . . . . . . . . . . . . . . . . . . 31
Section 6.8 Acts of Securityholders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 6.9 Inspection of Records. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
ARTICLE VII
Representations and Warranties . . . . . . . . . . . . . 32
Section 7.1 Representations and Warranties of the Property Trustee and the Delaware . . . . . 32
Section 7.2 Representations and Warranties of Depositor. . . . . . . . . . . . . . . . . . . 33
ARTICLE VIII
The Trustees . . . . . . . . . . . . . . . . . 34
Section 8.1 Certain Duties and Responsibilities. . . . . . . . . . . . . . . . . . . . . . . 34
Section 8.2 Certain Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 8.3 Certain Rights of Property Trustee. . . . . . . . . . . . . . . . . . . . . . . . 36
Section 8.4 Not Responsible for Recitals or Issuance of Securities. . . . . . . . . . . . . . 38
</TABLE>
ii
<PAGE> 6
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
Section 8.5 May Hold Securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 8.6 Compensation; Indemnity; Fees. . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 8.7 Corporate Property Trustee Required; Eligibility of Trustees. . . . . . . . . . . 39
Section 8.8 Conflicting Interests. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 8.9 Co-Trustees and Separate Trustee. . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 8.10 Resignation and Removal; Appointment of Successor. . . . . . . . . . . . . . . . 42
Section 8.11 Acceptance of Appointment by Successor. . . . . . . . . . . . . . . . . . . . . . 43
Section 8.12 Merger, Conversion, Consolidation or Succession to Business. . . . . . . . . . . 44
Section 8.13 Preferential Collection of Claims Against Depositor or Trust. . . . . . . . . . . 44
Section 8.14 Reports by Property Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 8.15 Reports to the Property Trustee. . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 8.16 Evidence of Compliance with Conditions Precedent. . . . . . . . . . . . . . . . . 45
Section 8.17 Number of Trustees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 8.18 Delegation of Power. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
ARTICLE IX
Termination, Liquidation and Merger . . . . . . . . . . . 46
Section 9.1 Termination Upon Expiration Date. . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 9.2 Early Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 9.3 Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 9.4 Liquidation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 9.5 Mergers, Consolidations, Amalgamations or Replacements of the Trust. . . . . . . 49
ARTICLE X
Miscellaneous Provisions . . . . . . . . . . . . . . . 50
Section 10.1 Limitation of Rights of Securityholders. . . . . . . . . . . . . . . . . . . . . 50
Section 10.2 Liability of the Common Securityholder . . . . . . . . . . . . . . . . . . . . . . 50
Section 10.3 Amendment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Section 10.4 Consolidation, Merger, Conveyance, Transfer or Lease . . . . . . . . . . . . . . . 51
Section 10.5 Separability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 10.6 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Section 10.7 Payments Due on Non-Business Day. . . . . . . . . . . . . . . . . . . . . . . . . 52
Section 10.8 Successors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Section 10.9 Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Section 10.10 Reports, Notices and Demands. . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Section 10.11 Agreement Not to Petition. . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Section 10.12 Trust Indenture Act; Conflict with Trust Indenture Act. . . . . . . . . . . . . . 53
Section 10.13 Acceptance of Terms of Trust Agreement, Guarantee and Indenture. . . . . . . . . 54
Section 10.14 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
</TABLE>
iii
<PAGE> 7
AMENDED AND RESTATED TRUST AGREEMENT, dated as of December 18, 1996,
among (i) MBNA Corporation, a Maryland corporation (including any successors or
assigns, the "Depositor"), (ii) The Bank of New York, a New York banking
corporation, as property trustee (in such capacity, the "Property Trustee" and,
in its separate corporate capacity and not in its capacity as Property Trustee,
the "Bank"), (iii) The Bank of New York (Delaware), a banking corporation
organized under the laws of the State of Delaware, as Delaware trustee (the
"Delaware Trustee"), (iv) M. Scot Kaufman, an individual, and John W. Scheflen
an individual, each of whose address is c/o MBNA Corporation, Wilmington,
Delaware 19884 (each an "Administrative Trustee" and collectively the
"Administrative Trustees") (the Property Trustee, the Delaware Trustee and the
Administrative Trustees referred to collectively as the "Trustees") and (v) the
several Holders, as hereinafter defined.
WITNESSETH
WHEREAS, the Depositor and the Delaware Trustee have heretofore duly
declared and established a business trust pursuant to the Delaware Business
Trust Act by the entering into that certain Trust Agreement, dated as of
November 4, 1996 (the "Original Trust Agreement"), and by the execution and
filing with the Secretary of State of the State of Delaware of the Certificate
of Trust, filed on November 6, 1996, attached as Exhibit A (the "Certificate of
Trust"); and
WHEREAS, the parties thereto amended and restated the Original Trust
Agreement by entering into the Amended and Restated Trust Agreement of the
Trust, dated as of December 11, 1996 (the "Restated Agreement"); and
WHEREAS, the Depositor and the Trustees desire to amend and restate
the Restated Agreement in its entirety as set forth herein to provide for,
among other things, (i) the issuance of the Common Securities by the Trust to
the Depositor, (ii) the issuance and sale of the Capital Securities by the
Trust pursuant to the Underwriting Agreement and (iii) the acquisition by the
Trust from the Depositor of all of the right, title and interest in the
Debentures;
NOW THEREFORE, in consideration of the agreements and obligations set
forth herein and for other good and valuable consideration, the sufficiency of
which is hereby acknowledged, each party, for the benefit of the other parties
and for the benefit of the Securityholders, hereby amends and restates the
Original Trust Agreement in its entirety and agrees as follows:
ARTICLE I
DEFINED TERMS
Section I.1 Definitions.
For all purposes of this Trust Agreement, except as otherwise
expressly provided or unless the context otherwise requires:
(a) the terms defined in this Article have the meanings assigned to
them in this Article and include the plural as well as the singular;
(b) all other terms used herein that are defined in the Trust
Indenture Act, either directly or by reference therein, have the meanings
assigned to them therein;
(c) unless the context otherwise requires, any reference to an
"Article" or a "Section" refers to an Article or a Section, as the case may be,
of this Trust Agreement; and
<PAGE> 8
2
(d) the words "herein", "hereof" and "hereunder" and other words of
similar import refer to this Trust Agreement as a whole and not to any
particular Article, Section or other subdivision.
"Act" has the meaning specified in Section 6.8.
"Additional Amount" means, with respect to Trust Securities of a given
Liquidation Amount and/or a given period, the amount of Additional Interest (as
defined in the Indenture) paid by the Depositor on a Like Amount of Debentures
for such period.
"Administrative Trustee" means each of the individuals identified as
an "Administrative Trustee" in the preamble to this Trust Agreement solely in
such individual's capacity as Administrative Trustee of the Trust formed and
continued hereunder and not in such individual's individual capacity, or such
Administrative Trustee's successor in interest in such capacity, or any
successor trustee appointed as herein provided.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Bank" has the meaning specified in the preamble to this Trust
Agreement.
"Bankruptcy Event" means, with respect to any Person:
(a) the entry of a decree or order by a court having jurisdiction in
the premises judging such Person as bankrupt or insolvent, or approving as
properly filed a petition seeking reorganization, arrangement, adjudication or
composition of or in respect of such Person under any applicable federal or
state bankruptcy, insolvency, reorganization or other similar law, or
appointing a receiver, liquidator, assignee, trustee, sequestrator (or other
similar official) of such Person or of any substantial part of its property or
ordering the winding up or liquidation of its affairs, and the continuance of
any such decree or order unstayed and in effect for a period of 60 consecutive
days; or
(b) the institution by such Person of proceedings to be adjudicated as
a bankrupt or insolvent, or the consent by it to the institution of bankruptcy
or insolvency proceedings against it, or the filing by it of a petition or
answer or consent seeking reorganization or relief under any applicable federal
or state bankruptcy, insolvency, reorganization or other similar law, or the
consent by it to the filing of any such petition or to the appointment of a
receiver, liquidator, assignee, trustee, sequestrator (or similar official) of
such Person or of any substantial part of its property, or the making by it of
an assignment for the benefit of creditors, or the admission by it in writing
of its inability to pay its debts generally as they become due and its
willingness to be adjudicated as bankrupt, or the taking of corporate action by
such Person in furtherance of any such action.
"Bankruptcy Laws" has the meaning specified in Section 10.11.
"Book-Entry Capital Securities Certificates" means a beneficial
interest in the Capital Securities Certificates, ownership and transfers of
which shall be made through book entries by a Clearing Agency as described in
Section 5.11.
<PAGE> 9
3
"Business Day" means a day other than (a) a Saturday or Sunday, (b) 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 (c) a day on which the
Property Trustee's Corporate Trust Office or the Corporate Trust Office of the
Debenture Trustee is closed for business.
"Capital Security" means an undivided beneficial ownership interest in
the assets of the Trust, having a Liquidation Amount of $1,000 and having the
rights provided therefor in this Trust Agreement, including the right to
receive Distributions and a Liquidation Distribution as provided herein.
"Capital Securities Certificate" means a certificate evidencing
ownership of Capital Securities, substantially in the form attached as Exhibit
D.
"Capital Treatment Event" means the reasonable determination by the
Depositor 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 Capital Securities
hereunder, there is more than an insubstantial risk that the Depositor will not
be entitled to treat an amount equal to the Liquidation Amount of the 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 Depositor.
"Certificate Depository Agreement" means the agreement among the
Trust, the Depositor and The Depository Trust Company, as the initial Clearing
Agency, dated as of the Closing Date, relating to the Trust Securities
Certificates, substantially in the form attached as Exhibit B, as the same may
be amended and supplemented from time to time.
"Certificate of Trust" has the meaning specified in the recitals
hereof, as amended from time to time.
"Clearing Agency" means an organization registered as a "clearing
agency" pursuant to Section 17A of the Securities Exchange Act of 1934, as
amended. The Depository Trust Company will be the initial Clearing Agency.
"Clearing Agency Participant" means a broker, dealer, bank, other
financial institution or other Person for whom from time to time a Clearing
Agency effects book-entry transfers and pledges of securities deposited with
the Clearing Agency.
"Closing Date" means the date of execution and delivery of this Trust
Agreement.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commission" means the Securities and Exchange Commission, as from
time to time constituted, created under the Securities Exchange Act of 1934, as
amended, or, if at any time after the execution of this instrument such
Commission is not existing and performing the duties now assigned to it under
the Trust Indenture Act, then the body performing such duties at such time.
"Common Securities Certificate" means a certificate evidencing
ownership of Common Securities, substantially in the form attached as Exhibit
C.
<PAGE> 10
4
"Common Security" means an undivided beneficial ownership interest in
the assets of the Trust, having a Liquidation Amount of $1,000 and having the
rights provided therefor in this Trust Agreement, including the right to
receive Distributions and a Liquidation Distribution as provided herein.
"Corporate Trust Office" means (i) when used with respect to the
Property Trustee, the principal office of the Property Trustee located in New
York, New York, and (ii) when used with respect to the Debenture Trustee, the
principal office of the Debenture Trustee located in New York, New York.
"Debenture Event of Default" means an "Event of Default" as defined in
the Indenture.
"Debenture Redemption Date" means, with respect to any Debentures to
be redeemed under the Indenture, the date fixed for redemption under the
Indenture.
"Debenture Tax Event" means a "Tax Event" as defined in the Indenture.
"Debenture Trustee" means The Bank of New York, a New York banking
corporation, as trustee under the Indenture, and any successor trustee
appointed as provided therein.
"Debentures" means the $257,732,000 aggregate principal amount of the
Depositor's 8.278% Junior Subordinated Deferrable Interest Debentures, Series
A, issued pursuant to the Indenture.
"Definitive Capital Securities Certificates" means either or both (as
the context requires) of (a) Capital Securities Certificates issued as
Book-Entry Capital Securities Certificates as provided in Section 5.11(a) and
(b) Capital Securities Certificates issued in certificated, fully registered
form as provided in Section 5.13.
"Delaware Business Trust Act" means Chapter 38 of Title 12 of the
Delaware Code, 12 Del. C. 3801, et seq., as it may be amended from time to
time.
"Delaware Trustee" means the Person identified as the "Delaware
Trustee" in the preamble to this Trust Agreement solely in its capacity as
Delaware Trustee of the Trust formed and continued hereunder and not in its
individual capacity, or its successor in interest in such capacity, or any
successor trustee appointed as herein provided.
"Depositor" has the meaning specified in the preamble to this Trust
Agreement.
"Distribution Date" has the meaning specified in Section 4.1(a).
"Distributions" means amounts payable in respect of the Trust
Securities as provided in Section 4.1.
"Early Termination Event" has the meaning specified in Section 9.2.
"Event of Default" means any one of the following events (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):
(a) the occurrence of a Debenture Event of Default; or
<PAGE> 11
5
(b) 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
(c) default by the Property Trustee in the payment of any Redemption
Price of any Trust Security when it becomes due and payable; or
(d) default in the performance, or breach, in any material respect,
of any covenant or warranty of the Trustees in this Trust Agreement (other than
a covenant or warranty a default in the performance or breach of which is dealt
with in clause (b) or (c) above) and continuation of such default or breach for
a period of 90 days after there has been given, by registered or certified
mail, to the defaulting Trustee or Trustees by the Holders of at least 25% in
aggregate Liquidation Amount of the Outstanding Capital Securities, a written
notice specifying such default or breach and requiring it to be remedied and
stating that such notice is a "Notice of Default" hereunder; or
(e) the occurrence of a Bankruptcy Event with respect to the Property
Trustee and the failure by the Depositor to appoint a successor Property
Trustee within 90 days thereof.
"Expiration Date" has the meaning specified in Section 9.1.
"Federal Reserve" means the Board of Governors of the Federal Reserve
System, as from time to time constituted, or if at any time after the execution
of this Trust Agreement the Federal Reserve is not existing and performing the
duties now assigned to it, then the body performing such duties at such time.
"Guarantee" means the Guarantee Agreement executed and delivered by
the Depositor and The Bank of New York, as trustee, contemporaneously with the
execution and delivery of this Trust Agreement, for the benefit of the Holders
of the Trust Securities, as amended from time to time.
"Indenture" means the Junior Subordinated Indenture, dated as of
December 18, 1996, between the Depositor and the Debenture Trustee, as trustee,
as amended or supplemented from time to time.
"Lien" means any lien, pledge, charge, encumbrance, mortgage, deed of
trust, adverse ownership interest, hypothecation, assignment, security interest
or preference, priority or other security agreement or preferential arrangement
of any kind or nature whatsoever.
"Like Amount" means (a) with respect to a redemption of Trust
Securities, Trust Securities having a Liquidation Amount equal to the principal
amount of Debentures to be contemporaneously redeemed in accordance with the
Indenture the proceeds of which will be used to pay the Redemption Price of
such Trust Securities, and (b) with respect to a distribution of Debentures to
Holders of Trust Securities in connection with a dissolution or liquidation of
the Trust, Debentures having a principal amount equal to the Liquidation Amount
of the Trust Securities of the Holder to whom such Debentures are distributed.
"Liquidation Amount" means the stated amount of $1,000 per Trust
Security.
"Liquidation Date" means the date on which Debentures are to be
distributed to Holders of Trust Securities in connection with a termination and
liquidation of the Trust pursuant to Section 9.4(a).
<PAGE> 12
6
"Liquidation Distribution" has the meaning specified in Section
9.4(d).
"1940 Act" means the Investment Company Act of 1940, as amended.
"Officers' Certificate" means a certificate signed by the Chairman and
Chief Executive Officer, President or a Vice President, and by the Treasurer,
an Associate Treasurer, an Assistant Treasurer, the Controller, the Secretary
or an Assistant Secretary, of the Depositor, and delivered to the appropriate
Trustee. One of the officers signing an Officers' Certificate given pursuant to
Section 8.16 shall be the principal executive, financial or accounting officer
of the Depositor. Any Officers' Certificate delivered with respect to
compliance with a condition or covenant provided for in this Trust Agreement
shall include:
(a) a statement that each officer signing the Officers' Certificate
has read the covenant or condition and the definitions relating thereto;
(b) a brief statement of the nature and scope of the examination or
investigation undertaken by each officer in rendering the Officers'
Certificate;
(c) a statement that each such officer has made such examination or
investigation as, in such officer's opinion, is necessary to enable such
officer to express an informed opinion as to whether or not such covenant or
condition has been complied with; and
(d) a statement as to whether, in the opinion of each such officer,
such condition or covenant has been complied with.
"Opinion of Counsel" means a written opinion of counsel, who may be
counsel for the Trust, the Property Trustee or the Depositor, and who shall be
reasonably acceptable to the Property Trustee.
"Original Trust Agreement" has the meaning specified in the recitals
to this Trust Agreement.
"Outstanding" when used with respect to Trust Securities, means, as of
the date of determination, all Trust Securities theretofore executed and
delivered under this Trust Agreement, except:
(a) Trust Securities theretofore cancelled by the Securities Registrar
or delivered to the Securities Registrar for cancellation;
(b) Trust Securities for whose payment or redemption money in the
necessary amount has been theretofore deposited with the Property Trustee or
any Paying Agent for the Holders of such Trust Securities; provided that, if
such Trust Securities are to be redeemed, notice of such redemption has been
duly given pursuant to this Trust Agreement; and
(c) Trust Securities which have been paid or in exchange for or in
lieu of which other Trust Securities have been executed and delivered pursuant
to this Trust Agreement, including pursuant to Sections 5.4, 5.5, 5.11 and
5.13;
provided, however, that in determining whether the Holders of the requisite
Liquidation Amount of the Outstanding Capital Securities have given any
request, demand, authorization, direction, notice, consent or waiver hereunder,
Capital Securities owned by the Depositor, any Trustee or any Affiliate of the
Depositor or any Trustee shall be disregarded and deemed not to be Outstanding,
except that (a) in determining whether any Trustee shall be protected in
relying
<PAGE> 13
7
upon any such request, demand, authorization, direction, notice, consent or
waiver, only Capital Securities that such Trustee actually knows to be so owned
shall be so disregarded and (b) the foregoing shall not apply at any time when
all of the outstanding Capital Securities are owned by the Depositor, one or
more of the Trustees and/or any such Affiliate. Capital Securities so owned
which have been pledged in good faith may be regarded as Outstanding if the
pledgee establishes to the satisfaction of the Administrative Trustees the
pledgee's right so to act with respect to such Capital Securities and that the
pledgee is not the Depositor or any Affiliate of the Depositor.
"Owner" means each Person who is the beneficial owner of a Book-Entry
Capital Securities Certificate as reflected in the records of the Clearing
Agency or, if a Clearing Agency Participant is not the beneficial owner, then
as reflected in the records of a Person maintaining an account with such
Clearing Agency (directly or indirectly, in accordance with the rules of such
Clearing Agency).
"Paying Agent" means any paying agent or co-paying agent appointed
pursuant to Section 5.9 and shall initially be the Bank.
"Payment Account" means a segregated non-interest-bearing corporate
trust account maintained by the Property Trustee with the Bank in its corporate
trust department for the benefit of the Securityholders in which all amounts
paid in respect of the Debentures will be held and from which the Property
Trustee, through the Paying Agent, shall make payments to the Securityholders
in accordance with Sections 4.1 and 4.2.
"Person" means any individual, corporation, partnership, joint
venture, trust, limited liability company or corporation, unincorporated
organization or government or any agency or political subdivision thereof.
"Property Trustee" means the Person identified as the "Property
Trustee" in the preamble to this Trust Agreement solely in its capacity as
Property Trustee of the Trust heretofore created and continued hereunder and
not in its individual capacity, or its successor in interest in such capacity,
or any successor property trustee appointed as herein provided.
"Redemption Date" means, with respect to any Trust Security to be
redeemed, the date fixed for such redemption by or pursuant to this Trust
Agreement; provided that each Debenture Redemption Date and the stated maturity
of the Debentures shall be a Redemption Date for a Like Amount of Trust
Securities.
"Redemption Price" means, with respect to any Trust Security, the
Liquidation Amount of such Trust Security, plus accumulated and unpaid
Distributions to the Redemption Date, plus the related amount of the premium,
if any, paid by the Depositor upon the concurrent redemption of a Like Amount
of Debentures, allocated on a pro rata basis (based on Liquidation Amounts)
among the Trust Securities.
"Relevant Trustee" shall have the meaning specified in Section 8.10.
"Securities Register" and "Securities Registrar" have the respective
meanings specified in Section 5.4.
"Securityholder" or "Holder" means a Person in whose name a Trust
Security or Trust Securities is registered in the Securities Register; any such
Person shall be a beneficial owner within the meaning of the Delaware Business
Trust Act; provided, however, that in determining whether the Holders of the
requisite amount of Capital Securities have voted on any matter provided for in
this Trust Agreement, then for the purpose of any such determination, so long
as
<PAGE> 14
8
Definitive Capital Securities Certificates have not been issued, the term
Securityholders or Holders as used herein shall refer to the Owners.
"Tax Event" means the receipt by the Trust or the Depositor 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 Capital Securities under this Trust Agreement, there is
more than an insubstantial risk that (i) the Trust is, or will be within 90
days after the date of such Opinion of Counsel, subject to United States
federal income tax with respect to income received or accrued on the
Debentures, (ii) interest payable by the Depositor on the Debentures is not, or
within 90 days after the date of such Opinion of Counsel, will not be,
deductible by the Depositor, in whole or in part, for United States federal
income tax purposes or (iii) the Trust is, or will be within 90 days after the
date of such Opinion of Counsel, subject to more than a de minimis amount of
other taxes, duties or other governmental charges.
"Trust" means the Delaware business trust created and continued hereby
and identified on the cover page to this Trust Agreement.
"Trust Agreement" means this Amended and Restated Trust Agreement, as
the same may be modified, amended or supplemented in accordance with the
applicable provisions hereof, including (i) all exhibits hereto and (ii) for
all purposes of this Trust Agreement and any such modification, amendment or
supplement, the provisions of the Trust Indenture Act that are deemed to be a
part of and govern this Trust Agreement and any such modification, amendment or
supplement, respectively.
"Trust Indenture Act" means the Trust Indenture Act of 1939 as in
force at the date as of which this instrument was executed; provided, however,
that in the event the Trust Indenture Act of 1939 is amended after such date,
"Trust Indenture Act" means, to the extent required by any such amendment, the
Trust Indenture Act of 1939 as so amended.
"Trust Property" means (a) the Debentures, (b) any cash on deposit in,
or owing to, the Payment Account and (c) all proceeds and rights in respect of
the foregoing.
"Trust Security" means any one of the Common Securities or the Capital
Securities.
"Trust Securities Certificate" means any one of the Common Securities
Certificates or the Capital Securities Certificates.
"Trustees" means, collectively, the Property Trustee, the Delaware
Trustee and the Administrative Trustees.
"Underwriting Agreement" means the Pricing Agreement, dated as of
December 11, 1996, among the Trust, the Depositor and Goldman, Sachs & Co., as
representative of the underwriters named therein, incorporating the
Underwriting Agreement dated December 11, 1996.
<PAGE> 15
9
ARTICLE II
CONTINUATION OF THE TRUST
Section II.1 Name.
The Trust continued hereby shall be known as "MBNA Capital A," as such
name may be modified from time to time by the Administrative Trustees following
written notice to the Holders of Trust Securities and the other Trustees, in
which name the Trustees engage in the transactions contemplated hereby, make
and execute contracts and other instruments on behalf of the Trust and sue and
be sued.
Section II.2 Office of the Delaware Trustee; Principal Place
of Business.
The address of the Delaware Trustee in the State of Delaware is c/o
The Bank of New York (Delaware), White Clay Center, Route 273, Newark, Delaware
19711, Attention: Corporate Trust Department or such other address in the
State of Delaware as the Delaware Trustee may designate by written notice to
the Securityholders and the Depositor. The principal executive office of the
Trust is c/o MBNA Corporation, Wilmington, Delaware 19884.
Section II.3 Initial Contribution of Trust Property; Organizational
Expenses.
The Property Trustee acknowledges receipt in trust from the Depositor
in connection with the Original Trust Agreement of the sum of $10, which
constituted the initial Trust Property. The Depositor shall pay organizational
expenses of the Trust as they arise or shall, upon request of any Trustee,
promptly reimburse such Trustee for any such expenses paid by such Trustee. The
Depositor shall make no claim upon the Trust Property for the payment of such
expenses.
Section II.4 Issuance of the Capital Securities.
As of December 11, 1996, the Depositor, on behalf of the Trust and
pursuant to the Original Trust Agreement, executed and delivered the
Underwriting Agreement. Contemporaneously with the execution and delivery of
this Trust Agreement, an Administrative Trustee, on behalf of the Trust, shall
execute in accordance with Section 5.2 and deliver to the Underwriters named in
the Underwriting Agreement Capital Securities Certificates, registered in the
name of the nominee of the initial Clearing Agency, in an aggregate amount of
250,000 Capital Securities having an aggregate Liquidation Amount of
$250,000,000, against receipt of an aggregate purchase price of such Capital
Securities of $250,000,000, which amount such Administrative Trustee shall
promptly deliver to the Property Trustee.
Section II.5 Issuance of the Common Securities; Subscription and
Purchase of Debentures.
Contemporaneously with the execution and delivery of this Trust
Agreement, an Administrative Trustee, on behalf of the Trust, shall execute in
accordance with Section 5.2 and deliver to the Depositor Common Securities
Certificates, registered in the name of the Depositor, in an aggregate amount
of 7,732 Common Securities having an aggregate Liquidation Amount of $7,732,000
against payment by the Depositor of an aggregate purchase price therefor of
$7,732,000, which amount such Administrative Trustee shall promptly deliver to
the Property Trustee. Contemporaneously therewith, an Administrative Trustee,
on behalf of the Trust, shall subscribe to and purchase from the Depositor
Debentures, registered in the name of the Trust and having an aggregate
principal amount equal to $257,732,000, and, in satisfaction of the purchase
price for such Debentures, the Property Trustee, on behalf of the Trust, shall
deliver to the Depositor the sum of $257,732,000 (being the sum of the amounts
delivered to the Property
<PAGE> 16
10
Trustee pursuant to (i) the second sentence of Section 2.4 and (ii) the first
sentence of this Section 2.5).
Section II.6 Declaration of Trust.
The exclusive purposes and functions of the Trust are (a) to issue and
sell Trust Securities, (b) to use the proceeds from such sale to acquire the
Debentures and (c) to engage in those activities necessary or incidental
thereto. The Depositor hereby appoints the Trustees as trustees of the Trust,
to have all the rights, powers and duties to the extent set forth herein, and
the Trustees hereby accept such appointment. The Property Trustee hereby
declares that it will hold the Trust Property in trust upon and subject to the
conditions set forth herein for the benefit of the Trust and the
Securityholders. The Administrative Trustees shall have all rights, powers and
duties set forth herein and in accordance with applicable law with respect to
accomplishing the purposes of the Trust. The Delaware Trustee shall not be
entitled to exercise any powers, nor shall the Delaware Trustee have any of the
duties and responsibilities, of the Property Trustee or the Administrative
Trustees set forth herein. The Delaware Trustee shall be one of the Trustees of
the Trust for the sole and limited purpose of fulfilling the requirements of
Section 3807 of the Delaware Business Trust Act.
Section II.7 Authorization to Enter into Certain Transactions.
(a) The Trustees shall conduct the affairs of the Trust in accordance
with the terms of this Trust Agreement. Subject to the limitations set forth in
paragraph (b) of this Section, Article VIII and in accordance with the
following provisions (i) and (ii), the Trustees shall have the authority to
enter into all transactions and agreements determined by the Trustees to be
appropriate in exercising the authority, express or implied, otherwise granted
to the Trustees under this Trust Agreement, and to perform all acts in
furtherance thereof, including without limitation, the following:
(i) As among the Trustees, each Administrative Trustee shall
have the power and authority to act on behalf of the Trust with
respect to the following matters:
(A) the issuance and sale of the Trust Securities;
(B) to cause the Trust to enter into, and to execute,
deliver and perform on behalf of the Trust, the Certificate
Depository Agreement, the Underwriting Agreement, and such other
agreements as may be necessary or desirable in connection with the
purposes and function of the Trust;
(C) assisting in the registration of the Capital Securities
under the Securities Act of 1933, as amended, and under state
securities or blue sky laws, and the qualification of this Trust
Agreement as a trust indenture under the Trust Indenture Act;
(D) assisting in the listing, if any, of the Capital
Securities upon such national securities exchange or exchanges or
automated quotation system or systems as shall be determined by
the Depositor and the registration of the Capital Securities under
the Securities Exchange Act of 1934, as amended, and the
preparation and filing of all periodic and other reports and other
documents pursuant to the foregoing;
(E) the sending of notices (other than notices of default)
and other information regarding the Trust Securities and the
Debentures to the Securityholders in accordance with this Trust
Agreement;
<PAGE> 17
11
(F) the appointment of a Paying Agent and Securities
Registrar in accordance with this Trust Agreement;
(G) registering transfer of the Trust Securities in
accordance with this Trust Agreement;
(H) to the extent provided in this Trust Agreement, the
winding up of the affairs of and liquidation of the Trust and the
execution and filing of the certificate of cancellation with the
Secretary of State of the State of Delaware; and
(I) the taking of any action incidental to the foregoing as
the Trustees may from time to time determine is necessary or
advisable to give effect to the terms of this Trust Agreement for
the benefit of the Securityholders (without consideration of the
effect of any such action on any particular Securityholder).
(ii) As among the Trustees, the Property Trustee shall have the
power, duty and authority to act on behalf of the Trust with respect
to the following matters:
(A) the establishment of the Payment Account;
(B) the receipt of the Debentures;
(C) the collection of interest, principal and any other
payments made in respect of the Debentures in the Payment Account;
(D) the distribution through the Paying Agent of amounts
owed to the Securityholders in respect of the Trust Securities;
(E) the exercise of all of the rights, powers and privileges
of a holder of the Debentures;
(F) the sending of notices of default and other information
regarding the Trust Securities and the Debentures to the
Securityholders in accordance with this Trust Agreement;
(G) the distribution of the Trust Property in accordance
with the terms of this Trust Agreement;
(H) to the extent provided in this Trust Agreement, the
winding up of the affairs of and liquidation of the Trust and the
execution and filing of the certificate of cancellation with the
Secretary of State of the State of Delaware;
(I) after an Event of Default (other than under paragraph
(b), (c), (d) or (e) of the definition of such term if such Event
of Default is by or with respect to the Property Trustee) the
taking of any action incidental to the foregoing as the Property
Trustee may from time to time determine is necessary or advisable
to give effect to the terms of this Trust Agreement and protect
and conserve the Trust Property for the benefit of the
Securityholders (without consideration of the effect of any such
action on any particular Securityholder); and
(J) except as otherwise provided in this Section 2.7(a)(ii),
the Property Trustee shall have none of the duties, liabilities,
powers or the authority of the Administrative Trustees set forth
in Section 2.7(a)(i).
(b) So long as this Trust Agreement remains in effect, the Trust (or
the Trustees acting on behalf of the Trust) shall not undertake any business,
activities or transaction except as expressly
<PAGE> 18
12
provided herein or contemplated hereby. In particular, the Trustees shall not
(i) acquire any investments or engage in any activities not authorized by this
Trust Agreement, (ii) sell, assign, transfer, exchange, mortgage, pledge,
set-off or otherwise dispose of any of the Trust Property or interests therein,
including to Securityholders, except as expressly provided herein, (iii) take
any action that would cause the Trust to fail or cease to qualify as a "grantor
trust" for United States federal income tax purposes, (iv) incur any
indebtedness for borrowed money or issue any other debt, (v) take or consent to
any action that would result in the placement of a Lien on any of the Trust
Property, (vi) invest any proceeds received by the Trust from holding the
Debentures, but shall distribute all such proceeds to Holders of Trust
Securities pursuant to the terms of this Trust Agreement and of the Securities;
(vii) acquire any assets other than the Trust Property; (viii) possess any
power or otherwise act in such a way as to vary the Trust Property; (ix)
possess any power or otherwise act in such a way as to vary the terms of the
Securities in any way whatsoever (except to the extent expressly authorized in
this Trust Agreement or by the terms of the Trust Securities); or (x) issue any
securities or other evidences of beneficial ownership of, or beneficial
interest in, the Trust other than the Trust Securities. The Administrative
Trustees shall defend all claims and demands of all Persons at any time
claiming any Lien on any of the Trust Property adverse to the interest of the
Trust or the Securityholders in their capacity as Securityholders.
(c) In connection with the issue and sale of the Capital Securities,
the Depositor shall have the right and responsibility to assist the Trust with
respect to, or effect on behalf of the Trust, the following (and any actions
taken by the Depositor in furtherance of the following prior to the date of
this Trust Agreement are hereby ratified and confirmed in all respects):
(i) the preparation and filing by the Trust with the
Commission and the execution on behalf of the Trust of a registration
statement on the appropriate form in relation to the Capital
Securities, including any amendments thereto;
(ii) the determination of the states in which to take
appropriate action to qualify or register for sale all or part of the
Capital Securities and the determination of any and all such acts,
other than actions which must be taken by or on behalf of the Trust,
and the advice to the Trustees of actions they must take on behalf of
the Trust, and the preparation for execution and filing of any
documents to be executed and filed by the Trust or on behalf of the
Trust, as the Depositor deems necessary or advisable in order to
comply with the applicable laws of any such states;
(iii) the preparation for filing by the Trust and
execution on behalf of the Trust of an application to the New York
Stock Exchange or any other national stock exchange or the NASDAQ
National Market or any other automated quotation system for listing
upon notice of issuance of any Capital Securities and filing with such
exchange or self regulatory organization such notifications and
documents as may be necessary from time to time to maintain such
listing;
(iv) the negotiation of the terms of, and the
execution and delivery of, the Underwriting Agreement providing for
the sale of the Capital Securities; and
(v) the taking of any other actions necessary or
desirable to carry out any of the foregoing activities.
(d) Notwithstanding anything herein to the contrary, the
Administrative Trustees are authorized and directed to conduct the affairs of
the Trust and to operate the Trust so that the Trust will not be deemed to be
an "investment company" required to be registered under the 1940 Act, or fail
to be classified as a grantor trust for United States federal income tax
purposes and so that the Debentures will be treated as indebtedness of the
Depositor for United States federal income tax purposes. In this connection,
the Depositor and the Administrative Trustees
<PAGE> 19
13
are authorized to take any action, not inconsistent with applicable law, the
Certificate of Trust or this Trust Agreement, that each of the Depositor and
any Administrative Trustee determines in its discretion to be necessary or
desirable for such purposes, as long as such action does not adversely affect
in any material respect the interests of the Holders of the Capital Securities.
Section II.8 Assets of Trust.
The assets of the Trust shall consist solely of the Trust Property.
Section II.9 Title to Trust Property.
Legal title to all Trust Property shall be vested at all times in the
Property Trustee (in its capacity as such) and shall be held and administered
by the Property Trustee for the benefit of the Trust and the Securityholders in
accordance with this Trust Agreement.
ARTICLE III
Payment Account
Section III.1 Payment Account.
(a) On or prior to the Closing Date, the Property Trustee shall
establish the Payment Account. The Property Trustee and any agent of the
Property Trustee shall have exclusive control and sole right of withdrawal with
respect to the Payment Account for the purpose of making deposits in and
withdrawals from the Payment Account in accordance with this Trust Agreement.
All monies and other property deposited or held from time to time in the
Payment Account shall be held by the Property Trustee in the Payment Account
for the exclusive benefit of the Securityholders and for distribution as herein
provided, including (and subject to) any priority of payments provided for
herein.
(b) The Property Trustee shall deposit in the Payment Account,
promptly upon receipt, all payments of principal of or interest or premium on,
and any other payments or proceeds with respect to, the Debentures. Amounts
held in the Payment Account shall not be invested by the Property Trustee.
ARTICLE IV
Distributions; Redemption
Section IV.1 Distributions.
(a) The Trust Securities represent undivided beneficial ownership
interests in the Trust Property, and Distributions (including of Additional
Amounts) will be made on the Trust Securities at the rate and on the dates that
payments of interest (including of Additional Interest, as defined in the
Indenture) are made on the Debentures. Accordingly:
(i) Distributions on the Trust Securities shall be
cumulative, and will accumulate whether or not there are funds of the
Trust available for the payment of Distributions. Distributions shall
accrue from December 18, 1996, and, except in the event (and to the
extent) that the Depositor exercises its right to defer the payment of
interest on the Debentures pursuant to the Indenture, shall be payable
semi-annually in arrears on June 1 and December 1 of each year,
commencing on June 1, 1997. If any date
<PAGE> 20
14
on which a Distribution is otherwise payable on the Trust Securities
is not a Business Day, then the payment of such Distribution shall 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,
payment of such Distribution shall be made on the immediately
preceding Business Day, in each case with the same force and effect as
if made on such date (each date on which Distributions are payable in
accordance with this Section 4.1(a), a "Distribution Date").
(ii) Assuming payments of interest on the Debentures are
made when due (and before giving effect to Additional Amounts, if
applicable), Distributions on the Trust Securities shall be payable at
a rate of 8.278% per annum of the Liquidation Amount of the Trust
Securities. The amount of Distributions shall be computed on the basis
of the number of days elapsed in a 360-day year of twelve 30-day
months. The amount of Distributions payable for any period shall
include the Additional Amounts, if any.
(iii) Distributions on the Trust Securities shall be made
by the Property Trustee from the Payment Account and shall be payable
on each Distribution Date only to the extent that the Trust has funds
then on hand and available in the Payment Account for the payment of
such Distributions.
(b) Distributions on the Trust Securities with respect to a
Distribution Date shall be payable to the Holders thereof as they appear on the
Securities Register for the Trust Securities on the relevant record date, which
shall be one Business Day prior to such Distribution Date; provided, however,
that in the event that the Capital Securities do not remain in book-entry-only
form, the relevant record date shall be the 15th day of the month prior to the
relevant Distribution Date (whether or not such record date is a Business Day).
Section IV.2 Redemption.
(a) On each Debenture Redemption Date and on the stated maturity of
the Debentures, the Trust will be required to redeem a Like Amount of Trust
Securities at the Redemption Price.
(b) Notice of redemption shall be given by the Property Trustee by
first-class mail, postage prepaid, mailed not less than 30 nor more than 60
days prior to the Redemption Date to each Holder of Trust Securities to be
redeemed, at such Holder's address appearing in the Security Register. All
notices of redemption shall state:
(i) the Redemption Date;
(ii) the Redemption Price;
(iii) the CUSIP number;
(iv) if less than all the Outstanding Trust Securities are
to be redeemed, the identification and the total Liquidation Amount of
the particular Trust Securities to be redeemed;
(v) that on the Redemption Date the Redemption Price will
become due and payable upon each such Trust Security to be redeemed
and that Distributions thereon will cease to accrue on and after said
date; and
(vi) if the Capital Securities are no longer in book-entry-
only form, the place and address where the Holders shall surrender
their Capital Securities Certificates.
<PAGE> 21
15
(c) The Trust Securities redeemed on each Redemption Date shall be
redeemed at the Redemption Price with the proceeds from the contemporaneous
redemption or payment at stated maturity of Debentures. Redemptions of the
Trust Securities shall be made and the Redemption Price shall be payable on
each Redemption Date only to the extent that the Trust has funds then on hand
and available in the Payment Account for the payment of such Redemption Price.
(d) If the Property Trustee gives a notice of redemption in respect of
any Capital Securities, then, by 12:00 noon, New York City time, on the
Redemption Date, subject to Section 4.2(c), the Property Trustee will, so long
as the Capital Securities are in book-entry-only form, irrevocably deposit with
the Clearing Agency for the Capital Securities funds sufficient to pay the
applicable Redemption Price and will give such Clearing Agency irrevocable
instructions and authority to pay the Redemption Price to the Owners thereof.
If the Capital Securities are no longer in book-entry-only form, the Property
Trustee, subject to Section 4.2(c), will irrevocably deposit with the Paying
Agent funds sufficient to pay the applicable Redemption Price and will give the
Paying Agent irrevocable instructions and authority to pay the Redemption Price
to the Holders thereof upon surrender of their Capital Securities Certificates.
Notwithstanding the foregoing, Distributions payable on or prior to the
Redemption Date for any Trust Securities called for redemption shall be payable
to the Holders of such Trust Securities as they appear on the Securities
Register for the Trust 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
Securityholders holding Trust Securities so called for redemption will cease,
except the right of such Securityholders to receive the Redemption Price and
any Distribution payable on or prior to the Redemption Date, but without
interest thereon, and such Trust Securities will cease to be outstanding. In
the event that any date on which any Redemption Price is payable is not a
Business Day, then payment of the Redemption Price 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 falls in the next calendar year, such payment will be made on the
immediately preceding Business Day, in each case, with the same force and
effect as if made on such date. In the event that payment of the Redemption
Price in respect of any Trust Securities called for redemption is improperly
withheld or refused and not paid either by the Trust or by the Depositor
pursuant to the Guarantee, Distributions on such Trust Securities will continue
to accrue, at the then applicable rate, from the Redemption Date originally
established by the Trust for such Trust 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.
(e) Payment of the Redemption Price on the Trust Securities shall be
made to the recordholders thereof as they appear on the Securities Register for
the Trust Securities on the relevant record date, which shall be one Business
Day prior to the relevant Redemption Date; provided, however, that in the event
that the Capital Securities do not remain in book-entry-only form, the relevant
record date shall be the date fifteen days prior to the relevant Redemption
Date.
(f) Subject to Section 4.3(a), if less than all the Outstanding Trust
Securities are to be redeemed on a Redemption Date, then the aggregate
Liquidation Amount of Trust Securities to be redeemed shall be allocated on a
pro rata basis (based on Liquidation Amounts) among the Common Securities and
the Capital Securities. The particular Capital Securities to be redeemed shall
be selected on a pro rata basis (based upon Liquidation Amounts) not more than
60 days prior to the Redemption Date by the Property Trustee from the
Outstanding Capital Securities not previously called for redemption, by such
method (including, without limitation, by lot) as the Property Trustee shall
deem fair and appropriate and which may provide for the selection for
redemption of portions (equal to $1,000 or an integral multiple of $1,000 in
excess thereof) of the Liquidation Amount of Capital Securities of a
denomination larger than $1,000. The Property
<PAGE> 22
16
Trustee shall promptly notify the Security Registrar in writing of the Capital
Securities selected for redemption and, in the case of any Capital Securities
selected for partial redemption, the Liquidation Amount thereof to be redeemed.
For all purposes of this Trust Agreement, unless the context otherwise
requires, all provisions relating to the redemption of Capital Securities shall
relate, in the case of any Capital Securities redeemed or to be redeemed only
in part, to the portion of the Liquidation Amount of Capital Securities that
has been or is to be redeemed.
Section IV.3 Subordination of Common Securities.
(a) Payment of Distributions (including Additional Amounts, if
applicable) on, and the Redemption Price of, the Trust Securities, as
applicable, shall be made, subject to Section 4.2(f), pro rata among the Common
Securities and the Capital Securities based on the Liquidation Amount of the
Trust Securities; provided, however, that if on any Distribution Date or
Redemption Date any Event of Default resulting from a Debenture Event of
Default shall have occurred and be continuing, no payment of any Distribution
(including Additional Amounts, if applicable) on, or Redemption Price of, any
Common Security, and no other payment on account of the redemption, liquidation
or other acquisition of Common Securities, shall be made unless payment in full
in cash of all accumulated and unpaid Distributions (including Additional
Amounts, if applicable) on all Outstanding Capital 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
Outstanding Capital Securities then called for redemption, shall have been made
or provided for, and all funds immediately available to the Property Trustee
shall first be applied to the payment in full in cash of all Distributions
(including Additional Amounts, if applicable) on, or the Redemption Price of,
Capital Securities then due and payable.
(b) In the case of the occurrence of any Event of Default resulting
from any Debenture Event of Default, the Holder of Common Securities will be
deemed to have waived any right to act with respect to any such Event of
Default under this Trust Agreement until the effect of all such Events of
Default with respect to the Capital Securities have been cured, waived or
otherwise eliminated. Until any such Event of Default under this Trust
Agreement with respect to the Capital Securities has been so cured, waived or
otherwise eliminated, the Property Trustee shall act solely on behalf of the
Holders of the Capital Securities and not the Holder of the Common Securities,
and only the Holders of the Capital Securities will have the right to direct
the Property Trustee to act on their behalf.
Section IV.4 Payment Procedures.
Payments of Distributions (including Additional Amounts, if
applicable) in respect of the Capital Securities shall be made by check mailed
to the address of the Person entitled thereto as such address shall appear on
the Securities Register or, if the Capital Securities are held by a Clearing
Agency, such Distributions shall be made to the Clearing Agency in immediately
available funds, which shall credit the relevant Persons' accounts at such
Clearing Agency on the applicable Distribution Dates. Payments in respect of
the Common Securities shall be made in such manner as shall be mutually agreed
in writing between the Property Trustee and the Common Securityholder.
Section IV.5 Tax Returns and Reports.
The Administrative Trustees shall prepare (or cause to be prepared),
at the Depositor's expense, and file all United States federal, state and local
tax and information returns and reports required to be filed by or in respect
of the Trust. In this regard, the Administrative Trustees shall (a) prepare and
file (or cause to be prepared and filed) the appropriate Internal Revenue
Service Form required to be filed in respect of the Trust in each taxable year
of the Trust and (b) prepare
<PAGE> 23
17
and furnish (or cause to be prepared and furnished) to each Securityholder the
appropriate Internal Revenue Service form and the information required to be
provided on such form. The Administrative Trustees shall provide the Depositor
and the Property Trustee with a copy of all such returns and reports promptly
after such filing or furnishing. The Trustees shall comply with United States
federal withholding and backup withholding tax laws and information reporting
requirements with respect to any payments to Securityholders under the Trust
Securities.
Section IV.6 Payment of Expenses of the Trust.
(a) Pursuant to Section 10.6 of the Indenture, the Depositor, as
borrower, has agreed to pay to the Trust, and reimburse the Trust for, the full
amount of any costs, expenses or liabilities of the Trust (other than
obligations of the Trust to pay the holders of any Trust Securities or other
similar interests in the Trust the amounts due such Holders pursuant to the
terms of the Trust Securities or such other similar interests, as the case may
be), including without limitation, any taxes, duties or other governmental
charges of whatever nature (other than United States withholding taxes) imposed
on the Trust by the United States or any other taxing authority. Such payment
obligation includes any such costs, expenses or liabilities of the Trust that
are required by applicable law to be satisfied in connection with a termination
of such Trust.
(b) Upon receipt by the Trust of the amounts described in subsection
4.6(a), the Trust shall promptly pay any taxes, duties or other governmental
charges of whatever nature (other than United States withholding taxes) imposed
on the Trust by the United States or any other taxing authority.
Section IV.7 Payments under Indenture or Pursuant to Direct Actions.
Any amount payable hereunder to any Holder of Capital Securities shall
be reduced by the amount of any corresponding payment such Holder (or an Owner
with respect to the Holder's Capital Securities) has directly received pursuant
to Section 5.8 of the Indenture or Section 5.14 of this Trust Agreement.
ARTICLE V
Trust Securities Certificates
Section V.1 Initial Ownership.
Upon the creation of the Trust and the contribution by the Depositor
pursuant to Section 2.3 and until the issuance of the Trust Securities, and at
any time during which no Trust Securities are outstanding, the Depositor shall
be the sole beneficial owner of the Trust.
Section V.2 The Trust Securities Certificates.
The Capital Securities Certificates shall be issued in minimum
denominations of $1,000 Liquidation Amount and integral multiples of $1,000 in
excess thereof, and the Common Securities Certificates shall be issued in
denominations of $1,000 Liquidation Amount and integral multiples thereof. The
Trust Securities Certificates shall be (i) executed on behalf of the Trust by
manual or facsimile signature of at least one Administrative Trustee and, if
executed on behalf of the Trust by facsimile, countersigned by a transfer agent
or its agent and (ii) authenticated by the Property Trustee by manual or
facsimile signature of an authorized signatory thereof and, if executed by such
authorized signatory of the Property Trustee by facsimile, countersigned by a
transfer agent or its agent. Trust Securities Certificates bearing the manual
signatures of individuals who were, at the time when such signatures shall have
been
<PAGE> 24
18
affixed, authorized to sign on behalf of the Trust or the Property Trustee or,
if executed on behalf of the Trust or the Property Trustee by facsimile,
countersigned by a transfer agent or its agent, shall be validly issued and
entitled to the benefits of this Trust Agreement, notwithstanding that such
individuals or any of them shall have ceased to be so authorized prior to the
delivery of such Trust Securities Certificates or did not hold such offices at
the date of delivery of such Trust Securities Certificates. A transferee of a
Trust Securities Certificate shall become a Securityholder, and shall be
entitled to the rights and subject to the obligations of a Securityholder
hereunder, upon due registration of such Trust Securities Certificate in such
transferee's name pursuant to Sections 5.4, 5.11 and 5.13.
Section V.3 Execution and Delivery of Trust Securities Certificates.
On the Closing Date, the Administrative Trustees shall cause Trust
Securities Certificates, in an aggregate Liquidation Amount as provided in
Sections 2.4 and 2.5, to be executed on behalf of the Trust and delivered to or
upon the written order of the Depositor, signed by its chairman of the board,
its president, any executive vice president or any vice president, treasurer or
assistant treasurer or controller without further corporate action by the
Depositor, in authorized denominations.
Section V.4 Registration of Transfer and Exchange of Capital
Securities Certificates.
The Depositor shall keep or cause to be kept, at the office or agency
maintained pursuant to Section 5.8, a register or registers for the purpose of
registering Trust Securities Certificates and transfers and exchanges of
Capital Securities Certificates (the "Securities Register") in which the
transfer agent and registrar designated by the Depositor (the "Securities
Registrar"), subject to such reasonable regulations as it may prescribe, shall
provide for the registration of Capital Securities Certificates and Common
Securities Certificates (subject to Section 5.10 in the case of the Common
Securities Certificates) and registration of transfers and exchanges of Capital
Securities Certificates as herein provided. The Bank shall be the initial
Securities Registrar.
Upon surrender for registration of transfer of any Capital Securities
Certificate at the office or agency maintained pursuant to Section 5.8, the
Administrative Trustees or any one of them shall execute on behalf of the Trust
(and if executed on behalf of the Trust by a facsimile signature, such
certificate shall be countersigned by a transfer agent or its agent) and
deliver, in the name of the designated transferee or transferees, one or more
new Capital Securities Certificates in authorized denominations of a like
aggregate Liquidation Amount dated the date of execution by such Administrative
Trustee or Trustees. The Securities Registrar shall not be required to
register the transfer of any Capital Securities that have been called for
redemption during a period beginning at the opening of business 15 days before
the day of the mailing of a notice of redemption and ending at the close of
business on the day of such mailing.
At the option of a Holder, Capital Securities Certificates may be
exchanged for other Capital Securities Certificates in authorized denominations
of the same class and of a like aggregate Liquidation Amount upon surrender of
the Capital Securities Certificates to be exchanged at the office or agency
maintained pursuant to Section 5.8.
Every Capital Securities Certificate presented or surrendered for
registration of transfer or exchange shall be accompanied by a written
instrument of transfer in form satisfactory to an Administrative Trustee and
the Securities Registrar duly executed by the Holder or his attorney duly
authorized in writing. Each Capital Securities Certificate surrendered for
registration of transfer or exchange shall be cancelled and subsequently
disposed of by an Administrative Trustee or the Securities Registrar in
accordance with such Person's customary practice.
<PAGE> 25
19
No service charge shall be made for any registration of transfer or
exchange of Capital Securities Certificates, but the Securities Registrar may
require payment of a sum sufficient to cover any tax or governmental charge
that may be imposed in connection with any transfer or exchange of Capital
Securities Certificates.
Section V.5 Mutilated, Destroyed, Lost or Stolen Trust Securities
Certificates.
If (a) any mutilated Trust Securities Certificate shall be surrendered
to the Securities Registrar, or if the Securities Registrar shall receive
evidence to its satisfaction of the destruction, loss or theft of any Trust
Securities Certificate and (b) there shall be delivered to the Securities
Registrar and the Administrative Trustees such security or indemnity as may be
required by them to save each of them harmless, then in the absence of notice
that such Trust Securities Certificate shall have been acquired by a bona fide
purchaser, the Administrative Trustees, or any one of them, on behalf of the
Trust shall execute by manual or facsimile signature and, if executed on behalf
of the Trust by facsimile signature, such certificate shall be countersigned by
a transfer agent, and make available for delivery, in exchange for or in lieu
of any such mutilated, destroyed, lost or stolen Trust Securities Certificate,
a new Trust Securities Certificate of like class, tenor and denomination. In
connection with the issuance of any new Trust Securities Certificate under this
Section, the Administrative Trustees or the Securities Registrar may require
the payment of a sum sufficient to cover any tax or other governmental charge
that may be imposed in connection therewith. Any duplicate Trust Securities
Certificate issued pursuant to this Section shall constitute conclusive
evidence of an undivided beneficial interest in the Trust Property, as if
originally issued, whether or not the lost, stolen or destroyed Trust
Securities Certificate shall be found at any time.
Section V.6 Persons Deemed Securityholders.
The Trustees or the Securities Registrar shall treat the Person in
whose name any Trust Securities Certificate shall be registered in the
Securities Register as the owner of such Trust Securities Certificate for the
purpose of receiving Distributions and for all other purposes whatsoever, and
neither the Trustees nor the Securities Registrar shall be bound by any notice
to the contrary.
Section V.7 Access to List of Securityholders' Names and Addresses.
Each Holder and each Owner shall be deemed to have agreed not to hold
the Depositor, the Property Trustee or the Administrative Trustees accountable
by reason of the disclosure of its name and address, regardless of the source
from which such information was derived.
Section V.8 Maintenance of Office or Agency.
The Administrative Trustees shall maintain an office or offices or
agency or agencies where Capital Securities Certificates may be surrendered for
registration of transfer or exchange and where notices and demands to or upon
the Trustees in respect of the Trust Securities Certificates may be served. The
Administrative Trustees initially designate The Bank of New York, 101 Barclay
Street, Floor 21 West, New York, New York 10286 Attn: Corporate Trust
Administration, as its principal corporate trust office for such purposes. The
Administrative Trustees shall give prompt written notice to the Depositor, the
Property Trustee and to the Securityholders of any change in the location of
the Securities Register or any such office or agency.
Section V.9 Appointment of Paying Agent.
The Paying Agent shall make Distributions to Securityholders from the
Payment Account
<PAGE> 26
20
and shall report the amounts of such Distributions to the Property Trustee and
the Administrative Trustees. Any Paying Agent shall have the revocable power to
withdraw funds from the Payment Account for the purpose of making the
Distributions referred to above. The Administrative Trustees may revoke such
power and remove the Paying Agent if such Trustees determine in their sole
discretion that the Paying Agent shall have failed to perform its obligations
under this Trust Agreement in any material respect. The Paying Agent shall
initially be the Bank, and any co-paying agent chosen by the Bank, and
acceptable to the Administrative Trustees and the Depositor. Any Person acting
as Paying Agent shall be permitted to resign as Paying Agent upon 30 days'
written notice to the Administrative Trustees, the Property Trustee and the
Depositor. In the event that the Bank shall no longer be the Paying Agent or a
successor Paying Agent shall resign or its authority to act be revoked, the
Administrative Trustees shall appoint a successor that is acceptable to the
Property Trustee and the Depositor to act as Paying Agent (which shall be a
bank or trust company). The Administrative Trustees shall cause such successor
Paying Agent or any additional Paying Agent appointed by the Administrative
Trustees to execute and deliver to the Trustees an instrument in which such
successor Paying Agent or additional Paying Agent shall agree with the Trustees
that as Paying Agent, such successor Paying Agent or additional Paying Agent
will hold all sums, if any, held by it for payment to the Securityholders in
trust for the benefit of the Securityholders entitled thereto until such sums
shall be paid to such Securityholders. The Paying Agent shall return all
unclaimed funds to the Property Trustee and upon resignation or removal of a
Paying Agent such Paying Agent shall also return all funds in its possession to
the Property Trustee. The provisions of Sections 8.1, 8.3 and 8.6 herein shall
apply to the Bank also in its role as Paying Agent, for so long as the Bank
shall act as Paying Agent and, to the extent applicable, to any other paying
agent appointed hereunder, and any Paying Agent shall be bound by the
requirements with respect to paying agents of securities issued pursuant to the
Trust Indenture Act. Any reference in this Agreement to the Paying Agent shall
include any co-paying agent unless the context requires otherwise.
Section V.10 Ownership of Common Securities by Depositor.
On the Closing Date, the Depositor shall acquire and retain beneficial
and record ownership of the Common Securities. To the fullest extent permitted
by law, other than a transfer in connection with a consolidation or merger of
the Depositor into another Person, or any conveyance, transfer or lease by the
Depositor of its properties and assets substantially as an entirety to any
Person, pursuant to Section 8.1 of the Indenture, any attempted transfer of the
Common Securities shall be void. The Administrative Trustees shall cause each
Common Securities Certificate issued to the Depositor to contain a legend
stating "THIS CERTIFICATE IS NOT TRANSFERABLE TO ANY PERSON".
Section V.11 Book-Entry Capital Securities Certificates; Common
Securities Certificate.
(a) The Capital Securities Certificates, upon original issuance, will
be issued in the form of a typewritten Capital Securities Certificate or
Certificates representing Book-Entry Capital Securities Certificates, to be
delivered to The Depository Trust Company, the initial Clearing Agency, by, or
on behalf of, the Trust. Such Capital Securities Certificate or Certificates
shall initially be registered on the Securities Register in the name of Cede &
Co., the nominee of the initial Clearing Agency, and no Owner will receive a
Definitive Capital Securities Certificate representing such Owner's interest in
such Capital Securities, except as provided in Section 5.13. Unless and until
Definitive Capital Securities Certificates have been issued to Owners pursuant
to Section 5.13:
(i) the provisions of this Section 5.11(a) shall be in
full force and effect;
(ii) the Securities Registrar and the Trustees shall be
entitled to deal with
<PAGE> 27
21
the Clearing Agency for all purposes of this Trust Agreement relating
to the Book-Entry Capital Securities Certificates (including the
payment of the Liquidation Amount of and Distributions on the Capital
Securities evidenced by Book-Entry Capital Securities Certificates and
the giving of instructions or directions to Owners of Capital
Securities evidenced by Book-Entry Capital Securities Certificates) as
the sole Holder of Capital Securities evidenced by Book-Entry Capital
Securities Certificates and shall have no obligations to the Owners
thereof;
(iii) to the extent that the provisions of this Section
5.11 conflict with any other provisions of this Trust Agreement, the
provisions of this Section 5.11 shall control; and
(iv) the rights of the Owners of the Book-Entry Capital
Securities Certificates shall be exercised only through the Clearing
Agency and shall be limited to those established by law and agreements
between such Owners and the Clearing Agency and/or the Clearing Agency
Participants. Pursuant to the Certificate Depository Agreement, unless
and until Definitive Capital Securities Certificates are issued
pursuant to Section 5.13, the initial Clearing Agency will make book-
entry transfers among the Clearing Agency Participants and receive and
transmit payments on the Capital Securities to such Clearing Agency
Participants.
(b) A single Common Securities Certificate representing the Common
Securities shall be issued to the Depositor in the form of a definitive Common
Securities Certificate.
Section V.12 Notices to Clearing Agency.
To the extent that a notice or other communication to the Owners is
required under this Trust Agreement, unless and until Definitive Capital
Securities Certificates shall have been issued to Owners pursuant to Section
5.13, the Trustees shall give all such notices and communications specified
herein to be given to Owners to the Clearing Agency, and shall have no
obligations to the Owners.
Section V.13 Definitive Capital Securities Certificates.
If (a) the Depositor or the Clearing Agency advises the Trustees in
writing that the Clearing Agency is no longer willing or able to properly
discharge its responsibilities with respect to the Capital Securities
Certificates, and the Depositor is unable to locate a qualified successor, or
if at anytime the Clearing Agency ceases to be a clearing agency registered
under the Securities Exchange Act of 1934, as amended, at a time when the
Clearing Agency is required to be so registered to act as such depositary, (b)
the Depositor at its option advises the Trustees in writing that it elects to
terminate the book-entry system through the Clearing Agency or (c) after the
occurrence of a Debenture Event of Default, Owners of Capital Securities
Certificates representing beneficial interests aggregating at least a majority
of the Liquidation Amount advise the Administrative Trustees in writing that
the continuation of a book-entry system through the Clearing Agency is no
longer in the best interest of the Owners of Capital Securities Certificates,
then the Administrative Trustees shall notify other Trustees and the Clearing
Agency, and the Clearing Agency, in accordance with its customary rules and
procedures, shall notify all Clearing Agency Participants for whom it holds
Capital Securities of the occurrence of any such event and of the availability
of the Definitive Capital Securities Certificates to Owners of such class or
classes, as applicable, requesting the same. Upon surrender to the
Administrative Trustees of the typewritten Capital Securities Certificate or
Certificates representing the Book-Entry Capital Securities Certificates by the
Clearing Agency, accompanied by registration instructions, the Administrative
Trustees, or any one of them, shall execute the Definitive Capital Securities
Certificates in accordance with the instructions of the
<PAGE> 28
22
Clearing Agency or, if executed on behalf of the Trust by facsimile,
countersigned by a transfer agent or its agent. Neither the Securities
Registrar nor the Trustees shall be liable for any delay in delivery of such
instructions and may conclusively rely on, and shall be protected in relying
on, such instructions. Upon the issuance of Definitive Capital Securities
Certificates, the Trustees shall recognize the Holders of the Definitive
Capital Securities Certificates as Securityholders. The Definitive Capital
Securities Certificates shall be printed, lithographed or engraved or may be
produced in any other manner as is reasonably acceptable to the Administrative
Trustees that meets the requirements of any stock exchange or automated
quotation system on which the Capital Securities are then listed or approved
for trading, as evidenced by the execution thereof by the Administrative
Trustees or any one of them.
Section V.14 Rights of Securityholders.
(a) The legal title to the Trust Property is vested exclusively in the
Property Trustee (in its capacity as such) in accordance with Section 2.9, and
the Securityholders shall not have any right or title therein other than the
undivided beneficial ownership interest in the assets of the Trust conferred by
their Trust Securities and they shall have no right to call for any partition
or division of property, profits or rights of the Trust except as described
below. The Trust Securities shall be personal property giving only the rights
specifically set forth therein and in this Trust Agreement. The Trust
Securities shall have no preemptive or similar rights and when issued and
delivered to Securityholders against payment of the purchase price therefor
will be fully paid and nonassessable by the Trust. The Holders of the Trust
Securities, in their capacities as such, shall be entitled to the same
limitation of personal liability extended to stockholders of private
corporations for profit organized under the General Corporation Law of the
State of Delaware.
(b) For so long as any Capital Securities remain Outstanding, if, upon
a Debenture Event of Default, the Debenture Trustee fails or the holders of not
less than 25% in principal amount of the outstanding Debentures fail to declare
the principal of all of the Debentures to be immediately due and payable, the
Holders of at least 25% in Liquidation Amount of the Capital Securities then
Outstanding shall have such right by a notice in writing to the Depositor and
the Debenture Trustee; and upon any such declaration such principal amount of
and the accrued interest on all of the Debentures shall become immediately due
and payable as set forth in the Indenture, provided that the payment of
principal, premium and interest on such Debentures shall remain subordinated to
the extent provided in the Indenture.
At any time after such a declaration of acceleration with respect to
the Debentures has been made and before a judgment or decree for payment of the
money due has been obtained by the Debenture Trustee as in the Indenture
provided, the Holders of a majority in Liquidation Amount of the Capital
Securities, by written notice to the Property Trustee, the Depositor and the
Debenture Trustee, may rescind and annul such declaration and its consequences
if:
(i) the Depositor has paid or deposited with the
Debenture Trustee a sum sufficient to pay
(A) all overdue installments of interest (including
any Additional Interest (as defined in the Indenture)) on all of
the Debentures,
(B) the principal of (and premium, if any, on) any
Debentures which have become due otherwise than by such declaration
of acceleration and interest thereon at the rate borne by the
Debentures, and
(C) all sums paid or advanced by the Debenture
Trustee under the Indenture and the reasonable compensation,
expenses, disbursements and advances of the Debenture Trustee and
the Property Trustee, their agents and
<PAGE> 29
23
counsel; and
(ii) all Events of Default with respect to the Debentures,
other than the non-payment of the principal of the Debentures which
has become due solely by such acceleration, have been cured or waived
as provided in Section 5.13 of the Indenture.
The holders of a majority in aggregate Liquidation Amount of the
Capital Securities may, on behalf of the Holders of all the Capital Securities,
waive any past default under the Indenture, except a default in the payment of
principal, premium or interest (unless all Events of Default with respect to
the Debentures, other than the non-payment of the principal of the Debentures
which has become due solely by such acceleration, have been cured or annulled
as provided in Section 5.3 of the Indenture and the Company has paid or
deposited with the Debenture Trustee a sum sufficient to pay all overdue
installments of interest (including any Additional Interest (as defined in the
Indenture)) on the Debentures, the principal of (and premium, if any, on) any
Debentures which have become due otherwise than by such declaration of
acceleration and interest thereon at the rate borne by the Debentures, and all
sums paid or advanced by the Debenture Trustee under the Indenture and the
reasonable compensation, expenses, disbursements and advances of the Debenture
Trustee and the Property trustee, their agents and counsel) 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 Debenture. No
such rescission shall affect any subsequent default or impair any right
consequent thereon.
Upon receipt by the Property Trustee of written notice declaring such
an acceleration, or rescission and annulment thereof, by Holders of the Capital
Securities all or part of which is represented by Book-Entry Capital Securities
Certificates, a record date shall be established for determining Holders of
Outstanding Capital Securities entitled to join in such notice, which record
date shall be at the close of business on the day the Property Trustee receives
such notice. The Holders of Outstanding Capital Securities on such record date,
or their duly designated proxies, and only such Persons, shall be entitled to
join in such notice, whether or not such Holders remain Holders after such
record date; provided, that, unless such declaration of acceleration, or
rescission and annulment, as the case may be, shall have become effective by
virtue of the requisite percentage having joined in such notice prior to the
day which is 90 days after such record date, such notice of declaration of
acceleration, or rescission and annulment, as the case may be, shall
automatically and without further action by any Holder be canceled and of no
further effect. Nothing in this paragraph shall prevent a Holder, or a proxy
of a Holder, from giving, after expiration of such 90-day period, a new written
notice of declaration of acceleration, or rescission and annulment thereof, as
the case may be, that is identical to a written notice which has been canceled
pursuant to the proviso to the preceding sentence, in which event a new record
date shall be established pursuant to the provisions of this Section 5.14(b).
(c) For so long as any Capital Securities remain Outstanding, to the
fullest extent permitted by law and subject to the terms of this Trust
Agreement and the Indenture, upon a Debenture Event of Default specified in
Section 5.1(1) or 5.1(2) of the Indenture, any Holder of Capital Securities
shall have the right to institute a proceeding directly against the Depositor,
pursuant to Section 5.8 of the Indenture, for enforcement of payment to such
Holder of the principal amount of or premium or interest on Debentures having a
principal amount equal to the Liquidation Amount of the Capital Securities of
such Holder (a "Direct Action"). Except as set forth in Section 5.14(b) and
this Section 5.14(c), the Holders of Capital Securities shall have no right to
exercise directly any right or remedy available to the holders of, or in
respect of, the Debentures.
Section V.15 CUSIP Numbers.
The Administrative Trustees in issuing the Capital Securities may use
"CUSIP" numbers
<PAGE> 30
24
(if then generally in use), and, if so, the Property Trustee shall use "CUSIP"
numbers in notices of redemption as a convenience to Holders; provided that any
such notice may state that no representation is made as to the correctness of
such numbers either as printed on the Capital Securities or as contained in any
notice of a redemption and that reliance may be placed only on the other
identification numbers printed on the Capital Securities, and any such
redemption shall not be affected by any defect in or omission of such numbers.
The Administrative Trustees will promptly notify the Property Trustee of any
change in the CUSIP numbers.
ARTICLE VI
Acts of Securityholders; Meetings; Voting
Section VI.1 Limitations on Voting Rights.
(a) Except as provided in this Section, in Sections 5.14, 8.10 and
10.3 and in the Indenture and as otherwise required by law, no Holder of
Capital Securities shall have any right to vote or in any manner otherwise
control the administration, operation and management of the Trust or the
obligations of the parties hereto, nor shall anything herein set forth, or
contained in the terms of the Trust Securities Certificates, be construed so as
to constitute the Securityholders from time to time as partners or members of
an association.
(b) So long as any Debentures are held by the Property Trustee, the
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 Debenture Trustee with respect to such
Debentures, (ii) waive any past default which is waiveable under Section 5.13
of the Indenture, (iii) exercise any right to rescind or annul a declaration
that the principal of all the Debentures shall be due and payable or (iv)
consent to any amendment, modification or termination of the Indenture or the
Debentures, where such consent shall be required, without, in each case,
obtaining the prior approval of the Holders of at least a majority in
Liquidation Amount of all Outstanding Capital Securities, provided, however,
that where a consent under the Indenture would require the consent of each
holder of Debentures affected thereby, no such consent shall be given by the
Property Trustee without the prior written consent of each Holder of Capital
Securities. The Trustees shall not revoke any action previously authorized or
approved by a vote of the Holders of Capital Securities, except by a subsequent
vote of the Holders of Capital Securities. The Property Trustee shall notify
all Holders of the Capital Securities of any notice of default received from
the Debenture Trustee with respect to the Debentures. In addition to obtaining
the foregoing approvals of the Holders of the Capital Securities, prior to
taking any of the foregoing actions, the Administrative Trustees shall, at the
expense of the Depositor, obtain an Opinion of Counsel experienced in such
matters to the effect that such action shall not cause the Trust to fail to be
classified as a grantor trust for United States federal income tax purposes.
(c) If any proposed amendment to the Trust Agreement provides for, or
the Trustees otherwise propose to effect, (i) any action that would adversely
affect in any material respect the powers, preferences or special rights of the
Capital Securities, whether by way of amendment to this Trust Agreement or
otherwise, or (ii) the dissolution, winding-up or termination of the Trust,
other than pursuant to the terms of this Trust Agreement, then the Holders of
Outstanding Capital Securities as a class will be entitled to vote on such
amendment or proposal and such amendment or proposal shall not be effective
except with the approval of the Holders of at least a majority in Liquidation
Amount of the Outstanding Capital Securities. Notwithstanding any other
provision of this Trust Agreement, no amendment to this Trust Agreement may be
made if, as a result of such amendment, it would cause the Trust to fail to be
classified as a grantor trust for United States federal income tax purposes.
<PAGE> 31
25
Section VI.2 Notice of Meetings.
Notice of all meetings of the Capital Securityholders, stating the
time, place and purpose of the meeting, shall be given by the Property Trustee
pursuant to Section 10.10 to each Capital Securityholder of record, at his
registered address, at least 15 days and not more than 90 days before the
meeting. At any such meeting, any business properly before the meeting may be
so considered whether or not stated in the notice of the meeting. Any adjourned
meeting may be held as adjourned without further notice.
Section VI.3 Meetings of Capital Securityholders.
No annual meeting of Securityholders is required to be held. The
Administrative Trustees, however, shall call a meeting of Capital
Securityholders to vote on any matter upon the written request of the Capital
Securityholders of record of 25% of the Outstanding Capital Securities (based
upon their Liquidation Amount) and the Administrative Trustees or the Property
Trustee may, at any time in their discretion, call a meeting of Capital
Securityholders to vote on any matters as to which Capital Securityholders are
entitled to vote.
Capital Securityholders of record of 50% of the Outstanding Capital
Securities (based upon their Liquidation Amount), present in person or by
proxy, shall constitute a quorum at any meeting of Capital Securityholders.
If a quorum is present at a meeting, an affirmative vote by the
Capital Securityholders of record present, in person or by proxy, holding more
than a majority of the Outstanding Capital Securities (based upon their
Liquidation Amount) held by holders of record of Outstanding Capital Securities
present, either in person or by proxy, at such meeting shall constitute the
action of the Capital Securityholders, unless this Trust Agreement requires a
greater number of affirmative votes.
Section VI.4 Voting Rights.
Securityholders shall be entitled to one vote for each $1,000 of
Liquidation Amount represented by their Trust Securities in respect of any
matter as to which such Securityholders are entitled to vote.
Section VI.5 Proxies, etc.
At any meeting of Securityholders, any Securityholder entitled to vote
thereat may vote by proxy, provided that no proxy shall be voted at any meeting
unless it shall have been placed on file with the Administrative Trustees, or
with such other officer or agent of the Trust as the Administrative Trustees
may direct, for verification prior to the time at which such vote shall be
taken. Pursuant to a resolution of the Property Trustee, proxies may be
solicited in the name of the Property Trustee or one or more officers of the
Property Trustee. Only Securityholders of record shall be entitled to vote.
When Trust Securities are held jointly by several Persons, any one of them may
vote at any meeting in person or by proxy in respect of such Trust Securities,
but if more than one of them shall be present at such meeting in person or by
proxy, and such joint owners or their proxies so present disagree as to any
vote to be cast, such vote shall not be received in respect of such Trust
Securities. A proxy purporting to be executed by or on behalf of a
Securityholder shall be deemed valid unless challenged at or prior to its
exercise, and the burden of proving invalidity shall rest on the challenger. No
proxy shall be valid more than three years after its date of execution.
<PAGE> 32
26
Section VI.6 Securityholder Action by Written Consent.
Any action which may be taken by Securityholders at a meeting may be
taken without a meeting if Securityholders holding more than a majority of all
Outstanding Trust Securities (based upon their Liquidation Amount) entitled to
vote in respect of such action (or such larger proportion thereof as shall be
required by any express provision of this Trust Agreement) shall consent to the
action in writing.
Section VI.7 Record Date for Voting and Other Purposes.
For the purposes of determining the Securityholders who are entitled
to notice of and to vote at any meeting or by written consent, or to
participate in any Distribution on the Trust Securities in respect of which a
record date is not otherwise provided for in this Trust Agreement, or for the
purpose of any other action, the Administrative Trustees may from time to time
fix a date, not more than 90 days prior to the date of any meeting of
Securityholders or the payment of a Distribution or other action, as the case
may be, as a record date for the determination of the identity of the
Securityholders of record for such purposes.
Section VI.8 Acts of Securityholders.
Any request, demand, authorization, direction, notice, consent, waiver
or other action provided or permitted by this Trust Agreement to be given, made
or taken by Securityholders or Owners may be embodied in and evidenced by one
or more instruments of substantially similar tenor signed by such
Securityholders or Owners in person or by an agent duly appointed in writing;
and, except as otherwise expressly provided herein, such action shall become
effective when such instrument or instruments are delivered to an
Administrative Trustee. Such instrument or instruments (and the action embodied
therein and evidenced thereby) are herein sometimes referred to as the "Act" of
the Securityholders or Owners signing such instrument or instruments. Proof of
execution of any such instrument or of a writing appointing any such agent
shall be sufficient for any purpose of this Trust Agreement and (subject to
Section 8.1) conclusive in favor of the Trustees, if made in the manner
provided in this Section.
The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer authorized by
law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof. Where
such execution is by a signer acting in a capacity other than his individual
capacity, such certificate or affidavit shall also constitute sufficient proof
of his authority. The fact and date of the execution of any such instrument or
writing, or the authority of the Person executing the same, may also be proved
in any other manner which any Trustee receiving the same deems sufficient.
The ownership of Capital Securities shall be proved by the Securities
Register.
Any request, demand, authorization, direction, notice, consent, waiver
or other Act of the Securityholder of any Trust Security shall bind every
future Securityholder of the same Trust Security and the Securityholder of
every Trust Security issued upon the registration of transfer thereof or in
exchange therefor or in lieu thereof in respect of anything done, omitted or
suffered to be done by the Trustees or the Trust in reliance thereon, whether
or not notation of such action is made upon such Trust Security.
Without limiting the foregoing, a Securityholder entitled hereunder to
take any action hereunder with regard to any particular Trust Security may do
so with regard to all or any part of the Liquidation Amount of such Trust
Security or by one or more duly appointed agents each of
<PAGE> 33
27
which may do so pursuant to such appointment with regard to all or any part of
such Liquidation Amount.
If any dispute shall arise between the Securityholders and the
Administrative Trustees or among such Securityholders or Trustees with respect
to the authenticity, validity or binding nature of any request, demand,
authorization, direction, consent, waiver or other Act of such Securityholder
or Trustee under this Article VI, then the determination of such matter by the
Property Trustee shall be conclusive with respect to such matter.
Section VI.9 Inspection of Records.
Upon reasonable notice to the Administrative Trustees and the Property
Trustee, the records of the Trust shall be open to inspection by
Securityholders during normal business hours for any purpose reasonably related
to such Securityholder's interest as a Securityholder.
ARTICLE VII
Representations and Warranties
Section VII.1 Representations and Warranties of the Property Trustee
and the Delaware Trustee.
The Property Trustee and the Delaware Trustee, each severally on
behalf of and as to itself, hereby represents and warrants for the benefit of
the Depositor and the Securityholders that:
(a) the Property Trustee is a New York banking corporation duly
organized, validly existing and in good standing under the laws of the State of
New York;
(b) the Property Trustee has full corporate power, authority and legal
right to execute, deliver and perform its obligations under this Trust
Agreement and has taken all necessary action to authorize the execution,
delivery and performance by it of this Trust Agreement;
(c) the Delaware Trustee is a Delaware banking corporation duly
organized, validly existing and in good standing in the State of Delaware;
(d) the Delaware Trustee has full corporate power, authority and legal
right to execute, deliver and perform its obligations under this Trust
Agreement and has taken all necessary action to authorize the execution,
delivery and performance by it of this Trust Agreement;
(e) this Trust Agreement has been duly authorized, executed and
delivered by the Property Trustee and the Delaware Trustee and constitutes the
valid and legally binding agreement of each of the Property Trustee and the
Delaware Trustee enforceable against each of them in accordance with its terms,
subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or affecting
creditors' rights and to general equity principles;
(f) the execution, delivery and performance of this Trust Agreement
has been duly authorized by all necessary corporate or other action on the part
of the Property Trustee and the Delaware Trustee and does not require any
approval of stockholders of the Property Trustee and the Delaware Trustee and
such execution, delivery and performance will not (i) violate the charter or
by-laws of the Property Trustee or the Delaware Trustee, (ii) violate any
provision of, or constitute, with or without notice or lapse of time, a default
under, or result in the creation or imposition of, any Lien on any properties
included in the Trust Property pursuant to the
<PAGE> 34
28
provisions of, any indenture, mortgage, credit agreement, license or other
agreement or instrument to which the Property Trustee or the Delaware Trustee
is a party or by which it is bound, or (iii) violate any law, governmental rule
or regulation of the State of New York or the State of Delaware, as the case
may be, governing the banking, trust or general powers of the Property Trustee
or the Delaware Trustee (as appropriate in context) or any order, judgment or
decree applicable to the Property Trustee or the Delaware Trustee;
(g) neither the authorization, execution or delivery by the Property
Trustee or the Delaware Trustee of this Trust Agreement nor the consummation of
any of the transactions by the Property Trustee or the Delaware Trustee (as
appropriate in context) contemplated herein or therein requires the consent or
approval of, the giving of notice to, the registration with or the taking of
any other action with respect to any governmental authority or agency under any
existing New York or Delaware law governing the banking, trust or general
powers of the Property Trustee or the Delaware Trustee, as the case may be; and
(h) there are no proceedings pending or, to the best of each of the
Property Trustee's and the Delaware Trustee's knowledge, threatened against or
affecting the Property Trustee or the Delaware Trustee in any court or before
any governmental authority, agency or arbitration board or tribunal which,
individually or in the aggregate, would materially and adversely affect the
Trust or would question the right, power and authority of the Property Trustee
or the Delaware Trustee, as the case may be, to enter into or perform its
obligations as one of the Trustees under this Trust Agreement.
Section VII.2 Representations and Warranties of Depositor.
The Depositor hereby represents and warrants for the benefit of the
Securityholders that:
(a) the Trust Securities Certificates issued at the Closing Date on
behalf of the Trust have been duly authorized and will have been, duly and
validly executed, issued and delivered by the Trustees pursuant to the terms
and provisions of, and in accordance with the requirements of, this Trust
Agreement and the Securityholders will be, as of such date, entitled to the
benefits of this Trust Agreement; and
(b) there are no taxes, fees or other governmental charges payable by
the Trust (or the Trustees on behalf of the Trust) under the laws of the State
of Delaware or any political subdivision thereof in connection with the
execution, delivery and performance by the Property Trustee or the Delaware
Trustee, as the case may be, of this Trust Agreement.
ARTICLE VIII
The Trustees
Section VIII.1 Certain Duties and Responsibilities.
(a) The duties and responsibilities of the Trustees shall be as
provided by this Trust Agreement and, in the case of the Property Trustee, by
the Trust Indenture Act. Notwithstanding the foregoing, no provision of this
Trust Agreement shall require the Trustees to expend or risk their own funds or
otherwise incur any financial liability in the performance of any of their
duties hereunder, or in the exercise of any of their rights or powers, if they
shall have reasonable grounds for believing that repayment of such funds or
adequate indemnity against such risk or liability is not reasonably assured to
them. Whether or not therein expressly so provided, every provision of this
Trust Agreement relating to the conduct or affecting the liability of or
affording protection to the Trustees shall be subject to the provisions of this
Section. Nothing in this Trust
<PAGE> 35
29
Agreement shall be construed to release an Administrative Trustee from
liability for its own gross negligent action, its own gross negligent failure
to act, or its own willful misconduct. To the extent that, at law or in equity,
an Administrative Trustee has duties (including fiduciary duties) and
liabilities relating thereto to the Trust or to the Securityholders, such
Administrative Trustee shall not be liable to the Trust or to any
Securityholder for such Trustee's good faith reliance on the provisions of this
Trust Agreement. The Administrative Trustees shall not be liable for the
default or misconduct of the Property Trustee or the Delaware Trustee. The
provisions of this Trust Agreement, to the extent that they restrict the duties
and liabilities of the Administrative Trustees otherwise existing at law or in
equity, are agreed by the Depositor and the Securityholders to replace such
other duties and liabilities of the Administrative Trustees.
No provision of this Trust Agreement shall be deemed to impose any
duty or obligation on any Administrative Trustee to perform any act or acts or
exercise any right, power, duty or obligation conferred or imposed on it, in
any jurisdiction in which it shall be illegal, or in which such Administrative
Trustee shall be unqualified or incompetent in accordance with applicable law,
to perform any such act or acts, or to exercise any such right, power, duty or
obligation. No permissive power or authority available to any Administrative
Trustee shall be construed to be a duty.
(b) All payments made by the Property Trustee or a Paying Agent in
respect of the Trust Securities shall be made only from the revenue and
proceeds from the Trust Property and only to the extent that there shall be
sufficient revenue or proceeds from the Trust Property to enable the Property
Trustee or a Paying Agent to make payments in accordance with the terms hereof.
Each Securityholder, by its acceptance of a Trust Security, agrees that it will
look solely to the revenue and proceeds from the Trust Property to the extent
legally available for distribution to it as herein provided and that the
Trustees are not personally liable to it for any amount distributable in
respect of any Trust Security or for any other liability in respect of any
Trust Security. This Section 8.1(b) does not limit the liability of the
Trustees expressly set forth elsewhere in this Trust Agreement or, in the case
of the Property Trustee, in the Trust Indenture Act.
(c) No provision of this Trust Agreement shall be construed to relieve
the Property Trustee from liability for its own negligent action, its own
negligent failure to act, or its own willful misconduct, except that:
(i) the Property Trustee shall not be liable for any
error of judgment made in good faith by an authorized officer of the
Property Trustee, unless it shall be proved that the Property Trustee
was negligent in ascertaining the pertinent facts;
(ii) the Property Trustee shall not be liable with respect
to any action taken or omitted to be taken by it in good faith in
accordance with the direction of the Holders of not less than a
majority in Liquidation Amount of the Trust Securities relating to the
time, method and place of conducting any proceeding for any remedy
available to the Property Trustee, or exercising any trust or power
conferred upon the Property Trustee under this Trust Agreement;
(iii) the Property Trustee's sole duty with respect to the
custody, safe keeping and physical preservation of the Debentures and
the Payment Account shall be to deal with such property in a similar
manner as the Property Trustee deals with similar property for its own
account, subject to the protections and limitations on liability
afforded to the Property Trustee under this Trust Agreement and the
Trust Indenture Act;
(iv) the Property Trustee shall not be liable for any
interest on any money received by it except as it may otherwise agree
in writing with the Depositor; and money held by the Property Trustee
need not be segregated from other funds held by it except in relation
to the Payment Account maintained by the Property Trustee pursuant to
Section 3.1 and except to the extent otherwise required by law; and
<PAGE> 36
30
(v) the Property Trustee shall not be responsible for
monitoring the compliance by the Administrative Trustees or the
Depositor with their respective duties under this Trust Agreement, nor
shall the Property Trustee be liable for the default or misconduct of
the Administrative Trustees or the Depositor.
Section VIII.2 Certain Notices.
Within five Business Days after the occurrence of any Event of Default
actually known to the Property Trustee, the Property Trustee shall transmit, in
the manner and to the extent provided in Section 10.10, notice of such Event of
Default to the Securityholders, the Administrative Trustees and the Depositor,
unless such Event of Default shall have been cured or waived.
Within five Business Days after the receipt of notice of the
Depositor's exercise of its right to defer the payment of interest on the
Debentures pursuant to the Indenture, the Administrative Trustee shall
transmit, in the manner and to the extent provided in Section 10.10, notice of
such exercise to the Securityholders and the Property Trustee, unless such
exercise shall have been revoked.
Section VIII.3 Certain Rights of Property Trustee.
Subject to the provisions of Section 8.1:
(a) the Property Trustee may rely and shall be protected in acting or
refraining from acting in good faith upon any resolution, Opinion of Counsel,
certificate, written representation of a Holder or transferee, certificate of
auditors or any other certificate, statement, instrument, opinion, report,
notice, request, consent, order, appraisal, bond, debenture, note, other
evidence of indebtedness or other paper or document believed by it to be
genuine and to have been signed or presented by the proper party or parties;
(b) if (i) in performing its duties under this Trust Agreement the
Property Trustee is required to decide between alternative courses of action or
(ii) in construing any of the provisions of this Trust Agreement the Property
Trustee finds the same ambiguous or inconsistent with any other provisions
contained herein or (iii) the Property Trustee is unsure of the application of
any provision of this Trust Agreement, then, except as to any matter as to
which the Capital Securityholders are entitled to vote under the terms of this
Trust Agreement, the Property Trustee shall deliver a notice to the Depositor
requesting written instructions of the Depositor as to the course of action to
be taken and the Property Trustee shall take such action, or refrain from
taking such action, as the Property Trustee shall be instructed in writing to
take, or to refrain from taking, by the Depositor; provided, however, that if
the Property Trustee does not receive such instructions of the Depositor within
ten Business Days after it has delivered such notice, or such reasonably
shorter period of time set forth in such notice (which to the extent
practicable shall not be less than two Business Days), it may, but shall be
under no duty to, take or refrain from taking such action not inconsistent with
this Trust Agreement as it shall deem advisable and in the best interests of
the Securityholders, in which event the Property Trustee shall have no
liability except for its own bad faith, negligence or willful misconduct;
(c) any direction or act of the Depositor or the Administrative
Trustees contemplated by this Trust Agreement shall be sufficiently evidenced
by an Officers' Certificate;
(d) whenever in the administration of this Trust Agreement, the
Property Trustee shall deem it desirable that a matter be established before
undertaking, suffering or omitting any action hereunder, the Property Trustee
(unless other evidence is herein specifically prescribed) may, in
<PAGE> 37
31
the absence of bad faith on its part, request and rely upon an Officers'
Certificate which, upon receipt of such request, shall be promptly delivered by
the Depositor or the Administrative Trustees;
(e) the Property Trustee shall have no duty to see to any recording,
filing or registration of any instrument (including any financing or
continuation statement or any filing under tax or securities laws) or any
rerecording, refiling or reregistration thereof;
(f) the Property Trustee may consult with counsel of its selection
(which counsel may be counsel to the Depositor or any of its Affiliates, and
may include any of its employees) and the advice of such counsel shall be full
and complete authorization and protection in respect of any action taken,
suffered or omitted by it hereunder in good faith and in reliance thereon and
in accordance with such advice, such counsel may be counsel to the Depositor or
any of its Affiliates, and may include any of its employees; the Property
Trustee shall have the right at any time to seek instructions concerning the
administration of this Trust Agreement from any court of competent
jurisdiction;
(g) the Property Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by this Trust Agreement at the request or
direction of any of the Securityholders pursuant to this Trust Agreement,
unless such Securityholders shall have offered to the Property Trustee
reasonable security or indemnity against the costs, expenses and liabilities
which might be incurred by it in compliance with such request or direction;
(h) the Property Trustee shall not be bound to make any investigation
into the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, consent, order, approval, bond,
debenture, note or other evidence of indebtedness or other paper or document,
unless requested in writing to do so by one or more Securityholders, but the
Property Trustee may make such further inquiry or investigation into such facts
or matters as it may see fit;
(i) the Property Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or through its
agents or attorneys, provided that the Property Trustee shall be responsible
for its own negligence or recklessness with respect to selection of any agent
or attorney appointed by it hereunder;
(j) whenever in the administration of this Trust Agreement the
Property Trustee shall deem it desirable to receive written instructions with
respect to enforcing any remedy or right or taking any other action hereunder
the Property Trustee (i) may request written instructions from the Holders of
the Trust Securities which written instructions may only be given by the
Holders of the same proportion in Liquidation Amount of the Trust Securities as
would be entitled to direct the Property Trustee under the terms of the Trust
Securities in respect of such remedy, right or action, (ii) may refrain from
enforcing such remedy or right or taking such other action until such written
instructions are received, and (iii) shall be protected in acting in accordance
with such written instructions; and
(k) except as otherwise expressly provided by this Trust Agreement,
the Property Trustee shall not be under any obligation to take any action that
is discretionary under the provisions of this Trust Agreement.
No provision of this Trust Agreement shall be deemed to impose any
duty or obligation on the Property Trustee to perform any act or acts or
exercise any right, power, duty or obligation conferred or imposed on it, in
any jurisdiction in which it shall be illegal, or in which the Property Trustee
shall be unqualified or incompetent in accordance with applicable law, to
perform any such act or acts, or to exercise any such right, power, duty or
obligation. No
<PAGE> 38
32
permissive power or authority available to the Property Trustee shall be
construed to be a duty.
Section VIII.4 Not Responsible for Recitals or Issuance of
Securities.
The recitals contained herein and in the Trust Securities Certificates
shall be taken as the statements of the Trust, and the Trustees do not assume
any responsibility for their correctness. The Trustees shall not be accountable
for the use or application by the Depositor of the proceeds of the Debentures.
Section VIII.5 May Hold Securities.
Any Trustee or any other agent of any Trustee or the Trust, in its
individual or any other capacity, may become the owner or pledgee of Trust
Securities and, subject to Sections 8.8 and 8.13, except as provided in the
definition of the term "Outstanding" in Article I, may otherwise deal with the
Trust with the same rights it would have if it were not a Trustee or such other
agent.
Section VIII.6 Compensation; Indemnity; Fees.
Pursuant to Section 10.6 of the Indenture, the Depositor, as borrower,
agrees:
(a) to pay to the Trustees from time to time such compensation as
shall be agreed in writing with the Depositor for all services rendered by them
hereunder (which compensation shall not be limited by any provision of law in
regard to the compensation of a trustee of an express trust);
(b) except as otherwise expressly provided herein, to reimburse the
Trustees upon request for all reasonable expenses, disbursements and advances
incurred or made by the Trustees in accordance with any provision of this Trust
Agreement (including the reasonable compensation and the expenses and
disbursements of its agents and counsel), except any such expense, disbursement
or advance as may be attributable to its negligence or bad faith; and
(c) to the fullest extent permitted by applicable law, to indemnify
and hold harmless (i) each Trustee, (ii) any Affiliate of any Trustee, (iii)
any officer, director, shareholder, employee, representative or agent of any
Trustee, and (iv) any employee or agent of the Trust or its Affiliates,
(referred to herein as an "Indemnified Person") from and against any and all
loss, damage, liability, tax, penalty, expense or claim of any kind or nature
whatsoever incurred by such Indemnified Person by reason of the creation,
operation or termination of the Trust or any act or omission performed or
omitted by such Indemnified Person in good faith on behalf of the Trust and in
a manner such Indemnified Person reasonably believed to be within the scope of
authority conferred on such Indemnified Person by this Trust Agreement, except
that no Indemnified Person shall be entitled to be indemnified in respect of
any loss, damage or claim incurred by such Indemnified Person by reason of
negligence, bad faith, or willful or intentional misconduct with respect to
such acts or omissions. When the Property Trustee incurs expenses or renders
services in connection with an Event of Default specified in Section 5.1(4) or
Section 5.1(5) of the Indenture, the expenses (including the reasonable charges
and expenses of its counsel) and the compensation for the services are intended
to constitute expenses of administration under any applicable federal or state
bankruptcy, insolvency or other similar law.
The provisions of this Section 8.6 shall survive the termination of
this Trust Agreement.
No Trustee may claim any lien or charge on any Trust Property as a
result of any amount due pursuant to this Section 8.6.
The Depositor and any Trustee (in the case of the Property Trustee,
subject to Section 8.8
<PAGE> 39
33
hereof) may engage in or possess an interest in other business ventures of any
nature or description, independently or with others, similar or dissimilar to
the business of the Trust, and the Trust and the Holders of Trust Securities
shall have no rights by virtue of this Trust Agreement in and to such
independent ventures or the income or profits derived therefrom, and the
pursuit of any such venture, even if competitive with the business of the
Trust, shall not be deemed wrongful or improper. Neither the Depositor, nor any
Trustee, shall be obligated to present any particular investment or other
opportunity to the Trust even if such opportunity is of a character that, if
presented to the Trust, could be taken by the Trust, and the Depositor or any
Trustee shall have the right to take for its own account (individually or as a
partner or fiduciary) or to recommend to others any such particular investment
or other opportunity. Any Trustee may engage or be interested in any financial
or other transaction with the Depositor or any Affiliate of the Depositor, or
may act as depository for, trustee or agent for, or act on any committee or
body of holders of, securities or other obligations of the Depositor or its
Affiliates.
Section VIII.7 Corporate Property Trustee Required; Eligibility of
Trustees.
(a) There shall at all times be a Property Trustee hereunder with
respect to the Trust Securities. The Property Trustee shall be a Person that is
eligible pursuant to the Trust Indenture Act to act as such and has a combined
capital and surplus of at least $50,000,000. If any such Person publishes
reports of condition at least annually, pursuant to law or to the requirements
of its supervising or examining authority, then for the purposes of this
Section, the combined capital and surplus of such Person shall be deemed to be
its combined capital and surplus as set forth in its most recent report of
condition so published. If at any time the Property Trustee with respect to the
Trust Securities shall cease to be eligible in accordance with the provisions
of this Section, it shall resign immediately in the manner and with the effect
hereinafter specified in this Article.
(b) There shall at all times be one or more Administrative Trustees
hereunder with respect to the Trust Securities. Each Administrative Trustee
shall be either a natural person who is at least 21 years of age or a legal
entity that shall act through one or more persons authorized to bind that
entity.
(c) There shall at all times be a Delaware Trustee with respect to the
Trust Securities. The Delaware Trustee shall either be (i) a natural person who
is at least 21 years of age and a resident of the State of Delaware or (ii) a
legal entity with its principal place of business in the State of Delaware and
that otherwise meets the requirements of applicable Delaware law that shall act
through one or more persons authorized to bind such entity.
Section VIII.8 Conflicting Interests.
If the Property Trustee has or shall acquire a conflicting interest
within the meaning of the Trust Indenture Act, the Property Trustee shall
either eliminate such interest or resign, to the extent and in the manner
provided by, and subject to the provisions of, the Trust Indenture Act and this
Trust Agreement.
Section VIII.9 Co-Trustees and Separate Trustee.
Unless an Event of Default shall have occurred and be continuing, at
any time or times, 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 Depositor and the Administrative
Trustees, by agreed action of the majority of such Trustees, shall have power
to appoint, and upon the written request of the Administrative Trustees, the
Depositor shall for such purpose join with the Administrative Trustees in the
execution, delivery, and performance of all instruments and agreements
necessary or proper to appoint, one or more Persons approved by the Property
Trustee either to act as co-trustee, jointly with the Property Trustee, of all
or any
<PAGE> 40
34
part of such Trust Property, or to the extent required by law 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 the capacity aforesaid, any property, title, right or power deemed
necessary or desirable, subject to the other provisions of this Section. If the
Depositor does not join in such appointment within 15 days after the receipt by
it of a request so to do, or in case a Debenture Event of Default has occurred
and is continuing, the Property Trustee alone shall have power to make such
appointment. Any co-trustee or separate trustee appointed pursuant to this
Section shall either be (i) a natural person who is at least 21 years of age
and a resident of the United States or (ii) a legal entity with its principal
place of business in the United States that shall act through one or more
persons authorized to bind such entity.
Should any written instrument from the Depositor be required by any
co-trustee or separate trustee so appointed for more fully confirming to such
co-trustee or separate trustee such property, title, right, or power, any and
all such instruments shall, on request, be executed, acknowledged and delivered
by the Depositor.
Every co-trustee or separate trustee shall, to the extent permitted by
law, but to such extent only, be appointed subject to the following terms,
namely:
(a) The Trust Securities shall be executed and delivered and all
rights, powers, duties, and obligations hereunder in respect of the custody of
securities, cash and other personal property held by, or required to be
deposited or pledged with, the Trustees specified hereunder shall be exercised
solely by such Trustees and not by such co-trustee or separate trustee.
(b) The rights, powers, duties, and obligations hereby conferred or
imposed upon the Property Trustee in respect of any property covered by such
appointment shall be conferred or imposed upon and exercised or performed by
the Property Trustee or by the Property Trustee and such co-trustee or separate
trustee jointly, as shall be provided in the instrument appointing such
co-trustee or separate trustee, except to the extent that under any law of any
jurisdiction in which any particular act is to be performed, the Property
Trustee shall be incompetent or unqualified to perform such act, in which event
such rights, powers, duties and obligations shall be exercised and performed by
such co-trustee or separate trustee.
(c) The Property Trustee at any time, by an instrument in writing
executed by it, with the written concurrence of the Depositor, may accept the
resignation of or remove any co-trustee or separate trustee appointed under
this Section, and, in case a Debenture Event of Default has occurred and is
continuing, the Property Trustee shall have power to accept the resignation of,
or remove, any such co-trustee or separate trustee without the concurrence of
the Depositor. Upon the written request of the Property Trustee, the Depositor
shall join with the Property Trustee in the execution, delivery and performance
of all instruments and agreements necessary or proper to effectuate such
resignation or removal. A successor to any co-trustee or separate trustee so
resigned or removed may be appointed in the manner provided in this Section.
(d) No co-trustee or separate trustee hereunder shall be personally
liable by reason of any act or omission of the Property Trustee or any other
trustee hereunder.
(e) The Property Trustee shall not be liable by reason of any act of a
co-trustee or separate trustee.
(f) Any Act of Holders delivered to the Property Trustee shall be
deemed to have been delivered to each such co-trustee and separate trustee.
<PAGE> 41
35
Section VIII.10 Resignation and Removal; Appointment of Successor.
No resignation or removal of any Trustee (the "Relevant Trustee") and
no appointment of a successor Trustee pursuant to this Article shall become
effective until the acceptance of appointment by the successor Trustee in
accordance with the applicable requirements of Section 8.11.
Subject to the immediately preceding paragraph, the Relevant Trustee
may resign at any time. The Property Trustee and the Delaware Trustee shall
give written notice thereof to the Securityholders and the Administrative
Trustee shall give notice thereof to the Depositor. If the instrument of
acceptance by the successor Trustee required by Section 8.11 shall not have
been delivered to the Relevant Trustee within 30 days after the giving of such
notice of resignation, the Relevant Trustee may petition, at the expense of the
Trust, any court of competent jurisdiction for the appointment of a successor
Relevant Trustee.
Unless a Debenture Event of Default shall have occurred and be
continuing, any Trustee may be removed at any time by Act of the Common
Securityholder. If a Debenture Event of Default shall have occurred and be
continuing, the Property Trustee or the Delaware Trustee, or both of them, may
be removed at such time by Act of the Holders of a majority in Liquidation
Amount of the Capital Securities, delivered to the Relevant Trustee (in its
individual capacity and on behalf of the Trust). An Administrative Trustee may
be removed by the Common Securityholder at any time. If the instrument of
acceptance by the successor Trustee required by Section 8.11 shall not have
been delivered to the Relevant Trustee within 30 days after such removal, the
Relevant Trustee may petition, at the expense of the Trust, any court of
competent jurisdiction for the appointment of a successor Relevant Trustee.
If any Trustee shall resign, be removed or become incapable of acting
as Trustee, or if a vacancy shall occur in the office of any Trustee for any
cause, at a time when no Debenture Event of Default shall have occurred and be
continuing, the Common Securityholder, by Act of the Common Securityholder
delivered to the retiring Trustee, shall promptly appoint a successor Trustee
or Trustees, and the retiring Trustee shall comply with the applicable
requirements of Section 8.11. If the Property Trustee or the Delaware Trustee
shall resign, be removed or become incapable of continuing to act as the
Property Trustee or the Delaware Trustee, as the case may be, at a time when a
Debenture Event of Default shall have occurred and be continuing, the Capital
Securityholders, by Act of the Securityholders of a majority in Liquidation
Amount of the Capital Securities then Outstanding delivered to the retiring
Relevant Trustee, shall promptly appoint a successor Relevant Trustee or
Trustees, and such successor Trustee shall comply with the applicable
requirements of Section 8.11. If an Administrative Trustee shall resign, be
removed or become incapable of acting as Administrative Trustee, at a time when
a Debenture Event of Default shall have occurred and be continuing, the Common
Securityholder by Act of the Common Securityholder delivered to the
Administrative Trustee shall promptly appoint a successor Administrative
Trustee or Administrative Trustees and such successor Administrative Trustee or
Trustees shall comply with the applicable requirements of Section 8.11. If no
successor Relevant Trustee shall have been so appointed by the Common
Securityholder or the Capital Securityholders and accepted appointment in the
manner required by Section 8.11, any Securityholder who has been a
Securityholder of Trust Securities for at least six months may, on behalf of
himself and all others similarly situated, petition any court of competent
jurisdiction for the appointment of a successor Relevant Trustee.
The Property Trustee shall give notice of each resignation and each
removal of a Trustee (other than an Administrative Trustee) and each
appointment of a successor Trustee (other than an Administrative Trustee) to
all Securityholders in the manner provided in Section 10.10 and shall give
notice to the Depositor. Each notice shall include the name of the successor
Relevant Trustee and the address of its Corporate Trust Office if it is the
Property Trustee.
<PAGE> 42
36
Notwithstanding the foregoing or any other provision of this Trust
Agreement, in the event any Administrative Trustee or a Delaware Trustee who is
a natural person dies or becomes, in the opinion of the Depositor, incompetent
or incapacitated, the vacancy created by such death, incompetence or incapacity
may be filled by (a) the unanimous act of the remaining Administrative Trustees
if there are at least two of them or (b) otherwise by the Depositor (with the
successor in each case being a Person who satisfies the eligibility requirement
for Administrative Trustees or Delaware Trustee, as the case may be, set forth
in Section 8.7).
Section VIII.11 Acceptance of Appointment by Successor.
In case of the appointment hereunder of a successor Relevant Trustee,
the retiring Relevant Trustee and each successor Relevant Trustee with respect
to the Trust Securities shall execute and deliver an amendment hereto wherein
each successor Relevant Trustee shall accept such appointment and which (a)
shall contain such provisions as shall be necessary or desirable to transfer
and confirm to, and to vest in, each successor Relevant Trustee all the rights,
powers, trusts and duties of the retiring Relevant Trustee with respect to the
Trust Securities and the Trust and (b) shall add to or change any of the
provisions of this Trust Agreement as shall be necessary to provide for or
facilitate the administration of the Trust by more than one Relevant Trustee,
it being understood that nothing herein or in such amendment shall constitute
such Relevant Trustees co-trustees and upon the execution and delivery of such
amendment the resignation or removal of the retiring Relevant Trustee shall
become effective to the extent provided therein and each such successor
Relevant Trustee, without any further act, deed or conveyance, shall become
vested with all the rights, powers, trusts and duties of the retiring Relevant
Trustee; but, on written request of the Trust or any successor Relevant Trustee
such retiring Relevant Trustee shall duly assign, transfer and deliver to such
successor Relevant Trustee all Trust Property, all proceeds thereof and money
held by such retiring Relevant Trustee hereunder with respect to the Trust
Securities and the Trust.
Upon written request of any such successor Relevant Trustee, the Trust
shall execute any and all instruments for more fully and certainly vesting in
and confirming to such successor Relevant Trustee all such rights, powers and
trusts referred to in the first or second preceding paragraph, as the case may
be.
No successor Relevant Trustee shall accept its appointment unless at
the time of such acceptance such successor Relevant Trustee shall be qualified
and eligible under this Article.
Section VIII.12 Merger, Conversion, Consolidation or Succession to
Business.
Any Person into which the Property Trustee or the Delaware Trustee 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 Relevant
Trustee shall be a party, or any Person succeeding to all or substantially all
the corporate trust business of such Relevant Trustee, shall be the successor
of such Relevant Trustee hereunder, provided such Person shall be otherwise
qualified and eligible under this Article, without the execution or filing of
any paper or any further act on the part of any of the parties hereto.
<PAGE> 43
37
Section VIII.13 Preferential Collection of Claims Against Depositor
or Trust.
In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, adjustment, composition or other
similar judicial proceeding relative to the Trust or any other obligor upon the
Trust Securities or the property of the Trust or of such other obligor or their
creditors, the Property Trustee (irrespective of whether any Distributions on
the Trust Securities shall then be due and payable as therein expressed or by
declaration or otherwise and irrespective of whether the Property Trustee shall
have made any demand on the Trust for the payment of any past due
Distributions) shall be entitled and empowered, to the fullest extent permitted
by law, by intervention in such proceeding or otherwise:
(a) to file and prove a claim for the whole amount of any
Distributions owing and unpaid in respect of the Trust Securities and to file
such other papers or documents as may be necessary or advisable in order to
have the claims of the Property Trustee (including any claim for the reasonable
compensation, expenses, disbursements and advances of the Property Trustee, its
agents and counsel) and of the Holders allowed in such judicial proceeding, and
(b) to collect and receive any moneys or other property payable or
deliverable on any such claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or
other similar official in any such judicial proceeding is hereby authorized by
each Holder to make such payments to the Property Trustee and, in the event the
Property Trustee shall consent to the making of such payments directly to the
Holders, to pay to the Property Trustee any amount due it for the reasonable
compensation, expenses, disbursements and advances of the Property Trustee, its
agents and counsel, and any other amounts due the Property Trustee.
Nothing herein contained shall be deemed to authorize the Property
Trustee to authorize or consent to or accept or adopt on behalf of any Holder
any plan of reorganization, arrangement adjustment or compensation affecting
the Trust Securities or the rights of any Holder thereof or to authorize the
Property Trustee to vote in respect of the claim of any Holder in any such
proceeding.
Section VIII.14 Reports by Property Trustee.
(a) The Property Trustee shall transmit to Securityholders such
reports concerning the Property Trustee and its actions under this Trust
Agreement as may be required pursuant to the Trust Indenture Act at the times
and in the manner provided pursuant thereto. If required by Section 313(a) of
the Trust Indenture Act, the Property Trustee shall, within sixty days after
each May 15 following the date of this Trust Agreement deliver to
Securityholders a brief report, dated as of such May 15, which complies with
the provisions of such Section 313(a).
(b) A copy of each such report shall, at the time of such transmission
to Holders, be filed by the Property Trustee with each national stock exchange,
the Nasdaq National Market or such other interdealer quotation system or
self-regulatory organization upon which the Trust Securities are listed or
traded, if any, with the Commission and with the Depositor. The Depositor will
promptly notify the Property Trustee of any such listing or trading.
Section VIII.15 Reports to the Property Trustee.
The Depositor and the Administrative Trustees on behalf of the Trust
shall provide to the Property Trustee such documents, reports and information
as required by Section 314 of the Trust Indenture Act (if any) and the
compliance certificate required by Section 314(a) of the
<PAGE> 44
38
Trust Indenture Act in the form, in the manner and at the times required by
Section 314 of the Trust Indenture Act. Delivery of such reports, information
and documents to the Property Trustee is for informational purposes only and
the Property Trustee's receipt of such shall not constitute constructive notice
of any information contained therein or determinable from information contained
therein, including the Trust's compliance with any of its covenants hereunder
(as to which the Property Trustee is entitled to rely exclusively on Officers'
Certificates).
Section VIII.16 Evidence of Compliance with Conditions Precedent.
Each of the Depositor and the Administrative Trustees on behalf of the
Trust shall provide to the Property Trustee such evidence of compliance with
any conditions precedent, if any, provided for in this Trust Agreement that
relate to any of the matters set forth in Section 314 (c) of the Trust
Indenture Act. Any certificate or opinion required to be given by an officer
pursuant to Section 314(c)(1) of the Trust Indenture Act shall be given in the
form of an Officers' Certificate.
Section VIII.17 Number of Trustees.
(a) The number of Trustees shall be four, provided that the Holder of
all of the Common Securities by written instrument may increase or decrease the
number of Administrative Trustees. The Property Trustee and the Delaware
Trustee may be the same Person.
(b) If a Trustee ceases to hold office for any reason and the number
of Administrative Trustees is not reduced pursuant to Section 8.17(a), or if
the number of Trustees is increased pursuant to Section 8.17(a), a vacancy
shall occur. The vacancy shall be filled with a Trustee appointed in accordance
with Section 8.10.
(c) The death, resignation, retirement, removal, bankruptcy,
incompetence or incapacity to perform the duties of a Trustee shall not operate
to dissolve, terminate or annul the Trust. Whenever a vacancy in the number of
Administrative Trustees shall occur, until such vacancy is filled by the
appointment of an Administrative Trustee in accordance with Section 8.10, the
Administrative Trustees in office, regardless of their number (and
notwithstanding any other provision of this Agreement), shall have all the
powers granted to the Administrative Trustees and shall discharge all the
duties imposed upon the Administrative Trustees by this Trust Agreement.
Section VIII.18 Delegation of Power.
(a) Any Administrative Trustee may, by power of attorney consistent
with applicable law, delegate to any other natural person over the age of 21
his or her power for the purpose of executing any documents contemplated in
Section 2.7(a), including any registration statement or amendment thereto filed
with the Commission, or making any other governmental filing; and
(b) The Administrative Trustees shall have power to delegate from time
to time to such of their number or to the Depositor the doing of such things
and the execution of such instruments either in the name of the Trust or the
names of the Administrative Trustees or otherwise as the Administrative
Trustees may deem expedient, to the extent such delegation is not prohibited by
applicable law or contrary to the provisions of this Trust Agreement, as set
forth herein.
<PAGE> 45
39
ARTICLE IX
Termination, Liquidation and Merger
Section IX.1 Termination Upon Expiration Date.
Unless earlier terminated, the Trust shall automatically terminate on
December 31, 2051 (the "Expiration Date"), following the distribution of the
Trust Property in accordance with Section 9.4.
Section IX.2 Early Termination.
The first to occur of any of the following events is an "Early
Termination Event":
(a) the occurrence of a Bankruptcy Event in respect of, or the
dissolution or liquidation of, the Depositor or the Holder of the Common
Securities;
(b) the written direction to the Property Trustee from the Depositor
at any time to terminate the Trust and, after satisfaction of liabilities to
creditors of the Trust as provided by applicable law, distribute Debentures to
Securityholders in exchange for the Capital Securities (which direction is
optional and wholly within the discretion of the Depositor);
(c) the redemption of all of the Capital Securities in connection with
the redemption of all of the Debentures; and
(d) the entry of an order for dissolution of the Trust by a court of
competent jurisdiction.
Section IX.3 Termination.
The respective obligations and responsibilities of the Trustees and
the Trust created and continued hereby shall terminate upon the latest to occur
of the following: (a) the distribution by the Property Trustee to
Securityholders upon the liquidation of the Trust pursuant to Section 9.4, or
upon the redemption of all of the Trust Securities pursuant to Section 4.2, of
all amounts required to be distributed hereunder upon the final payment of the
Trust Securities; (b) the payment of any expenses owed by the Trust; and (c)
the discharge of all administrative duties of the Administrative Trustees,
including the performance of any tax reporting obligations with respect to the
Trust or the Securityholders.
Section IX.4 Liquidation.
(a) If an Early Termination Event specified in clause (a), (b) or (d)
of Section 9.2 occurs or upon the Expiration Date, the Trust shall be
liquidated by the Trustees as expeditiously as the Trustees determine to be
possible by distributing, after satisfaction or the making of reasonable
provisions for the payment of liabilities to creditors of the Trust as provided
by applicable law, to each Securityholder a Like Amount of Debentures, subject
to Section 9.4(d). Notice of liquidation shall be given by the Property Trustee
by first-class mail, postage prepaid mailed not later than 30 nor more than 60
days prior to the Liquidation Date to each Holder of Trust Securities at such
Holder's address appearing in the Securities Register. All notices of
liquidation shall:
(i) state the CUSIP Number of the Trust Securities;
(ii) state the Liquidation Date;
<PAGE> 46
40
(iii) state that from and after the Liquidation Date, the
Trust Securities will no longer be deemed to be Outstanding and any
Trust Securities Certificates not surrendered for exchange will be
deemed to represent a Like Amount of Debentures; and
(iv) provide such information with respect to the
mechanics by which Holders may exchange Trust Securities Certificates
for Debentures, or if Section 9.4(d) applies receive a Liquidation
Distribution, as the Administrative Trustees or the Property Trustee
shall deem appropriate.
(b) Except where Section 9.2(c) or 9.4(d) applies, in order to effect
the liquidation of the Trust and distribution of the Debentures to
Securityholders, the Property Trustee shall establish a record date for such
distribution (which shall be not more than 45 days prior to the Liquidation
Date) and, either itself acting as exchange agent or through the appointment of
a separate exchange agent, shall establish such procedures as it shall deem
appropriate to effect the distribution of Debentures in exchange for the
Outstanding Trust Securities Certificates.
(c) Except where Section 9.2(c) or 9.4(d) applies, after the
Liquidation Date, (i) the Trust Securities will no longer be deemed to be
Outstanding, (ii) certificates representing a Like Amount of Debentures will be
issued to Holders of Trust Securities Certificates, upon surrender of such
certificates to the Administrative Trustees or their agent for exchange, (iii)
the Depositor shall use its best efforts to have the Debentures listed on the
New York Stock Exchange or on such other exchange, interdealer quotation system
or self-regulatory organization as the Capital Securities are then listed or
traded, (iv) any Trust Securities Certificates not so surrendered for exchange
will be deemed to represent a Like Amount of Debentures, accruing interest at
the rate provided for in the Debentures from the last Distribution Date on
which a Distribution was made on such Trust Securities Certificates until such
certificates are so surrendered (and until such certificates are so
surrendered, no payments of interest or principal will be made to Holders of
Trust Securities Certificates with respect to such Debentures) and (v) all
rights of Securityholders holding Trust Securities will cease, except the right
of such Securityholders to receive Debentures upon surrender of Trust
Securities Certificates.
(d) In the event that, notwithstanding the other provisions of this
Section 9.4, whether because of an order for dissolution entered by a court of
competent jurisdiction or otherwise, distribution of the Debentures in the
manner provided herein is determined by the Property Trustee not to be
practical, the Trust Property shall be liquidated, and the Trust shall be
dissolved, wound-up or terminated, by the Property Trustee. In such event, on
the date of the dissolution, winding-up or other termination of the Trust,
Securityholders will be entitled to receive out of the assets of the Trust
available for distribution to Securityholders, after satisfaction of
liabilities to creditors of the Trust as provided by applicable law, an amount
equal to the Liquidation Amount per Trust Security plus accumulated and unpaid
Distributions thereon to the date of payment (such amount being the
"Liquidation Distribution"). If, upon any such dissolution, winding up or
termination, the Liquidation Distribution can be paid only in part because the
Trust has insufficient assets available to pay in full the aggregate
Liquidation Distribution, then, subject to the next succeeding sentence, the
amounts payable by the Trust on the Trust Securities shall be paid on a pro
rata basis (based upon Liquidation Amounts). The Holder of the Common
Securities will be entitled to receive Liquidation Distributions upon any such
dissolution, winding-up or termination pro rata (determined as aforesaid) with
Holders of Capital Securities, except that, if a Debenture Event of Default has
occurred and is continuing, the Capital Securities shall have a priority over
the Common Securities.
Section IX.5 Mergers, Consolidations, Amalgamations or Replacements
of the Trust.
The Trust may not merge with or into, consolidate, amalgamate, or be
replaced by, or
<PAGE> 47
41
convey, transfer or lease its properties and assets substantially as an
entirety to any corporation or other Person, except pursuant to this Article
IX. At the request of the Depositor, with the consent of the Administrative
Trustees and without the consent of the Holders of the Capital Securities, the
Property Trustee or the Delaware Trustee, the Trust may 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 the Trust with respect to the
Capital Securities or (b) substitutes for the Capital Securities other
securities having substantially the same terms as the Capital Securities (the
"Successor Securities") so long as the Successor Securities rank the same as
the Capital Securities rank in priority with respect to distributions and
payments upon liquidation, redemption and otherwise, (ii) the Depositor
expressly appoints a trustee of such successor entity possessing the same
powers and duties as the Property Trustee as the holder of the Debentures,
(iii) the Successor Securities are listed or traded, or any Successor
Securities will be listed upon notification of issuance, on any national
securities exchange or other organization on which the Capital Securities are
then listed or traded, if any, (iv) such merger, consolidation, amalgamation,
replacement, conveyance, transfer or lease does not cause the Capital
Securities (including any Successor Securities) to be downgraded by any
nationally recognized statistical rating organization, (v) such merger,
consolidation, amalgamation, replacement, conveyance, transfer or lease does
not adversely affect the rights, preferences and privileges of the holders of
the Capital Securities (including any Successor Securities) in any material
respect, (vi) such successor entity has a purpose identical to that of the
Trust, (vii) prior to such merger, consolidation, amalgamation, replacement,
conveyance, transfer or lease, the Depositor has received an Opinion of Counsel
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 Capital Securities (including any
Successor Securities) in any material respect, and (b) following such merger,
consolidation, amalgamation, replacement, conveyance, transfer or lease,
neither the Trust nor such successor entity will be required to register as an
investment company under the 1940 Act and (viii) the Depositor 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, the Trust shall not,
except with the consent of Holders of 100% in Liquidation Amount of the Capital
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 Person or permit any other Person to consolidate,
amalgamate, merge with or into, or replace it if such consolidation,
amalgamation, merger, replacement, conveyance, transfer or lease would cause
the Trust or the successor entity to be classified as other than a grantor
trust for United States federal income tax purposes.
ARTICLE X
Miscellaneous Provisions
Section X.1 Limitation of Rights of Securityholders.
The death, incapacity, liquidation, dissolution, termination or
bankruptcy of any Person having an interest, beneficial or otherwise, in Trust
Securities shall not operate to terminate this Trust Agreement, nor entitle the
legal representatives or heirs of such Person or any Securityholder for such
Person, to claim an accounting, take any action or bring any proceeding in any
court for a partition or winding up of the arrangements contemplated hereby,
nor otherwise affect the rights, obligations and liabilities of the parties
hereto or any of them.
Section X.2 Liability of the Common Securityholder.
<PAGE> 48
42
The Holder of the Common Securities shall be liable for all of the
debts and obligations of the Trust (other than with respect to the Trust
Securities) to the extent not satisfied out of the Trust's assets.
Section X.3 Amendment.
(a) This Trust Agreement may be amended from time to time by the
Property Trustee, the Delaware Trustee, the Administrative Trustees and the
Depositor, without the consent of any Securityholders, (i) to cure any
ambiguity, correct or supplement any provision herein which may be inconsistent
with any other provision herein, or to make any other provisions with respect
to matters or questions arising under this Trust Agreement, which shall not be
inconsistent with the other provisions of this Trust Agreement, or (ii) to
modify, eliminate or add to any provisions of this Trust Agreement to such
extent as shall be necessary to ensure that the Trust 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 Trust will not be
required to register as an investment company under the 1940 Act; provided,
however, that in the case of clause (i) or clause (ii), such action shall not
adversely affect in any material respect the interests of any Securityholder,
and any amendments of this Trust Agreement shall become effective when notice
thereof is given to the Securityholders.
(b) Except as provided in Section 10.3(c) hereof, any provision of
this Trust Agreement may be amended by the Trustees and the Depositor with (i)
the consent of Trust Securityholders representing not less than a majority
(based upon Liquidation Amounts) of the Trust Securities then Outstanding and
(ii) receipt by the Trustees of an Opinion of Counsel to the effect that such
amendment or the exercise of any power granted to the Trustees in accordance
with such amendment will not affect the Trust's status as a grantor trust for
United States federal income tax purposes or the Trust's exemption from status
of an investment company under the 1940 Act.
(c) In addition to and notwithstanding any other provision in this
Trust Agreement, without the consent of each affected Securityholder (such
consent being obtained in accordance with Section 6.3 or 6.6 hereof), this
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 Securityholder to institute
suit for the enforcement of any such payment on or after such date;
notwithstanding any other provision herein, without the unanimous consent of
the Securityholders (such consent being obtained in accordance with Section 6.3
or 6.6 hereof), this paragraph (c) of this Section 10.3 may not be amended.
(d) Notwithstanding any other provisions of this Trust Agreement, no
Trustee shall enter into or consent to any amendment to this Trust Agreement
which would cause the Trust to fail or cease to qualify for the exemption from
status of an investment company under the 1940 Act or fail or cease to be
classified as a grantor trust for United States federal income tax purposes.
(e) Notwithstanding anything in this Trust Agreement to the contrary,
without the consent of the Depositor, this Trust Agreement may not be amended
in a manner which imposes any additional obligation on the Depositor.
(f) In the event that any amendment to this Trust Agreement is made,
the Administrative Trustees shall promptly provide to the Depositor a copy of
such amendment.
(g) Neither the Property Trustee nor the Delaware Trustee shall be
required to enter into any amendment to this Trust Agreement which affects its
own rights, duties or immunities under this Trust Agreement. The Property
Trustee shall be entitled to receive an Opinion of Counsel and an Officers'
Certificate stating that any amendment to this Trust Agreement is in compliance
<PAGE> 49
43
with this Trust Agreement.
Section X.4 Consolidation, Merger, Conveyance, Transfer or Lease.
The Depositor shall not consolidate with or merge into any other
Person or convey, transfer or lease its properties and assets substantially as
an entirety to any Person, and no Person shall consolidate with or merge into
the Depositor or convey, transfer or lease its properties and assets
substantially as an entirety to the Depositor, unless it has complied with the
terms of Section 8.1 of the Indenture.
Section X.5 Separability.
In case any provision in this Trust Agreement or in the Trust
Securities Certificates shall be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.
<PAGE> 50
44
Section X.6 Governing Law.
THIS TRUST AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF EACH OF THE
SECURITYHOLDERS, THE TRUST AND THE TRUSTEES WITH RESPECT TO THIS TRUST
AGREEMENT AND THE TRUST SECURITIES SHALL BE CONSTRUED IN ACCORDANCE WITH AND
GOVERNED BY THE LAWS OF THE STATE OF DELAWARE (WITHOUT REGARD TO CONFLICT OF
LAWS PRINCIPLES).
Section X.7 Payments Due on Non-Business Day.
If the date fixed for any payment on any Trust Security shall be a day
that is not a Business Day, then such payment need not be made on such date but
may be made on the next succeeding day that is a Business Day (except as
otherwise provided in Sections 4.1(a) and 4.2(d)), with the same force and
effect as though made on the date fixed for such payment, and no interest shall
accrue thereon for the period after such date.
Section X.8 Successors.
This Trust Agreement shall be binding upon and shall inure to the
benefit of any successor to the Depositor, the Trust or the Relevant Trustee,
including any successor by operation of law. Except in connection with a
consolidation, merger or sale involving the Depositor that is permitted under
Article Eight of the Indenture and pursuant to which the assignee agrees in
writing to perform the Depositor's obligations hereunder, the Depositor shall
not assign its obligations hereunder.
Section X.9 Headings.
The Article and Section headings are for convenience only and shall
not affect the construction of this Trust Agreement.
Section X.10 Reports, Notices and Demands.
Any report, notice, demand or other communication which by any
provision of this Trust Agreement is required or permitted to be given or
served to or upon any Securityholder or the Depositor may be given or served in
writing by deposit thereof, first-class postage prepaid, in the United States
mail, hand delivery or facsimile transmission, in each case, addressed, (a) in
the case of a Capital Securityholder, to such Capital Securityholder as such
Securityholder's name and address may appear on the Securities Register; and
(b) in the case of the Common Securityholder or the Depositor, to MBNA
Corporation, Wilmington, Delaware 19884, Attention: Vernon H.C. Wright,
facsimile no.: (302) 456-8348. Such notice, demand or other communication to or
upon a Securityholder shall be deemed to have been sufficiently given or made,
for all purposes, upon hand delivery, mailing or transmission.
Any notice, demand or other communication which by any provision of
this Trust Agreement is required or permitted to be given or served to or upon
the Trust, the Property Trustee, the Delaware Trustee or the Administrative
Trustees shall be given in writing addressed (until another address is
published by the Trust) as follows: (a) with respect to the Property Trustee to
The Bank of New York, 101 Barclay Street, New York, New York 10286, Attention:
Corporate Trust Administration; (b) with respect to the Delaware Trustee, to
The Bank of New York (Delaware), White Clay Center, Route 273, Newark,
Delaware, with a copy to the Property Trustee at the address set forth in
Clause (a); and (c) with respect to the Administrative Trustees, to them at the
address above for notices to the Depositor, marked "Attention Administrative
<PAGE> 51
45
Trustees of MBNA Capital A." Such notice, demand or other communication to or
upon the Trust or the Property Trustee shall be deemed to have been
sufficiently given or made only upon actual receipt of the writing by the Trust
or the Property Trustee.
Section X.11 Agreement Not to Petition.
Each of the Trustees and the Depositor agree for the benefit of the
Securityholders that, until at least one year and one day after the Trust has
been terminated in accordance with Article IX, they shall not file, or join in
the filing of, a petition against the Trust under any bankruptcy, insolvency,
reorganization or other similar law (including, without limitation, the United
States Bankruptcy Code) (collectively, "Bankruptcy Laws") or otherwise join in
the commencement of any proceeding against the Trust under any Bankruptcy Law.
In the event the Depositor takes action in violation of this Section 10.11, the
Property Trustee agrees, for the benefit of Securityholders, that at the
expense of the Depositor, it shall file an answer with the bankruptcy court or
otherwise properly contest the filing of such petition by the Depositor against
the Trust or the commencement of such action and raise the defense that the
Depositor has agreed in writing not to take such action and should be stopped
and precluded therefrom and such other defenses, if any, as counsel for the
Trustee or the Trust may assert. The provisions of this Section 10.11 shall
survive the termination of this Trust Agreement.
Section X.12 Trust Indenture Act; Conflict with Trust Indenture Act.
(a) This Trust Agreement is subject to the provisions of the Trust
Indenture Act that are required or deemed to be part of this Trust Agreement
and shall, to the extent applicable, be governed by such provisions.
(b) The Property Trustee shall be the only Trustee which is a trustee
for the purposes of the Trust Indenture Act.
(c) If any provision hereof limits, qualifies or conflicts with
another provision hereof which is required or deemed to be included in this
Trust Agreement by any of the provisions of the Trust Indenture Act, such
required or deemed provision shall control. If any provision of this Trust
Agreement modifies or excludes any provision of the Trust Indenture Act which
may be so modified or excluded, the latter provision shall be deemed to apply
to this Trust Agreement as so modified or excluded, as the case may be.
(d) The application of the Trust Indenture Act to this Trust Agreement
shall not affect the nature of the Trust Securities as equity securities
representing undivided beneficial interests in the assets of the Trust.
Section X.13 Acceptance of Terms of Trust Agreement, Guarantee and
Indenture.
THE RECEIPT AND ACCEPTANCE OF A TRUST SECURITY OR ANY INTEREST THEREIN
BY OR ON BEHALF OF A SECURITYHOLDER OR ANY BENEFICIAL OWNER, WITHOUT ANY
SIGNATURE OR FURTHER MANIFESTATION OF ASSENT, SHALL CONSTITUTE THE
UNCONDITIONAL ACCEPTANCE BY THE SECURITYHOLDER AND ALL OTHERS HAVING A
BENEFICIAL INTEREST IN SUCH TRUST SECURITY OF ALL THE TERMS AND PROVISIONS OF
THIS TRUST AGREEMENT AND AGREEMENT TO THE SUBORDINATION PROVISIONS AND OTHER
TERMS OF THE GUARANTEE AND THE INDENTURE, AND SHALL CONSTITUTE THE AGREEMENT OF
THE TRUST, SUCH SECURITYHOLDER AND SUCH OTHERS THAT THE TERMS AND PROVISIONS OF
THIS TRUST AGREEMENT SHALL BE BINDING, OPERATIVE AND EFFECTIVE AS BETWEEN THE
TRUST AND SUCH SECURITYHOLDER AND SUCH OTHERS.
<PAGE> 52
46
Section X.14 Counterparts.
This Trust Agreement may contain more than one counterpart of the
signature page and this Trust Agreement may be executed by the affixing of the
signature of each of the Trustees of one of such counterpart signature pages.
All of such counterpart signature pages shall be read as though one, and they
shall have the same force and effect as though all of the signers had signed a
single signature page.
MBNA Corporation
By:
-----------------------------------------
Name:
Title:
The Bank of New York,
as Property Trustee
By:
-----------------------------------------
Name:
Title:
The Bank of New York (Delaware),
as Delaware Trustee
By:
-----------------------------------------
Name:
Title:
--------------------------------------------
M. Scot Kaufman
as Administrative Trustee
--------------------------------------------
John W. Scheflen
as Administrative Trustee
<PAGE> 53
EXHIBIT A
<PAGE> 54
EXHIBIT B
<PAGE> 55
EXHIBIT C
<PAGE> 56
EXHIBIT D
<PAGE> 1
EXHIBIT 4.7
- - --------------------------------------------------------------------------------
GUARANTEE AGREEMENT
BETWEEN
MBNA CORPORATION
(AS GUARANTOR)
AND
THE BANK OF NEW YORK
(AS TRUSTEE)
DATED AS OF
DECEMBER 18, 1996
- - --------------------------------------------------------------------------------
<PAGE> 2
CROSS-REFERENCE TABLE*
<TABLE>
<CAPTION>
Section of
Trust Indenture Act Section of
of 1939, as amended Guarantee Agreement
- - ------------------- -------------------
<S> <C>
310(a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1(a)
310(b). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1(c), 2.8
310(c). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Inapplicable
311(a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2(b)
311(b). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2(b)
311(c). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Inapplicable
312(a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2(a)
312(b). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2(b)
313. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.3
314(a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.4
314(b). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Inapplicable
314(c). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.5
314(d). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Inapplicable
314(e). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.1, 2.5, 3.2
314(f). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1, 3.2
315(a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1(d)
315(b). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.7
315(c). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1
315(d). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1(d)
316(a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.1, 2.6, 5.4
316(b). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.3
316(c). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.2
317(a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Inapplicable
317(b). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Inapplicable
318(a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1(b)
318(b). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1
318(c). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1(a)
</TABLE>
- - ----------------
* This Cross-Reference Table does not constitute part of the Guarantee
Agreement and shall not affect the interpretation of any of its terms
or provisions.
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II. TRUST INDENTURE ACT . . . . . . . . . . . . . . . . . . . . . . 4
Section 2.1. Trust Indenture Act; Application . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 2.2. List of Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 2.3. Reports by the Guarantee Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 2.4. Periodic Reports to the Guarantee Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 2.5. Evidence of Compliance with Conditions Precedent . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 2.6. Events of Default; Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 2.7. Event of Default; Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 2.8. Conflicting Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE III. POWERS, DUTIES AND RIGHTS
OF THE GUARANTEE TRUSTEE . . . . . . . . . . . . . . . . . . . . . 6
Section 3.1. Powers and Duties of the Guarantee Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 3.2. Certain Rights of Guarantee Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 3.3. Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE IV. GUARANTEE TRUSTEE . . . . . . . . . . . . . . . . . . . . . . . 9
Section 4.1. Guarantee Trustee: Eligibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 4.2. Appointment, Removal and Resignation of the Guarantee Trustee . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE V. GUARANTEE . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 5.1. Guarantee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 5.2. Waiver of Notice and Demand . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 5.3. Obligations Not Affected . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 5.4. Rights of Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 5.5. Guarantee of Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 5.6. Subrogation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 5.7. Independent Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE VI. COVENANTS AND SUBORDINATION . . . . . . . . . . . . . . . . . . . . 12
Section 6.1. Subordination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 6.2. Pari Passu Guarantees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE VII. TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . 13
</TABLE>
<PAGE> 4
<TABLE>
<S> <C> <C>
Section 7.1. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE VIII. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . 13
Section 8.1. Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 8.2. Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 8.3. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 8.4. Consolidation, Merger, Conveyance, Transfer or Lease . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 8.5. Benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 8.6. Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 8.7. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
</TABLE>
- ii -
<PAGE> 5
GUARANTEE AGREEMENT
This GUARANTEE AGREEMENT, dated as of December 18, 1996, is executed
and delivered by MBNA CORPORATION, a Maryland corporation (the "Guarantor")
having its principal office at Wilmington, Delaware 19884, and THE BANK OF NEW
YORK, a New York banking corporation, as trustee (the "Guarantee Trustee"), for
the benefit of the Holders (as defined herein) from time to time of the Capital
Securities and Common Securities (each as defined herein and together, the
"Securities") of MBNA Capital A, a Delaware statutory business trust (the
"Issuer").
WHEREAS, pursuant to an Amended and Restated Trust Agreement, dated as
of December 18, 1996 (the "Trust Agreement"), among the Guarantor, as
Depositor, the Property Trustee and the Delaware Trustee named therein, the
Administrative Trustees named therein and the Holders from time to time of
undivided beneficial interests in the assets of the Issuer, the Issuer is
issuing $250,000,000 aggregate Liquidation Amount (as defined in the Trust
Agreement) of its 8.278% Capital Securities, Series A, Liquidation Amount
$1,000 per preferred security) (the "Capital Securities") representing
preferred undivided beneficial interests in the assets of the Issuer and having
the terms set forth in the Trust Agreement;
WHEREAS, the Capital Securities will be issued by the Issuer and the
proceeds thereof, together with the proceeds from the issuance of the Issuer's
Common Securities (as defined herein), will be used to purchase the Debentures
(as defined in the Trust Agreement) of the Guarantor which will be deposited
with The Bank of New York, as Property Trustee under the Trust Agreement, as
trust assets; and
WHEREAS, as incentive for the Holders to purchase Securities the
Guarantor desires irrevocably and unconditionally to agree, to the extent set
forth herein, to pay to the Holders of the Securities the Guarantee Payments
(as defined herein) and to make certain other payments on the terms and
conditions set forth herein.
NOW, THEREFORE, in consideration of the purchase by each Holder of
Securities, which purchase the Guarantor hereby agrees shall benefit the
Guarantor, the Guarantor executes and delivers this Guarantee Agreement for the
benefit of the Holders from time to time of the Securities.
ARTICLE I. DEFINITIONS
Section 1.1. Definitions.
As used in this Guarantee Agreement, the terms set forth below shall,
unless the context otherwise requires, have the following meanings. Capitalized
or otherwise defined terms used but not otherwise defined herein shall have the
meanings assigned to such terms in the Trust Agreement as in effect on the date
hereof.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person; provided, however, that an Affiliate of the
Guarantor shall not be deemed to be an Affiliate of the Issuer. For the
purposes of this definition, "control" when used with respect to any specified
Person means the power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership of voting securities, by
contract or otherwise; and the terms "controlling" and "controlled" have
meanings correlative to the foregoing.
<PAGE> 6
2
"Board of Directors" means either the board of directors of the
Guarantor or any committee of that board duly authorized to act hereunder.
"Common Securities" means the securities representing common undivided
beneficial interests in the assets of the Issuer.
"Event of Default" means a default by the Guarantor on any of its
payment or other obligations under this Guarantee Agreement; provided, however,
that, except with respect to a default in payment of any Guarantee Payments,
the Guarantor shall have received notice of default and shall not have cured
such default within 90 days after receipt of such notice.
"Guarantee Payments" means the following payments or distributions,
without duplication, with respect to the Securities, to the extent not paid or
made by or on behalf of the Issuer: (i) any accumulated and unpaid
Distributions (as defined in the Trust Agreement) required to be paid on the
Securities, to the extent the Issuer shall have funds on hand available
therefor at such time, (ii) the redemption price, including all accrued and
unpaid Distributions to the date of redemption (the"Redemption Price"), with
respect to any Securities called for redemption by the Issuer, to the extent
the Issuer shall have funds on hand available therefor at such time, and (iii)
upon a voluntary or involuntary termination, winding up or liquidation of the
Issuer, unless Debentures are distributed to the Holders, the lesser of (a) the
aggregate of the Liquidation Amount plus accrued and unpaid Distributions to
the date of payment and (b) the amount of assets of the Issuer remaining
available for distribution to Holders in liquidation of the Issuer after
satisfaction of liabilities to creditors of the Issuer as required by
applicable law (in either case, the "Liquidation Distribution").
"Guarantee Trustee" means The Bank of New York, until a Successor
Guarantee Trustee has been appointed and has accepted such appointment pursuant
to the terms of this Guarantee Agreement, and thereafter means each such
Successor Guarantee Trustee.
"Holder" means any holder, as registered on the books and records of
the Issuer, of any Securities; provided, however, that in determining whether
the holders of the requisite percentage of Securities have given any request,
notice, consent or waiver hereunder, "Holder" shall not include the Guarantor,
the Guarantee Trustee, or any Affiliate of the Guarantor or the Guarantee
Trustee.
"Indenture" means the Junior Subordinated Indenture dated as of
December 18, 1996, as supplemented and amended between the Guarantor and The
Bank of New York, as trustee.
"List of Holders" has the meaning specified in Section 2.2(a).
"Majority in aggregate Liquidation Amount of the Securities" means,
except as provided by the Trust Indenture Act, a vote by the Holder(s), voting
separately as a class, of more than 50% of the aggregate Liquidation Amount of
all then outstanding Securities issued by the Issuer.
"Officers' Certificate" means, with respect to any Person, a
certificate signed by the Chairman or a Vice Chairman of the Board of Directors
of such Person or the President or a Vice President of such Person, and by the
Treasurer, an Assistant Treasurer, the Secretary or an Assistant Secretary of
such Person, and delivered to the Guarantee Trustee. Any Officers' Certificate
delivered with respect to compliance with a condition or covenant provided for
in this Guarantee Agreement shall include:
(a) a statement that each officer signing the Officers' Certificate
has read the covenant or
<PAGE> 7
3
condition and the definitions relating thereto;
(b) a brief statement of the nature and scope of the examination or
investigation undertaken by each officer in rendering the Officers'
Certificate;
(c) a statement that each officer has made such examination or
investigation as, in such officer's opinion, is necessary to enable such
officer to express an informed opinion as to whether or not such covenant or
condition has been complied with; and
(d) a statement as to whether, in the opinion of each officer, such
condition or covenant has been complied with.
"Person" means a legal person, including any individual, corporation,
estate, partnership, joint venture, association, joint stock company, limited
liability company, trust, unincorporated association, or government or any
agency or political subdivision thereof, or any other entity of whatever
nature.
"Responsible Officer" when used with respect to the Guarantee Trustee
means any officer of the Guarantee Trustee assigned by the Guarantee Trustee
from time to time to administer its corporate trust matters.
"Successor Guarantee Trustee" means a successor Guarantee Trustee
possessing the qualifications to act as Guarantee Trustee under Section 4.1.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as
amended.
ARTICLE II. TRUST INDENTURE ACT
Section 2.1. Trust Indenture Act; Application.
(a) This Guarantee Agreement is subject to the provisions of the Trust
Indenture Act that are required to be part of this Guarantee Agreement and
shall, to the extent applicable, be governed by such provisions.
(b) If and to the extent that any provision of this Guarantee
Agreement limits, qualifies or conflicts with the duties imposed by Sections
310 to 317, inclusive, of the Trust Indenture Act, such imposed duties shall
control.
Section 2.2. List of Holders.
(a) The Guarantor will furnish or cause to be furnished to the
Guarantee Trustee:
(i) semi-annually, not more than 15 days after January 15 and
July 15 in each year, a list, in such form as the Guarantee Trustee
may reasonably require, of the names and addresses of the Holders as
of such January 1 and July 1, and
(ii) at such other times as the Guarantee Trustee may request
in writing, within 30 days after the receipt by the Guarantor of any
such request, a list of similar form and content as of a date not more
than 15 days prior to the time such list is furnished,
excluding from any such list names and addresses received by the
Guarantee Trustee in its capacity as Securities Registrar.
<PAGE> 8
4
(b) The Guarantee Trustee shall comply with its obligations under
Section 311(a), Section 311(b) and Section 312(b) of the Trust Indenture Act.
Section 2.3. Reports by the Guarantee Trustee.
The Guarantee Trustee shall transmit to Holders such reports
concerning the Guarantee Trustee and its actions under this Guarantee Agreement
as may be required pursuant to the Trust Indenture Act at the times and in the
manner provided pursuant thereto. If required by Section 313(a) of the Trust
Indenture Act, the Guarantee Trustee shall, within sixty days after each May 15
following the date of this Guarantee Agreement deliver to Holders a brief
report, dated as of such May 15, which complies with the provisions of such
Section 313(a).
Section 2.4. Periodic Reports to the Guarantee Trustee.
The Guarantor shall provide to the Guarantee Trustee, the Securities
and Exchange Commission and the Holders such documents, reports and
information, if any, as required by Section 314 of the Trust Indenture Act and
the compliance certificate required by Section 314 of the Trust Indenture Act,
in the form, in the manner and at the times required by Section 314 of the
Trust Indenture Act. Delivery of such reports, information and documents to
the Guarantee Trustee is for informational purposes only and the Guarantee
Trustee's receipt of such shall not constitute constructive notice of any
information contained therein, including the Guarantor's compliance with any of
its covenants hereunder (as to which the Guarantee Trustee is entitled to rely
exclusively on Officers' Certificates).
Section 2.5. Evidence of Compliance with Conditions Precedent.
The Guarantor shall provide to the Guarantee Trustee such evidence of
compliance with such conditions precedent, if any, provided for in this
Guarantee Agreement that relate to any of the matters set forth in Section
314(c) of the Trust Indenture Act. Any certificate or opinion required to be
given by an officer pursuant to Section 314(c)(1) may be given in the form of
an Officers' Certificate.
Section 2.6. Events of Default; Waiver.
The Holders of a Majority in aggregate Liquidation Amount of the
Securities may, by vote, on behalf of the Holders, waive any past Event of
Default and its consequences. Upon such waiver, any such Event of Default shall
cease to exist, and any Event of Default arising therefrom shall be deemed to
have been cured, for every purpose of this Guarantee Agreement, but no such
waiver shall extend to any subsequent or other default or Event of Default or
impair any right consequent therefrom.
Section 2.7. Event of Default; Notice.
(a) The Guarantee Trustee shall, within 90 days after the occurrence
of an Event of Default, transmit by mail, first class postage prepaid, to the
Holders, notices of all Events of Default actually known to the Guarantee
Trustee, unless such defaults have been cured before the giving of such notice,
provided, that, except in the case of a default in the payment of a Guarantee
Payment, the Guarantee Trustee shall be protected in withholding such notice if
and so long as the Board of Directors, the executive committee or a trust
committee of directors and/or Responsible Officers of the Guarantee Trustee in
good faith determines that the withholding of such notice is in the interests
of the Holders.
<PAGE> 9
5
(b) The Guarantee Trustee shall not be deemed to have knowledge of any
Event of Default unless the Guarantee Trustee shall have received written
notice, or a Responsible Officer charged with the administration of this
Guarantee Agreement shall have obtained written notice, of such Event of
Default.
Section 2.8. Conflicting Interests.
The Trust Agreement shall be deemed to be specifically described in
this Guarantee Agreement for the purposes of clause (i) of the first proviso
contained in Section 310(b) of the Trust Indenture Act.
ARTICLE III. POWERS, DUTIES AND RIGHTS OF THE GUARANTEE TRUSTEE
Section 3.1. Powers and Duties of the Guarantee Trustee.
(a) This Guarantee Agreement shall be held by the Guarantee Trustee
for the benefit of the Holders, and the Guarantee Trustee shall not transfer
this Guarantee Agreement to any Person except a Holder exercising his or her
rights pursuant to Section 5.4(iv) or to a Successor Guarantee Trustee on
acceptance by such Successor Guarantee Trustee of its appointment to act as
Successor Guarantee Trustee. The right, title and interest of the Guarantee
Trustee shall automatically vest in any Successor Guarantee Trustee, upon
acceptance by such Successor Guarantee Trustee of its appointment hereunder,
and such vesting and cessation of title shall be effective whether or not
conveyancing documents have been executed and delivered pursuant to the
appointment of such Successor Guarantee Trustee.
(b) If an Event of Default has occurred and is continuing, the
Guarantee Trustee shall enforce this Guarantee Agreement for the benefit of the
Holders.
(c) The Guarantee Trustee, before the occurrence of any Event of
Default and after the curing of all Events of Default that may have occurred,
shall undertake to perform only such duties as are specifically set forth in
this Guarantee Agreement, and no implied covenants shall be read into this
Guarantee Agreement against the Guarantee Trustee. In case an Event of Default
has occurred (that has not been cured or waived pursuant to Section 2.6), the
Guarantee Trustee shall exercise such of the rights and powers vested in it by
this Guarantee Agreement, and use the same degree of care and skill in its
exercise thereof, as a prudent person would exercise or use under the
circumstances in the conduct of his or her own affairs.
(d) No provision of this Guarantee Agreement shall be construed to
relieve the Guarantee Trustee from liability for its own negligent action, its
own negligent failure to act or its own willful misconduct, except that:
(i) prior to the occurrence of any Event of Default and after
the curing or waiving of all such Events of Default that may have
occurred:
(A) the duties and obligations of the Guarantee Trustee shall
be determined solely by the express provisions of this Guarantee
Agreement, and the Guarantee Trustee shall not be liable except for
the performance of such duties and obligations as are specifically set
forth in this Guarantee Agreement; and
(B) in the absence of bad faith on the part of the Guarantee
Trustee, the Guarantee Trustee may conclusively rely, as to the truth
of the statements and the correctness of the opinions expressed
therein, upon any certificates or opinions furnished to the Guarantee
<PAGE> 10
6
Trustee and conforming to the requirements of this Guarantee
Agreement; but in the case of any such certificates or opinions that
by any provision hereof or of the Trust Indenture Act are specifically
required to be furnished to the Guarantee Trustee, the Guarantee
Trustee shall be under a duty to examine the same to determine whether
or not they conform to the requirements of this Guarantee Agreement;
(ii) the Guarantee Trustee shall not be liable for any error
of judgment made in good faith by a Responsible Officer of the
Guarantee Trustee, unless it shall be proved that the Guarantee
Trustee was negligent in ascertaining the pertinent facts upon which
such judgment was made;
(iii) the Guarantee Trustee shall not be liable with respect
to any action taken or omitted to be taken by it in good faith in
accordance with the direction of the Holders of not less than a
Majority in aggregate Liquidation Amount of the Securities relating to
the time, method and place of conducting any proceeding for any remedy
available to the Guarantee Trustee, or exercising any trust or power
conferred upon the Guarantee Trustee under this Guarantee Agreement;
and
(iv) no provision of this Guarantee Agreement shall require
the Guarantee Trustee to expend or risk its own funds or otherwise
incur personal financial liability in the performance of any of its
duties or in the exercise of any of its rights or powers, if the
Guarantee Trustee shall have reasonable grounds for believing that the
repayment of such funds or liability is not reasonably assured to it
under the terms of this Guarantee Agreement or adequate indemnity
against such risk or liability is not reasonably assured to it.
Section 3.2. Certain Rights of Guarantee Trustee.
(a) Subject to the provisions of Section 3.1:
(i) The Guarantee Trustee may rely and shall be fully
protected in acting or refraining from acting upon any resolution,
certificate, statement, instrument, opinion, report, notice, request,
direction, consent, order, bond, debenture, note, other evidence of
indebtedness or other paper or document reasonably believed by it to
be genuine and to have been signed, sent or presented by the proper
party or parties.
(ii) Any direction or act of the Guarantor contemplated by
this Guarantee Agreement shall be sufficiently evidenced by an
Officers' Certificate unless otherwise prescribed herein.
(iii) Whenever, in the administration of this Guarantee
Agreement, the Guarantee Trustee shall deem it desirable that a matter
be proved or established before taking, suffering or omitting to take
any action hereunder, the Guarantee Trustee (unless other evidence is
herein specifically prescribed) may, in the absence of bad faith on
its part, request and rely upon an Officers' Certificate which, upon
receipt of such request from the Guarantee Trustee, shall be promptly
delivered by the Guarantor.
(iv) The Guarantee Trustee may consult with legal counsel of
its selection, and the advice or opinion of such legal counsel with
respect to legal matters shall be full and complete authorization and
protection in respect of any action taken, suffered or omitted to be
taken by it hereunder in good faith and in accordance with such advice
or opinion. Such legal counsel may be legal counsel to the Guarantor
or any of its Affiliates and may be one of its employees. The
Guarantee Trustee shall have the right at any time to seek
instructions concerning the administration of this Guarantee Agreement
from any court of competent
<PAGE> 11
7
jurisdiction.
(v) The Guarantee Trustee shall be under no obligation to
exercise any of the rights or powers vested in it by this Guarantee
Agreement at the request or direction of any Holder, unless such
Holder shall have provided to the Guarantee Trustee such adequate
security and indemnity as would satisfy a reasonable person in the
position of the Guarantee Trustee, against the costs, expenses
(including attorneys' fees and expenses) and liabilities that might be
incurred by it in complying with such request or direction, including
such reasonable advances as may be requested by the Guarantee Trustee;
provided that, nothing contained in this Section 3.2(a)(v) shall be
taken to relieve the Guarantee Trustee, upon the occurrence of an
Event of Default, of its obligation to exercise the rights and powers
vested in it by this Guarantee Agreement.
(vi) The Guarantee Trustee shall not be bound to make any
investigation into the facts or matters stated in any resolution,
certificate, statement, instrument, opinion, report, notice, request,
direction, consent, order, bond, debenture, note, other evidence of
indebtedness or other paper or document, but the Guarantee Trustee, in
its discretion, may make such further inquiry or investigation into
such facts or matters as it may see fit.
(vii) The Guarantee Trustee may execute any of the trusts or
powers hereunder or perform any duties hereunder either directly or by
or through its agents or attorneys, and the Guarantee Trustee shall
not be responsible for any misconduct or negligence on the part of any
such agent or attorney appointed with due care by it hereunder.
(viii) Whenever in the administration of this Guarantee
Agreement the Guarantee Trustee shall deem it desirable to receive
written instructions with respect to enforcing any remedy or right or
taking any other action hereunder, the Guarantee Trustee (A) may
request written instructions from the Holders, (B) may refrain from
enforcing such remedy or right or taking such other action until such
written instructions are received, and (C) shall be protected in
acting in accordance with such written instructions.
(ix) The Guarantee Trustee shall not be liable for any action
taken, suffered, or omitted to be taken by it in good faith and
reasonably believed by it to be authorized or within the discretion or
rights or powers conferred upon it by this Guarantee Agreement.
(b) No provision of this Guarantee Agreement shall be deemed to impose
any duty or obligation on the Guarantee Trustee to perform any act or acts or
exercise any right, power, duty or obligation conferred or imposed on it in any
jurisdiction in which it shall be illegal, or in which the Guarantee Trustee
shall be unqualified or incompetent in accordance with applicable law, to
perform any such act or acts or to exercise any such right, power, duty or
obligation. No permissive power or authority available to the Guarantee Trustee
shall be construed to be a duty to act in accordance with such power and
authority.
Section 3.3. Indemnity.
The Guarantor agrees to indemnify the Guarantee Trustee for, and to
hold it harmless against, any loss, liability or expense incurred without
negligence or bad faith on the part of the Guarantee Trustee, arising out of or
in connection with the acceptance or administration of this Guarantee
Agreement, including the costs and expenses of defending itself against any
claim or liability in connection with the exercise or performance of any of its
powers or duties hereunder.
ARTICLE IV. GUARANTEE TRUSTEE
<PAGE> 12
8
Section 4.1. Guarantee Trustee: Eligibility.
(a) There shall at all times be a Guarantee Trustee which shall:
(i) not be an Affiliate of the Guarantor; and
(ii) be a Person that is eligible pursuant to the Trust
Indenture Act to act as such and has a combined capital and surplus of
at least $50,000,000, and shall be a corporation meeting the
requirements of Section 310(a) of the Trust Indenture Act. If such
corporation publishes reports of condition at least annually, pursuant
to law or to the requirements of the supervising or examining
authority, then, for the purposes of this Section and to the extent
permitted by the Trust Indenture Act, the combined capital and surplus
of such corporation shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so
published.
(b) If at any time the Guarantee Trustee shall cease to be eligible to
so act under Section 4.1(a), the Guarantee Trustee shall immediately resign in
the manner and with the effect set out in Section 4.2(c).
(c) If the Guarantee Trustee has or shall acquire any "conflicting
interest" within the meaning of Section 310(b) of the Trust Indenture Act, the
Guarantee Trustee and Guarantor shall in all respects comply with the
provisions of Section 310(b) of the Trust Indenture Act.
Section 4.2. Appointment, Removal and Resignation of the Guarantee
Trustee.
(a) Subject to Section 4.2(b), the Guarantee Trustee may be appointed
or removed without cause at any time by the Guarantor.
(b) The Guarantee Trustee shall not be removed until a Successor
Guarantee Trustee has been appointed and has accepted such appointment by
written instrument executed by such Successor Guarantee Trustee and delivered
to the Guarantor. If an instrument of acceptance by a Successor Guarantee
Trustee shall not have been delivered to the Guarantee Trustee within 30 days
after such removal, the Guarantee Trustee being removed may petition any court
of competent jurisdiction for the appointment of a Successor Guarantee Trustee.
(c) The Guarantee Trustee appointed hereunder shall hold office until
a Successor Guarantee Trustee shall have been appointed or until its removal or
resignation. The Guarantee Trustee may resign from office (without need for
prior or subsequent accounting) by an instrument in writing executed by the
Guarantee Trustee and delivered to the Guarantor, which resignation shall not
take effect until a Successor Guarantee Trustee has been appointed and has
accepted such appointment by instrument in writing executed by such Successor
Guarantee Trustee and delivered to the Guarantor and the resigning Guarantee
Trustee.
(d) If no Successor Guarantee Trustee shall have been appointed and
accepted appointment as provided in this Section 4.2 within 60 days after
delivery to the Guarantor of an instrument of resignation, the resigning
Guarantee Trustee may petition, at the expense of the Guarantor, any court of
competent jurisdiction for appointment of a Successor Guarantee Trustee. Such
court may thereupon, after prescribing such notice, if any, as it may deem
proper, appoint a Successor Guarantee Trustee.
<PAGE> 13
9
ARTICLE V. GUARANTEE
Section 5.1. Guarantee.
The Guarantor irrevocably and unconditionally agrees to pay in full to
the Holders the Guarantee Payments (without duplication of amounts theretofore
paid by or on behalf of the Issuer), as and when due, regardless of any
defense, right of set-off or counterclaim which the Issuer may have or assert.
The Guarantor's obligation to make a Guarantee Payment may be satisfied by
direct payment of the required amounts by the Guarantor to the Holders or by
causing the Issuer to pay such amounts to the Holders.
Section 5.2. Waiver of Notice and Demand.
The Guarantor hereby waives notice of acceptance of the Guarantee
Agreement and of any liability to which it applies or may apply, presentment,
demand for payment, any right to require a proceeding first against the
Guarantee Trustee, Issuer or any other Person before proceeding against the
Guarantor, protest, notice of nonpayment, notice of dishonor, notice of
redemption and all other notices and demands.
Section 5.3. Obligations Not Affected.
The obligations, covenants, agreements and duties of the Guarantor
under this Guarantee Agreement shall in no way be affected or impaired by
reason of the happening from time to time of any of the following:
(a) the release or waiver, by operation of law or otherwise, of the
performance or observance by the Issuer of any express or implied agreement,
covenant, term or condition relating to the Securities to be performed or
observed by the Issuer;
(b) the extension of time for the payment by the Issuer of all or any
portion of the Distributions (other than an extension of time for payment of
Distributions that results from the extension of any interest payment period on
the Debentures as provided in the Indenture), Redemption Price, Liquidation
Distribution or any other sums payable under the terms of the Securities or the
extension of time for the performance of any other obligation under, arising
out of, or in connection with, the Securities;
(c) any failure, omission, delay or lack of diligence on the part of
the Holders to enforce, assert or exercise any right, privilege, power or
remedy conferred on the Holders pursuant to the terms of the Securities, or any
action on the part of the Issuer granting indulgence or extension of any kind;
(d) the voluntary or involuntary liquidation, dissolution, sale of any
collateral, receivership, insolvency, bankruptcy, assignment for the benefit of
creditors, reorganization, arrangement, composition or readjustment of debt of,
or other similar proceedings affecting, the Issuer or any of the assets of the
Issuer;
(e) any invalidity of, or defect or deficiency in, the Securities;
(f) the settlement or compromise of any obligation guaranteed hereby
or hereby incurred; or
(g) any other circumstance whatsoever that might otherwise constitute
a legal or equitable discharge or defense of a guarantor, it being the intent
of this Section 5.3 that the obligations of the Guarantor hereunder shall be
absolute and unconditional under any and all circumstances.
<PAGE> 14
10
There shall be no obligation of the Holders to give notice to, or obtain the
consent of, the Guarantor with respect to the happening of any of the
foregoing.
Section 5.4. Rights of Holders.
The Guarantor expressly acknowledges that: (i) this Guarantee
Agreement will be deposited with the Guarantee Trustee to be held for the
benefit of the Holders; (ii) the Guarantee Trustee has the right to enforce
this Guarantee Agreement on behalf of the Holders; (iii) the Holders of a
Majority in liquidation preference of the 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 this Guarantee Agreement or
exercising any trust or power conferred upon the Guarantee Trustee under this
Guarantee Agreement; and (iv) any Holder may institute a legal proceeding
directly against the Guarantor to enforce its rights under this Guarantee
Agreement, without first instituting a legal proceeding against the Guarantee
Trustee, the Issuer or any other Person.
Section 5.5. Guarantee of Payment
This Guarantee Agreement creates a guarantee of payment and not of
collection. This Guarantee Agreement will not be discharged except by payment
of the Guarantee Payments in full (without duplication of amounts theretofore
paid by the Issuer) or upon distribution of Debentures to Holders as provided
in the Trust Agreement.
Section 5.6. Subrogation.
The Guarantor shall be subrogated to all (if any) rights of the
Holders against the Issuer in respect of any amounts paid to the Holders by the
Guarantor under this Guarantee Agreement and shall have the right to waive
payment by the Issuer pursuant to Section 5.1; provided, however, that the
Guarantor shall not (except to the extent required by mandatory provisions of
law) be entitled to enforce or exercise any rights which it may acquire by way
of subrogation or any indemnity, reimbursement or other agreement, in all cases
as a result of payment under this Guarantee Agreement, if, at the time of any
such payment, any amounts are due and unpaid under this Guarantee Agreement. If
any amount shall be paid to the Guarantor in violation of the preceding
sentence, the Guarantor agrees to hold such amount in trust for the Holders and
to pay over such amount to the Holders.
Section 5.7. Independent Obligations.
The Guarantor acknowledges that its obligations hereunder are
independent of the obligations of the Issuer with respect to the Securities and
that the Guarantor shall be liable as principal and as debtor hereunder to make
Guarantee Payments pursuant to the terms of this Guarantee Agreement
notwithstanding the occurrence of any event referred to in subsections (a)
through (g), inclusive, of Section 5.3 hereof.
ARTICLE VI. COVENANTS AND SUBORDINATION
Section 6.1. Subordination.
The obligations of the Guarantor under this Guarantee Agreement will
constitute unsecured obligations of the Guarantor and will rank subordinate and
junior in right of payment to all Senior Debt (as defined in the Indenture) of
the Guarantor, except those made pari passu or subordinate to such obligations
expressly by their terms. in the same manner as set forth in Article XIII of
the
<PAGE> 15
11
Indenture.
Section 6.2. Pari Passu Guarantees.
The obligations of the Guarantor under this Guarantee Agreement shall
rank pari passu with the obligations of the Guarantor under any similar
Guarantee Agreements issued by the Guarantor on behalf of the holders of
preferred securities issued by any Trust (as defined in the Indenture).
ARTICLE VII. TERMINATION
Section 7.1. Termination.
This Guarantee Agreement shall terminate and be of no further force and
effect upon (i) full payment of the Redemption Price of all Securities, (ii)
the distribution of Debentures to the Holders in exchange for all of the
Securities or (iii) full payment of the amounts payable in accordance with the
Trust Agreement upon liquidation of the Issuer. Notwithstanding the foregoing,
this Guarantee Agreement will continue to be effective or will be reinstated,
as the case may be, if at any time any Holder must restore payment of any sums
paid with respect to Securities or this Guarantee Agreement.
ARTICLE VIII. MISCELLANEOUS
Section 8.1. Successors and Assigns.
All guarantees and agreements contained in this Guarantee Agreement
shall bind the successors, assigns, receivers, trustees and representatives of
the Guarantor and shall inure to the benefit of the Holders of the Securities
then outstanding. Except in connection with a consolidation, merger or sale
involving the Guarantor that is permitted under Article VIII of the Indenture
and pursuant to which the successor or assignee agrees in writing to perform
the Guarantor's obligations hereunder, the Guarantor shall not assign its
obligations hereunder.
Section 8.2. Amendments.
Except with respect to any changes which do not adversely affect the
rights of the Holders or the Guarantee Trustee in any material respect (in
which case no consent of the Holders or the Guarantee Trustee, as the case may
be, will be required), this Guarantee Agreement may only be amended with the
prior approval of the Holders of not less than a Majority in Liquidation Amount
of all the outstanding Securities and of the Guarantee Trustee. The provisions
of Article VI of the Trust Agreement concerning meetings of the Holders shall
apply to the giving of such approval.
Section 8.3. Notices.
Any notice, request or other communication required or permitted to be
given hereunder shall be in writing, duly signed by the party giving such
notice, and delivered, telecopied or mailed by first class mail as follows:
(a) if given to the Guarantor, to the address set forth below or such
other address, facsimile number or to the attention of such other Person as the
Guarantor may give notice to the Holders:
<PAGE> 16
12
MBNA Corporation
Wilmington, Delaware 19884
Facsimile No.: 302-456-8348
Attention: Vernon H.C. Wright
(b) if given to the Issuer, in care of the Guarantee Trustee, at the
Issuer's (and the Guarantee Trustee's) address set forth below or such other
address as the Guarantee Trustee on behalf of the Issuer may give notice to the
Holders:
MBNA Capital A
c/o MBNA Corporation
Wilmington, Delaware 19884
Facsimile No.: 302-456-8348
Attention: Vernon H.C. Wright
with a copy to:
The Bank of New York
101 Barclay Street, Floor 21 West
New York, New York 10286
Facsimile No.: 212-815-5915
Attention: Corporate Trust Administration
(c) if given to any Holder, at the address set forth on the books and
records of the Issuer.
All notices hereunder shall be deemed to have been given when received
in person, telecopied with receipt confirmed, or mailed by first class mail,
postage prepaid, except that if a notice or other document is refused delivery
or cannot be delivered because of a changed address of which no notice was
given, such notice or other document shall be deemed to have been delivered on
the date of such refusal or inability to deliver.
Section 8.4. Consolidation, Merger, Conveyance, Transfer or Lease.
The Guarantor shall not consolidate with or merge into any other
Person or convey, transfer or lease its properties and assets substantially as
an entirety to any Person, and no Person shall consolidate with or merge into
the Guarantor or convey, transfer or lease its properties and assets
substantially as an entirety to the Guarantor, unless it has complied with the
terms of Section 8.1 of the Indenture.
Section 8.5. Benefit.
This Guarantee Agreement is solely for the benefit of the Holders and
is not separately transferable from the Securities.
Section 8.6. Interpretation.
In this Guarantee Agreement, unless the context otherwise requires:
(a) capitalized terms used in this Guarantee Agreement but not
defined in the preamble
<PAGE> 17
13
hereto have the respective meanings assigned to them in Section 1.1;
(b) a term defined anywhere in this Guarantee Agreement has the same
meaning throughout;
(c) all references to "the Guarantee Agreement" or "this Guarantee
Agreement" are to this Guarantee Agreement as modified, supplemented or amended
from time to time;
(d) all references in this Guarantee Agreement to Articles and
Sections are to Articles and Sections of this Guarantee Agreement unless
otherwise specified;
(e) a term defined in the Trust Indenture Act has the same meaning
when used in this Guarantee Agreement unless otherwise defined in this
Guarantee Agreement or unless the context otherwise requires;
(f) a reference to the singular includes the plural and vice versa;
and
(g) the masculine, feminine or neuter genders used herein shall
include the masculine, feminine and neuter genders.
Section 8.7. Governing Law.
THIS GUARANTEE AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD
TO THE CONFLICT OF LAW PRINCIPLES THEREOF.
<PAGE> 18
14
This instrument may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.
THIS GUARANTEE AGREEMENT is executed as of the day and year first
above written.
MBNA Corporation
By:
------------------------------------
Name:
Title:
The Bank of New York
as Guarantee Trustee
By:
------------------------------------
Name:
Title:
<PAGE> 1
EXHIBIT 4.8
AMENDED AND RESTATED
TRUST AGREEMENT
among
MBNA 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 HEREIN
Dated as of January 23, 1997
MBNA CAPITAL B
<PAGE> 2
MBNA Capital B
Certain Sections of this Trust Agreement relating to Sections 310
through 318 of the Trust Indenture Act of 1939:
<TABLE>
<CAPTION>
Trust Indenture Trust Agreement
Act Section Section
- - --------------- ---------------
<S> <C>
(Section) 310 (a)(1)................................................................. 8.7
(a)(2)................................................................. 8.7
(a)(3)................................................................. 8.9
(a)(4)................................................................. 2.7(a)(ii)
(b).................................................................... 8.8
(Section) 311 (a).................................................................... 8.13
(b).................................................................... 8.13
(Section) 312 (a).................................................................... 5.7
(b).................................................................... 5.7
(c).................................................................... 5.7
(Section) 313 (a).................................................................... 8.14(a)
(a)(4)................................................................. 8.14(b)
(b).................................................................... 8.14(a)
(c).................................................................... 10.10
(d).................................................................... 8.14(b)
(Section) 314 (a).................................................................... 8.15
(b).................................................................... Not Applicable
(c)(1)................................................................. 8.16
(c)(2)................................................................. 8.16
(c)(3)................................................................. Not Applicable
(d).................................................................... Not Applicable
(e).................................................................... 1.1, 8.16
(Section) 315 (a).................................................................... 8.1(a), 8.3(a)
(b).................................................................... 8.2, 10.10
(c).................................................................... 8.1(a)
(d).................................................................... 8.1, 8.3
(e).................................................................... Not Applicable
(Section) 316 (a).................................................................... Not Applicable
(a)(1)(A).............................................................. Not Applicable
(a)(1)(B).............................................................. Not Applicable
(a)(2)................................................................. Not Applicable
(b).................................................................... 5.14
(c).................................................................... 6.7
(Section) 317 (a)(1)................................................................. Not Applicable
(a)(2)................................................................. Not Applicable
(b).................................................................... 5.9
(Section) 318 (a).................................................................... 10.11
</TABLE>
- - ------
Note: This reconciliation and tie sheet shall not, for any purpose, be deemed to
be a part of the Trust Agreement.
<PAGE> 3
<TABLE>
<CAPTION>
PAGE
TABLE OF CONTENTS
<S> <C>
ARTICLE I
Defined Terms.................................................1
Section 1.1 Definitions. .......................................................................1
ARTICLE II
Continuation of the Trust......................................... 10
Section 2.1 Name. ............................................................................ 10
Section 2.2 Office of the Delaware Trustee; Principal Place of Business. ..................... 10
Section 2.3 Initial Contribution of Trust Property; Organizational Expenses. ................. 10
Section 2.4 Issuance of the Capital Securities. .............................................. 10
Section 2.5 Issuance of the Common Securities; Subscription and Purchase of Debentures. ...... 11
Section 2.6 Declaration of Trust. ............................................................ 11
Section 2.7 Authorization to Enter into Certain Transactions. ................................ 11
Section 2.8 Assets of Trust. ................................................................. 15
Section 2.9 Title to Trust Property. ......................................................... 15
ARTICLE III
Payment Account.............................................. 15
Section 3.1 Payment Account. ................................................................. 15
ARTICLE IV
Distributions; Redemption......................................... 16
Section 4.1 Distributions. ................................................................... 16
Section 4.2 Redemption. ...................................................................... 17
Section 4.3 Subordination of Common Securities. .............................................. 19
Section 4.4 Payment Procedures. .............................................................. 19
Section 4.5 Tax Returns and Reports. ......................................................... 19
Section 4.6 Payment of Expenses of the Trust. ................................................ 20
Section 4.7 Payments under Indenture or Pursuant to Direct Actions............................ 20
ARTICLE V
Trust Securities Certificates....................................... 20
Section 5.1 Initial Ownership. ............................................................... 20
</TABLE>
i
<PAGE> 4
<TABLE>
<CAPTION>
PAGE
<S> <C>
Section 5.2 The Trust Securities Certificates. ............................................... 20
Section 5.3 Execution and Delivery of Trust Securities Certificates. ......................... 21
Section 5.4 Registration of Transfer and Exchange of Capital Securities Certificates.......... 21
Section 5.5 Mutilated, Destroyed, Lost or Stolen Trust Securities Certificates. .............. 22
Section 5.6 Persons Deemed Securityholders. .................................................. 23
Section 5.7 Access to List of Securityholders' Names and Addresses. .......................... 23
Section 5.8 Maintenance of Office or Agency. ................................................. 23
Section 5.9 Appointment of Paying Agent. ..................................................... 23
Section 5.10 Ownership of Common Securities by Depositor. ..................................... 24
Section 5.11 Book-Entry Capital Securities Certificates; Common
Securities Certificate. .................................................... 24
Section 5.12 Notices to Clearing Agency. ...................................................... 25
Section 5.13 Definitive Capital Securities Certificates. ...................................... 25
Section 5.14 Rights of Securityholders. ....................................................... 26
Section 5.15 CUSIP Numbers..................................................................... 28
ARTICLE VI
Acts of Securityholders; Meetings; Voting................................. 28
Section 6.1 Limitations on Voting Rights. .................................................... 28
Section 6.2 Notice of Meetings. .............................................................. 29
Section 6.3 Meetings of Capital Securityholders. ............................................. 29
Section 6.4 Voting Rights. ................................................................... 30
Section 6.5 Proxies, etc. .................................................................... 30
Section 6.6 Securityholder Action by Written Consent. ........................................ 31
Section 6.7 Record Date for Voting and Other Purposes. ....................................... 31
Section 6.8 Acts of Securityholders. ......................................................... 31
Section 6.9 Inspection of Records. ........................................................... 32
ARTICLE VII
Representations and Warranties....................................... 32
Section 7.1 Representations and Warranties of the Property Trustee and the Delaware........... 32
Section 7.2 Representations and Warranties of Depositor. ..................................... 33
ARTICLE VIII
The Trustees................................................ 34
Section 8.1 Certain Duties and Responsibilities. ............................................. 34
Section 8.2 Certain Notices. ................................................................. 36
Section 8.3 Certain Rights of Property Trustee. .............................................. 36
Section 8.4 Not Responsible for Recitals or Issuance of Securities. .......................... 38
</TABLE>
ii
<PAGE> 5
<TABLE>
<CAPTION>
PAGE
<S> <C>
Section 8.5 May Hold Securities. ............................................................. 38
Section 8.6 Compensation; Indemnity; Fees. ................................................... 38
Section 8.7 Corporate Property Trustee Required; Eligibility of Trustees. .................... 39
Section 8.8 Conflicting Interests. ........................................................... 40
Section 8.9 Co-Trustees and Separate Trustee. ................................................ 40
Section 8.10 Resignation and Removal; Appointment of Successor. ............................... 42
Section 8.11 Acceptance of Appointment by Successor. .......................................... 43
Section 8.12 Merger, Conversion, Consolidation or Succession to Business. ..................... 44
Section 8.13 Preferential Collection of Claims Against Depositor or Trust. .................... 44
Section 8.14 Reports by Property Trustee. ..................................................... 45
Section 8.15 Reports to the Property Trustee. ................................................. 45
Section 8.16 Evidence of Compliance with Conditions Precedent. ................................ 45
Section 8.17 Number of Trustees. .............................................................. 45
Section 8.18 Delegation of Power. ............................................................. 46
ARTICLE IX
Termination, Liquidation and Merger.................................... 46
Section 9.1 Termination Upon Expiration Date. ................................................ 46
Section 9.2 Early Termination. ............................................................... 46
Section 9.3 Termination. ..................................................................... 47
Section 9.4 Liquidation. ..................................................................... 47
Section 9.5 Mergers, Consolidations, Amalgamations or Replacements of the Trust. ............. 49
ARTICLE X
Miscellaneous Provisions.......................................... 50
Section 10.1 Limitation of Rights of Securityholders. ......................................... 50
Section 10.2 Liability of the Common Securityholder............................................ 50
Section 10.3 Amendment. ....................................................................... 50
Section 10.4 Consolidation, Merger, Conveyance, Transfer or Lease.............................. 51
Section 10.5 Separability. .................................................................... 51
Section 10.6 Governing Law..................................................................... 52
Section 10.7 Payments Due on Non-Business Day. ................................................ 52
Section 10.8 Successors. ...................................................................... 52
Section 10.9 Headings. ........................................................................ 52
Section 10.10 Reports, Notices and Demands. .................................................... 52
Section 10.11 Agreement Not to Petition. ....................................................... 53
Section 10.12 Trust Indenture Act; Conflict with Trust Indenture Act. .......................... 53
Section 10.13 Acceptance of Terms of Trust Agreement, Guarantee and Indenture. ................. 54
Section 10.14 Counterparts...................................................................... 55
</TABLE>
iii
<PAGE> 6
AMENDED AND RESTATED TRUST AGREEMENT, dated as of January 23, 1997,
1996, among (i) MBNA Corporation, a Maryland corporation (including any
successors or assigns, the "Depositor"), (ii) The Bank of New York, a New York
banking corporation, as property trustee (in such capacity, the "Property
Trustee" and, in its separate corporate capacity and not in its capacity as
Property Trustee, the "Bank"), (iii) The Bank of New York (Delaware), a banking
corporation organized under the laws of the State of Delaware, as Delaware
trustee (the "Delaware Trustee"), (iv) M. Scot Kaufman, an individual, and John
W. Scheflen an individual, each of whose address is c/o MBNA Corporation,
Wilmington, Delaware 19884 (each an "Administrative Trustee" and collectively
the "Administrative Trustees") (the Property Trustee, the Delaware Trustee and
the Administrative Trustees referred to collectively as the "Trustees") and (v)
the several Holders, as hereinafter defined.
Witnesseth
WHEREAS, the Depositor and the Delaware Trustee have heretofore duly
declared and established a business trust pursuant to the Delaware Business
Trust Act by the entering into that certain Trust Agreement, dated as of
November 4, 1996 (the "Original Trust Agreement"), and by the execution and
filing with the Secretary of State of the State of Delaware of the Certificate
of Trust, filed on November 6, 1996, attached as Exhibit A (the "Certificate of
Trust"); and
WHEREAS, the parties thereto amended and restated the Original Trust
Agreement by entering into the Amended and Restated Trust Agreement of the
Trust, dated as of December 11, 1996 (the "Restated Agreement"); and
WHEREAS, the Depositor and the Trustees desire to amend and restate the
Restated Agreement in its entirety as set forth herein to provide for, among
other things, (i) the issuance of the Common Securities by the Trust to the
Depositor, (ii) the issuance and sale of the Capital Securities by the Trust
pursuant to the Underwriting Agreement and (iii) the acquisition by the Trust
from the Depositor of all of the right, title and interest in the Debentures;
NOW THEREFORE, in consideration of the agreements and obligations set
forth herein and for other good and valuable consideration, the sufficiency of
which is hereby acknowledged, each party, for the benefit of the other parties
and for the benefit of the Securityholders, hereby amends and restates the
Restated Agreement in its entirety and agrees as follows:
ARTICLE I
Defined Terms
Section I.1 Definitions.
For all purposes of this Trust Agreement, except as otherwise expressly
provided or unless the context otherwise requires:
(a) the terms defined in this Article have the meanings assigned to
them in this Article and include the plural as well as the singular;
(b) all other terms used herein that are defined in the Trust Indenture
Act, either directly or by reference therein, have the meanings assigned to them
therein;
(c) unless the context otherwise requires, any reference to an
"Article" or a "Section" refers to an Article or a Section, as the case may be,
of this Trust Agreement; and
<PAGE> 7
2
(d) the words "herein", "hereof" and "hereunder" and other words of
similar import refer to this Trust Agreement as a whole and not to any
particular Article, Section or other subdivision.
"Act" has the meaning specified in Section 6.8.
"Additional Amount" means, with respect to Trust Securities of a given
Liquidation Amount and/or a given period, the amount of Additional Interest (as
defined in the Indenture) paid by the Depositor on a Like Amount of Debentures
for such period.
"Administrative Trustee" means each of the individuals identified as an
"Administrative Trustee" in the preamble to this Trust Agreement solely in such
individual's capacity as Administrative Trustee of the Trust heretofore created
and continued hereunder and not in such individual's individual capacity, or
such Administrative Trustee's successor in interest in such capacity, or any
successor trustee appointed as herein provided.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Bank" has the meaning specified in the preamble to this Trust
Agreement.
"Bankruptcy Event" means, with respect to any Person:
(a) the entry of a decree or order by a court having jurisdiction in
the premises judging such Person as bankrupt or insolvent, or approving as
properly filed a petition seeking reorganization, arrangement, adjudication or
composition of or in respect of such Person under any applicable federal or
state bankruptcy, insolvency, reorganization or other similar law, or appointing
a receiver, liquidator, assignee, trustee, sequestrator (or other similar
official) of such Person or of any substantial part of its property or ordering
the winding up or liquidation of its affairs, and the continuance of any such
decree or order unstayed and in effect for a period of 60 consecutive days; or
(b) the institution by such Person of proceedings to be adjudicated as
a bankrupt or insolvent, or the consent by it to the institution of bankruptcy
or insolvency proceedings against it, or the filing by it of a petition or
answer or consent seeking reorganization or relief under any applicable federal
or state bankruptcy, insolvency, reorganization or other similar law, or the
consent by it to the filing of any such petition or to the appointment of a
receiver, liquidator, assignee, trustee, sequestrator (or similar official) of
such Person or of any substantial part of its property, or the making by it of
an assignment for the benefit of creditors, or the admission by it in writing of
its inability to pay its debts generally as they become due and its willingness
to be adjudicated as bankrupt, or the taking of corporate action by such Person
in furtherance of any such action.
"Bankruptcy Laws" has the meaning specified in Section 10.11.
"Book-Entry Capital Securities Certificates" means a beneficial
interest in the Capital Securities Certificates, ownership and transfers of
which shall be made through book entries by a Clearing Agency as described in
Section 5.11.
<PAGE> 8
3
"Business Day" means a day other than (a) a Saturday or Sunday, (b) 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 (c) a day on which the
Property Trustee's Corporate Trust Office or the Corporate Trust Office of the
Debenture Trustee is closed for business.
"Capital Security" means an undivided beneficial ownership interest in
the assets of the Trust, having a Liquidation Amount of $1,000 and having the
rights provided therefor in this Trust Agreement, including the right to receive
Distributions and a Liquidation Distribution as provided herein.
"Capital Securities Certificate" means a certificate evidencing
ownership of Capital Securities, substantially in the form attached as Exhibit
D.
"Capital Treatment Event" means the reasonable determination by the
Depositor 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 Capital Securities hereunder,
there is more than an insubstantial risk that the Depositor will not be entitled
to treat an amount equal to the Liquidation Amount of the 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 Depositor.
"Certificate Depository Agreement" means the agreement among the Trust,
the Depositor and The Depository Trust Company, as the initial Clearing Agency,
dated as of the Closing Date, relating to the Trust Securities Certificates,
substantially in the form attached as Exhibit B, as the same may be amended and
supplemented from time to time.
"Certificate of Trust" has the meaning specified in the recitals
hereof, as amended or restated from time to time.
"Clearing Agency" means an organization registered as a "clearing
agency" pursuant to Section 17A of the Securities Exchange Act of 1934, as
amended. The Depository Trust Company will be the initial Clearing Agency.
"Clearing Agency Participant" means a broker, dealer, bank, other
financial institution or other Person for whom from time to time a Clearing
Agency effects book-entry transfers and pledges of securities deposited with the
Clearing Agency.
"Closing Date" means the date of execution and delivery of this Trust
Agreement.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commission" means the Securities and Exchange Commission, as from time
to time constituted, created under the Securities Exchange Act of 1934, as
amended, or, if at any time after the execution of this instrument such
Commission is not existing and performing the duties now assigned to it under
the Trust Indenture Act, then the body performing such duties at such time.
"Common Securities Certificate" means a certificate evidencing
ownership of Common Securities, substantially in the form attached as Exhibit C.
<PAGE> 9
4
"Common Security" means an undivided beneficial ownership interest in
the assets of the Trust, having a Liquidation Amount of $1,000 and having the
rights provided therefor in this Trust Agreement, including the right to receive
Distributions and a Liquidation Distribution as provided herein.
"Corporate Trust Office" means (i) when used with respect to the
Property Trustee, the principal office of the Property Trustee located in New
York, New York, and (ii) when used with respect to the Debenture Trustee, the
principal office of the Debenture Trustee located in New York, New York.
"Debenture Event of Default" means an "Event of Default" as defined in
the Indenture.
"Debenture Redemption Date" means, with respect to any Debentures to be
redeemed under the Indenture, the date fixed for redemption under the Indenture.
"Debenture Tax Event" means a "Tax Event" as defined in the Indenture.
"Debenture Trustee" means The Bank of New York, a New York banking
corporation, as trustee under the Indenture, and any successor trustee appointed
as provided therein.
"Debentures" means the $288,660,000 aggregate principal amount of the
Depositor's Floating Rate Junior Subordinated Deferrable Interest Debentures,
Series B, issued pursuant to the Indenture.
"Definitive Capital Securities Certificates" means either or both (as
the context requires) of (a) Capital Securities Certificates issued as
Book-Entry Capital Securities Certificates as provided in Section 5.11(a) and
(b) Capital Securities Certificates issued in certificated, fully registered
form as provided in Section 5.13.
"Delaware Business Trust Act" means Chapter 38 of Title 12 of the
Delaware Code, 12 Del. C. 3801, et seq., as it may be amended from time to time.
"Delaware Trustee" means the Person identified as the "Delaware
Trustee" in the preamble to this Trust Agreement solely in its capacity as
Delaware Trustee of the Trust heretofore created and continued hereunder and not
in its individual capacity, or its successor in interest in such capacity, or
any successor trustee appointed as herein provided.
"Depositor" has the meaning specified in the preamble to this Trust
Agreement.
"Distribution Date" has the meaning specified in Section 4.1(a).
"Distributions" means amounts payable in respect of the Trust
Securities as provided in Section 4.1.
"Early Termination Event" has the meaning specified in Section 9.2.
"Event of Default" means any one of the following events (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):
(a) the occurrence of a Debenture Event of Default; or
<PAGE> 10
5
(b) 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
(c) default by the Property Trustee in the payment of any Redemption
Price of any Trust Security when it becomes due and payable; or
(d) default in the performance, or breach, in any material respect, of
any covenant or warranty of the Trustees in this Trust Agreement (other than a
covenant or warranty a default in the performance or breach of which is dealt
with in clause (b) or (c) above) and continuation of such default or breach for
a period of 90 days after there has been given, by registered or certified mail,
to the defaulting Trustee or Trustees by the Holders of at least 25% in
aggregate Liquidation Amount of the Outstanding Capital Securities, a written
notice specifying such default or breach and requiring it to be remedied and
stating that such notice is a "Notice of Default" hereunder; or
(e) the occurrence of a Bankruptcy Event with respect to the Property
Trustee and the failure by the Depositor to appoint a successor Property Trustee
within 90 days thereof.
"Expiration Date" has the meaning specified in Section 9.1.
"Federal Reserve" means the Board of Governors of the Federal Reserve
System, as from time to time constituted, or if at any time after the execution
of this Trust Agreement the Federal Reserve is not existing and performing the
duties now assigned to it, then the body performing such duties at such time.
"Guarantee" means the Guarantee Agreement executed and delivered by the
Depositor and The Bank of New York, as trustee, contemporaneously with the
execution and delivery of this Trust Agreement, for the benefit of the Holders
of the Trust Securities, as amended from time to time.
"Indenture" means the Junior Subordinated Indenture, dated as of
December 18, 1996, between the Depositor and the Debenture Trustee, as trustee,
as amended or supplemented from time to time.
"Lien" means any lien, pledge, charge, encumbrance, mortgage, deed of
trust, adverse ownership interest, hypothecation, assignment, security interest
or preference, priority or other security agreement or preferential arrangement
of any kind or nature whatsoever.
"Like Amount" means (a) with respect to a redemption of Trust
Securities, Trust Securities having a Liquidation Amount equal to the principal
amount of Debentures to be contemporaneously redeemed in accordance with the
Indenture the proceeds of which will be used to pay the Redemption Price of such
Trust Securities, and (b) with respect to a distribution of Debentures to
Holders of Trust Securities in connection with a dissolution or liquidation of
the Trust, Debentures having a principal amount equal to the Liquidation Amount
of the Trust Securities of the Holder to whom such Debentures are distributed.
"Liquidation Amount" means the stated amount of $1,000 per Trust
Security.
"Liquidation Date" means the date on which Debentures are to be
distributed to Holders of Trust Securities in connection with a termination and
liquidation of the Trust pursuant to Section 9.4(a).
<PAGE> 11
6
"Liquidation Distribution" has the meaning specified in Section 9.4(d).
"1940 Act" means the Investment Company Act of 1940, as amended.
"Officers' Certificate" means a certificate signed by the Chairman and
Chief Executive Officer, President or a Vice President, and by the Treasurer, an
Associate Treasurer, an Assistant Treasurer, the Controller, the Secretary or an
Assistant Secretary, of the Depositor, and delivered to the appropriate Trustee.
One of the officers signing an Officers' Certificate given pursuant to Section
8.16 shall be the principal executive, financial or accounting officer of the
Depositor. Any Officers' Certificate delivered with respect to compliance with a
condition or covenant provided for in this Trust Agreement shall include:
(a) a statement that each officer signing the Officers' Certificate has
read the covenant or condition and the definitions relating thereto;
(b) a brief statement of the nature and scope of the examination or
investigation undertaken by each officer in rendering the Officers' Certificate;
(c) a statement that each such officer has made such examination or
investigation as, in such officer's opinion, is necessary to enable such officer
to express an informed opinion as to whether or not such covenant or condition
has been complied with; and
(d) a statement as to whether, in the opinion of each such officer,
such condition or covenant has been complied with.
"Opinion of Counsel" means a written opinion of counsel, who may be
counsel for the Trust, the Property Trustee or the Depositor, and who shall be
reasonably acceptable to the Property Trustee.
"Original Trust Agreement" has the meaning specified in the recitals to
this Trust Agreement.
"Outstanding" when used with respect to Trust Securities, means, as of
the date of determination, all Trust Securities theretofore executed and
delivered under this Trust Agreement, except:
(a) Trust Securities theretofore cancelled by the Securities Registrar
or delivered to the Securities Registrar for cancellation;
(b) Trust Securities for whose payment or redemption money in the
necessary amount has been theretofore deposited with the Property Trustee or any
Paying Agent for the Holders of such Trust Securities; provided that, if such
Trust Securities are to be redeemed, notice of such redemption has been duly
given pursuant to this Trust Agreement; and
(c) Trust Securities which have been paid or in exchange for or in lieu
of which other Trust Securities have been executed and delivered pursuant to
this Trust Agreement, including pursuant to Sections 5.4, 5.5, 5.11 and 5.13;
provided, however, that in determining whether the Holders of the requisite
Liquidation Amount of the Outstanding Capital Securities have given any request,
demand, authorization, direction, notice, consent or waiver hereunder, Capital
Securities owned by the Depositor, any Trustee or any Affiliate of the Depositor
or any Trustee shall be disregarded and deemed not to be Outstanding, except
that (a) in determining whether any Trustee shall be protected in relying
<PAGE> 12
7
upon any such request, demand, authorization, direction, notice, consent or
waiver, only Capital Securities that such Trustee actually knows to be so owned
shall be so disregarded and (b) the foregoing shall not apply at any time when
all of the outstanding Capital Securities are owned by the Depositor, one or
more of the Trustees and/or any such Affiliate. Capital Securities so owned
which have been pledged in good faith may be regarded as Outstanding if the
pledgee establishes to the satisfaction of the Administrative Trustees the
pledgee's right so to act with respect to such Capital Securities and that the
pledgee is not the Depositor or any Affiliate of the Depositor.
"Owner" means each Person who is the beneficial owner of a Book-Entry
Capital Securities Certificate as reflected in the records of the Clearing
Agency or, if a Clearing Agency Participant is not the beneficial owner, then as
reflected in the records of a Person maintaining an account with such Clearing
Agency (directly or indirectly, in accordance with the rules of such Clearing
Agency).
"Paying Agent" means any paying agent or co-paying agent appointed
pursuant to Section 5.9 and shall initially be the Bank.
"Payment Account" means a segregated non-interest-bearing corporate
trust account maintained by the Property Trustee with the Bank in its corporate
trust department for the benefit of the Securityholders in which all amounts
paid in respect of the Debentures will be held and from which the Property
Trustee, through the Paying Agent, shall make payments to the Securityholders in
accordance with Sections 4.1 and 4.2.
"Person" means any individual, corporation, partnership, joint venture,
trust, limited liability company or corporation, unincorporated organization or
government or any agency or political subdivision thereof.
"Property Trustee" means the Person identified as the "Property
Trustee" in the preamble to this Trust Agreement solely in its capacity as
Property Trustee of the Trust heretofore created and continued hereunder and not
in its individual capacity, or its successor in interest in such capacity, or
any successor property trustee appointed as herein provided.
"Redemption Date" means, with respect to any Trust Security to be
redeemed, the date fixed for such redemption by or pursuant to this Trust
Agreement; provided that each Debenture Redemption Date and the stated maturity
of the Debentures shall be a Redemption Date for a Like Amount of Trust
Securities.
"Redemption Price" means, with respect to any Trust Security, the
Liquidation Amount of such Trust Security, plus accumulated and unpaid
Distributions to the Redemption Date, plus the related amount of the premium, if
any, paid by the Depositor upon the concurrent redemption of a Like Amount of
Debentures, allocated on a pro rata basis (based on Liquidation Amounts) among
the Trust Securities.
"Relevant Trustee" shall have the meaning specified in Section 8.10.
"Securities Register" and "Securities Registrar" have the respective
meanings specified in Section 5.4.
"Securityholder" or "Holder" means a Person in whose name a Trust
Security or Trust Securities is registered in the Securities Register; any such
Person shall be a beneficial owner within the meaning of the Delaware Business
Trust Act; provided, however, that in determining whether the Holders of the
requisite amount of Capital Securities have voted on any matter provided for in
this Trust Agreement, then for the purpose of any such determination, so long as
<PAGE> 13
8
Definitive Capital Securities Certificates have not been issued, the term
Securityholders or Holders as used herein shall refer to the Owners.
"Tax Event" means the receipt by the Trust or the Depositor 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 Capital Securities under this Trust Agreement, there is
more than an insubstantial risk that (i) the Trust is, or will be within 90 days
after the date of such Opinion of Counsel, subject to United States federal
income tax with respect to income received or accrued on the Debentures, (ii)
interest payable by the Depositor on the Debentures is not, or within 90 days
after the date of such Opinion of Counsel, will not be, deductible by the
Depositor, in whole or in part, for United States federal income tax purposes or
(iii) the Trust is, or will be within 90 days after the date of such Opinion of
Counsel, subject to more than a de minimis amount of other taxes, duties or
other governmental charges.
"Trust" means the Delaware business trust heretofore created and
continued hereby and identified on the cover page to this Trust Agreement.
"Trust Agreement" means this Amended and Restated Trust Agreement, as
the same may be modified, amended or supplemented in accordance with the
applicable provisions hereof, including (i) all exhibits hereto and (ii) for all
purposes of this Trust Agreement and any such modification, amendment or
supplement, the provisions of the Trust Indenture Act that are deemed to be a
part of and govern this Trust Agreement and any such modification, amendment or
supplement, respectively.
"Trust Indenture Act" means the Trust Indenture Act of 1939 as in force
at the date as of which this instrument was executed; provided, however, that in
the event the Trust Indenture Act of 1939 is amended after such date, "Trust
Indenture Act" means, to the extent required by any such amendment, the Trust
Indenture Act of 1939 as so amended.
"Trust Property" means (a) the Debentures, (b) any cash on deposit in,
or owing to, the Payment Account and (c) all proceeds and rights in respect of
the foregoing.
"Trust Security" means any one of the Common Securities or the Capital
Securities.
"Trust Securities Certificate" means any one of the Common Securities
Certificates or the Capital Securities Certificates.
"Trustees" means, collectively, the Property Trustee, the Delaware
Trustee and the Administrative Trustees.
"Underwriting Agreement" means the Pricing Agreement, dated as of
January 16, 1997, among the Trust, the Depositor and Salomon Brothers Inc, as
representative of the underwriters named therein, incorporating the Underwriting
Agreement dated January 16, 1997.
<PAGE> 14
9
ARTICLE II
Continuation of the Trust
Section II.1 Name.
The Trust continued hereby shall be known as "MBNA Capital B," as such
name may be modified from time to time by the Administrative Trustees following
written notice to the Holders of Trust Securities and the other Trustees, in
which name the Trustees engage in the transactions contemplated hereby, make and
execute contracts and other instruments on behalf of the Trust and sue and be
sued.
Section II.2 Office of the Delaware Trustee; Principal Place of
Business.
The address of the Delaware Trustee in the State of Delaware is c/o The
Bank of New York (Delaware), White Clay Center, Route 273, Newark, Delaware
19711, Attention: Corporate Trust Department or such other address in the State
of Delaware as the Delaware Trustee may designate by written notice to the
Securityholders and the Depositor. The principal executive office of the Trust
is c/o MBNA Corporation, Wilmington, Delaware 19884.
Section II.3 Initial Contribution of Trust Property; Organizational
Expenses.
The Property Trustee acknowledges receipt in trust from the Depositor
in connection with the Original Trust Agreement of the sum of $10, which
constituted the initial Trust Property. The Depositor shall pay organizational
expenses of the Trust as they arise or shall, upon request of any Trustee,
promptly reimburse such Trustee for any such expenses paid by such Trustee. The
Depositor shall make no claim upon the Trust Property for the payment of such
expenses.
Section II.4 Issuance of the Capital Securities.
As of January 16, 1997, the Depositor, on behalf of the Trust and
pursuant to the Original Trust Agreement, executed and delivered the
Underwriting Agreement. Contemporaneously with the execution and delivery of
this Trust Agreement, an Administrative Trustee, on behalf of the Trust, shall
execute in accordance with Section 5.2 and deliver to the Underwriters named in
the Underwriting Agreement Capital Securities Certificates, registered in the
name of the nominee of the initial Clearing Agency, in an aggregate amount of
280,000 Capital Securities having an aggregate Liquidation Amount of
$280,000,000, against receipt of an aggregate purchase price of such Capital
Securities of $276,785,600, which amount such Administrative Trustee shall
promptly deliver to the Property Trustee.
Section II.5 Issuance of the Common Securities; Subscription and
Purchase of Debentures.
Contemporaneously with the execution and delivery of this Trust
Agreement, an Administrative Trustee, on behalf of the Trust, shall execute in
accordance with Section 5.2 and deliver to the Depositor Common Securities
Certificates, registered in the name of the Depositor, in an aggregate amount of
8,660 Common Securities having an aggregate Liquidation Amount of $8,660,000
against payment by the Depositor of an aggregate purchase price therefor of
$8,560,583.20 which amount such Administrative Trustee shall promptly deliver to
the Property Trustee. Contemporaneously therewith, an Administrative Trustee, on
behalf of the Trust, shall subscribe to and purchase from the Depositor
Debentures, registered in the name of the Trust and having an aggregate
principal amount equal to $288,660,000, and, in satisfaction of the purchase
price for such Debentures, the Property Trustee, on behalf of the Trust, shall
deliver to the Depositor the sum of $285,346,183.20 (being the sum of the
amounts delivered to the Property
<PAGE> 15
10
Trustee pursuant to (i) the second sentence of Section 2.4 and (ii) the first
sentence of this Section 2.5).
Section II.6 Declaration of Trust.
The exclusive purposes and functions of the Trust are (a) to issue and
sell Trust Securities, (b) to use the proceeds from such sale to acquire the
Debentures and (c) to engage in those activities necessary or incidental
thereto. The Depositor hereby appoints the Trustees as trustees of the Trust, to
have all the rights, powers and duties to the extent set forth herein, and the
Trustees hereby accept such appointment. The Property Trustee hereby declares
that it will hold the Trust Property in trust upon and subject to the conditions
set forth herein for the benefit of the Trust and the Securityholders. The
Administrative Trustees shall have all rights, powers and duties set forth
herein and in accordance with applicable law with respect to accomplishing the
purposes of the Trust. The Delaware Trustee shall not be entitled to exercise
any powers, nor shall the Delaware Trustee have any of the duties and
responsibilities, of the Property Trustee or the Administrative Trustees set
forth herein. The Delaware Trustee shall be one of the Trustees of the Trust for
the sole and limited purpose of fulfilling the requirements of Section 3807 of
the Delaware Business Trust Act.
Section II.7 Authorization to Enter into Certain Transactions.
(a) The Trustees shall conduct the affairs of the Trust in accordance
with the terms of this Trust Agreement. Subject to the limitations set forth in
paragraph (b) of this Section, Article VIII and in accordance with the following
provisions (i) and (ii), the Trustees shall have the authority to enter into all
transactions and agreements determined by the Trustees to be appropriate in
exercising the authority, express or implied, otherwise granted to the Trustees
under this Trust Agreement, and to perform all acts in furtherance thereof,
including without limitation, the following:
(i) As among the Trustees, each Administrative Trustee
shall have the power and authority to act on behalf of the Trust with
respect to the following matters:
(A) the issuance and sale of the Trust Securities;
(B) to cause the Trust to enter into, and to execute,
deliver and perform on behalf of the Trust, the Certificate
Depository Agreement, the Underwriting Agreement, and such
other agreements as may be necessary or desirable in
connection with the purposes and function of the Trust;
(C) assisting in the registration of the Capital
Securities under the Securities Act of 1933, as amended, and
under state securities or blue sky laws, and the qualification
of this Trust Agreement as a trust indenture under the Trust
Indenture Act;
(D) assisting in the listing, if any, of the Capital
Securities upon such national or international securities
exchange or exchanges or automated quotation system or systems
as shall be determined by the Depositor and the registration
of the Capital Securities under the Securities Exchange Act of
1934, as amended, and the preparation and filing of all
periodic and other reports and other documents pursuant to the
foregoing;
(E) the sending of notices (other than notices of
default) and other information regarding the Trust Securities
and the Debentures to the Securityholders in accordance with
this Trust Agreement;
<PAGE> 16
11
(F) the appointment of a Paying Agent and Securities
Registrar in accordance with this Trust Agreement;
(G) registering transfer of the Trust Securities in
accordance with this Trust Agreement;
(H) to the extent provided in this Trust Agreement,
the winding up of the affairs of and liquidation of the Trust
and the execution and filing of the certificate of
cancellation with the Secretary of State of the State of
Delaware; and
(I) the taking of any action incidental to the
foregoing as the Trustees may from time to time determine is
necessary or advisable to give effect to the terms of this
Trust Agreement for the benefit of the Securityholders
(without consideration of the effect of any such action on any
particular Securityholder).
(ii) As among the Trustees, the Property Trustee shall
have the power, duty and authority to act on behalf of the Trust with
respect to the following matters:
(A) the establishment of the Payment Account;
(B) the receipt of the Debentures;
(C) the collection of interest, principal and any
other payments made in respect of the Debentures in the
Payment Account;
(D) the distribution through the Paying Agent of
amounts owed to the Securityholders in respect of the Trust
Securities;
(E) the exercise of all of the rights, powers and
privileges of a holder of the Debentures;
(F) the sending of notices of default and other
information regarding the Trust Securities and the Debentures
to the Securityholders in accordance with this Trust
Agreement;
(G) the distribution of the Trust Property in
accordance with the terms of this Trust Agreement;
(H) to the extent provided in this Trust Agreement,
the winding up of the affairs of and liquidation of the Trust
and the execution and filing of the certificate of
cancellation with the Secretary of State of the State of
Delaware;
(I) after an Event of Default (other than under
paragraph (b), (c), (d) or (e) of the definition of such term
if such Event of Default is by or with respect to the Property
Trustee) the taking of any action incidental to the foregoing
as the Property Trustee may from time to time determine is
necessary or advisable to give effect to the terms of this
Trust Agreement and protect and conserve the Trust Property
for the benefit of the Securityholders (without consideration
of the effect of any such action on any particular
Securityholder); and
(J) except as otherwise provided in this Section
2.7(a)(ii), the Property Trustee shall have none of the
duties, liabilities, powers or the authority of the
Administrative Trustees set forth in Section 2.7(a)(i).
(b) So long as this Trust Agreement remains in effect, the Trust (or
the Trustees acting on behalf of the Trust) shall not undertake any business,
activities or transactions except as
<PAGE> 17
12
expressly provided herein or contemplated hereby. In particular, the Trustees
shall not (i) acquire any investments or engage in any activities not authorized
by this Trust Agreement, (ii) sell, assign, transfer, exchange, mortgage,
pledge, set-off or otherwise dispose of any of the Trust Property or interests
therein, including to Securityholders, except as expressly provided herein,
(iii) take any action that would cause the Trust to fail or cease to qualify as
a "grantor trust" for United States federal income tax purposes, (iv) incur any
indebtedness for borrowed money or issue any other debt, (v) take or consent to
any action that would result in the placement of a Lien on any of the Trust
Property, (vi) invest any proceeds received by the Trust from holding the
Debentures, but shall distribute all such proceeds to Holders of Trust
Securities pursuant to the terms of this Trust Agreement and of the Trust
Securities; (vii) acquire any assets other than the Trust Property; (viii)
possess any power or otherwise act in such a way as to vary the Trust Property;
(ix) possess any power or otherwise act in such a way as to vary the terms of
the Trust Securities in any way whatsoever (except to the extent expressly
authorized in this Trust Agreement or by the terms of the Trust Securities); or
(x) issue any securities or other evidences of beneficial ownership of, or
beneficial interest in, the Trust other than the Trust Securities. The
Administrative Trustees shall defend all claims and demands of all Persons at
any time claiming any Lien on any of the Trust Property adverse to the interest
of the Trust or the Securityholders in their capacity as Securityholders.
(c) In connection with the issue and sale of the Capital Securities,
the Depositor shall have the right and responsibility to assist the Trust with
respect to, or effect on behalf of the Trust, the following (and any actions
taken by the Depositor in furtherance of the following prior to the date of this
Trust Agreement are hereby ratified and confirmed in all respects):
(i) the preparation and filing by the Trust with the
Commission and the execution on behalf of the Trust of a registration
statement on the appropriate form in relation to the Capital
Securities, including any amendments thereto;
(ii) the determination of the states in which to take
appropriate action to qualify or register for sale all or part of the
Capital Securities and the determination of any and all such acts,
other than actions which must be taken by or on behalf of the Trust,
and the advice to the Trustees of actions they must take on behalf of
the Trust, and the preparation for execution and filing of any
documents to be executed and filed by the Trust or on behalf of the
Trust, as the Depositor deems necessary or advisable in order to comply
with the applicable laws of any such states;
(iii) the preparation for filing by the Trust and
execution on behalf of the Trust of an application to the New York
Stock Exchange or any other national or international stock exchange or
the NASDAQ National Market or any other automated quotation system for
listing upon notice of issuance of any Capital Securities and filing
with such exchange or self regulatory organization such notifications
and documents as may be necessary from time to time to maintain such
listing;
(iv) the negotiation of the terms of, and the
execution and delivery of, the Underwriting Agreement providing for
the sale of the Capital Securities; and
(v) the taking of any other actions necessary or
desirable to carry out any of the foregoing activities.
(d) Notwithstanding anything herein to the contrary, the Administrative
Trustees are authorized and directed to conduct the affairs of the Trust and to
operate the Trust so that the Trust will not be deemed to be an "investment
company" required to be registered under the 1940 Act, or fail to be classified
as a grantor trust for United States federal income tax purposes and so that the
Debentures will be treated as indebtedness of the Depositor for United States
federal income tax purposes. In this connection, the Depositor and the
Administrative Trustees
<PAGE> 18
13
are authorized to take any action, not inconsistent with applicable law, the
Certificate of Trust or this Trust Agreement, that each of the Depositor and any
Administrative Trustee determines in its discretion to be necessary or desirable
for such purposes, as long as such action does not adversely affect in any
material respect the interests of the Holders of the Capital Securities.
Section II.8 Assets of Trust.
The assets of the Trust shall consist solely of the Trust Property.
Section II.9 Title to Trust Property.
Legal title to all Trust Property shall be vested at all times in the
Property Trustee (in its capacity as such) and shall be held and administered by
the Property Trustee for the benefit of the Trust and the Securityholders in
accordance with this Trust Agreement.
ARTICLE III
Payment Account
Section III.1 Payment Account.
(a) On or prior to the Closing Date, the Property Trustee shall
establish the Payment Account. The Property Trustee and any agent of the
Property Trustee shall have exclusive control and sole right of withdrawal with
respect to the Payment Account for the purpose of making deposits in and
withdrawals from the Payment Account in accordance with this Trust Agreement.
All monies and other property deposited or held from time to time in the Payment
Account shall be held by the Property Trustee in the Payment Account for the
exclusive benefit of the Securityholders and for distribution as herein
provided, including (and subject to) any priority of payments provided for
herein.
(b) The Property Trustee shall deposit in the Payment Account, promptly
upon receipt, all payments of principal of or interest or premium on, and any
other payments or proceeds with respect to, the Debentures. Amounts held in the
Payment Account shall not be invested by the Property Trustee.
ARTICLE IV
Distributions; Redemption
Section IV.1 Distributions.
(a) The Trust Securities represent undivided beneficial ownership
interests in the Trust Property, and Distributions (including of Additional
Amounts) will be made on the Trust Securities at the rate and on the dates that
payments of interest (including of Additional Interest, as defined in the
Indenture) are made on the Debentures. Accordingly:
(i) Distributions on the Trust Securities shall be
cumulative, and will accumulate whether or not there are funds of the
Trust available for the payment of Distributions. Distributions shall
accrue from January 23, 1997, and, except in the event (and to the
extent) that the Depositor exercises its right to defer the payment of
interest on the Debentures pursuant to the Indenture, shall be payable
quarterly in arrears on February 1, May 1, August 1 and November 1 of
each year, commencing on May 1,
<PAGE> 19
14
1997. If any date on which a Distribution is otherwise payable on the
Trust Securities is not a Business Day, then the payment of such
Distribution shall 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, payment of such Distribution shall be made on
the immediately preceding Business Day, in each case with the same
force and effect as if made on such date (each date on which
Distributions are payable in accordance with this Section 4.1(a), a
"Distribution Date").
(ii) Assuming payments of interest on the Debentures are
made when due (and before giving effect to Additional Amounts, if
applicable), Distributions on the Trust Securities shall be payable at
the rate of 0.80% per annum plus LIBOR (as defined in the Debentures)
on the Liquidation Amount of the Trust Securities. The amount of
Distributions shall be computed on the basis of the actual number of
days in the period and a 360 day year. The amount of Distributions
payable for any period shall include the Additional Amounts, if any.
(iii) Distributions on the Trust Securities shall be made
by the Property Trustee from the Payment Account and shall be payable
on each Distribution Date only to the extent that the Trust has funds
then on hand and available in the Payment Account for the payment of
such Distributions.
(b) Distributions on the Trust Securities with respect to a
Distribution Date shall be payable to the Holders thereof as they appear on the
Securities Register for the Trust Securities on the relevant record date, which
shall be one Business Day prior to such Distribution Date; provided, however,
that in the event that the Capital Securities do not remain in book-entry-only
form, the relevant record date shall be the 15th day of the month prior to the
relevant Distribution Date (whether or not such record date is a Business Day).
Section IV.2 Redemption.
(a) On each Debenture Redemption Date and on the stated maturity of the
Debentures, the Trust will be required to redeem a Like Amount of Trust
Securities at the Redemption Price.
(b) Notice of redemption shall be given by the Property Trustee by
first-class mail, postage prepaid, mailed not less than 30 nor more than 60 days
prior to the Redemption Date to each Holder of Trust Securities to be redeemed,
at such Holder's address appearing in the Security Register. All notices of
redemption shall state:
(i) the Redemption Date;
(ii) the Redemption Price;
(iii) the CUSIP number, International Securities
Identification Number and Common Code;
(iv) if less than all the Outstanding Trust Securities
are to be redeemed, the identification and the total Liquidation Amount
of the particular Trust Securities to be redeemed;
(v) that on the Redemption Date the Redemption Price
will become due and payable upon each such Trust Security to be
redeemed and that Distributions thereon will cease to accrue on and
after said date; and
<PAGE> 20
15
(vi) if the Capital Securities are no longer in
book-entry-only form, the place and address where the Holders shall
surrender their Capital Securities Certificates.
(c) The Trust Securities redeemed on each Redemption Date shall be
redeemed at the Redemption Price with the proceeds from the contemporaneous
redemption or payment at stated maturity of Debentures. Redemptions of the Trust
Securities shall be made and the Redemption Price shall be payable on each
Redemption Date only to the extent that the Trust has funds then on hand and
available in the Payment Account for the payment of such Redemption Price.
(d) If the Property Trustee gives a notice of redemption in respect of
any Capital Securities, then, by 12:00 noon, New York City time, on the
Redemption Date, subject to Section 4.2(c), the Property Trustee will, so long
as the Capital Securities are in book-entry-only form, irrevocably deposit with
the Clearing Agency for the Capital Securities funds sufficient to pay the
applicable Redemption Price and will give such Clearing Agency irrevocable
instructions and authority to pay the Redemption Price to the Owners thereof. If
the Capital Securities are no longer in book-entry-only form, the Property
Trustee, subject to Section 4.2(c), will irrevocably deposit with the Paying
Agent funds sufficient to pay the applicable Redemption Price and will give the
Paying Agent irrevocable instructions and authority to pay the Redemption Price
to the Holders thereof upon surrender of their Capital Securities Certificates.
Notwithstanding the foregoing, Distributions payable on or prior to the
Redemption Date for any Trust Securities called for redemption shall be payable
to the Holders of such Trust Securities as they appear on the Securities
Register for the Trust 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
Securityholders holding Trust Securities so called for redemption will cease,
except the right of such Securityholders to receive the Redemption Price and any
Distribution payable on or prior to the Redemption Date, but without interest
thereon, and such Trust Securities will cease to be outstanding. In the event
that any date on which any Redemption Price is payable is not a Business Day,
then payment of the Redemption Price 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 falls
in the next calendar year, such payment will be made on the immediately
preceding Business Day, in each case, with the same force and effect as if made
on such date. In the event that payment of the Redemption Price in respect of
any Trust Securities called for redemption is improperly withheld or refused and
not paid either by the Trust or by the Depositor pursuant to the Guarantee,
Distributions on such Trust Securities will continue to accrue, at the then
applicable rate, from the Redemption Date originally established by the Trust
for such Trust 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.
(e) Payment of the Redemption Price on the Trust Securities shall be
made to the recordholders thereof as they appear on the Securities Register for
the Trust Securities on the relevant record date, which shall be one Business
Day prior to the relevant Redemption Date; provided, however, that in the event
that the Capital Securities do not remain in book-entry-only form, the relevant
record date shall be the date fifteen days prior to the relevant Redemption
Date.
(f) Subject to Section 4.3(a), if less than all the Outstanding Trust
Securities are to be redeemed on a Redemption Date, then the aggregate
Liquidation Amount of Trust Securities to be redeemed shall be allocated on a
pro rata basis (based on Liquidation Amounts) among the Common Securities and
the Capital Securities. The particular Capital Securities to be redeemed shall
be selected on a pro rata basis (based upon Liquidation Amounts) not more than
60 days prior to the Redemption Date by the Property Trustee from the
Outstanding Capital Securities not previously called for redemption, by such
method (including, without limitation, by lot) as
<PAGE> 21
16
the Property Trustee shall deem fair and appropriate and which may provide for
the selection for redemption of portions (equal to $1,000 or an integral
multiple of $1,000 in excess thereof) of the Liquidation Amount of Capital
Securities of a denomination larger than $1,000. The Property Trustee shall
promptly notify the Security Registrar in writing of the Capital Securities
selected for redemption and, in the case of any Capital Securities selected for
partial redemption, the Liquidation Amount thereof to be redeemed. For all
purposes of this Trust Agreement, unless the context otherwise requires, all
provisions relating to the redemption of Capital Securities shall relate, in the
case of any Capital Securities redeemed or to be redeemed only in part, to the
portion of the Liquidation Amount of Capital Securities that has been or is to
be redeemed.
Section IV.3 Subordination of Common Securities.
(a) Payment of Distributions (including Additional Amounts, if
applicable) on, and the Redemption Price of, the Trust Securities, as
applicable, shall be made, subject to Section 4.2(f), pro rata among the Common
Securities and the Capital Securities based on the Liquidation Amount of the
Trust Securities; provided, however, that if on any Distribution Date or
Redemption Date any Event of Default resulting from a Debenture Event of Default
shall have occurred and be continuing, no payment of any Distribution (including
Additional Amounts, if applicable) on, or Redemption Price of, any Common
Security, and no other payment on account of the redemption, liquidation or
other acquisition of Common Securities, shall be made unless payment in full in
cash of all accumulated and unpaid Distributions (including Additional Amounts,
if applicable) on all Outstanding Capital 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 Outstanding
Capital Securities then called for redemption, shall have been made or provided
for, and all funds immediately available to the Property Trustee shall first be
applied to the payment in full in cash of all Distributions (including
Additional Amounts, if applicable) on, or the Redemption Price of, Capital
Securities then due and payable.
(b) In the case of the occurrence of any Event of Default resulting
from any Debenture Event of Default, the Holder of Common Securities will be
deemed to have waived any right to act with respect to any such Event of Default
under this Trust Agreement until the effect of all such Events of Default with
respect to the Capital Securities have been cured, waived or otherwise
eliminated. Until any such Event of Default under this Trust Agreement with
respect to the Capital Securities has been so cured, waived or otherwise
eliminated, the Property Trustee shall act solely on behalf of the Holders of
the Capital Securities and not the Holder of the Common Securities, and only the
Holders of the Capital Securities will have the right to direct the Property
Trustee to act on their behalf.
Section IV.4 Payment Procedures.
Payments of Distributions (including Additional Amounts, if applicable)
in respect of the Capital Securities shall be made by check mailed to the
address of the Person entitled thereto as such address shall appear on the
Securities Register or, if the Capital Securities are held by a Clearing Agency,
such Distributions shall be made to the Clearing Agency in immediately available
funds, which shall credit the relevant Persons' accounts at such Clearing Agency
on the applicable Distribution Dates. Payments in respect of the Common
Securities shall be made in such manner as shall be mutually agreed in writing
between the Property Trustee and the Common Securityholder.
Section IV.5 Tax Returns and Reports.
The Administrative Trustees shall prepare (or cause to be prepared), at
the Depositor's expense, and file all United States federal, state and local tax
and information returns and reports
<PAGE> 22
17
required to be filed by or in respect of the Trust. In this regard, the
Administrative Trustees shall (a) prepare and file (or cause to be prepared and
filed) the appropriate Internal Revenue Service Form required to be filed in
respect of the Trust in each taxable year of the Trust and (b) prepare and
furnish (or cause to be prepared and furnished) to each Securityholder the
appropriate Internal Revenue Service form and the information required to be
provided on such form. The Administrative Trustees shall provide the Depositor
and the Property Trustee with a copy of all such returns and reports promptly
after such filing or furnishing. The Trustees shall comply with United States
federal withholding and backup withholding tax laws and information reporting
requirements with respect to any payments to Securityholders under the Trust
Securities.
Section IV.6 Payment of Expenses of the Trust.
(a) Pursuant to Section 10.6 of the Indenture, the Depositor, as
borrower, has agreed to pay to the Trust, and reimburse the Trust for, the full
amount of any costs, expenses or liabilities of the Trust (other than
obligations of the Trust to pay the holders of any Trust Securities or other
similar interests in the Trust the amounts due such Holders pursuant to the
terms of the Trust Securities or such other similar interests, as the case may
be), including without limitation, any taxes, duties or other governmental
charges of whatever nature (other than United States withholding taxes) imposed
on the Trust by the United States or any other taxing authority. Such payment
obligation includes any such costs, expenses or liabilities of the Trust that
are required by applicable law to be satisfied in connection with a termination
of such Trust.
(b) Upon receipt by the Trust of the amounts described in subsection
4.6(a), the Trust shall promptly pay any taxes, duties or other governmental
charges of whatever nature (other than United States withholding taxes) imposed
on the Trust by the United States or any other taxing authority.
Section IV.7 Payments under Indenture or Pursuant to Direct Actions.
Any amount payable hereunder to any Holder of Capital Securities shall
be reduced by the amount of any corresponding payment such Holder (or an Owner
with respect to the Holder's Capital Securities) has directly received pursuant
to Section 5.8 of the Indenture or Section 5.14 of this Trust Agreement.
ARTICLE V
Trust Securities Certificates
Section V.1 Initial Ownership.
Upon the creation of the Trust and the contribution by the Depositor
referred to in Section 2.3 and until the issuance of the Trust Securities, and
at any time during which no Trust Securities are outstanding, the Depositor
shall be the sole beneficial owner of the Trust.
Section V.2 The Trust Securities Certificates.
The Capital Securities Certificates shall be issued in minimum
denominations of $1,000 Liquidation Amount and integral multiples of $1,000 in
excess thereof, and the Common Securities Certificates shall be issued in
denominations of $1,000 Liquidation Amount and integral multiples thereof. The
Trust Securities Certificates shall be executed on behalf of the Trust by manual
or facsimile
<PAGE> 23
18
signature of at least one Administrative Trustee and, if executed on behalf of
the Trust by facsimile, countersigned by a transfer agent or its agent. The
Capital Securities Certificates shall be authenticated by the Property Trustee
by manual or facsimile signature of an authorized signatory thereof and, if
executed by such authorized signatory of the Property Trustee by facsimile,
countersigned by a transfer agent or its agent. Trust Securities Certificates
bearing the manual signatures of individuals who were, at the time when such
signatures shall have been affixed, authorized to sign on behalf of the Trust or
the Property Trustee or, if executed on behalf of the Trust or the Property
Trustee by facsimile, countersigned by a transfer agent or its agent, shall be
validly issued and entitled to the benefits of this Trust Agreement,
notwithstanding that such individuals or any of them shall have ceased to be so
authorized prior to the delivery of such Trust Securities Certificates or did
not hold such offices at the date of delivery of such Trust Securities
Certificates. A transferee of a Trust Securities Certificate shall become a
Securityholder, and shall be entitled to the rights and subject to the
obligations of a Securityholder hereunder, upon due registration of such Trust
Securities Certificate in such transferee's name pursuant to Sections 5.4, 5.11
and 5.13.
Section V.3 Execution and Delivery of Trust Securities Certificates.
On the Closing Date, the Administrative Trustees shall cause Trust
Securities Certificates, in an aggregate Liquidation Amount as provided in
Sections 2.4 and 2.5, to be executed on behalf of the Trust and delivered to or
upon the written order of the Depositor, signed by its chairman of the board,
its president, any executive vice president or any vice president, treasurer or
assistant treasurer or controller without further corporate action by the
Depositor, in authorized denominations.
Section V.4 Registration of Transfer and Exchange of Capital Securities
Certificates.
The Depositor shall keep or cause to be kept, at the office or agency
maintained pursuant to Section 5.8, a register or registers for the purpose of
registering Trust Securities Certificates and transfers and exchanges of Capital
Securities Certificates (the "Securities Register") in which the transfer agent
and registrar designated by the Depositor (the "Securities Registrar"), subject
to such reasonable regulations as it may prescribe, shall provide for the
registration of Capital Securities Certificates and Common Securities
Certificates (subject to Section 5.10 in the case of the Common Securities
Certificates) and registration of transfers and exchanges of Capital Securities
Certificates as herein provided. The Bank shall be the initial Securities
Registrar.
Upon surrender for registration of transfer of any Capital Securities
Certificate at the office or agency maintained pursuant to Section 5.8, the
Administrative Trustees or any one of them shall execute on behalf of the Trust
(and if executed on behalf of the Trust by a facsimile signature, such
certificate shall be countersigned by a transfer agent or its agent) and
deliver, in the name of the designated transferee or transferees, one or more
new Capital Securities Certificates in authorized denominations of a like
aggregate Liquidation Amount dated the date of execution by such Administrative
Trustee or Trustees. The Securities Registrar shall not be required to register
the transfer of any Capital Securities that have been called for redemption
during a period beginning at the opening of business 15 days before the day of
the mailing of a notice of redemption and ending at the close of business on the
day of such mailing.
At the option of a Holder, Capital Securities Certificates may be
exchanged for other Capital Securities Certificates in authorized denominations
of the same class and of a like aggregate Liquidation Amount upon surrender of
the Capital Securities Certificates to be exchanged at the office or agency
maintained pursuant to Section 5.8.
Every Capital Securities Certificate presented or surrendered for
registration of transfer or exchange shall be accompanied by a written
instrument of transfer in form satisfactory to an Administrative Trustee and the
Securities Registrar duly executed by the Holder or his attorney duly authorized
in writing. Each Capital Securities Certificate surrendered for registration of
<PAGE> 24
19
transfer or exchange shall be cancelled and subsequently disposed of by an
Administrative Trustee or the Securities Registrar in accordance with such
Person's customary practice.
No service charge shall be made for any registration of transfer or
exchange of Capital Securities Certificates, but the Securities Registrar may
require payment of a sum sufficient to cover any tax or governmental charge that
may be imposed in connection with any transfer or exchange of Capital Securities
Certificates.
Section V.5 Mutilated, Destroyed, Lost or Stolen Trust Securities
Certificates.
If (a) any mutilated Trust Securities Certificate shall be surrendered
to the Securities Registrar, or if the Securities Registrar shall receive
evidence to its satisfaction of the destruction, loss or theft of any Trust
Securities Certificate and (b) there shall be delivered to the Securities
Registrar and the Administrative Trustees such security or indemnity as may be
required by them to save each of them harmless, then in the absence of notice
that such Trust Securities Certificate shall have been acquired by a bona fide
purchaser, the Administrative Trustees, or any one of them, on behalf of the
Trust shall execute by manual or facsimile signature and, if executed on behalf
of the Trust by facsimile signature, such certificate shall be countersigned by
a transfer agent, and make available for delivery, in exchange for or in lieu of
any such mutilated, destroyed, lost or stolen Trust Securities Certificate, a
new Trust Securities Certificate of like class, tenor and denomination. In
connection with the issuance of any new Trust Securities Certificate under this
Section, the Administrative Trustees or the Securities Registrar may require the
payment of a sum sufficient to cover any tax or other governmental charge that
may be imposed in connection therewith. Any duplicate Trust Securities
Certificate issued pursuant to this Section shall constitute conclusive evidence
of an undivided beneficial interest in the Trust Property, as if originally
issued, whether or not the lost, stolen or destroyed Trust Securities
Certificate shall be found at any time.
Section V.6 Persons Deemed Securityholders.
The Trustees or the Securities Registrar shall treat the Person in
whose name any Trust Securities Certificate shall be registered in the
Securities Register as the owner of such Trust Securities Certificate for the
purpose of receiving Distributions and for all other purposes whatsoever, and
neither the Trustees nor the Securities Registrar shall be bound by any notice
to the contrary.
Section V.7 Access to List of Securityholders' Names and Addresses.
Each Holder and each Owner shall be deemed to have agreed not to hold
the Depositor, the Property Trustee or the Administrative Trustees accountable
by reason of the disclosure of its name and address, regardless of the source
from which such information was derived.
Section V.8 Maintenance of Office or Agency.
The Administrative Trustees shall maintain an office or offices or
agency or agencies where Capital Securities Certificates may be surrendered for
registration of transfer or exchange and where notices and demands to or upon
the Trustees in respect of the Trust Securities Certificates may be served. The
Administrative Trustees initially designate The Bank of New York, 101 Barclay
Street, Floor 21 West, New York, New York 10286 Attn: Corporate Trust
Administration, as its principal corporate trust office for such purposes. The
Administrative Trustees shall give prompt written notice to the Depositor, the
Property Trustee and to the Securityholders of any change in the location of the
Securities Register or any such office or agency.
<PAGE> 25
20
Section V.9 Appointment of Paying Agent.
The Paying Agent shall make Distributions to Securityholders from the
Payment Account and shall report the amounts of such Distributions to the
Property Trustee and the Administrative Trustees. Any Paying Agent shall have
the revocable power to withdraw funds from the Payment Account for the purpose
of making the Distributions referred to above. The Administrative Trustees may
revoke such power and remove the Paying Agent if such Trustees determine in
their sole discretion that the Paying Agent shall have failed to perform its
obligations under this Trust Agreement in any material respect. The Paying Agent
shall initially be the Bank, and any co-paying agent chosen by the Bank, and
acceptable to the Administrative Trustees and the Depositor. Any Person acting
as Paying Agent shall be permitted to resign as Paying Agent upon 30 days'
written notice to the Administrative Trustees, the Property Trustee and the
Depositor. In the event that the Bank shall no longer be the Paying Agent or a
successor Paying Agent shall resign or its authority to act be revoked, the
Administrative Trustees shall appoint a successor that is acceptable to the
Property Trustee and the Depositor to act as Paying Agent (which shall be a bank
or trust company). The Administrative Trustees shall cause such successor Paying
Agent or any additional Paying Agent appointed by the Administrative Trustees to
execute and deliver to the Trustees an instrument in which such successor Paying
Agent or additional Paying Agent shall agree with the Trustees that as Paying
Agent, such successor Paying Agent or additional Paying Agent will hold all
sums, if any, held by it for payment to the Securityholders in trust for the
benefit of the Securityholders entitled thereto until such sums shall be paid to
such Securityholders. The Paying Agent shall return all unclaimed funds to the
Property Trustee and upon resignation or removal of a Paying Agent such Paying
Agent shall also return all funds in its possession to the Property Trustee. The
provisions of Sections 8.1, 8.3 and 8.6 herein shall apply to the Bank also in
its role as Paying Agent, for so long as the Bank shall act as Paying Agent and,
to the extent applicable, to any other paying agent appointed hereunder, and any
Paying Agent shall be bound by the requirements with respect to paying agents of
securities issued pursuant to the Trust Indenture Act. Any reference in this
Agreement to the Paying Agent shall include any co-paying agent unless the
context requires otherwise.
Section V.10 Ownership of Common Securities by Depositor.
On the Closing Date, the Depositor shall acquire and retain beneficial
and record ownership of the Common Securities. To the fullest extent permitted
by law, other than a transfer in connection with a consolidation or merger of
the Depositor into another Person, or any conveyance, transfer or lease by the
Depositor of its properties and assets substantially as an entirety to any
Person, pursuant to Section 8.1 of the Indenture, any attempted transfer of the
Common Securities shall be void. The Administrative Trustees shall cause each
Common Securities Certificate issued to the Depositor to contain a legend
stating "THIS CERTIFICATE IS NOT TRANSFERABLE TO ANY PERSON".
Section V.11 Book-Entry Capital Securities Certificates; Common
Securities Certificate.
(a) The Capital Securities Certificates, upon original issuance, will
be issued in the form of a typewritten Capital Securities Certificate or
Certificates representing Book-Entry Capital Securities Certificates, to be
delivered to The Depository Trust Company, the initial Clearing Agency, by, or
on behalf of, the Trust. Such Capital Securities Certificate or Certificates
shall initially be registered on the Securities Register in the name of Cede &
Co., the nominee of the initial Clearing Agency, and no Owner will receive a
Definitive Capital Securities Certificate representing such Owner's interest in
such Capital Securities, except as provided in Section 5.13. Unless and until
Definitive Capital Securities Certificates have been issued to Owners pursuant
to Section 5.13:
<PAGE> 26
21
(i) the provisions of this Section 5.11(a) shall be in
full force and effect;
(ii) the Securities Registrar and the Trustees shall be
entitled to deal with the Clearing Agency for all purposes of this
Trust Agreement relating to the Book-Entry Capital Securities
Certificates (including the payment of the Liquidation Amount of and
Distributions on the Capital Securities evidenced by Book-Entry Capital
Securities Certificates and the giving of instructions or directions to
Owners of Capital Securities evidenced by Book-Entry Capital Securities
Certificates) as the sole Holder of Capital Securities evidenced by
Book-Entry Capital Securities Certificates and shall have no
obligations to the Owners thereof;
(iii) to the extent that the provisions of this Section
5.11 conflict with any other provisions of this Trust Agreement, the
provisions of this Section 5.11 shall control; and
(iv) the rights of the Owners of the Book-Entry Capital
Securities Certificates shall be exercised only through the Clearing
Agency and shall be limited to those established by law and agreements
between such Owners and the Clearing Agency and/or the Clearing Agency
Participants. Pursuant to the Certificate Depository Agreement, unless
and until Definitive Capital Securities Certificates are issued
pursuant to Section 5.13, the initial Clearing Agency will make
book-entry transfers among the Clearing Agency Participants and receive
and transmit payments on the Capital Securities to such Clearing Agency
Participants.
(b) A single Common Securities Certificate representing the Common
Securities shall be issued to the Depositor in the form of a definitive Common
Securities Certificate.
Section V.12 Notices to Clearing Agency.
To the extent that a notice or other communication to the Owners is
required under this Trust Agreement, unless and until Definitive Capital
Securities Certificates shall have been issued to Owners pursuant to Section
5.13, the Trustees shall give all such notices and communications specified
herein to be given to Owners to the Clearing Agency, and shall have no
obligations to the Owners.
Section V.13 Definitive Capital Securities Certificates.
If (a) the Depositor or the Clearing Agency advises the Trustees in
writing that the Clearing Agency is no longer willing or able to properly
discharge its responsibilities with respect to the Capital Securities
Certificates, and the Depositor is unable to locate a qualified successor, or if
at anytime the Clearing Agency ceases to be a clearing agency registered under
the Securities Exchange Act of 1934, as amended, at a time when the Clearing
Agency is required to be so registered to act as such depositary, (b) the
Depositor at its option advises the Trustees in writing that it elects to
terminate the book-entry system through the Clearing Agency or (c) after the
occurrence of a Debenture Event of Default, Owners of Capital Securities
Certificates representing beneficial interests aggregating at least a majority
of the Liquidation Amount advise the Administrative Trustees in writing that the
continuation of a book-entry system through the Clearing Agency is no longer in
the best interest of the Owners of Capital Securities Certificates, then the
Administrative Trustees shall notify other Trustees and the Clearing Agency, and
the Clearing Agency, in accordance with its customary rules and procedures,
shall notify all Clearing Agency Participants for whom it holds Capital
Securities of the occurrence of any such event and of the availability of the
Definitive Capital Securities Certificates to Owners of such class or classes,
as applicable, requesting the same. Upon surrender to the Administrative
Trustees of the typewritten Capital Securities Certificate or
<PAGE> 27
22
Certificates representing the Book-Entry Capital Securities Certificates by the
Clearing Agency, accompanied by registration instructions, the Administrative
Trustees, or any one of them, shall execute the Definitive Capital Securities
Certificates in accordance with the instructions of the Clearing Agency or, if
executed on behalf of the Trust by facsimile, countersigned by a transfer agent
or its agent. Neither the Securities Registrar nor the Trustees shall be liable
for any delay in delivery of such instructions and may conclusively rely on, and
shall be protected in relying on, such instructions. Upon the issuance of
Definitive Capital Securities Certificates, the Trustees shall recognize the
Holders of the Definitive Capital Securities Certificates as Securityholders.
The Definitive Capital Securities Certificates shall be printed, lithographed or
engraved or may be produced in any other manner as is reasonably acceptable to
the Administrative Trustees that meets the requirements of any stock exchange or
automated quotation system on which the Capital Securities are then listed or
approved for trading, as evidenced by the execution thereof by the
Administrative Trustees or any one of them.
Section V.14 Rights of Securityholders.
(a) The legal title to the Trust Property is vested exclusively in the
Property Trustee (in its capacity as such) in accordance with Section 2.9, and
the Securityholders shall not have any right or title therein other than the
undivided beneficial ownership interest in the assets of the Trust conferred by
their Trust Securities and they shall have no right to call for any partition or
division of property, profits or rights of the Trust except as described below.
The Trust Securities shall be personal property giving only the rights
specifically set forth therein and in this Trust Agreement. The Trust Securities
shall have no preemptive or similar rights and when issued and delivered to
Securityholders against payment of the purchase price therefor will be fully
paid and nonassessable by the Trust. The Holders of the Trust Securities, in
their capacities as such, shall be entitled to the same limitation of personal
liability extended to stockholders of private corporations for profit organized
under the General Corporation Law of the State of Delaware.
(b) For so long as any Capital Securities remain Outstanding, if, upon
a Debenture Event of Default, the Debenture Trustee fails or the holders of not
less than 25% in principal amount of the outstanding Debentures fail to declare
the principal of all of the Debentures to be immediately due and payable, the
Holders of at least 25% in Liquidation Amount of the Capital Securities then
Outstanding shall have such right by a notice in writing to the Depositor and
the Debenture Trustee; and upon any such declaration such principal amount of
and the accrued interest on all of the Debentures shall become immediately due
and payable as set forth in the Indenture, provided that the payment of
principal, premium and interest on such Debentures shall remain subordinated to
the extent provided in the Indenture.
At any time after such a declaration of acceleration with respect to
the Debentures has been made and before a judgment or decree for payment of the
money due has been obtained by the Debenture Trustee as in the Indenture
provided, the Holders of a majority in Liquidation Amount of the Capital
Securities, by written notice to the Property Trustee, the Depositor and the
Debenture Trustee, may rescind and annul such declaration and its consequences
if:
(i) the Depositor has paid or deposited with the
Debenture Trustee a sum sufficient to pay
(A) all overdue installments of interest (including
any Additional Interest (as defined in the Indenture)) on all
of the Debentures,
(B) the principal of (and premium, if any, on) any
Debentures which have become due otherwise than by such
declaration of acceleration and interest thereon at the rate
borne by the Debentures, and
<PAGE> 28
23
(C) all sums paid or advanced by the Debenture
Trustee under the Indenture and the reasonable compensation,
expenses, disbursements and advances of the Debenture Trustee
and the Property Trustee, their agents and counsel; and
(ii) all Events of Default with respect to the
Debentures, other than the non-payment of the principal of the
Debentures which has become due solely by such acceleration, have been
cured or waived as provided in Section 5.13 of the Indenture.
The holders of a majority in aggregate Liquidation Amount of the
Capital Securities may, on behalf of the Holders of all the Capital Securities,
waive any past default under the Indenture, except a default in the payment of
principal, premium or interest (unless all Events of Default with respect to the
Debentures, other than the non-payment of the principal of the Debentures which
has become due solely by such acceleration, have been cured or annulled as
provided in Section 5.3 of the Indenture and the Company has paid or deposited
with the Debenture Trustee a sum sufficient to pay all overdue installments of
interest (including any Additional Interest (as defined in the Indenture)) on
the Debentures, the principal of (and premium, if any, on) any Debentures which
have become due otherwise than by such declaration of acceleration and interest
thereon at the rate borne by the Debentures, and all sums paid or advanced by
the Debenture Trustee under the Indenture and the reasonable compensation,
expenses, disbursements and advances of the Debenture Trustee and the Property
Trustee, their agents and counsel) 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 Debenture. No such rescission shall
affect any subsequent default or impair any right consequent thereon.
Upon receipt by the Property Trustee of written notice declaring such
an acceleration, or rescission and annulment thereof, by Holders of the Capital
Securities all or part of which is represented by Book-Entry Capital Securities
Certificates, a record date shall be established for determining Holders of
Outstanding Capital Securities entitled to join in such notice, which record
date shall be at the close of business on the day the Property Trustee receives
such notice. The Holders of Outstanding Capital Securities on such record date,
or their duly designated proxies, and only such Persons, shall be entitled to
join in such notice, whether or not such Holders remain Holders after such
record date; provided, that, unless such declaration of acceleration, or
rescission and annulment, as the case may be, shall have become effective by
virtue of the requisite percentage having joined in such notice prior to the day
which is 90 days after such record date, such notice of declaration of
acceleration, or rescission and annulment, as the case may be, shall
automatically and without further action by any Holder be canceled and of no
further effect. Nothing in this paragraph shall prevent a Holder, or a proxy of
a Holder, from giving, after expiration of such 90-day period, a new written
notice of declaration of acceleration, or rescission and annulment thereof, as
the case may be, that is identical to a written notice which has been canceled
pursuant to the proviso to the preceding sentence, in which event a new record
date shall be established pursuant to the provisions of this Section 5.14(b).
(c) For so long as any Capital Securities remain Outstanding, to the
fullest extent permitted by law and subject to the terms of this Trust Agreement
and the Indenture, upon a Debenture Event of Default specified in Section 5.1(1)
or 5.1(2) of the Indenture, any Holder of Capital Securities shall have the
right to institute a proceeding directly against the Depositor, pursuant to
Section 5.8 of the Indenture, for enforcement of payment to such Holder of the
principal amount of or premium or interest on Debentures having a principal
amount equal to the Liquidation Amount of the Capital Securities of such Holder
(a "Direct Action"). Except as set forth in Section 5.14(b) and this Section
5.14(c), the Holders of Capital Securities shall have no right to exercise
directly any right or remedy available to the holders of, or in respect of, the
Debentures.
<PAGE> 29
24
Section V.15 CUSIP Numbers, International Securities Identification
Numbers and Common Codes.
The Administrative Trustees in issuing the Capital Securities may use
"CUSIP" numbers, International Securities Identification Numbers and Common
Codes (each, if then generally in use), and, if so, the Property Trustee shall
use "CUSIP" numbers, International Securities Identification Numbers and Common
Codes in notices of redemption as a convenience to Holders; provided that any
such notice may state that no representation is made as to the correctness of
such numbers either as printed on the Capital Securities or as contained in any
notice of a redemption and that reliance may be placed only on the other
identification numbers printed on the Capital Securities, and any such
redemption shall not be affected by any defect in or omission of such numbers.
The Administrative Trustees will promptly notify the Property Trustee of any
change in the CUSIP numbers, International Securities Identification Numbers or
Common Codes.
ARTICLE VI
Acts of Securityholders; Meetings; Voting
Section VI.1 Limitations on Voting Rights.
(a) Except as provided in this Section, in Sections 5.14, 8.10 and 10.3
and in the Indenture and as otherwise required by law, no Holder of Capital
Securities shall have any right to vote or in any manner otherwise control the
administration, operation and management of the Trust or the obligations of the
parties hereto, nor shall anything herein set forth, or contained in the terms
of the Trust Securities Certificates, be construed so as to constitute the
Securityholders from time to time as partners or members of an association.
(b) So long as any Debentures are held by the Property Trustee, the
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 Debenture Trustee with respect to such
Debentures, (ii) waive any past default which is waiveable under Section 5.13 of
the Indenture, (iii) exercise any right to rescind or annul a declaration that
the principal of all the Debentures shall be due and payable or (iv) consent to
any amendment, modification or termination of the Indenture or the Debentures,
where such consent shall be required, without, in each case, obtaining the prior
approval of the Holders of at least a majority in Liquidation Amount of all
Outstanding Capital Securities, provided, however, that where a consent under
the Indenture would require the consent of each holder of Debentures affected
thereby, no such consent shall be given by the Property Trustee without the
prior written consent of each Holder of Capital Securities. The Trustees shall
not revoke any action previously authorized or approved by a vote of the Holders
of Capital Securities, except by a subsequent vote of the Holders of Capital
Securities. The Property Trustee shall notify all Holders of the Capital
Securities of any notice of default received from the Debenture Trustee with
respect to the Debentures. In addition to obtaining the foregoing approvals of
the Holders of the Capital Securities, prior to taking any of the foregoing
actions, the Administrative Trustees shall, at the expense of the Depositor,
obtain an Opinion of Counsel experienced in such matters to the effect that such
action shall not cause the Trust to fail to be classified as a grantor trust for
United States federal income tax purposes.
(c) If any proposed amendment to the Trust Agreement provides for, or
the Trustees otherwise propose to effect, (i) any action that would adversely
affect in any material respect the powers, preferences or special rights of the
Capital Securities, whether by way of amendment to this Trust Agreement or
otherwise, or (ii) the dissolution, winding-up or termination of the Trust,
<PAGE> 30
25
other than pursuant to the terms of this Trust Agreement, then the Holders of
Outstanding Capital Securities as a class will be entitled to vote on such
amendment or proposal and such amendment or proposal shall not be effective
except with the approval of the Holders of at least a majority in Liquidation
Amount of the Outstanding Capital Securities. Notwithstanding any other
provision of this Trust Agreement, no amendment to this Trust Agreement may be
made if, as a result of such amendment, it would cause the Trust to fail to be
classified as a grantor trust for United States federal income tax purposes.
Section VI.2 Notice of Meetings.
Notice of all meetings of the Capital Securityholders, stating the
time, place and purpose of the meeting, shall be given by the Property Trustee
pursuant to Section 10.10 to each Capital Securityholder of record, at his
registered address, at least 15 days and not more than 90 days before the
meeting. At any such meeting, any business properly before the meeting may be so
considered whether or not stated in the notice of the meeting. Any adjourned
meeting may be held as adjourned without further notice.
Section VI.3 Meetings of Capital Securityholders.
No annual meeting of Securityholders is required to be held. The
Administrative Trustees, however, shall call a meeting of Capital
Securityholders to vote on any matter upon the written request of the Capital
Securityholders of record of 25% of the Outstanding Capital Securities (based
upon their Liquidation Amount) and the Administrative Trustees or the Property
Trustee may, at any time in their discretion, call a meeting of Capital
Securityholders to vote on any matters as to which Capital Securityholders are
entitled to vote.
Capital Securityholders of record of 50% of the Outstanding Capital
Securities (based upon their Liquidation Amount), present in person or by proxy,
shall constitute a quorum at any meeting of Capital Securityholders.
If a quorum is present at a meeting, an affirmative vote by the Capital
Securityholders of record present, in person or by proxy, holding more than a
majority of the Outstanding Capital Securities (based upon their Liquidation
Amount) held by holders of record of Outstanding Capital Securities present,
either in person or by proxy, at such meeting shall constitute the action of the
Capital Securityholders, unless this Trust Agreement requires a greater number
of affirmative votes.
Section VI.4 Voting Rights.
Securityholders shall be entitled to one vote for each $1,000 of
Liquidation Amount represented by their Trust Securities in respect of any
matter as to which such Securityholders are entitled to vote.
Section VI.5 Proxies, etc.
At any meeting of Securityholders, any Securityholder entitled to vote
thereat may vote by proxy, provided that no proxy shall be voted at any meeting
unless it shall have been placed on file with the Administrative Trustees, or
with such other officer or agent of the Trust as the Administrative Trustees may
direct, for verification prior to the time at which such vote shall be taken.
Pursuant to a resolution of the Property Trustee, proxies may be solicited in
the name of the Property Trustee or one or more officers of the Property
Trustee. Only Securityholders of record shall be entitled to vote. When Trust
Securities are held jointly by several Persons, any one of them may vote at any
meeting in person or by proxy in respect of such Trust Securities, but if more
than one of them shall be present at such meeting in person or by proxy, and
such
<PAGE> 31
26
joint owners or their proxies so present disagree as to any vote to be
cast, such vote shall not be received in respect of such Trust Securities. A
proxy purporting to be executed by or on behalf of a Securityholder shall be
deemed valid unless challenged at or prior to its exercise, and the burden of
proving invalidity shall rest on the challenger. No proxy shall be valid more
than three years after its date of execution.
Section VI.6 Securityholder Action by Written Consent.
Any action which may be taken by Securityholders at a meeting may be
taken without a meeting if Securityholders holding more than a majority of all
Outstanding Trust Securities (based upon their Liquidation Amount) entitled to
vote in respect of such action (or such larger proportion thereof as shall be
required by any express provision of this Trust Agreement) shall consent to the
action in writing.
Section VI.7 Record Date for Voting and Other Purposes.
For the purposes of determining the Securityholders who are entitled to
notice of and to vote at any meeting or by written consent, or to participate in
any Distribution on the Trust Securities in respect of which a record date is
not otherwise provided for in this Trust Agreement, or for the purpose of any
other action, the Administrative Trustees may from time to time fix a date, not
more than 90 days prior to the date of any meeting of Securityholders or the
payment of a Distribution or other action, as the case may be, as a record date
for the determination of the identity of the Securityholders of record for such
purposes.
Section VI.8 Acts of Securityholders.
Any request, demand, authorization, direction, notice, consent, waiver
or other action provided or permitted by this Trust Agreement to be given, made
or taken by Securityholders or Owners may be embodied in and evidenced by one or
more instruments of substantially similar tenor signed by such Securityholders
or Owners in person or by an agent duly appointed in writing; and, except as
otherwise expressly provided herein, such action shall become effective when
such instrument or instruments are delivered to an Administrative Trustee. Such
instrument or instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "Act" of the Securityholders or
Owners signing such instrument or instruments. Proof of execution of any such
instrument or of a writing appointing any such agent shall be sufficient for any
purpose of this Trust Agreement and (subject to Section 8.1) conclusive in favor
of the Trustees, if made in the manner provided in this Section.
The fact and date of the execution by any Person of any such instrument
or writing may be proved by the affidavit of a witness of such execution or by a
certificate of a notary public or other officer authorized by law to take
acknowledgments of deeds, certifying that the individual signing such instrument
or writing acknowledged to him the execution thereof. Where such execution is by
a signer acting in a capacity other than his individual capacity, such
certificate or affidavit shall also constitute sufficient proof of his
authority. The fact and date of the execution of any such instrument or writing,
or the authority of the Person executing the same, may also be proved in any
other manner which any Trustee receiving the same deems sufficient.
The ownership of Capital Securities shall be proved by the Securities
Register.
Any request, demand, authorization, direction, notice, consent, waiver
or other Act of the Securityholder of any Trust Security shall bind every future
Securityholder of the same Trust Security and the Securityholder of every Trust
Security issued upon the registration of transfer thereof or in exchange
therefor or in lieu thereof in respect of anything done, omitted or suffered to
be done by the Trustees or the Trust in reliance thereon, whether or not
notation of such action
<PAGE> 32
27
is made upon such Trust Security.
Without limiting the foregoing, a Securityholder entitled hereunder to
take any action hereunder with regard to any particular Trust Security may do so
with regard to all or any part of the Liquidation Amount of such Trust Security
or by one or more duly appointed agents each of which may do so pursuant to such
appointment with regard to all or any part of such Liquidation Amount.
If any dispute shall arise between the Securityholders and the
Administrative Trustees or among such Securityholders or Trustees with respect
to the authenticity, validity or binding nature of any request, demand,
authorization, direction, consent, waiver or other Act of such Securityholder or
Trustee under this Article VI, then the determination of such matter by the
Property Trustee shall be conclusive with respect to such matter.
Section VI.9 Inspection of Records.
Upon reasonable notice to the Administrative Trustees and the Property
Trustee, the records of the Trust shall be open to inspection by Securityholders
during normal business hours for any purpose reasonably related to such
Securityholder's interest as a Securityholder.
ARTICLE VII
Representations and Warranties
Section VII.1 Representations and Warranties of the Property Trustee
and the Delaware Trustee.
The Property Trustee and the Delaware Trustee, each severally on behalf
of and as to itself, hereby represents and warrants for the benefit of the
Depositor and the Securityholders that:
(a) the Property Trustee is a New York banking corporation duly
organized, validly existing and in good standing under the laws of the State of
New York;
(b) the Property Trustee has full corporate power, authority and legal
right to execute, deliver and perform its obligations under this Trust Agreement
and has taken all necessary action to authorize the execution, delivery and
performance by it of this Trust Agreement;
(c) the Delaware Trustee is a Delaware banking corporation duly
organized, validly existing and in good standing in the State of Delaware;
(d) the Delaware Trustee has full corporate power, authority and legal
right to execute, deliver and perform its obligations under this Trust Agreement
and has taken all necessary action to authorize the execution, delivery and
performance by it of this Trust Agreement;
(e) this Trust Agreement has been duly authorized, executed and
delivered by the Property Trustee and the Delaware Trustee and constitutes the
valid and legally binding agreement of each of the Property Trustee and the
Delaware Trustee enforceable against each of them in accordance with its terms,
subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or affecting
creditors' rights and to general equity principles;
(f) the execution, delivery and performance of this Trust Agreement has
been duly authorized by all necessary corporate or other action on the part of
the Property Trustee and the
<PAGE> 33
28
Delaware Trustee and does not require any approval of stockholders of the
Property Trustee and the Delaware Trustee and such execution, delivery and
performance will not (i) violate the charter or by-laws of the Property Trustee
or the Delaware Trustee, (ii) violate any provision of, or constitute, with or
without notice or lapse of time, a default under, or result in the creation or
imposition of, any Lien on any properties included in the Trust Property
pursuant to the provisions of, any indenture, mortgage, credit agreement,
license or other agreement or instrument to which the Property Trustee or the
Delaware Trustee is a party or by which it is bound, or (iii) violate any law,
governmental rule or regulation of the State of New York or the State of
Delaware, as the case may be, governing the banking, trust or general powers of
the Property Trustee or the Delaware Trustee (as appropriate in context) or any
order, judgment or decree applicable to the Property Trustee or the Delaware
Trustee;
(g) neither the authorization, execution or delivery by the Property
Trustee or the Delaware Trustee of this Trust Agreement nor the consummation of
any of the transactions by the Property Trustee or the Delaware Trustee (as
appropriate in context) contemplated herein or therein requires the consent or
approval of, the giving of notice to, the registration with or the taking of any
other action with respect to any governmental authority or agency under any
existing New York or Delaware law governing the banking, trust or general powers
of the Property Trustee or the Delaware Trustee, as the case may be; and
(h) there are no proceedings pending or, to the best of each of the
Property Trustee's and the Delaware Trustee's knowledge, threatened against or
affecting the Property Trustee or the Delaware Trustee in any court or before
any governmental authority, agency or arbitration board or tribunal which,
individually or in the aggregate, would materially and adversely affect the
Trust or would question the right, power and authority of the Property Trustee
or the Delaware Trustee, as the case may be, to enter into or perform its
obligations as one of the Trustees under this Trust Agreement.
Section VII.2 Representations and Warranties of Depositor.
The Depositor hereby represents and warrants for the benefit of the
Securityholders that:
(a) the Trust Securities Certificates issued at the Closing Date on
behalf of the Trust have been duly authorized and will have been, duly and
validly executed, issued and delivered by the Trustees pursuant to the terms and
provisions of, and in accordance with the requirements of, this Trust Agreement
and the Securityholders will be, as of such date, entitled to the benefits of
this Trust Agreement; and
(b) there are no taxes, fees or other governmental charges payable by
the Trust (or the Trustees on behalf of the Trust) under the laws of the State
of Delaware or any political subdivision thereof in connection with the
execution, delivery and performance by the Property Trustee or the Delaware
Trustee, as the case may be, of this Trust Agreement.
ARTICLE VIII
The Trustees
Section VIII.1 Certain Duties and Responsibilities.
(a) The duties and responsibilities of the Trustees shall be as
provided by this Trust Agreement and, in the case of the Property Trustee, by
the Trust Indenture Act. Notwithstanding the foregoing, no provision of this
Trust Agreement shall require the Trustees to expend or risk their own funds or
otherwise incur any financial liability in the performance of any of their
duties
<PAGE> 34
29
hereunder, or in the exercise of any of their rights or powers, if they shall
have reasonable grounds for believing that repayment of such funds or adequate
indemnity against such risk or liability is not reasonably assured to them.
Whether or not therein expressly so provided, every provision of this Trust
Agreement relating to the conduct or affecting the liability of or affording
protection to the Trustees shall be subject to the provisions of this Section.
Nothing in this Trust Agreement shall be construed to release an Administrative
Trustee from liability for its own gross negligent action, its own gross
negligent failure to act, or its own willful misconduct. To the extent that, at
law or in equity, an Administrative Trustee has duties (including fiduciary
duties) and liabilities relating thereto to the Trust or to the Securityholders,
such Administrative Trustee shall not be liable to the Trust or to any
Securityholder for such Trustee's good faith reliance on the provisions of this
Trust Agreement. The Administrative Trustees shall not be liable for the default
or misconduct of the Property Trustee or the Delaware Trustee. The provisions of
this Trust Agreement, to the extent that they restrict the duties and
liabilities of the Administrative Trustees otherwise existing at law or in
equity, are agreed by the Depositor and the Securityholders to replace such
other duties and liabilities of the Administrative Trustees.
No provision of this Trust Agreement shall be deemed to impose any duty
or obligation on any Administrative Trustee to perform any act or acts or
exercise any right, power, duty or obligation conferred or imposed on it, in any
jurisdiction in which it shall be illegal, or in which such Administrative
Trustee shall be unqualified or incompetent in accordance with applicable law,
to perform any such act or acts, or to exercise any such right, power, duty or
obligation. No permissive power or authority available to any Administrative
Trustee shall be construed to be a duty.
(b) All payments made by the Property Trustee or a Paying Agent in
respect of the Trust Securities shall be made only from the revenue and proceeds
from the Trust Property and only to the extent that there shall be sufficient
revenue or proceeds from the Trust Property to enable the Property Trustee or a
Paying Agent to make payments in accordance with the terms hereof. Each
Securityholder, by its acceptance of a Trust Security, agrees that it will look
solely to the revenue and proceeds from the Trust Property to the extent legally
available for distribution to it as herein provided and that the Trustees are
not personally liable to it for any amount distributable in respect of any Trust
Security or for any other liability in respect of any Trust Security. This
Section 8.1(b) does not limit the liability of the Trustees expressly set forth
elsewhere in this Trust Agreement or, in the case of the Property Trustee, in
the Trust Indenture Act.
(c) No provision of this Trust Agreement shall be construed to relieve
the Property Trustee from liability for its own negligent action, its own
negligent failure to act, or its own willful misconduct, except that:
(i) the Property Trustee shall not be liable for any
error of judgment made in good faith by an authorized officer of the
Property Trustee, unless it shall be proved that the Property Trustee
was negligent in ascertaining the pertinent facts;
(ii) the Property Trustee shall not be liable with
respect to any action taken or omitted to be taken by it in good faith
in accordance with the direction of the Holders of not less than a
majority in Liquidation Amount of the Trust Securities relating to the
time, method and place of conducting any proceeding for any remedy
available to the Property Trustee, or exercising any trust or power
conferred upon the Property Trustee under this Trust Agreement;
(iii) the Property Trustee's sole duty with respect to the
custody, safe keeping and physical preservation of the Debentures and
the Payment Account shall be to deal with such property in a similar
manner as the Property Trustee deals with similar property for its own
account, subject to the protections and limitations on liability
afforded to the Property Trustee under this Trust Agreement and the
Trust Indenture Act;
<PAGE> 35
30
(iv) the Property Trustee shall not be liable for any
interest on any money received by it except as it may otherwise agree
in writing with the Depositor; and money held by the Property Trustee
need not be segregated from other funds held by it except in relation
to the Payment Account maintained by the Property Trustee pursuant to
Section 3.1 and except to the extent otherwise required by law; and
(v) the Property Trustee shall not be responsible for
monitoring the compliance by the Administrative Trustees or the
Depositor with their respective duties under this Trust Agreement, nor
shall the Property Trustee be liable for the default or misconduct of
the Administrative Trustees or the Depositor.
Section VIII.2 Certain Notices.
Within five Business Days after the occurrence of any Event of Default
actually known to the Property Trustee, the Property Trustee shall transmit, in
the manner and to the extent provided in Section 10.10, notice of such Event of
Default to the Securityholders, the Administrative Trustees and the Depositor,
unless such Event of Default shall have been cured or waived.
Within five Business Days after the receipt of notice of the
Depositor's exercise of its right to defer the payment of interest on the
Debentures pursuant to the Indenture, the Administrative Trustee shall transmit,
in the manner and to the extent provided in Section 10.10, notice of such
exercise to the Securityholders and the Property Trustee, unless such exercise
shall have been revoked.
Within four Business Days after the determination of the LIBOR rate for
any Distribution period, the Property Trustee shall cause the rate of
Distributions and any other information required by the Luxembourg Stock
Exchange, to be published in a leading newspaper having general circulation in
Luxembourg (a "Luxembourg Newspaper") which meets the requirements of the
Luxembourg Stock Exchange. The Property Trustee shall also, at the direction of
the Depositor, cause to be published in a Luxembourg Newspaper any other notices
required by the Luxembourg Stock Exchange.
Section VIII.3 Certain Rights of Property Trustee.
Subject to the provisions of Section 8.1:
(a) the Property Trustee may rely and shall be protected in acting or
refraining from acting in good faith upon any resolution, Opinion of Counsel,
certificate, written representation of a Holder or transferee, certificate of
auditors or any other certificate, statement, instrument, opinion, report,
notice, request, consent, order, appraisal, bond, debenture, note, other
evidence of indebtedness or other paper or document believed by it to be genuine
and to have been signed or presented by the proper party or parties;
(b) if (i) in performing its duties under this Trust Agreement the
Property Trustee is required to decide between alternative courses of action or
(ii) in construing any of the provisions of this Trust Agreement the Property
Trustee finds the same ambiguous or inconsistent with any other provisions
contained herein or (iii) the Property Trustee is unsure of the application of
any provision of this Trust Agreement, then, except as to any matter as to which
the Capital Securityholders are entitled to vote under the terms of this Trust
Agreement, the Property Trustee shall deliver a notice to the Depositor
requesting written instructions of the Depositor as to the course of action to
be taken and the Property Trustee shall take such action, or refrain from taking
such action, as the Property Trustee shall be instructed in writing to take, or
to refrain from taking, by the Depositor; provided, however, that if the
Property Trustee does not receive
<PAGE> 36
31
such instructions of the Depositor within ten Business Days after it has
delivered such notice, or such reasonably shorter period of time set forth in
such notice (which to the extent practicable shall not be less than two Business
Days), it may, but shall be under no duty to, take or refrain from taking such
action not inconsistent with this Trust Agreement as it shall deem advisable and
in the best interests of the Securityholders, in which event the Property
Trustee shall have no liability except for its own bad faith, negligence or
willful misconduct;
(c) any direction or act of the Depositor or the Administrative
Trustees contemplated by this Trust Agreement shall be sufficiently evidenced by
an Officers' Certificate;
(d) whenever in the administration of this Trust Agreement, the
Property Trustee shall deem it desirable that a matter be established before
undertaking, suffering or omitting any action hereunder, the Property Trustee
(unless other evidence is herein specifically prescribed) may, in the absence of
bad faith on its part, request and rely upon an Officers' Certificate which,
upon receipt of such request, shall be promptly delivered by the Depositor or
the Administrative Trustees;
(e) the Property Trustee shall have no duty to see to any recording,
filing or registration of any instrument (including any financing or
continuation statement or any filing under tax or securities laws) or any
rerecording, refiling or reregistration thereof;
(f) the Property Trustee may consult with counsel of its selection
(which counsel may be counsel to the Depositor or any of its Affiliates, and may
include any of its employees) and the advice of such counsel shall be full and
complete authorization and protection in respect of any action taken, suffered
or omitted by it hereunder in good faith and in reliance thereon and in
accordance with such advice, such counsel may be counsel to the Depositor or any
of its Affiliates, and may include any of its employees; the Property Trustee
shall have the right at any time to seek instructions concerning the
administration of this Trust Agreement from any court of competent jurisdiction;
(g) the Property Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by this Trust Agreement at the request or
direction of any of the Securityholders pursuant to this Trust Agreement, unless
such Securityholders shall have offered to the Property Trustee reasonable
security or indemnity against the costs, expenses and liabilities which might be
incurred by it in compliance with such request or direction;
(h) the Property Trustee shall not be bound to make any investigation
into the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, consent, order, approval, bond,
debenture, note or other evidence of indebtedness or other paper or document,
unless requested in writing to do so by one or more Securityholders, but the
Property Trustee may make such further inquiry or investigation into such facts
or matters as it may see fit;
(i) the Property Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or through its
agents or attorneys, provided that the Property Trustee shall be responsible for
its own negligence or recklessness with respect to selection of any agent or
attorney appointed by it hereunder;
(j) whenever in the administration of this Trust Agreement the Property
Trustee shall deem it desirable to receive written instructions with respect to
enforcing any remedy or right or taking any other action hereunder the Property
Trustee (i) may request written instructions from the Holders of the Trust
Securities which written instructions may only be given by the Holders of the
same proportion in Liquidation Amount of the Trust Securities as would be
entitled to direct the Property Trustee under the terms of the Trust Securities
in respect of such remedy,
<PAGE> 37
32
right or action, (ii) may refrain from enforcing such remedy or right or taking
such other action until such written instructions are received, and (iii) shall
be protected in acting in accordance with such written instructions; and
(k) except as otherwise expressly provided by this Trust Agreement, the
Property Trustee shall not be under any obligation to take any action that is
discretionary under the provisions of this Trust Agreement.
No provision of this Trust Agreement shall be deemed to impose any duty
or obligation on the Property Trustee to perform any act or acts or exercise any
right, power, duty or obligation conferred or imposed on it, in any jurisdiction
in which it shall be illegal, or in which the Property Trustee shall be
unqualified or incompetent in accordance with applicable law, to perform any
such act or acts, or to exercise any such right, power, duty or obligation. No
permissive power or authority available to the Property Trustee shall be
construed to be a duty.
Section VIII.4 Not Responsible for Recitals or Issuance of Securities.
The recitals contained herein and in the Trust Securities Certificates
shall be taken as the statements of the Trust, and the Trustees do not assume
any responsibility for their correctness. The Trustees shall not be accountable
for the use or application by the Depositor of the proceeds of the Debentures.
Section VIII.5 May Hold Securities.
Any Trustee or any other agent of any Trustee or the Trust, in its
individual or any other capacity, may become the owner or pledgee of Trust
Securities and, subject to Sections 8.8 and 8.13, except as provided in the
definition of the term "Outstanding" in Article I, may otherwise deal with the
Trust with the same rights it would have if it were not a Trustee or such other
agent.
Section VIII.6 Compensation; Indemnity; Fees.
Pursuant to Section 10.6 of the Indenture, the Depositor, as borrower,
agrees:
(a) to pay to the Trustees from time to time such compensation as shall
be agreed in writing with the Depositor for all services rendered by them
hereunder (which compensation shall not be limited by any provision of law in
regard to the compensation of a trustee of an express trust);
(b) except as otherwise expressly provided herein, to reimburse the
Trustees upon request for all reasonable expenses, disbursements and advances
incurred or made by the Trustees in accordance with any provision of this Trust
Agreement (including the reasonable compensation and the expenses and
disbursements of its agents and counsel), except any such expense, disbursement
or advance as may be attributable to its negligence or bad faith; and
(c) to the fullest extent permitted by applicable law, to indemnify and
hold harmless (i) each Trustee, (ii) any Affiliate of any Trustee, (iii) any
officer, director, shareholder, employee, representative or agent of any
Trustee, and (iv) any employee or agent of the Trust or its Affiliates,
(referred to herein as an "Indemnified Person") from and against any and all
loss, damage, liability, tax, penalty, expense or claim of any kind or nature
whatsoever incurred by such Indemnified Person by reason of the creation,
operation or termination of the Trust or any act or omission performed or
omitted by such Indemnified Person in good faith on behalf of the Trust and in a
manner such Indemnified Person reasonably believed to be within the scope of
authority conferred on such Indemnified Person by this Trust Agreement, except
that no Indemnified Person shall be entitled to be indemnified in respect of any
loss, damage or claim
<PAGE> 38
33
incurred by such Indemnified Person by reason of negligence, bad faith, or
willful or intentional misconduct with respect to such acts or omissions. When
the Property Trustee incurs expenses or renders services in connection with an
Event of Default specified in Section 5.1(4) or Section 5.1(5) of the Indenture,
the expenses (including the reasonable charges and expenses of its counsel) and
the compensation for the services are intended to constitute expenses of
administration under any applicable federal or state bankruptcy, insolvency or
other similar law.
The provisions of this Section 8.6 shall survive the termination of
this Trust Agreement.
No Trustee may claim any lien or charge on any Trust Property as a
result of any amount due pursuant to this Section 8.6.
The Depositor and any Trustee (in the case of the Property Trustee,
subject to Section 8.8 hereof) may engage in or possess an interest in other
business ventures of any nature or description, independently or with others,
similar or dissimilar to the business of the Trust, and the Trust and the
Holders of Trust Securities shall have no rights by virtue of this Trust
Agreement in and to such independent ventures or the income or profits derived
therefrom, and the pursuit of any such venture, even if competitive with the
business of the Trust, shall not be deemed wrongful or improper. Neither the
Depositor, nor any Trustee, shall be obligated to present any particular
investment or other opportunity to the Trust even if such opportunity is of a
character that, if presented to the Trust, could be taken by the Trust, and the
Depositor or any Trustee shall have the right to take for its own account
(individually or as a partner or fiduciary) or to recommend to others any such
particular investment or other opportunity. Any Trustee may engage or be
interested in any financial or other transaction with the Depositor or any
Affiliate of the Depositor, or may act as depository for, trustee or agent for,
or act on any committee or body of holders of, securities or other obligations
of the Depositor or its Affiliates.
Section VIII.7 Corporate Property Trustee Required; Eligibility of
Trustees.
(a) There shall at all times be a Property Trustee hereunder with
respect to the Trust Securities. The Property Trustee shall be a Person that is
eligible pursuant to the Trust Indenture Act to act as such and has a combined
capital and surplus of at least $50,000,000. If any such Person publishes
reports of condition at least annually, pursuant to law or to the requirements
of its supervising or examining authority, then for the purposes of this
Section, the combined capital and surplus of such Person shall be deemed to be
its combined capital and surplus as set forth in its most recent report of
condition so published. If at any time the Property Trustee with respect to the
Trust Securities shall cease to be eligible in accordance with the provisions of
this Section, it shall resign immediately in the manner and with the effect
hereinafter specified in this Article.
(b) There shall at all times be one or more Administrative Trustees
hereunder with respect to the Trust Securities. Each Administrative Trustee
shall be either a natural person who is at least 21 years of age or a legal
entity that shall act through one or more persons authorized to bind that
entity.
(c) There shall at all times be a Delaware Trustee with respect to the
Trust Securities. The Delaware Trustee shall either be (i) a natural person who
is at least 21 years of age and a resident of the State of Delaware or (ii) a
legal entity with its principal place of business in the State of Delaware and
that otherwise meets the requirements of applicable Delaware law that shall act
through one or more persons authorized to bind such entity.
Section VIII.8 Conflicting Interests.
If the Property Trustee has or shall acquire a conflicting interest
within the meaning of the Trust Indenture Act, the Property Trustee shall either
eliminate such interest or resign, to the
<PAGE> 39
34
extent and in the manner provided by, and subject to the provisions of, the
Trust Indenture Act and this Trust Agreement.
Section VIII.9 Co-Trustees and Separate Trustee.
Unless an Event of Default shall have occurred and be continuing, at
any time or times, 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 Depositor and the Administrative
Trustees, by agreed action of the majority of such Trustees, shall have power to
appoint, and upon the written request of the Administrative Trustees, the
Depositor shall for such purpose join with the Administrative Trustees in the
execution, delivery, and performance of all instruments and agreements necessary
or proper to appoint, one or more Persons approved by the Property Trustee
either to act as co-trustee, jointly with the Property Trustee, of all or any
part of such Trust Property, or to the extent required by law 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 the
capacity aforesaid, any property, title, right or power deemed necessary or
desirable, subject to the other provisions of this Section. If the Depositor
does not join in such appointment within 15 days after the receipt by it of a
request so to do, or in case a Debenture Event of Default has occurred and is
continuing, the Property Trustee alone shall have power to make such
appointment. Any co-trustee or separate trustee appointed pursuant to this
Section shall either be (i) a natural person who is at least 21 years of age and
a resident of the United States or (ii) a legal entity with its principal place
of business in the United States that shall act through one or more persons
authorized to bind such entity.
Should any written instrument from the Depositor be required by any
co-trustee or separate trustee so appointed for more fully confirming to such
co-trustee or separate trustee such property, title, right, or power, any and
all such instruments shall, on request, be executed, acknowledged and delivered
by the Depositor.
Every co-trustee or separate trustee shall, to the extent permitted by
law, but to such extent only, be appointed subject to the following terms,
namely:
(a) The Trust Securities shall be executed and delivered and all
rights, powers, duties, and obligations hereunder in respect of the custody of
securities, cash and other personal property held by, or required to be
deposited or pledged with, the Trustees specified hereunder shall be exercised
solely by such Trustees and not by such co-trustee or separate trustee.
(b) The rights, powers, duties, and obligations hereby conferred or
imposed upon the Property Trustee in respect of any property covered by such
appointment shall be conferred or imposed upon and exercised or performed by the
Property Trustee or by the Property Trustee and such co-trustee or separate
trustee jointly, as shall be provided in the instrument appointing such
co-trustee or separate trustee, except to the extent that under any law of any
jurisdiction in which any particular act is to be performed, the Property
Trustee shall be incompetent or unqualified to perform such act, in which event
such rights, powers, duties and obligations shall be exercised and performed by
such co-trustee or separate trustee.
(c) The Property Trustee at any time, by an instrument in writing
executed by it, with the written concurrence of the Depositor, may accept the
resignation of or remove any co-trustee or separate trustee appointed under this
Section, and, in case a Debenture Event of Default has occurred and is
continuing, the Property Trustee shall have power to accept the resignation of,
or remove, any such co-trustee or separate trustee without the concurrence of
the Depositor. Upon the written request of the Property Trustee, the Depositor
shall join with the Property Trustee in the execution, delivery and performance
of all instruments and agreements necessary or proper to effectuate such
resignation or removal. A successor to any co-trustee or separate trustee so
<PAGE> 40
35
resigned or removed may be appointed in the manner provided in this Section.
(d) No co-trustee or separate trustee hereunder shall be personally
liable by reason of any act or omission of the Property Trustee or any other
trustee hereunder.
(e) The Property Trustee shall not be liable by reason of any act of a
co-trustee or separate trustee.
(f) Any Act of Holders delivered to the Property Trustee shall be
deemed to have been delivered to each such co-trustee and separate trustee.
Section VIII.10 Resignation and Removal; Appointment of Successor.
No resignation or removal of any Trustee (the "Relevant Trustee") and
no appointment of a successor Trustee pursuant to this Article shall become
effective until the acceptance of appointment by the successor Trustee in
accordance with the applicable requirements of Section 8.11.
Subject to the immediately preceding paragraph, the Relevant Trustee
may resign at any time. The Property Trustee and the Delaware Trustee shall give
written notice thereof to the Securityholders and the Administrative Trustee
shall give notice thereof to the Depositor. If the instrument of acceptance by
the successor Trustee required by Section 8.11 shall not have been delivered to
the Relevant Trustee within 30 days after the giving of such notice of
resignation, the Relevant Trustee may petition, at the expense of the Trust, any
court of competent jurisdiction for the appointment of a successor Relevant
Trustee.
Unless a Debenture Event of Default shall have occurred and be
continuing, any Trustee may be removed at any time by Act of the Common
Securityholder. If a Debenture Event of Default shall have occurred and be
continuing, the Property Trustee or the Delaware Trustee, or both of them, may
be removed at such time by Act of the Holders of a majority in Liquidation
Amount of the Capital Securities, delivered to the Relevant Trustee (in its
individual capacity and on behalf of the Trust). An Administrative Trustee may
be removed by the Common Securityholder at any time. If the instrument of
acceptance by the successor Trustee required by Section 8.11 shall not have been
delivered to the Relevant Trustee within 30 days after such removal, the
Relevant Trustee may petition, at the expense of the Trust, any court of
competent jurisdiction for the appointment of a successor Relevant Trustee.
If any Trustee shall resign, be removed or become incapable of acting
as Trustee, or if a vacancy shall occur in the office of any Trustee for any
cause, at a time when no Debenture Event of Default shall have occurred and be
continuing, the Common Securityholder, by Act of the Common Securityholder
delivered to the retiring Trustee, shall promptly appoint a successor Trustee or
Trustees, and the retiring Trustee shall comply with the applicable requirements
of Section 8.11. If the Property Trustee or the Delaware Trustee shall resign,
be removed or become incapable of continuing to act as the Property Trustee or
the Delaware Trustee, as the case may be, at a time when a Debenture Event of
Default shall have occurred and be continuing, the Capital Securityholders, by
Act of the Securityholders of a majority in Liquidation Amount of the Capital
Securities then Outstanding delivered to the retiring Relevant Trustee, shall
promptly appoint a successor Relevant Trustee or Trustees, and such successor
Trustee shall comply with the applicable requirements of Section 8.11. If an
Administrative Trustee shall resign, be removed or become incapable of acting as
Administrative Trustee, at a time when a Debenture Event of Default shall have
occurred and be continuing, the Common Securityholder by Act of the Common
Securityholder delivered to the Administrative Trustee shall promptly appoint a
successor Administrative Trustee or Administrative Trustees and such successor
Administrative Trustee or Trustees shall comply with the applicable requirements
of Section 8.11. If no
<PAGE> 41
36
successor Relevant Trustee shall have been so appointed by the Common
Securityholder or the Capital Securityholders and accepted appointment in the
manner required by Section 8.11, any Securityholder who has been a
Securityholder of Trust Securities for at least six months may, on behalf of
himself and all others similarly situated, petition any court of competent
jurisdiction for the appointment of a successor Relevant Trustee.
The Property Trustee shall give notice of each resignation and each
removal of a Trustee (other than an Administrative Trustee) and each appointment
of a successor Trustee (other than an Administrative Trustee) to all
Securityholders in the manner provided in Section 10.10 and shall give notice to
the Depositor. Each notice shall include the name of the successor Relevant
Trustee and the address of its Corporate Trust Office if it is the Property
Trustee.
Notwithstanding the foregoing or any other provision of this Trust
Agreement, in the event any Administrative Trustee or a Delaware Trustee who is
a natural person dies or becomes, in the opinion of the Depositor, incompetent
or incapacitated, the vacancy created by such death, incompetence or incapacity
may be filled by (a) the unanimous act of the remaining Administrative Trustees
if there are at least two of them or (b) otherwise by the Depositor (with the
successor in each case being a Person who satisfies the eligibility requirement
for Administrative Trustees or Delaware Trustee, as the case may be, set forth
in Section 8.7).
Section VIII.11 Acceptance of Appointment by Successor.
In case of the appointment hereunder of a successor Relevant Trustee,
the retiring Relevant Trustee and each successor Relevant Trustee with respect
to the Trust Securities shall execute and deliver an amendment hereto wherein
each successor Relevant Trustee shall accept such appointment and which (a)
shall contain such provisions as shall be necessary or desirable to transfer and
confirm to, and to vest in, each successor Relevant Trustee all the rights,
powers, trusts and duties of the retiring Relevant Trustee with respect to the
Trust Securities and the Trust and (b) shall add to or change any of the
provisions of this Trust Agreement as shall be necessary to provide for or
facilitate the administration of the Trust by more than one Relevant Trustee, it
being understood that nothing herein or in such amendment shall constitute such
Relevant Trustees co-trustees and upon the execution and delivery of such
amendment the resignation or removal of the retiring Relevant Trustee shall
become effective to the extent provided therein and each such successor Relevant
Trustee, without any further act, deed or conveyance, shall become vested with
all the rights, powers, trusts and duties of the retiring Relevant Trustee; but,
on written request of the Trust or any successor Relevant Trustee such retiring
Relevant Trustee shall duly assign, transfer and deliver to such successor
Relevant Trustee all Trust Property, all proceeds thereof and money held by such
retiring Relevant Trustee hereunder with respect to the Trust Securities and the
Trust.
Upon written request of any such successor Relevant Trustee, the Trust
shall execute any and all instruments for more fully and certainly vesting in
and confirming to such successor Relevant Trustee all such rights, powers and
trusts referred to in the first or second preceding paragraph, as the case may
be.
No successor Relevant Trustee shall accept its appointment unless at
the time of such acceptance such successor Relevant Trustee shall be qualified
and eligible under this Article.
Section VIII.12 Merger, Conversion, Consolidation or Succession to
Business.
Any Person into which the Property Trustee or the Delaware Trustee 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 Relevant
Trustee shall be a party, or any Person succeeding to all or substantially all
the corporate trust business of such Relevant Trustee, shall
<PAGE> 42
37
be the successor of such Relevant Trustee hereunder, provided such Person shall
be otherwise qualified and eligible under this Article, without the execution or
filing of any paper or any further act on the part of any of the parties hereto.
Section VIII.13 Preferential Collection of Claims Against Depositor or
Trust.
In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, adjustment, composition or other
similar judicial proceeding relative to the Trust or any other obligor upon the
Trust Securities or the property of the Trust or of such other obligor or their
creditors, the Property Trustee (irrespective of whether any Distributions on
the Trust Securities shall then be due and payable as therein expressed or by
declaration or otherwise and irrespective of whether the Property Trustee shall
have made any demand on the Trust for the payment of any past due Distributions)
shall be entitled and empowered, to the fullest extent permitted by law, by
intervention in such proceeding or otherwise:
(a) to file and prove a claim for the whole amount of any Distributions
owing and unpaid in respect of the Trust Securities and to file such other
papers or documents as may be necessary or advisable in order to have the claims
of the Property Trustee (including any claim for the reasonable compensation,
expenses, disbursements and advances of the Property Trustee, its agents and
counsel) and of the Holders allowed in such judicial proceeding, and
(b) to collect and receive any moneys or other property payable or
deliverable on any such claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or
other similar official in any such judicial proceeding is hereby authorized by
each Holder to make such payments to the Property Trustee and, in the event the
Property Trustee shall consent to the making of such payments directly to the
Holders, to pay to the Property Trustee any amount due it for the reasonable
compensation, expenses, disbursements and advances of the Property Trustee, its
agents and counsel, and any other amounts due the Property Trustee.
Nothing herein contained shall be deemed to authorize the Property
Trustee to authorize or consent to or accept or adopt on behalf of any Holder
any plan of reorganization, arrangement adjustment or compensation affecting the
Trust Securities or the rights of any Holder thereof or to authorize the
Property Trustee to vote in respect of the claim of any Holder in any such
proceeding.
Section VIII.14 Reports by Property Trustee.
(a) The Property Trustee shall transmit to Securityholders such reports
concerning the Property Trustee and its actions under this Trust Agreement as
may be required pursuant to the Trust Indenture Act at the times and in the
manner provided pursuant thereto. If required by Section 313(a) of the Trust
Indenture Act, the Property Trustee shall, within sixty days after each May 15
following the date of this Trust Agreement deliver to Securityholders a brief
report, dated as of such May 15, which complies with the provisions of such
Section 313(a).
(b) A copy of each such report shall, at the time of such transmission
to Holders, be filed by the Property Trustee with each national stock exchange,
the Nasdaq National Market or such other interdealer quotation system or
self-regulatory organization upon which the Trust Securities are listed or
traded, if any, with the Commission and with the Depositor. The Depositor will
promptly notify the Property Trustee of any such listing or trading.
Section VIII.15 Reports to the Property Trustee.
<PAGE> 43
38
The Depositor and the Administrative Trustees on behalf of the Trust
shall provide to the Property Trustee such documents, reports and information as
required by Section 314 of the Trust Indenture Act (if any) and the compliance
certificate required by Section 314(a) of the Trust Indenture Act in the form,
in the manner and at the times required by Section 314 of the Trust Indenture
Act. Delivery of such reports, information and documents to the Property Trustee
is for informational purposes only and the Property Trustee's receipt of such
shall not constitute constructive notice of any information contained therein or
determinable from information contained therein, including the Trust's
compliance with any of its covenants hereunder (as to which the Property Trustee
is entitled to rely exclusively on Officers' Certificates).
Section VIII.16 Evidence of Compliance with Conditions Precedent.
Each of the Depositor and the Administrative Trustees on behalf of the
Trust shall provide to the Property Trustee such evidence of compliance with any
conditions precedent, if any, provided for in this Trust Agreement that relate
to any of the matters set forth in Section 314 (c) of the Trust Indenture Act.
Any certificate or opinion required to be given by an officer pursuant to
Section 314(c)(1) of the Trust Indenture Act shall be given in the form of an
Officers' Certificate.
Section VIII.17 Number of Trustees.
(a) The number of Trustees shall be four, provided that the Holder of
all of the Common Securities by written instrument may increase or decrease the
number of Administrative Trustees. The Property Trustee and the Delaware Trustee
may be the same Person.
(b) If a Trustee ceases to hold office for any reason and the number of
Administrative Trustees is not reduced pursuant to Section 8.17(a), or if the
number of Trustees is increased pursuant to Section 8.17(a), a vacancy shall
occur. The vacancy shall be filled with a Trustee appointed in accordance with
Section 8.10.
(c) The death, resignation, retirement, removal, bankruptcy,
incompetence or incapacity to perform the duties of a Trustee shall not operate
to dissolve, terminate or annul the Trust. Whenever a vacancy in the number of
Administrative Trustees shall occur, until such vacancy is filled by the
appointment of an Administrative Trustee in accordance with Section 8.10, the
Administrative Trustees in office, regardless of their number (and
notwithstanding any other provision of this Agreement), shall have all the
powers granted to the Administrative Trustees and shall discharge all the duties
imposed upon the Administrative Trustees by this Trust Agreement.
Section VIII.18 Delegation of Power.
(a) Any Administrative Trustee may, by power of attorney consistent
with applicable law, delegate to any other natural person over the age of 21 his
or her power for the purpose of executing any documents contemplated in Section
2.7(a), including any registration statement or amendment thereto filed with the
Commission, or making any other governmental filing; and
(b) The Administrative Trustees shall have power to delegate from time
to time to such of their number or to the Depositor the doing of such things and
the execution of such instruments either in the name of the Trust or the names
of the Administrative Trustees or otherwise as the Administrative Trustees may
deem expedient, to the extent such delegation is not prohibited by applicable
law or contrary to the provisions of this Trust Agreement, as set forth herein.
<PAGE> 44
39
ARTICLE IX
Termination, Liquidation and Merger
Section IX.1 Termination Upon Expiration Date.
Unless earlier terminated, the Trust shall automatically terminate on
January 31, 2052 (the "Expiration Date"), following the distribution of the
Trust Property in accordance with Section 9.4.
Section IX.2 Early Termination.
The first to occur of any of the following events is an "Early
Termination Event":
(a) the occurrence of a Bankruptcy Event in respect of, or the
dissolution or liquidation of, the Depositor or the Holder of the Common
Securities;
(b) the written direction to the Property Trustee from the Depositor at
any time to terminate the Trust and, after satisfaction of liabilities to
creditors of the Trust as provided by applicable law, distribute Debentures to
Securityholders in exchange for the Capital Securities (which direction is
optional and wholly within the discretion of the Depositor);
(c) the redemption of all of the Capital Securities in connection with
the redemption of all of the Debentures; and
(d) the entry of an order for dissolution of the Trust by a court of
competent jurisdiction.
Section IX.3 Termination.
The respective obligations and responsibilities of the Trustees and the
Trust created and continued hereby shall terminate upon the latest to occur of
the following: (a) the distribution by the Property Trustee to Securityholders
upon the liquidation of the Trust pursuant to Section 9.4, or upon the
redemption of all of the Trust Securities pursuant to Section 4.2, of all
amounts required to be distributed hereunder upon the final payment of the Trust
Securities; (b) the payment of any expenses owed by the Trust; and (c) the
discharge of all administrative duties of the Administrative Trustees, including
the performance of any tax reporting obligations with respect to the Trust or
the Securityholders.
Section IX.4 Liquidation.
(a) If an Early Termination Event specified in clause (a), (b) or (d)
of Section 9.2 occurs or upon the Expiration Date, the Trust shall be liquidated
by the Trustees as expeditiously as the Trustees determine to be possible by
distributing, after satisfaction or the making of reasonable provisions for the
payment of liabilities to creditors of the Trust as provided by applicable law,
to each Securityholder a Like Amount of Debentures, subject to Section 9.4(d).
Notice of liquidation shall be given by the Property Trustee by first-class
mail, postage prepaid mailed not later than 30 nor more than 60 days prior to
the Liquidation Date to each Holder of Trust Securities at such Holder's address
appearing in the Securities Register. All notices of liquidation shall:
(i) state the CUSIP Number, International Securities
Identification Number and Common Code of the Trust Securities;
<PAGE> 45
40
(ii) state the Liquidation Date;
(iii) state that from and after the Liquidation Date,
the Trust Securities will no longer be deemed to be Outstanding and any
Trust Securities Certificates not surrendered for exchange will be
deemed to represent a Like Amount of Debentures; and
(iv) provide such information with respect to the
mechanics by which Holders may exchange Trust Securities Certificates
for Debentures, or if Section 9.4(d) applies receive a Liquidation
Distribution, as the Administrative Trustees or the Property Trustee
shall deem appropriate.
(b) Except where Section 9.2(c) or 9.4(d) applies, in order to effect
the liquidation of the Trust and distribution of the Debentures to
Securityholders, the Property Trustee shall establish a record date for such
distribution (which shall be not more than 45 days prior to the Liquidation
Date) and, either itself acting as exchange agent or through the appointment of
a separate exchange agent, shall establish such procedures as it shall deem
appropriate to effect the distribution of Debentures in exchange for the
Outstanding Trust Securities Certificates.
(c) Except where Section 9.2(c) or 9.4(d) applies, after the
Liquidation Date, (i) the Trust Securities will no longer be deemed to be
Outstanding, (ii) certificates representing a Like Amount of Debentures will be
issued to Holders of Trust Securities Certificates, upon surrender of such
certificates to the Administrative Trustees or their agent for exchange, (iii)
the Depositor shall use its best efforts to have the Debentures listed on the
New York Stock Exchange or on such other exchange, interdealer quotation system
or self-regulatory organization as the Capital Securities are then listed or
traded, (iv) any Trust Securities Certificates not so surrendered for exchange
will be deemed to represent a Like Amount of Debentures, accruing interest at
the rate provided for in the Debentures from the last Distribution Date on which
a Distribution was made on such Trust Securities Certificates until such
certificates are so surrendered (and until such certificates are so surrendered,
no payments of interest or principal will be made to Holders of Trust Securities
Certificates with respect to such Debentures) and (v) all rights of
Securityholders holding Trust Securities will cease, except the right of such
Securityholders to receive Debentures upon surrender of Trust Securities
Certificates.
(d) In the event that, notwithstanding the other provisions of this
Section 9.4, whether because of an order for dissolution entered by a court of
competent jurisdiction or otherwise, distribution of the Debentures in the
manner provided herein is determined by the Property Trustee not to be
practical, the Trust Property shall be liquidated, and the Trust shall be
dissolved, wound-up or terminated, by the Property Trustee. In such event, on
the date of the dissolution, winding-up or other termination of the Trust,
Securityholders will be entitled to receive out of the assets of the Trust
available for distribution to Securityholders, after satisfaction of liabilities
to creditors of the Trust as provided by applicable law, an amount equal to the
Liquidation Amount per Trust Security plus accumulated and unpaid Distributions
thereon to the date of payment (such amount being the "Liquidation
Distribution"). If, upon any such dissolution, winding up or termination, the
Liquidation Distribution can be paid only in part because the Trust has
insufficient assets available to pay in full the aggregate Liquidation
Distribution, then, subject to the next succeeding sentence, the amounts payable
by the Trust on the Trust Securities shall be paid on a pro rata basis (based
upon Liquidation Amounts). The Holder of the Common Securities will be entitled
to receive Liquidation Distributions upon any such dissolution, winding-up or
termination pro rata (determined as aforesaid) with Holders of Capital
Securities, except that, if a Debenture Event of Default has occurred and is
continuing, the Capital Securities shall have a priority over the Common
Securities.
Section IX.5 Mergers, Consolidations, Amalgamations or Replacements of
the Trust.
<PAGE> 46
41
The Trust 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 pursuant
to this Article IX. At the request of the Depositor, with the consent of the
Administrative Trustees and without the consent of the Holders of the Capital
Securities, the Property Trustee or the Delaware Trustee, the Trust may 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 the Trust with
respect to the Capital Securities or (b) substitutes for the Capital Securities
other securities having substantially the same terms as the Capital Securities
(the "Successor Securities") so long as the Successor Securities rank the same
as the Capital Securities rank in priority with respect to distributions and
payments upon liquidation, redemption and otherwise, (ii) the Depositor
expressly appoints a trustee of such successor entity possessing the same powers
and duties as the Property Trustee as the holder of the Debentures, (iii) the
Successor Securities are listed or traded, or any Successor Securities will be
listed upon notification of issuance, on any national securities exchange or
other organization on which the Capital Securities are then listed or traded, if
any, (iv) such merger, consolidation, amalgamation, replacement, conveyance,
transfer or lease does not cause the Capital Securities (including any Successor
Securities) to be downgraded by any nationally recognized statistical rating
organization, (v) such merger, consolidation, amalgamation, replacement,
conveyance, transfer or lease does not adversely affect the rights, preferences
and privileges of the holders of the Capital Securities (including any Successor
Securities) in any material respect, (vi) such successor entity has a purpose
identical to that of the Trust, (vii) prior to such merger, consolidation,
amalgamation, replacement, conveyance, transfer or lease, the Depositor has
received an Opinion of Counsel 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
Capital Securities (including any Successor Securities) in any material respect,
and (b) following such merger, consolidation, amalgamation, replacement,
conveyance, transfer or lease, neither the Trust nor such successor entity will
be required to register as an investment company under the 1940 Act and (viii)
the Depositor 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, the Trust shall not, except with the consent of Holders of 100% in
Liquidation Amount of the Capital 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 Person or permit any other
Person to consolidate, amalgamate, merge with or into, or replace it if such
consolidation, amalgamation, merger, replacement, conveyance, transfer or lease
would cause the Trust or the successor entity to be classified as other than a
grantor trust for United States federal income tax purposes.
ARTICLE X
Miscellaneous Provisions
Section X.1 Limitation of Rights of Securityholders.
Except to the extent otherwise provided in Section 9.2, the death,
incapacity, liquidation, dissolution, termination or bankruptcy of any Person
having an interest, beneficial or otherwise, in Trust Securities shall not
operate to terminate this Trust Agreement, nor entitle the legal representatives
or heirs of such Person or any Securityholder for such Person, to claim an
accounting, take any action or bring any proceeding in any court for a partition
or winding up of the arrangements contemplated hereby, nor otherwise affect the
rights, obligations and liabilities of the parties hereto or any of them.
<PAGE> 47
42
Section X.2 Liability of the Common Securityholder.
The Holder of the Common Securities shall be liable for all of the
debts and obligations of the Trust (other than with respect to the Trust
Securities) to the extent not satisfied out of the Trust's assets.
Section X.3 Amendment.
(a) This Trust Agreement may be amended from time to time by the
Property Trustee, the Delaware Trustee, the Administrative Trustees and the
Depositor, without the consent of any Securityholders, (i) to cure any
ambiguity, correct or supplement any provision herein which may be inconsistent
with any other provision herein, or to make any other provisions with respect to
matters or questions arising under this Trust Agreement, which shall not be
inconsistent with the other provisions of this Trust Agreement, or (ii) to
modify, eliminate or add to any provisions of this Trust Agreement to such
extent as shall be necessary to ensure that the Trust 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 Trust will not be
required to register as an investment company under the 1940 Act; provided,
however, that in the case of clause (i) or clause (ii), such action shall not
adversely affect in any material respect the interests of any Securityholder,
and any amendments of this Trust Agreement shall become effective when notice
thereof is given to the Securityholders.
(b) Except as provided in Section 10.3(c) hereof, any provision of this
Trust Agreement may be amended by the Trustees and the Depositor with (i) the
consent of Trust Securityholders representing not less than a majority (based
upon Liquidation Amounts) of the Trust Securities then Outstanding and (ii)
receipt by the Trustees of an Opinion of Counsel to the effect that such
amendment or the exercise of any power granted to the Trustees in accordance
with such amendment will not affect the Trust's status as a grantor trust for
United States federal income tax purposes or the Trust's exemption from status
of an investment company under the 1940 Act.
(c) In addition to and notwithstanding any other provision in this
Trust Agreement, without the consent of each affected Securityholder (such
consent being obtained in accordance with Section 6.3 or 6.6 hereof), this 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 Securityholder to institute suit
for the enforcement of any such payment on or after such date; notwithstanding
any other provision herein, without the unanimous consent of the Securityholders
(such consent being obtained in accordance with Section 6.3 or 6.6 hereof), this
paragraph (c) of this Section 10.3 may not be amended.
(d) Notwithstanding any other provisions of this Trust Agreement, no
Trustee shall enter into or consent to any amendment to this Trust Agreement
which would cause the Trust to fail or cease to qualify for the exemption from
status of an investment company under the 1940 Act or fail or cease to be
classified as a grantor trust for United States federal income tax purposes.
(e) Notwithstanding anything in this Trust Agreement to the contrary,
without the consent of the Depositor, this Trust Agreement may not be amended in
a manner which imposes any additional obligation on the Depositor.
(f) In the event that any amendment to this Trust Agreement is made,
the Administrative Trustees shall promptly provide to the Depositor a copy of
such amendment.
(g) Neither the Property Trustee nor the Delaware Trustee shall be
required to enter into any amendment to this Trust Agreement which affects its
own rights, duties or immunities under
<PAGE> 48
43
this Trust Agreement. The Property Trustee shall be entitled to receive an
Opinion of Counsel and an Officers' Certificate stating that any amendment to
this Trust Agreement is in compliance with this Trust Agreement.
Section X.4 Consolidation, Merger, Conveyance, Transfer or Lease.
The Depositor shall not consolidate with or merge into any other Person
or convey, transfer or lease its properties and assets substantially as an
entirety to any Person, and no Person shall consolidate with or merge into the
Depositor or convey, transfer or lease its properties and assets substantially
as an entirety to the Depositor, unless it has complied with the terms of
Section 8.1 of the Indenture.
Section X.5 Separability.
In case any provision in this Trust Agreement or in the Trust
Securities Certificates shall be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.
<PAGE> 49
44
Section X.6 Governing Law.
THIS TRUST AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF EACH OF THE
SECURITYHOLDERS, THE TRUST AND THE TRUSTEES WITH RESPECT TO THIS TRUST AGREEMENT
AND THE TRUST SECURITIES SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY
THE LAWS OF THE STATE OF DELAWARE (WITHOUT REGARD TO CONFLICT OF LAWS
PRINCIPLES).
Section X.7 Payments Due on Non-Business Day.
If the date fixed for any payment on any Trust Security shall be a day
that is not a Business Day, then such payment need not be made on such date but
may be made on the next succeeding day that is a Business Day (except as
otherwise provided in Sections 4.1(a) and 4.2(d)), with the same force and
effect as though made on the date fixed for such payment, and no interest shall
accrue thereon for the period after such date.
Section X.8 Successors.
This Trust Agreement shall be binding upon and shall inure to the
benefit of any successor to the Depositor, the Trust or the Relevant Trustee,
including any successor by operation of law. Except in connection with a
consolidation, merger or sale involving the Depositor that is permitted under
Article Eight of the Indenture and pursuant to which the assignee agrees in
writing to perform the Depositor's obligations hereunder, the Depositor shall
not assign its obligations hereunder.
Section X.9 Headings.
The Article and Section headings are for convenience only and shall not
affect the construction of this Trust Agreement.
Section X.10 Reports, Notices and Demands.
Any report, notice, demand or other communication which by any
provision of this Trust Agreement is required or permitted to be given or served
to or upon any Securityholder or the Depositor may be given or served in writing
by deposit thereof, first-class postage prepaid, in the United States mail, hand
delivery or facsimile transmission, in each case, addressed, (a) in the case of
a Capital Securityholder, to such Capital Securityholder as such
Securityholder's name and address may appear on the Securities Register; and (b)
in the case of the Common Securityholder or the Depositor, to MBNA Corporation,
Wilmington, Delaware 19884, Attention: Vernon H.C. Wright, facsimile no.: (302)
456-8348. Such notice, demand or other communication to or upon a Securityholder
shall be deemed to have been sufficiently given or made, for all purposes, upon
hand delivery, mailing or transmission.
Any notice, demand or other communication which by any provision of
this Trust Agreement is required or permitted to be given or served to or upon
the Trust, the Property Trustee, the Delaware Trustee or the Administrative
Trustees shall be given in writing addressed (until another address is published
by the Trust) as follows: (a) with respect to the Property Trustee to The Bank
of New York, 101 Barclay Street, New York, New York 10286, Attention: Corporate
Trust Administration; (b) with respect to the Delaware Trustee, to The Bank of
New York (Delaware), White Clay Center, Route 273, Newark, Delaware, with a copy
to the Property Trustee at the address set forth in Clause (a); and (c) with
respect to the Administrative Trustees, to them at the address above for notices
to the Depositor, marked "Attention Administrative
<PAGE> 50
45
Trustees of MBNA Capital B." Such notice, demand or other communication to or
upon the Trust or the Property Trustee shall be deemed to have been sufficiently
given or made only upon actual receipt of the writing by the Trust or the
Property Trustee.
Section X.11 Agreement Not to Petition.
Each of the Trustees and the Depositor agree for the benefit of the
Securityholders that, until at least one year and one day after the Trust has
been terminated in accordance with Article IX, they shall not file, or join in
the filing of, a petition against the Trust under any bankruptcy, insolvency,
reorganization or other similar law (including, without limitation, the United
States Bankruptcy Code) (collectively, "Bankruptcy Laws") or otherwise join in
the commencement of any proceeding against the Trust under any Bankruptcy Law.
In the event the Depositor takes action in violation of this Section 10.11, the
Property Trustee agrees, for the benefit of Securityholders, that at the expense
of the Depositor, it shall file an answer with the bankruptcy court or otherwise
properly contest the filing of such petition by the Depositor against the Trust
or the commencement of such action and raise the defense that the Depositor has
agreed in writing not to take such action and should be stopped and precluded
therefrom and such other defenses, if any, as counsel for the Trustee or the
Trust may assert. The provisions of this Section 10.11 shall survive the
termination of this Trust Agreement.
Section X.12 Trust Indenture Act; Conflict with Trust Indenture Act.
(a) This Trust Agreement is subject to the provisions of the Trust
Indenture Act that are required or deemed to be part of this Trust Agreement and
shall, to the extent applicable, be governed by such provisions.
(b) The Property Trustee shall be the only Trustee which is a trustee
for the purposes of the Trust Indenture Act.
(c) If any provision hereof limits, qualifies or conflicts with another
provision hereof which is required or deemed to be included in this Trust
Agreement by any of the provisions of the Trust Indenture Act, such required or
deemed provision shall control. If any provision of this Trust Agreement
modifies or excludes any provision of the Trust Indenture Act which may be so
modified or excluded, the latter provision shall be deemed to apply to this
Trust Agreement as so modified or excluded, as the case may be.
(d) The application of the Trust Indenture Act to this Trust Agreement
shall not affect the nature of the Trust Securities as equity securities
representing undivided beneficial interests in the assets of the Trust.
Section X.13 Acceptance of Terms of Trust Agreement, Guarantee and
Indenture.
THE RECEIPT AND ACCEPTANCE OF A TRUST SECURITY OR ANY INTEREST THEREIN
BY OR ON BEHALF OF A SECURITYHOLDER OR ANY BENEFICIAL OWNER, WITHOUT ANY
SIGNATURE OR FURTHER MANIFESTATION OF ASSENT, SHALL CONSTITUTE THE UNCONDITIONAL
ACCEPTANCE BY THE SECURITYHOLDER AND ALL OTHERS HAVING A BENEFICIAL INTEREST IN
SUCH TRUST SECURITY OF ALL THE TERMS AND PROVISIONS OF THIS TRUST AGREEMENT AND
AGREEMENT TO THE SUBORDINATION PROVISIONS AND OTHER TERMS OF THE GUARANTEE AND
THE INDENTURE, AND SHALL CONSTITUTE THE AGREEMENT OF THE TRUST, SUCH
SECURITYHOLDER AND SUCH OTHERS THAT THE TERMS AND PROVISIONS OF THIS TRUST
AGREEMENT SHALL BE BINDING, OPERATIVE AND EFFECTIVE AS BETWEEN THE TRUST AND
SUCH SECURITYHOLDER AND SUCH OTHERS.
<PAGE> 51
46
Section X.14 Counterparts.
This Trust Agreement may contain more than one counterpart of the
signature page and this Trust Agreement may be executed by the affixing of the
signature of each of the Trustees of one of such counterpart signature pages.
All of such counterpart signature pages shall be read as though one, and they
shall have the same force and effect as though all of the signers had signed a
single signature page.
MBNA CORPORATION
By:
------------------------------------
Name:
Title:
The Bank of New York,
as Property Trustee
By:
------------------------------------
Name:
Title:
The Bank of New York (Delaware),
as Delaware Trustee
By:
------------------------------------
Name:
Title:
---------------------------------------
M. Scot Kaufman
as Administrative Trustee
---------------------------------------
John W. Scheflen
as Administrative Trustee
<PAGE> 52
EXHIBIT A
<PAGE> 53
EXHIBIT B
<PAGE> 54
EXHIBIT C
<PAGE> 55
EXHIBIT D
<PAGE> 1
EXHIBIT 4.9
- - --------------------------------------------------------------------------------
GUARANTEE AGREEMENT
BETWEEN
MBNA CORPORATION
(AS GUARANTOR)
AND
THE BANK OF NEW YORK
(AS TRUSTEE)
DATED AS OF
JANUARY 23, 1997
- - --------------------------------------------------------------------------------
<PAGE> 2
CROSS-REFERENCE TABLE*
<TABLE>
<CAPTION>
Section of
Trust Indenture Act Section of
of 1939, as amended Guarantee Agreement
- - ------------------- -------------------
<S> <C>
310(a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1(a)
310(b). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1(c), 2.8
310(c). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Inapplicable
311(a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2(b)
311(b). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2(b)
311(c). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Inapplicable
312(a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2(a)
312(b). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2(b)
313. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.3
314(a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.4
314(b). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Inapplicable
314(c). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.5
314(d). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Inapplicable
314(e). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.1, 2.5, 3.2
314(f). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1, 3.2
315(a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1(d)
315(b). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.7
315(c). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1
315(d). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1(d)
316(a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.1, 2.6, 5.4
316(b). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.3
316(c). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.2
317(a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Inapplicable
317(b). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Inapplicable
318(a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1(b)
318(b). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1
318(c). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1(a)
</TABLE>
- - ----------------
* This Cross-Reference Table does not constitute part of the Guarantee
Agreement and shall not affect the interpretation of any of its terms
or provisions.
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II. TRUST INDENTURE ACT . . . . . . . . . . . . . . . . . . . . . . 4
Section 2.1. Trust Indenture Act; Application . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 2.2. List of Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 2.3. Reports by the Guarantee Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 2.4. Periodic Reports to the Guarantee Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 2.5. Evidence of Compliance with Conditions Precedent . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 2.6. Events of Default; Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 2.7. Event of Default; Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 2.8. Conflicting Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE III. POWERS, DUTIES AND RIGHTS
OF THE GUARANTEE TRUSTEE . . . . . . . . . . . . . . . . . . . . . 6
Section 3.1. Powers and Duties of the Guarantee Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 3.2. Certain Rights of Guarantee Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 3.3. Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE IV. GUARANTEE TRUSTEE . . . . . . . . . . . . . . . . . . . . . . . 9
Section 4.1. Guarantee Trustee: Eligibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 4.2. Appointment, Removal and Resignation of the Guarantee Trustee . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE V. GUARANTEE . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 5.1. Guarantee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 5.2. Waiver of Notice and Demand . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 5.3. Obligations Not Affected . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 5.4. Rights of Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 5.5. Guarantee of Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 5.6. Subrogation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 5.7. Independent Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE VI. COVENANTS AND SUBORDINATION . . . . . . . . . . . . . . . . . . . . 12
Section 6.1. Subordination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 6.2. Pari Passu Guarantees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE VII. TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . 13
</TABLE>
<PAGE> 4
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Section 7.1. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE VIII. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . 13
Section 8.1. Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 8.2. Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 8.3. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 8.4. Consolidation, Merger, Conveyance, Transfer or Lease . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 8.5. Benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 8.6. Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 8.7. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
</TABLE>
- ii -
<PAGE> 5
GUARANTEE AGREEMENT
This GUARANTEE AGREEMENT, dated as of January 23, 1997, is executed
and delivered by MBNA CORPORATION, a Maryland corporation (the "Guarantor")
having its principal office at Wilmington, Delaware 19884, and THE BANK OF NEW
YORK, a New York banking corporation, as trustee (the "Guarantee Trustee"), for
the benefit of the Holders (as defined herein) from time to time of the Capital
Securities and Common Securities (each as defined herein and together, the
"Securities") of MBNA Capital B, a Delaware statutory business trust (the
"Issuer").
WHEREAS, pursuant to an Amended and Restated Trust Agreement, dated as
of January 23, 1997 (the "Trust Agreement"), among the Guarantor, as Depositor,
the Property Trustee and the Delaware Trustee named therein, the Administrative
Trustees named therein and the Holders from time to time of undivided
beneficial interests in the assets of the Issuer, the Issuer is issuing
$280,000,000 aggregate Liquidation Amount (as defined in the Trust Agreement)
of its Floating Rate Capital Securities, Series B, Liquidation Amount $1,000
per preferred security) (the "Capital Securities") representing preferred
undivided beneficial interests in the assets of the Issuer and having the terms
set forth in the Trust Agreement;
WHEREAS, the Capital Securities will be issued by the Issuer and the
proceeds thereof, together with the proceeds from the issuance of the Issuer's
Common Securities (as defined herein), will be used to purchase the Debentures
(as defined in the Trust Agreement) of the Guarantor which will be deposited
with The Bank of New York, as Property Trustee under the Trust Agreement, as
trust assets; and
WHEREAS, as incentive for the Holders to purchase Securities the
Guarantor desires irrevocably and unconditionally to agree, to the extent set
forth herein, to pay to the Holders of the Securities the Guarantee Payments
(as defined herein) and to make certain other payments on the terms and
conditions set forth herein.
NOW, THEREFORE, in consideration of the purchase by each Holder of
Securities, which purchase the Guarantor hereby agrees shall benefit the
Guarantor, the Guarantor executes and delivers this Guarantee Agreement for the
benefit of the Holders from time to time of the Securities.
ARTICLE I. DEFINITIONS
Section 1.1. Definitions.
As used in this Guarantee Agreement, the terms set forth below shall,
unless the context otherwise requires, have the following meanings. Capitalized
or otherwise defined terms used but not otherwise defined herein shall have the
meanings assigned to such terms in the Trust Agreement as in effect on the date
hereof.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person; provided, however, that an Affiliate of the
Guarantor shall not be deemed to be an Affiliate of the Issuer. For the
purposes of this definition, "control" when used with respect to any specified
Person means the power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership of voting securities, by
contract or otherwise; and the terms "controlling" and "controlled" have
meanings correlative to the foregoing.
<PAGE> 6
2
"Board of Directors" means either the board of directors of the
Guarantor or any committee of that board duly authorized to act hereunder.
"Common Securities" means the securities representing common undivided
beneficial interests in the assets of the Issuer.
"Event of Default" means a default by the Guarantor on any of its
payment or other obligations under this Guarantee Agreement; provided, however,
that, except with respect to a default in payment of any Guarantee Payments,
the Guarantor shall have received notice of default and shall not have cured
such default within 90 days after receipt of such notice.
"Guarantee Payments" means the following payments or distributions,
without duplication, with respect to the Securities, to the extent not paid or
made by or on behalf of the Issuer: (i) any accumulated and unpaid
Distributions (as defined in the Trust Agreement) required to be paid on the
Securities, to the extent the Issuer shall have funds on hand available
therefor at such time, (ii) the redemption price, including all accrued and
unpaid Distributions to the date of redemption (the"Redemption Price"), with
respect to any Securities called for redemption by the Issuer, to the extent
the Issuer shall have funds on hand available therefor at such time, and (iii)
upon a voluntary or involuntary termination, winding up or liquidation of the
Issuer, unless Debentures are distributed to the Holders, the lesser of (a) the
aggregate of the Liquidation Amount plus accrued and unpaid Distributions to
the date of payment and (b) the amount of assets of the Issuer remaining
available for distribution to Holders in liquidation of the Issuer after
satisfaction of liabilities to creditors of the Issuer as required by
applicable law (in either case, the "Liquidation Distribution").
"Guarantee Trustee" means The Bank of New York, until a Successor
Guarantee Trustee has been appointed and has accepted such appointment pursuant
to the terms of this Guarantee Agreement, and thereafter means each such
Successor Guarantee Trustee.
"Holder" means any holder, as registered on the books and records of
the Issuer, of any Securities; provided, however, that in determining whether
the holders of the requisite percentage of Securities have given any request,
notice, consent or waiver hereunder, "Holder" shall not include the Guarantor,
the Guarantee Trustee, or any Affiliate of the Guarantor or the Guarantee
Trustee.
"Indenture" means the Junior Subordinated Indenture dated as of
December 18, 1996, as supplemented and amended between the Guarantor and The
Bank of New York, as trustee.
"List of Holders" has the meaning specified in Section 2.2(a).
"Majority in aggregate Liquidation Amount of the Securities" means,
except as provided by the Trust Indenture Act, a vote by the Holder(s), voting
separately as a class, of more than 50% of the aggregate Liquidation Amount of
all then outstanding Securities issued by the Issuer.
"Officers' Certificate" means, with respect to any Person, a
certificate signed by the Chairman or a Vice Chairman of the Board of Directors
of such Person or the President or a Vice President of such Person, and by the
Treasurer, an Assistant Treasurer, the Secretary or an Assistant Secretary of
such Person, and delivered to the Guarantee Trustee. Any Officers' Certificate
delivered with respect to compliance with a condition or covenant provided for
in this Guarantee Agreement shall include:
(a) a statement that each officer signing the Officers' Certificate
has read the covenant or
<PAGE> 7
3
condition and the definitions relating thereto;
(b) a brief statement of the nature and scope of the examination or
investigation undertaken by each officer in rendering the Officers'
Certificate;
(c) a statement that each officer has made such examination or
investigation as, in such officer's opinion, is necessary to enable such
officer to express an informed opinion as to whether or not such covenant or
condition has been complied with; and
(d) a statement as to whether, in the opinion of each officer, such
condition or covenant has been complied with.
"Person" means a legal person, including any individual, corporation,
estate, partnership, joint venture, association, joint stock company, limited
liability company, trust, unincorporated association, or government or any
agency or political subdivision thereof, or any other entity of whatever
nature.
"Responsible Officer" when used with respect to the Guarantee Trustee
means any officer of the Guarantee Trustee assigned by the Guarantee Trustee
from time to time to administer its corporate trust matters.
"Successor Guarantee Trustee" means a successor Guarantee Trustee
possessing the qualifications to act as Guarantee Trustee under Section 4.1.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as
amended.
ARTICLE II. TRUST INDENTURE ACT
Section 2.1. Trust Indenture Act; Application.
(a) This Guarantee Agreement is subject to the provisions of the Trust
Indenture Act that are required to be part of this Guarantee Agreement and
shall, to the extent applicable, be governed by such provisions.
(b) If and to the extent that any provision of this Guarantee
Agreement limits, qualifies or conflicts with the duties imposed by Sections
310 to 317, inclusive, of the Trust Indenture Act, such imposed duties shall
control.
Section 2.2. List of Holders.
(a) The Guarantor will furnish or cause to be furnished to the
Guarantee Trustee:
(i) semi-annually, not more than 15 days after January 15 and
July 15 in each year, a list, in such form as the Guarantee Trustee
may reasonably require, of the names and addresses of the Holders as
of such January 1 and July 1, and
(ii) at such other times as the Guarantee Trustee may request
in writing, within 30 days after the receipt by the Guarantor of any
such request, a list of similar form and content as of a date not more
than 15 days prior to the time such list is furnished,
excluding from any such list names and addresses received by the
Guarantee Trustee in its capacity as Securities Registrar.
<PAGE> 8
4
(b) The Guarantee Trustee shall comply with its obligations under
Section 311(a), Section 311(b) and Section 312(b) of the Trust Indenture Act.
Section 2.3. Reports by the Guarantee Trustee.
The Guarantee Trustee shall transmit to Holders such reports
concerning the Guarantee Trustee and its actions under this Guarantee Agreement
as may be required pursuant to the Trust Indenture Act at the times and in the
manner provided pursuant thereto. If required by Section 313(a) of the Trust
Indenture Act, the Guarantee Trustee shall, within sixty days after each May 15
following the date of this Guarantee Agreement deliver to Holders a brief
report, dated as of such May 15, which complies with the provisions of such
Section 313(a).
Section 2.4. Periodic Reports to the Guarantee Trustee.
The Guarantor shall provide to the Guarantee Trustee, the Securities
and Exchange Commission and the Holders such documents, reports and
information, if any, as required by Section 314 of the Trust Indenture Act and
the compliance certificate required by Section 314 of the Trust Indenture Act,
in the form, in the manner and at the times required by Section 314 of the
Trust Indenture Act. Delivery of such reports, information and documents to
the Guarantee Trustee is for informational purposes only and the Guarantee
Trustee's receipt of such shall not constitute constructive notice of any
information contained therein, including the Guarantor's compliance with any of
its covenants hereunder (as to which the Guarantee Trustee is entitled to rely
exclusively on Officers' Certificates).
Section 2.5. Evidence of Compliance with Conditions Precedent.
The Guarantor shall provide to the Guarantee Trustee such evidence of
compliance with such conditions precedent, if any, provided for in this
Guarantee Agreement that relate to any of the matters set forth in Section
314(c) of the Trust Indenture Act. Any certificate or opinion required to be
given by an officer pursuant to Section 314(c)(1) may be given in the form of
an Officers' Certificate.
Section 2.6. Events of Default; Waiver.
The Holders of a Majority in aggregate Liquidation Amount of the
Securities may, by vote, on behalf of the Holders, waive any past Event of
Default and its consequences. Upon such waiver, any such Event of Default shall
cease to exist, and any Event of Default arising therefrom shall be deemed to
have been cured, for every purpose of this Guarantee Agreement, but no such
waiver shall extend to any subsequent or other default or Event of Default or
impair any right consequent therefrom.
Section 2.7. Event of Default; Notice.
(a) The Guarantee Trustee shall, within 90 days after the occurrence
of an Event of Default, transmit by mail, first class postage prepaid, to the
Holders, notices of all Events of Default actually known to the Guarantee
Trustee, unless such defaults have been cured before the giving of such notice,
provided, that, except in the case of a default in the payment of a Guarantee
Payment, the Guarantee Trustee shall be protected in withholding such notice if
and so long as the Board of Directors, the executive committee or a trust
committee of directors and/or Responsible Officers of the Guarantee Trustee in
good faith determines that the withholding of such notice is in the interests
of the Holders.
<PAGE> 9
5
(b) The Guarantee Trustee shall not be deemed to have knowledge of any
Event of Default unless the Guarantee Trustee shall have received written
notice, or a Responsible Officer charged with the administration of this
Guarantee Agreement shall have obtained written notice, of such Event of
Default.
Section 2.8. Conflicting Interests.
The Trust Agreement shall be deemed to be specifically described in
this Guarantee Agreement for the purposes of clause (i) of the first proviso
contained in Section 310(b) of the Trust Indenture Act.
ARTICLE III. POWERS, DUTIES AND RIGHTS OF THE GUARANTEE TRUSTEE
Section 3.1. Powers and Duties of the Guarantee Trustee.
(a) This Guarantee Agreement shall be held by the Guarantee Trustee
for the benefit of the Holders, and the Guarantee Trustee shall not transfer
this Guarantee Agreement to any Person except a Holder exercising his or her
rights pursuant to Section 5.4(iv) or to a Successor Guarantee Trustee on
acceptance by such Successor Guarantee Trustee of its appointment to act as
Successor Guarantee Trustee. The right, title and interest of the Guarantee
Trustee shall automatically vest in any Successor Guarantee Trustee, upon
acceptance by such Successor Guarantee Trustee of its appointment hereunder,
and such vesting and cessation of title shall be effective whether or not
conveyancing documents have been executed and delivered pursuant to the
appointment of such Successor Guarantee Trustee.
(b) If an Event of Default has occurred and is continuing, the
Guarantee Trustee shall enforce this Guarantee Agreement for the benefit of the
Holders.
(c) The Guarantee Trustee, before the occurrence of any Event of
Default and after the curing of all Events of Default that may have occurred,
shall undertake to perform only such duties as are specifically set forth in
this Guarantee Agreement, and no implied covenants shall be read into this
Guarantee Agreement against the Guarantee Trustee. In case an Event of Default
has occurred (that has not been cured or waived pursuant to Section 2.6), the
Guarantee Trustee shall exercise such of the rights and powers vested in it by
this Guarantee Agreement, and use the same degree of care and skill in its
exercise thereof, as a prudent person would exercise or use under the
circumstances in the conduct of his or her own affairs.
(d) No provision of this Guarantee Agreement shall be construed to
relieve the Guarantee Trustee from liability for its own negligent action, its
own negligent failure to act or its own willful misconduct, except that:
(i) prior to the occurrence of any Event of Default and after
the curing or waiving of all such Events of Default that may have
occurred:
(A) the duties and obligations of the Guarantee Trustee shall
be determined solely by the express provisions of this Guarantee
Agreement, and the Guarantee Trustee shall not be liable except for
the performance of such duties and obligations as are specifically set
forth in this Guarantee Agreement; and
(B) in the absence of bad faith on the part of the Guarantee
Trustee, the Guarantee Trustee may conclusively rely, as to the truth
of the statements and the correctness of the opinions expressed
therein, upon any certificates or opinions furnished to the Guarantee
<PAGE> 10
6
Trustee and conforming to the requirements of this Guarantee
Agreement; but in the case of any such certificates or opinions that
by any provision hereof or of the Trust Indenture Act are specifically
required to be furnished to the Guarantee Trustee, the Guarantee
Trustee shall be under a duty to examine the same to determine whether
or not they conform to the requirements of this Guarantee Agreement;
(ii) the Guarantee Trustee shall not be liable for any error
of judgment made in good faith by a Responsible Officer of the
Guarantee Trustee, unless it shall be proved that the Guarantee
Trustee was negligent in ascertaining the pertinent facts upon which
such judgment was made;
(iii) the Guarantee Trustee shall not be liable with respect
to any action taken or omitted to be taken by it in good faith in
accordance with the direction of the Holders of not less than a
Majority in aggregate Liquidation Amount of the Securities relating to
the time, method and place of conducting any proceeding for any remedy
available to the Guarantee Trustee, or exercising any trust or power
conferred upon the Guarantee Trustee under this Guarantee Agreement;
and
(iv) no provision of this Guarantee Agreement shall require
the Guarantee Trustee to expend or risk its own funds or otherwise
incur personal financial liability in the performance of any of its
duties or in the exercise of any of its rights or powers, if the
Guarantee Trustee shall have reasonable grounds for believing that the
repayment of such funds or liability is not reasonably assured to it
under the terms of this Guarantee Agreement or adequate indemnity
against such risk or liability is not reasonably assured to it.
Section 3.2. Certain Rights of Guarantee Trustee.
(a) Subject to the provisions of Section 3.1:
(i) The Guarantee Trustee may rely and shall be fully
protected in acting or refraining from acting upon any resolution,
certificate, statement, instrument, opinion, report, notice, request,
direction, consent, order, bond, debenture, note, other evidence of
indebtedness or other paper or document reasonably believed by it to
be genuine and to have been signed, sent or presented by the proper
party or parties.
(ii) Any direction or act of the Guarantor contemplated by
this Guarantee Agreement shall be sufficiently evidenced by an
Officers' Certificate unless otherwise prescribed herein.
(iii) Whenever, in the administration of this Guarantee
Agreement, the Guarantee Trustee shall deem it desirable that a matter
be proved or established before taking, suffering or omitting to take
any action hereunder, the Guarantee Trustee (unless other evidence is
herein specifically prescribed) may, in the absence of bad faith on
its part, request and rely upon an Officers' Certificate which, upon
receipt of such request from the Guarantee Trustee, shall be promptly
delivered by the Guarantor.
(iv) The Guarantee Trustee may consult with legal counsel of
its selection, and the advice or opinion of such legal counsel with
respect to legal matters shall be full and complete authorization and
protection in respect of any action taken, suffered or omitted to be
taken by it hereunder in good faith and in accordance with such advice
or opinion. Such legal counsel may be legal counsel to the Guarantor
or any of its Affiliates and may be one of its employees. The
Guarantee Trustee shall have the right at any time to seek
instructions concerning the administration of this Guarantee Agreement
from any court of competent
<PAGE> 11
7
jurisdiction.
(v) The Guarantee Trustee shall be under no obligation to
exercise any of the rights or powers vested in it by this Guarantee
Agreement at the request or direction of any Holder, unless such
Holder shall have provided to the Guarantee Trustee such adequate
security and indemnity as would satisfy a reasonable person in the
position of the Guarantee Trustee, against the costs, expenses
(including attorneys' fees and expenses) and liabilities that might be
incurred by it in complying with such request or direction, including
such reasonable advances as may be requested by the Guarantee Trustee;
provided that, nothing contained in this Section 3.2(a)(v) shall be
taken to relieve the Guarantee Trustee, upon the occurrence of an
Event of Default, of its obligation to exercise the rights and powers
vested in it by this Guarantee Agreement.
(vi) The Guarantee Trustee shall not be bound to make any
investigation into the facts or matters stated in any resolution,
certificate, statement, instrument, opinion, report, notice, request,
direction, consent, order, bond, debenture, note, other evidence of
indebtedness or other paper or document, but the Guarantee Trustee, in
its discretion, may make such further inquiry or investigation into
such facts or matters as it may see fit.
(vii) The Guarantee Trustee may execute any of the trusts or
powers hereunder or perform any duties hereunder either directly or by
or through its agents or attorneys, and the Guarantee Trustee shall
not be responsible for any misconduct or negligence on the part of any
such agent or attorney appointed with due care by it hereunder.
(viii) Whenever in the administration of this Guarantee
Agreement the Guarantee Trustee shall deem it desirable to receive
written instructions with respect to enforcing any remedy or right or
taking any other action hereunder, the Guarantee Trustee (A) may
request written instructions from the Holders, (B) may refrain from
enforcing such remedy or right or taking such other action until such
written instructions are received, and (C) shall be protected in
acting in accordance with such written instructions.
(ix) The Guarantee Trustee shall not be liable for any action
taken, suffered, or omitted to be taken by it in good faith and
reasonably believed by it to be authorized or within the discretion or
rights or powers conferred upon it by this Guarantee Agreement.
(b) No provision of this Guarantee Agreement shall be deemed to impose
any duty or obligation on the Guarantee Trustee to perform any act or acts or
exercise any right, power, duty or obligation conferred or imposed on it in any
jurisdiction in which it shall be illegal, or in which the Guarantee Trustee
shall be unqualified or incompetent in accordance with applicable law, to
perform any such act or acts or to exercise any such right, power, duty or
obligation. No permissive power or authority available to the Guarantee Trustee
shall be construed to be a duty to act in accordance with such power and
authority.
Section 3.3. Indemnity.
The Guarantor agrees to indemnify the Guarantee Trustee for, and to
hold it harmless against, any loss, liability or expense incurred without
negligence or bad faith on the part of the Guarantee Trustee, arising out of or
in connection with the acceptance or administration of this Guarantee
Agreement, including the costs and expenses of defending itself against any
claim or liability in connection with the exercise or performance of any of its
powers or duties hereunder.
ARTICLE IV. GUARANTEE TRUSTEE
<PAGE> 12
8
Section 4.1. Guarantee Trustee: Eligibility.
(a) There shall at all times be a Guarantee Trustee which shall:
(i) not be an Affiliate of the Guarantor; and
(ii) be a Person that is eligible pursuant to the Trust
Indenture Act to act as such and has a combined capital and surplus of
at least $50,000,000, and shall be a corporation meeting the
requirements of Section 310(a) of the Trust Indenture Act. If such
corporation publishes reports of condition at least annually, pursuant
to law or to the requirements of the supervising or examining
authority, then, for the purposes of this Section and to the extent
permitted by the Trust Indenture Act, the combined capital and surplus
of such corporation shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so
published.
(b) If at any time the Guarantee Trustee shall cease to be eligible to
so act under Section 4.1(a), the Guarantee Trustee shall immediately resign in
the manner and with the effect set out in Section 4.2(c).
(c) If the Guarantee Trustee has or shall acquire any "conflicting
interest" within the meaning of Section 310(b) of the Trust Indenture Act, the
Guarantee Trustee and Guarantor shall in all respects comply with the
provisions of Section 310(b) of the Trust Indenture Act.
Section 4.2. Appointment, Removal and Resignation of the Guarantee
Trustee.
(a) Subject to Section 4.2(b), the Guarantee Trustee may be appointed
or removed without cause at any time by the Guarantor.
(b) The Guarantee Trustee shall not be removed until a Successor
Guarantee Trustee has been appointed and has accepted such appointment by
written instrument executed by such Successor Guarantee Trustee and delivered
to the Guarantor. If an instrument of acceptance by a Successor Guarantee
Trustee shall not have been delivered to the Guarantee Trustee within 30 days
after such removal, the Guarantee Trustee being removed may petition any court
of competent jurisdiction for the appointment of a Successor Guarantee Trustee.
(c) The Guarantee Trustee appointed hereunder shall hold office until
a Successor Guarantee Trustee shall have been appointed or until its removal or
resignation. The Guarantee Trustee may resign from office (without need for
prior or subsequent accounting) by an instrument in writing executed by the
Guarantee Trustee and delivered to the Guarantor, which resignation shall not
take effect until a Successor Guarantee Trustee has been appointed and has
accepted such appointment by instrument in writing executed by such Successor
Guarantee Trustee and delivered to the Guarantor and the resigning Guarantee
Trustee.
(d) If no Successor Guarantee Trustee shall have been appointed and
accepted appointment as provided in this Section 4.2 within 60 days after
delivery to the Guarantor of an instrument of resignation, the resigning
Guarantee Trustee may petition, at the expense of the Guarantor, any court of
competent jurisdiction for appointment of a Successor Guarantee Trustee. Such
court may thereupon, after prescribing such notice, if any, as it may deem
proper, appoint a Successor Guarantee Trustee.
<PAGE> 13
9
ARTICLE V. GUARANTEE
Section 5.1. Guarantee.
The Guarantor irrevocably and unconditionally agrees to pay in full to
the Holders the Guarantee Payments (without duplication of amounts theretofore
paid by or on behalf of the Issuer), as and when due, regardless of any
defense, right of set-off or counterclaim which the Issuer may have or assert.
The Guarantor's obligation to make a Guarantee Payment may be satisfied by
direct payment of the required amounts by the Guarantor to the Holders or by
causing the Issuer to pay such amounts to the Holders.
Section 5.2. Waiver of Notice and Demand.
The Guarantor hereby waives notice of acceptance of the Guarantee
Agreement and of any liability to which it applies or may apply, presentment,
demand for payment, any right to require a proceeding first against the
Guarantee Trustee, Issuer or any other Person before proceeding against the
Guarantor, protest, notice of nonpayment, notice of dishonor, notice of
redemption and all other notices and demands.
Section 5.3. Obligations Not Affected.
The obligations, covenants, agreements and duties of the Guarantor
under this Guarantee Agreement shall in no way be affected or impaired by
reason of the happening from time to time of any of the following:
(a) the release or waiver, by operation of law or otherwise, of the
performance or observance by the Issuer of any express or implied agreement,
covenant, term or condition relating to the Securities to be performed or
observed by the Issuer;
(b) the extension of time for the payment by the Issuer of all or any
portion of the Distributions (other than an extension of time for payment of
Distributions that results from the extension of any interest payment period on
the Debentures as provided in the Indenture), Redemption Price, Liquidation
Distribution or any other sums payable under the terms of the Securities or the
extension of time for the performance of any other obligation under, arising
out of, or in connection with, the Securities;
(c) any failure, omission, delay or lack of diligence on the part of
the Holders to enforce, assert or exercise any right, privilege, power or
remedy conferred on the Holders pursuant to the terms of the Securities, or any
action on the part of the Issuer granting indulgence or extension of any kind;
(d) the voluntary or involuntary liquidation, dissolution, sale of any
collateral, receivership, insolvency, bankruptcy, assignment for the benefit of
creditors, reorganization, arrangement, composition or readjustment of debt of,
or other similar proceedings affecting, the Issuer or any of the assets of the
Issuer;
(e) any invalidity of, or defect or deficiency in, the Securities;
(f) the settlement or compromise of any obligation guaranteed hereby
or hereby incurred; or
(g) any other circumstance whatsoever that might otherwise constitute
a legal or equitable discharge or defense of a guarantor, it being the intent
of this Section 5.3 that the obligations of the Guarantor hereunder shall be
absolute and unconditional under any and all circumstances.
<PAGE> 14
10
There shall be no obligation of the Holders to give notice to, or obtain the
consent of, the Guarantor with respect to the happening of any of the
foregoing.
Section 5.4. Rights of Holders.
The Guarantor expressly acknowledges that: (i) this Guarantee
Agreement will be deposited with the Guarantee Trustee to be held for the
benefit of the Holders; (ii) the Guarantee Trustee has the right to enforce
this Guarantee Agreement on behalf of the Holders; (iii) the Holders of a
Majority in liquidation preference of the 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 this Guarantee Agreement or
exercising any trust or power conferred upon the Guarantee Trustee under this
Guarantee Agreement; and (iv) any Holder may institute a legal proceeding
directly against the Guarantor to enforce its rights under this Guarantee
Agreement, without first instituting a legal proceeding against the Guarantee
Trustee, the Issuer or any other Person.
Section 5.5. Guarantee of Payment
This Guarantee Agreement creates a guarantee of payment and not of
collection. This Guarantee Agreement will not be discharged except by payment
of the Guarantee Payments in full (without duplication of amounts theretofore
paid by the Issuer) or upon distribution of Debentures to Holders as provided
in the Trust Agreement.
Section 5.6. Subrogation.
The Guarantor shall be subrogated to all (if any) rights of the
Holders against the Issuer in respect of any amounts paid to the Holders by the
Guarantor under this Guarantee Agreement and shall have the right to waive
payment by the Issuer pursuant to Section 5.1; provided, however, that the
Guarantor shall not (except to the extent required by mandatory provisions of
law) be entitled to enforce or exercise any rights which it may acquire by way
of subrogation or any indemnity, reimbursement or other agreement, in all cases
as a result of payment under this Guarantee Agreement, if, at the time of any
such payment, any amounts are due and unpaid under this Guarantee Agreement. If
any amount shall be paid to the Guarantor in violation of the preceding
sentence, the Guarantor agrees to hold such amount in trust for the Holders and
to pay over such amount to the Holders.
Section 5.7. Independent Obligations.
The Guarantor acknowledges that its obligations hereunder are
independent of the obligations of the Issuer with respect to the Securities and
that the Guarantor shall be liable as principal and as debtor hereunder to make
Guarantee Payments pursuant to the terms of this Guarantee Agreement
notwithstanding the occurrence of any event referred to in subsections (a)
through (g), inclusive, of Section 5.3 hereof.
ARTICLE VI. COVENANTS AND SUBORDINATION
Section 6.1. Subordination.
The obligations of the Guarantor under this Guarantee Agreement will
constitute unsecured obligations of the Guarantor and will rank subordinate and
junior in right of payment to all Senior Debt (as defined in the Indenture) of
the Guarantor, except those made pari passu or subordinate to such obligations
expressly by their terms. in the same manner as set forth in Article XIII of
the
<PAGE> 15
11
Indenture.
Section 6.2. Pari Passu Guarantees.
The obligations of the Guarantor under this Guarantee Agreement shall
rank pari passu with the obligations of the Guarantor under any similar
Guarantee Agreements issued by the Guarantor on behalf of the holders of
preferred securities issued by any Trust (as defined in the Indenture).
ARTICLE VII. TERMINATION
Section 7.1. Termination.
This Guarantee Agreement shall terminate and be of no further force
and effect upon (i) full payment of the Redemption Price of all Securities,
(ii) the distribution of Debentures to the Holders in exchange for all of the
Securities or (iii) full payment of the amounts payable in accordance with the
Trust Agreement upon liquidation of the Issuer. Notwithstanding the foregoing,
this Guarantee Agreement will continue to be effective or will be reinstated,
as the case may be, if at any time any Holder must restore payment of any sums
paid with respect to Securities or this Guarantee Agreement.
ARTICLE VIII. MISCELLANEOUS
Section 8.1. Successors and Assigns.
All guarantees and agreements contained in this Guarantee Agreement
shall bind the successors, assigns, receivers, trustees and representatives of
the Guarantor and shall inure to the benefit of the Holders of the Securities
then outstanding. Except in connection with a consolidation, merger or sale
involving the Guarantor that is permitted under Article VIII of the Indenture
and pursuant to which the successor or assignee agrees in writing to perform
the Guarantor's obligations hereunder, the Guarantor shall not assign its
obligations hereunder.
Section 8.2. Amendments.
Except with respect to any changes which do not adversely affect the
rights of the Holders or the Guarantee Trustee in any material respect (in
which case no consent of the Holders or the Guarantee Trustee, as the case may
be, will be required), this Guarantee Agreement may only be amended with the
prior approval of the Holders of not less than a Majority in Liquidation Amount
of all the outstanding Securities and of the Guarantee Trustee. The provisions
of Article VI of the Trust Agreement concerning meetings of the Holders shall
apply to the giving of such approval.
Section 8.3. Notices.
Any notice, request or other communication required or permitted to be
given hereunder shall be in writing, duly signed by the party giving such
notice, and delivered, telecopied or mailed by first class mail as follows:
(a) if given to the Guarantor, to the address set forth below or such
other address, facsimile number or to the attention of such other Person as the
Guarantor may give notice to the Holders:
<PAGE> 16
12
MBNA Corporation
Wilmington, Delaware 19884
Facsimile No.: 302-456-8348
Attention: Vernon H.C. Wright
(b) if given to the Issuer, in care of the Guarantee Trustee, at the
Issuer's (and the Guarantee Trustee's) address set forth below or such other
address as the Guarantee Trustee on behalf of the Issuer may give notice to the
Holders:
MBNA Capital B
c/o MBNA Corporation
Wilmington, Delaware 19884
Facsimile No.: 302-456-8348
Attention: Vernon H.C. Wright
with a copy to:
The Bank of New York
101 Barclay Street, Floor 21 West
New York, New York 10286
Facsimile No.: 212-815-5915
Attention: Corporate Trust Administration
(c) if given to any Holder, at the address set forth on the books and
records of the Issuer.
All notices hereunder shall be deemed to have been given when received
in person, telecopied with receipt confirmed, or mailed by first class mail,
postage prepaid, except that if a notice or other document is refused delivery
or cannot be delivered because of a changed address of which no notice was
given, such notice or other document shall be deemed to have been delivered on
the date of such refusal or inability to deliver.
Section 8.4. Consolidation, Merger, Conveyance, Transfer or Lease.
The Guarantor shall not consolidate with or merge into any other
Person or convey, transfer or lease its properties and assets substantially as
an entirety to any Person, and no Person shall consolidate with or merge into
the Guarantor or convey, transfer or lease its properties and assets
substantially as an entirety to the Guarantor, unless it has complied with the
terms of Section 8.1 of the Indenture.
Section 8.5. Benefit.
This Guarantee Agreement is solely for the benefit of the Holders and
is not separately transferable from the Securities.
Section 8.6. Interpretation.
In this Guarantee Agreement, unless the context otherwise requires:
(a) capitalized terms used in this Guarantee Agreement but not
defined in the preamble
<PAGE> 17
13
hereto have the respective meanings assigned to them in Section 1.1;
(b) a term defined anywhere in this Guarantee Agreement has the same
meaning throughout;
(c) all references to "the Guarantee Agreement" or "this Guarantee
Agreement" are to this Guarantee Agreement as modified, supplemented or amended
from time to time;
(d) all references in this Guarantee Agreement to Articles and
Sections are to Articles and Sections of this Guarantee Agreement unless
otherwise specified;
(e) a term defined in the Trust Indenture Act has the same meaning
when used in this Guarantee Agreement unless otherwise defined in this
Guarantee Agreement or unless the context otherwise requires;
(f) a reference to the singular includes the plural and vice versa;
and
(g) the masculine, feminine or neuter genders used herein shall
include the masculine, feminine and neuter genders.
Section 8.7. Governing Law.
THIS GUARANTEE AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD
TO THE CONFLICT OF LAW PRINCIPLES THEREOF.
<PAGE> 18
14
This instrument may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.
THIS GUARANTEE AGREEMENT is executed as of the day and year first
above written.
MBNA Corporation
By:
-----------------------------------
Name:
Title:
The Bank of New York
as Guarantee Trustee
By:
-----------------------------------
Name:
Title:
<PAGE> 1
CONFORMED COPY
AMENDED AND RESTATED COMPETITIVE ADVANCE AND
REVOLVING CREDIT FACILITY AGREEMENT (the "Agreement")
dated as of January 15, 1997, among MBNA AMERICA
BANK, N.A., a national banking association (the
"Borrower"), the lenders listed in Schedule 2.01 (the
"Lenders"), and THE CHASE MANHATTAN BANK, a New York
banking corporation, as agent for the Lenders (in
such capacity, the "Agent").
The Borrower has requested the Lenders to extend credit to the
Borrower in order to enable it to borrow on a revolving credit basis on and
after the date hereof and at any time and from time to time prior to the
Maturity Date (as herein defined) a principal amount not in excess of
$2,000,000,000 at any time outstanding. The Borrower has also requested the
Lenders to provide a procedure pursuant to which the Borrower may invite the
Lenders to bid on an uncommitted basis on short-term borrowings by the Borrower.
The proceeds of all such borrowings are to be used for general corporate
purposes. The Lenders are willing to extend such credit to the Borrower on the
terms and subject to the conditions herein set forth.
Accordingly, the Borrower, the Lenders and the Agent agree as
follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Defined Terms. As used in this Agreement, the following
terms shall have the meanings specified below:
"ABR Borrowing" shall mean a Borrowing comprised of ABR Loans.
"ABR Loan" shall mean any Revolving Credit Loan bearing interest at a
rate determined by reference to the Alternate Base Rate in accordance with the
provisions of Article II.
"Administrative Questionnaire" shall mean an Administrative
Questionnaire in the form of Exhibit B.
<PAGE> 2
2
"Affiliate" shall mean, when used with respect to a specified Person,
another Person that directly, or indirectly through one or more intermediaries,
Controls or is Controlled by or is under common Control with the Person
specified.
"Agent Fees" shall have the meaning assigned to such term in Section
2.06(b).
"Alternate Base Rate" shall mean, for any day, a rate per annum
(rounded upwards, if necessary, to the next 1/16 of 1%) equal to the greatest of
(a) the Prime Rate in effect on such day, (b) the Base CD Rate in effect on such
day plus 1% and (c) the Federal Funds Effective Rate in effect on such day plus
1/2 of 1%. "Prime Rate" shall mean the rate of interest per annum publicly
announced from time to time by The Chase Manhattan Bank as its prime rate in
effect at its principal office in New York City; each change in the Prime Rate
shall be effective on the date such change is publicly announced as effective.
"Base CD Rate" shall mean the sum of (a) the product of (i) the Three-Month
Secondary CD Rate and (ii) Statutory Reserves and (b) the Assessment Rate.
"Three-Month Secondary CD Rate" shall mean, for any day, the secondary market
rate for three-month certificates of deposit reported as being in effect on such
day (or, if such day shall not be a Business Day, the next preceding Business
Day) by the Board through the public information telephone line of the Federal
Reserve Bank of New York (which rate will, under the current practices of the
Board, be published in Federal Reserve Statistical Release H.15(519) during the
week following such day), or, if such rate shall not be so reported on such day
or such next preceding Business Day, the average of the secondary market
quotations for three-month certificates of deposit of major money center banks
in New York City received at approximately 10:00 a.m., New York City time, on
such day (or, if such day shall not be a Business Day, on the next preceding
Business Day) by the Agent from three New York City negotiable certificate of
deposit dealers of recognized standing selected by it. "Federal Funds Effective
Rate" shall mean, for any day, the weighted average of the rates on overnight
Federal funds transactions with members of the Federal Reserve System arranged
by Federal funds brokers, as published on the next succeeding Business Day by
the Federal Reserve Bank of New York, or, if such rate is not so published for
any day which is a Business Day, the average of the quotations for the day of
such transactions received by the Agent from three Federal funds brokers of
recognized standing selected by it. If for any reason the Agent shall have
determined (which determination shall be conclusive absent manifest error) that
it is unable to ascertain the
<PAGE> 3
3
Base CD Rate or the Federal Funds Effective Rate or both for any reason,
including the inability of the Agent to obtain sufficient quotations in
accordance with the terms hereof, the Alternate Base Rate shall be determined
without regard to clause (b) or (c), or both, of the first sentence of this
definition, as appropriate, until the circumstances giving rise to such
inability no longer exist. Any change in the Alternate Base Rate due to a change
in the Prime Rate, the Base CD Rate or the Federal Funds Effective Rate shall be
effective on the effective date of such change in the Prime Rate, the Base CD
Rate or the Federal Funds Effective Rate, respectively.
"Assessment Rate" shall mean for any date the annual rate (rounded
upwards, if necessary, to the next 1/100 of 1%) most recently estimated by The
Chase Manhattan Bank as the then current net annual assessment rate that will be
employed in determining amounts payable by The Chase Manhattan Bank to the
Federal Deposit Insurance Corporation (or any successor) for insurance by such
Corporation (or such successor) of time deposits made in Dollars at The Chase
Manhattan Bank's domestic offices.
"Assignment and Acceptance" shall mean an assignment and acceptance
entered into by a Lender and an assignee substantially in the form of Exhibit C.
"Bank Regulatory Authority" shall mean the OCC, the Board, the Federal
Deposit Insurance Corporation and all other relevant bank regulatory authorities
(including relevant state and foreign bank regulatory authorities).
"Board" shall mean the Board of Governors of the Federal Reserve System
of the United States.
"Borrowing" shall mean a group of Loans of a single Type made by the
Lenders (or, in the case of a Competitive Borrowing, by the Lender or Lenders
whose Competitive Bids have been accepted pursuant to Section 2.03) on a single
date and as to which a single Interest Period is in effect.
"Business Day" shall mean any day (other than a day which is a
Saturday, Sunday or legal holiday in the State of New York) on which banks are
open for business in New York City and Newark, Delaware; provided, however,
that, when used in connection with a Eurodollar Loan, the term "Business Day"
shall also exclude any day on which banks are not open for dealings in Dollar
deposits in the London interbank market.
<PAGE> 4
4
"Capital Adequacy Regulations" shall mean the capital adequacy
regulations of the OCC applicable to national banks set forth in Part 3 of Title
12, Code of Federal Regulations, or any successor minimum capital adequacy
regulations of the primary federal Bank Regulatory Authority for the Borrower.
"Closing Date" shall mean the date hereof.
"Code" shall mean the Internal Revenue Code of 1986, as the same may be
amended from time to time.
"Commitment" shall mean, with respect to each Lender, the commitment of
such Lender hereunder as set forth in Schedule 2.01 as such Lender's Commitment
may be permanently terminated or reduced from time to time pursuant to Section
2.11 or changed as a result of an assignment pursuant to Section 9.04(b).
"Competitive Bid" shall mean an offer by a Lender to make a Competitive
Loan pursuant to Section 2.03.
"Competitive Bid Accept/Reject Letter" shall mean a notification made
by the Borrower pursuant to Section 2.03(d) in the form of Exhibit A-4.
"Competitive Bid Rate" shall mean, as to any Competitive Bid made by a
Lender pursuant to Section 2.03, (i) in the case of a Eurodollar Loan, the
Margin, and (ii) in the case of a Fixed Rate Loan, the fixed rate of interest,
offered by the Lender making such Competitive Bid.
"Competitive Bid Request" shall mean a request made pursuant to Section
2.03 in the form of Exhibit A-1.
"Competitive Borrowing" shall mean a Borrowing consisting of a
Competitive Loan or concurrent Competitive Loans from the Lender or Lenders
whose Competitive Bids for such Borrowing have been accepted by the Borrower
under the bidding procedure described in Section 2.03.
"Competitive Loan" shall mean a Loan from a Lender to the Borrower
pursuant to the bidding procedure described in Section 2.03. Each Competitive
Loan shall be a Eurodollar Competitive Loan or a Fixed Rate Loan.
"Consolidated Reports" shall have the meaning assigned to such term in
Section 3.10(a).
"Consolidated Tangible Net Worth" at any date shall mean the Tangible
Net Worth of the Borrower and the
<PAGE> 5
5
Subsidiaries on such date, determined on a consolidated basis in accordance with
RAP.
"Contingent Obligation" with respect to the Borrower or any Subsidiary
shall mean any obligation of the Borrower or such Subsidiary, as applicable,
guaranteeing or in effect guaranteeing any Indebtedness ("primary obligations")
of any other Person (the "primary obligor") in any manner, whether directly or
indirectly, including, without limitation, any obligation of such Person,
whether or not contingent, (a) to purchase any such primary obligation or any
property constituting direct or indirect security therefor, (b) to advance or
supply funds (i) for the purchase or payment of any such primary obligation or
(ii) to maintain working capital or equity capital of the primary obligor or
otherwise to maintain the net worth or solvency of the primary obligor, (c) to
purchase property, securities or services primarily for the purpose of assuring
the owner of any such primary obligation of the ability of the primary obligor
to make payment of such primary obligation or (d) otherwise to assure or hold
harmless the owner of such primary obligation against loss in respect thereof;
provided, however, that the term Contingent Obligation shall not include
endorsements of instruments for deposit or collection in the ordinary course of
business or guarantees by the Borrower of obligations of any Subsidiary. The
amount of any Contingent Obligation shall be deemed to equal the stated or
determinable amount of the primary obligation in respect of which such
Contingent Obligation is made or, if not stated or determinable, the maximum
reasonably anticipated liability in respect thereof as determined by the
Borrower in good faith.
"Continuing Directors" shall mean (i) persons who are members of the
Board of Directors of the Borrower on the date hereof and (ii) persons who
become members of the Board of Directors of the Borrower after the date hereof
(x) whose election or nomination for election was approved by a vote of a
majority of the then Continuing Directors and (y) who were not so elected or
nominated in connection with, or in contemplation of, any transaction of the
type referred to in Section 6.02.
"Contractual Obligation" with respect to the Borrower or any Subsidiary
shall mean any provision of any security issued by the Borrower or such
Subsidiary, as applicable, or of any agreement, instrument or undertaking to
which the Borrower or such Subsidiary, as applicable, is a party or by which it
or any of its property is bound.
"Control" shall mean the possession, directly or
<PAGE> 6
6
indirectly, of the power to direct or cause the direction of the management or
policies of a Person, whether through the ownership of voting securities, by
contract or otherwise, but not including the exercise of investment discretion
as an investment advisor or fiduciary, and "Controlling" and "Controlled" shall
have meanings correlative thereto.
"Coverage Date" shall mean (i) in the event the Borrower fails to
deliver any financial statements required to be delivered pursuant to Section
5.01(a) or (b) on or before the date specified for such delivery in such
Section , each day from such specified delivery date to the date on which all
such financial statements are actually delivered and (ii) otherwise, any day if
the Loss Ratio in respect of the period of four consecutive fiscal quarters
ending on the last day of the most recent fiscal quarter in respect of which
financial statements have been delivered pursuant to Section 5.01(a) or (b)
equals or exceeds 5.0%.
"Coverage Ratio" shall mean, on any date, the ratio of (x) the amount
of Eligible Receivables of the Borrower and its Subsidiaries as of the close of
business on a Business Day not more than five Business Days prior to such date
(adjusted for any subsequent Securitizations within the last five Business
Days), as such date is selected by the Borrower to (y) the aggregate principal
amount of all Loans outstanding on such date, after giving effect to any
Borrowings to be made on such date.
"Default" shall mean any event or condition which upon notice, lapse of
time or both would constitute an Event of Default.
"Dollars" or "$" shall mean lawful money of the United States of
America.
"Eligible Receivables" shall mean, on any date, the credit card and
related plan receivables which are owned by the Borrower or any Subsidiary on
such date and the Sellers' Retained Interests owned by the Borrower or any
Subsidiary on such date, in each case to the extent they are or would be
reflected on a consolidated balance sheet of the Borrower prepared in accordance
with RAP other than any such receivables or Sellers' Retained Interests which
(i) are in accounts (or in the case of the Sellers' Retained Interests,
represent indirect interests in receivables in accounts) that are nonaccruing or
that have balances 90 days or more past due, (ii) represent the Financed Portion
of receivables subject to a Securitization or (iii) are otherwise subject to any
Lien.
<PAGE> 7
7
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as the same may be amended from time to time.
"ERISA Affiliate" shall mean any trade or business (whether or not
incorporated) that, together with the Borrower, is treated as a single employer
under Section 414 of the Code.
"Eurocurrency Reserve Requirements" with respect to any Lender shall
mean the aggregate of the reserve percentages (including any marginal, special,
emergency or supplemental reserves) expressed as a decimal established by the
Board and any other banking authority to which such Lender is subject and
applicable to "Eurocurrency Liabilities", as such term is defined in Regulation
D of the Board, or any similar category of assets or liabilities relating to
eurocurrency fundings. Eurodollar Loans shall be deemed to constitute
Eurocurrency Liabilities. Eurocurrency Reserve Requirements shall be adjusted
automatically on and as of the effective date of any change in any reserve
percentage.
"Eurodollar Borrowing" shall mean a Borrowing comprised of Eurodollar
Loans.
"Eurodollar Competitive Borrowing" shall mean a Borrowing comprised of
Eurodollar Competitive Loans.
"Eurodollar Competitive Loan" shall mean any Competitive Loan bearing
interest at a rate determined by reference to the LIBO Rate in accordance with
the provisions of Article II.
"Eurodollar Loan" shall mean any Eurodollar Competitive Loan or
Eurodollar Revolving Credit Loan.
"Eurodollar Revolving Credit Borrowing" shall mean a Borrowing
comprised of Eurodollar Revolving Credit Loans.
"Eurodollar Revolving Credit Loan" shall mean any Revolving Credit Loan
bearing interest at a rate determined by reference to the LIBO Rate in
accordance with the provisions of Article II.
"Events of Default" shall have the meaning assigned to such term in
Article VII.
"Existing Credit Agreement" shall mean the Competitive Advance and
Revolving Credit Facility Agreement dated as of February 15, 1995, and amended
by the First
<PAGE> 8
8
Amendment dated as of December 27, 1995, among the Borrower, the lenders named
therein and The Chase Manhattan Bank (formerly known as Chemical Bank) as Agent.
"Facility Fee" shall have the meaning assigned to such term in
Section 2.06(a).
"Facility Fee Percentage" shall mean on any date the
applicable percentage set forth below based upon the ratings by S&P and Moody's,
respectively, applicable on such date to Index Debt:
<TABLE>
<CAPTION>
CATEGORY 1 Percentage
Rating
<S> <C>
AA- or higher by S&P
Aa3 or higher by Moody's 0.070%
CATEGORY 2
Rating
A+, A or A- by S&P
A1, A2 or A3 by Moody's 0.090%
CATEGORY 3
Rating
BBB+ by S&P
Baa1 by Moody's 0.100%
CATEGORY 4
Rating
BBB by S&P
Baa2 by Moody's 0.125%
CATEGORY 5
Rating
BBB- by S&P
Baa3 by Moody's 0.150%
CATEGORY 6
Rating
BB+ or below by S&P
Ba1 or below by Moody's 0.225%
</TABLE>
For purposes of the foregoing, (i) if at any time there shall
exist no Index Debt or Index Debt is not rated (other than by reason of the
circumstances referred to in the last sentence of this definition), then the
Lenders acting through the Agent and the Borrower shall negotiate in good faith
to determine a substitute basis for determining the applicable Facility Fee
Percentage, and during such negotiations the Facility Fee Percentage in effect
immediately prior to such time shall continue in effect; (ii) if the ratings
established or deemed to have been
<PAGE> 9
9
established by S&P and Moody's for the Index Debt shall fall within different
Categories, the Facility Fee Percentage shall be based on the Category
containing the higher of such ratings; provided, however, that if the difference
between such ratings is greater than one Category, the Facility Fee Percentage
shall be based on the Category containing the ratings one Category below the
Category containing the higher of such ratings; and (iii) if any rating for
Index Debt established or deemed to have been established by S&P or Moody's
shall be changed (other than as a result of a change in the rating system of S&P
or Moody's), such change shall be effective (A) if the Index Debt is not
publicly rated, as of the date of the applicable Ratings Review Letter
indicating such change, or (B) if the Index Debt is publicly rated, as of the
date on which such change is first announced by the applicable rating agency.
Each change in the Facility Fee Percentage shall apply during the period
commencing on the effective date of such change and ending on the date
immediately preceding the effective date of the next such change. If the rating
system of S&P or Moody's shall change, or if any such rating agency shall cease
to be in the business of rating corporate debt obligations, the Borrower and the
Lenders, acting through the Agent, shall negotiate in good faith to amend the
references to specific ratings in this definition to reflect such changed rating
system or the nonavailability of ratings from such rating agency, and pending
agreement on such amendment, the Facility Fee Percentage most recently
determined in accordance with this definition shall continue in effect.
"Federal Funds Effective Rate" shall have the meaning assigned
to such term in the definition of "Alternate Base Rate" in this Section 1.01.
"Fees" shall mean the Facility Fees, the Agent Fees and the
Utilization Fee.
"Financed Portion" shall mean at any time, with respect to
receivables subject to a Securitization, an amount of such receivables equal to
the aggregate amount of then outstanding debt or equity instruments or
securities (other than any seller's interest retained by the Borrower or a
Subsidiary) issued in connection with such Securitization, in each case
determined in accordance with RAP.
"Financial Officer" of any corporation shall mean the chief
financial officer, chief corporate finance officer, principal accounting
officer, Treasurer, Assistant Treasurer or Controller of such corporation.
<PAGE> 10
10
"Fixed Rate Borrowing" shall mean a Borrowing comprised of
Fixed Rate Loans.
"Fixed Rate Loan" shall mean any Competitive Loan bearing
interest at a fixed percentage rate per annum (expressed in the form of a
decimal to no more than four decimal places) specified by the Lender making such
Loan in its Competitive Bid.
"Governmental Authority" shall mean any Federal, state, local
or foreign court or governmental agency, authority, instrumentality or
regulatory body.
"Indebtedness" of any Person at any date shall mean (a) all
indebtedness of such Person for borrowed money or for the deferred purchase
price of property or services (other than current trade liabilities incurred in
the ordinary course of business and payable in accordance with customary
practices), (b) any other indebtedness of such Person which is evidenced by a
note, bond, debenture or similar instrument, (c) all obligations of such Person
in respect of acceptances issued or created for the account of such Person, (d)
all liabilities secured by any Lien on any property owned by such Person even
though such Person has not assumed or otherwise become liable for the payment
thereof, (e) indebtedness arising out of Securitizations which do not qualify
for sale treatment in accordance with RAP to the extent such Indebtedness would
be reflected on a balance sheet of such Person prepared in accordance with RAP,
provided that, for purposes hereof, the amount of any such Indebtedness arising
out of a Securitization described in this clause (e) shall be deemed to be
limited to the maximum amounts of such Indebtedness that can be satisfied,
directly or indirectly, by recourse to the assets or credit of such Person
(other than assets constituting the Financed Portion, at the time of a default,
of the receivables subject to such Securitization), and (f) Contingent
Obligations of such Person in respect of Indebtedness of others (other than any
undrawn lines of credit or undrawn credit commitments to individual persons);
provided that Indebtedness shall not include with respect to any such Person
which is a bank, (A) indebtedness in respect of deposits held by such Person,
(B) obligations in respect of federal funds purchased by such Person, (C)
indebtedness in respect of agreements in the ordinary course of business to
purchase or repurchase securities or loans or (D) contingent liabilities
incurred in the ordinary course of banking business (including banker's
acceptances, trade acceptances, letters of credit and finance acceptances), and
provided further, that each of the foregoing items described in this definition
shall be deemed to constitute Indebtedness only
<PAGE> 11
11
to the extent it would be (or in the case of Contingent Obligations, the
Indebtedness of the primary obligor would be) required to be reflected as a
liability by (and in the amount specified by) RAP and provided further, that
Indebtedness shall not include any Securitization which qualifies for treatment
as a sale under RAP or any obligations with respect to a Securitization which so
qualifies.
"Index Debt" shall mean (i) senior, unsecured
noncredit-enhanced, long-term debt of the Borrower (whether or not any such debt
shall be outstanding) publicly rated by both S&P and Moody's or (ii) if the debt
described in clause (i) shall not exist, long-term subordinated debt of the
Borrower (whether or not any such debt shall be outstanding) rated by both S&P
and Moody's, and the rating applicable to Index Debt shall be one category
higher than such rating, or (iii) if the debt described in clauses (i) and (ii)
shall not exist, senior, unsecured, noncredit-enhanced, long-term debt of the
Borrower (whether or not any such debt shall be outstanding) with respect to
which the Borrower has delivered to the Agent a Ratings Review Letter dated not
earlier than the most recent Ratings Review Date (or which has been publicly
rated by only one of S&P or Moody's and as to which a Ratings Review Letter from
the other rating agency has been delivered to the Agent not earlier than such
date).
"Intangibles" with respect to any Person at any date shall
mean the amount of all assets of such Person that would be classified as
intangible assets in accordance with RAP.
"Interest Payment Date" shall mean, with respect to any Loan,
the last day of the Interest Period applicable thereto and, in the case of a
Eurodollar Loan with an Interest Period of more than three months' duration or a
Fixed Rate Loan with an Interest Period of more than 90 days' duration, each day
that would have been an Interest Payment Date for such Loan had successive
Interest Periods of three months' duration or 90 days' duration, as the case may
be, been applicable to such Loan and, in addition, the date of any refinancing
or conversion of such Loan with or to a Loan of a different Type.
"Interest Period" shall mean (a) as to any Eurodollar
Borrowing, the period commencing on the date of such Borrowing and ending on the
numerically corresponding day (or, if there is no numerically corresponding day,
on the last day) in the calendar month that is 1, 2, 3 or 6 months thereafter,
as the Borrower may elect, (b) as to
<PAGE> 12
12
any ABR Borrowing, the period commencing on the date of such Borrowing and
ending on the next succeeding March 31, June 30, September 30 or December 31,
or, if earlier, on the Maturity Date or the date of prepayment of such Borrowing
and (c) as to any Fixed Rate Borrowing, the period commencing on the date of
such Borrowing and ending on the date specified in the Competitive Bids in which
the offers to make the Fixed Rate Loans comprising such Borrowing were extended,
which shall not be earlier than seven days after the date of such Borrowing or
later than 360 days after the date of such Borrowing; provided, however, that if
any Interest Period would end on a day other than a Business Day, such Interest
Period shall be extended to the next succeeding Business Day unless, in the case
of Eurodollar Loans only, such next succeeding Business Day would fall in the
next calendar month, in which case such Interest Period shall end on the next
preceding Business Day. Interest shall accrue from and including the first day
of an Interest Period to but excluding the last day of such Interest Period.
"LIBO Rate" shall mean, with respect to any Eurodollar
Borrowing for any Interest Period, an interest rate per annum equal to the
arithmetic mean (rounded upwards, if necessary, to the next 1/16 of 1%) of the
offered rates for Dollar deposits with a maturity comparable to such Interest
Period which appear on the Telerate British Bankers Assoc. Interest Settlement
Rates Page (as hereinafter defined) at approximately 11:00 a.m., London time,
two Business Days prior to the commencement of such Interest Period; provided,
however, that if there shall no longer exist a Telerate British Bankers Assoc.
Interest Settlement Rates Page, "LIBO Rate" shall mean an interest rate per
annum (rounded upwards, if necessary, to the next 1/16 of 1%) equal to the rate
at which Dollar deposits approximately equal in principal amount to (i) in the
case of a Eurodollar Revolving Credit Loan, The Chase Manhattan Bank's portion
of such Revolving Credit Borrowing and (ii) in the case of a Eurodollar
Competitive Loan, a principal amount that would have been The Chase Manhattan
Bank's portion of such Competitive Borrowing had such Competitive Borrowing been
a Eurodollar Revolving Credit Loan, and for a maturity comparable to such
Interest Period are offered to the principal London office of The Chase
Manhattan Bank in immediately available funds in the London interbank market at
approximately 11:00 a.m, London time, two Business Days prior to the
commencement of such Interest Period. "Telerate British Bankers Assoc. Interest
Settlement Rates Page" shall mean the display designated as Page 3750 on
Teleratesystem Incorporated (or such other page as may replace the LIBO page on
that service for the purpose
<PAGE> 13
13
of displaying London interbank offered rates of major banks).
"Lien" shall mean, with respect to any asset, any mortgage,
deed of trust, lien, pledge, assignment or transfer for security, encumbrance,
charge or security interest in or on such asset.
"Loan" shall mean a Competitive Loan or a Revolving Credit
Loan, whether made as a Eurodollar Loan, an ABR Loan or a Fixed Rate Loan, as
permitted hereby.
"Loan Documents" shall mean (i) this Agreement and the letter
agreement referred to in Section 2.06(b) and (ii) any amendment, supplement,
modification, consent or waiver of, to or in respect of either of the foregoing.
"Loss Ratio" shall mean, in respect of any period of four
consecutive fiscal quarters, the ratio of (x) the aggregate net credit losses
with respect to Managed Credit Card Receivables during such period to (y) the
average aggregate amount of Managed Credit Card Receivables.
"Managed Credit Card Receivables" shall mean the aggregate of
on-balance sheet credit card receivables of the Borrower and its Subsidiaries
and credit card receivables of the Borrower and its Subsidiaries transferred in
a Securitization.
"Margin" shall mean, as to any Eurodollar Competitive Loan,
the margin (expressed as a percentage rate per annum in the form of a decimal to
no more than four decimal places) to be added to or subtracted from the LIBO
Rate in order to determine the interest rate applicable to such Loan, as
specified in the Competitive Bid relating to such Loan.
"Margin Stock" shall have the meaning given such term under
Regulation U.
"Material Adverse Effect" shall mean a material adverse effect
on (i) the business, assets, operations or financial condition of the Borrower
and its Subsidiaries taken as a whole, (ii) the ability of the Borrower to
perform its obligations hereunder or (iii) the rights or remedies of the Lenders
hereunder.
"Maturity Date" shall mean February 15, 2001, as the same may
be extended pursuant to Section 2.11.
"Moody's" shall mean Moody's Investors Service,
<PAGE> 14
14
Inc., and its successors.
"Multiemployer Plan" shall mean a multiemployer plan as
defined in Section 4001(a)(3) of ERISA.
"OCC" shall mean the Office of the Comptroller of the Currency
of the United States or any successor Federal Bank Regulatory Authority.
"Organization Documents" shall mean, for any corporation, the
certificate or articles of incorporation, the by-laws, any certificate of
designation or instrument relating to the rights of preferred shareholders of
such corporation and all applicable resolutions of the board of directors (or
any committee thereof) of such corporation.
"Parent" shall mean MBNA Corporation, a Maryland corporation,
of which the Borrower is a wholly owned subsidiary.
"PBGC" shall mean the Pension Benefit Guaranty Corporation
referred to and defined in ERISA or any successor thereto.
"Person" shall mean any natural person, corporation, business
trust, joint venture, association, company, limited liability company,
partnership or government, or any agency or political subdivision thereof.
"Plan" shall mean any employee pension benefit plan (other
than a Multiemployer Plan) subject to the provisions of Title IV of ERISA or
Section 412 of the Code that is maintained for current or former employees, or
any beneficiary thereof, of the Borrower or any ERISA Affiliate.
"RAP" shall mean bank regulatory accounting principles from
time to time in effect in the United States required to be employed by banks in
the preparation of their consolidated reports of condition and income filed with
federal Bank Regulatory Authorities.
"Ratings Review Date" shall mean (a) the Closing Date, (b)
each anniversary of the Closing Date and (c) any date after the most recent date
referred to in (a) or (b) above which shall have been designated in a notice
delivered by the Required Lenders to the Borrower not fewer than 90 days prior
to such designated date, provided that the Required Lenders shall not deliver
such notice more than once a year.
"Ratings Review Letters" shall mean, on any date,
<PAGE> 15
15
the letters of each of S&P and Moody's that set forth the ratings of the Index
Debt by such rating agencies, which letters shall not be dated earlier than 10
days prior to the date of delivery thereof to the Agent.
"Regulation D" shall mean Regulation D of the Board as from
time to time in effect and all official rulings and interpretations thereunder
or thereof.
"Regulation G" shall mean Regulation G of the Board as from
time to time in effect and all official rulings and interpretations thereunder
or thereof.
"Regulation U" shall mean Regulation U of the Board as from
time to time in effect and all official rulings and interpretations thereunder
or thereof.
"Regulation X" shall mean Regulation X of the Board as from
time to time in effect and all official rulings and interpretations thereunder
or thereof.
"Reportable Event" shall mean any reportable event as defined
in Section 4043 of ERISA or the regulations issued thereunder with respect to a
Plan (other than a Plan maintained by an ERISA Affiliate that is considered an
ERISA Affiliate only pursuant to subsection (m) or (o) of Code Section 414).
"Required Lenders" shall mean, at any time, Lenders having
Commitments representing at least 50.1% in Dollar amount of the Total Commitment
or, for purposes of action taken to accelerate the maturity of Loans under
Article VII, Lenders holding Loans representing at least a majority of the
aggregate principal amount of the Loans outstanding.
"Requirement of Law" as to any Person shall mean the
certificate or articles of incorporation and by-laws or other organizational or
governing documents of such Person and any law, treaty, rule, regulation,
regulatory guideline or pronouncement or determination of an arbitrator or a
court or other Governmental Authority, in each case applicable to or binding
upon such Person or any of its property or to which such Person or any of its
property is subject.
"Responsible Officer" of any corporation shall mean any
executive officer or Financial Officer of such corporation and any other officer
or similar official thereof responsible for the administration of the
obligations of such corporation in respect of this
<PAGE> 16
16
Agreement.
"Revolving Credit Borrowing" shall mean a Borrowing consisting
of simultaneous Revolving Credit Loans from each of the Lenders.
"Revolving Credit Loan" shall mean a revolving loan made by
the Lenders to the Borrower pursuant to Section 2.04. Each Revolving Credit Loan
shall be a Eurodollar Revolving Credit Loan or an ABR Loan.
"Revolving Credit Request" shall mean a request made pursuant
to Section 2.04 in the form of Exhibit A-5.
"S&P" shall mean Standard and Poor's Ratings Services, a
Division of The McGraw-Hill Companies Inc., and its successors.
"Securitization" shall mean the transfer or pledge of assets
or interests in assets to a trust, partnership, corporation or other entity,
which transfer or pledge is funded by such entity in whole or in part by the
issuance of instruments or securities that are paid principally from the cash
flow derived from such assets or interests in assets.
"Sellers' Retained Interests" shall mean the debt or equity
interest held by the Borrower or its Subsidiaries in any trust, partnership,
corporation or other entity to which credit card receivables or related plan
receivables of the Borrower or its Subsidiaries have been transferred in a
Securitization, and, for purposes hereof, the amount of the Sellers' Retained
Interests at any date shall be the amount that would be reflected on a
consolidated balance sheet of the Borrower at such date prepared in accordance
with RAP.
"Significant Subsidiary" shall mean any Subsidiary which, at
the time any determination is being made, would constitute a "significant
subsidiary" of the Borrower as defined in Rule 1-02 of Regulation S-X of the
Securities and Exchange Commission, 17 C.F.R. Section 210.1-02, as in effect on
the date hereof.
"Spread" shall mean on any date, with respect to Eurodollar
Revolving Credit Loans or ABR Loans, the applicable percentage set forth below
based upon the ratings by S&P and Moody's, respectively, applicable on such date
to the Index Debt:
<PAGE> 17
17
<TABLE>
<CAPTION>
LIBO Spread ABR Spread
<S> <C> <C>
CATEGORY 1
Rating
AA- or higher by S&P .130% 0
Aa3 or higher by Moody's
CATEGORY 2
Rating
A+, A or A- by S&P .160% 0
A1, A2 or A3 by Moody's
CATEGORY 3
Rating
BBB+ by S&P .200% 0
Baa1 by Moody's
CATEGORY 4
Rating
BBB by S&P .225% 0
Baa2 by Moody's
CATEGORY 5
Rating
BBB- by S&P .250% 0
Baa3 by Moody's
CATEGORY 6
Rating
BB+ or below by S&P .425% 0
Ba1 or below by Moody's
</TABLE>
For purposes of the foregoing, (i) if there shall exist no
Index Debt or Index Debt is not rated (other than by reason of the circumstances
referred to in the last sentence of this definition), then the Lenders acting
through the Agent and the Borrower shall negotiate in good faith to determine a
substitute basis for determining the applicable Spread, and during such
negotiations the Spread in effect immediately prior to such time shall continue
in effect; (ii) if the ratings established or deemed to have been established by
S&P and Moody's for the Index Debt shall fall within different Categories, the
Spread shall be based on the Category containing the higher of such ratings;
provided, however, that if the difference between such ratings is greater than
one Category, the Spread shall be based on the Category containing the ratings
one Category below the Category containing the higher of such ratings; and (iii)
if any rating for Index Debt established or deemed to have been established by
S&P or Moody's shall be changed (other than as a result of a change in the
rating system of S&P or Moody's), such change shall be effective (A) if the
<PAGE> 18
18
Index Debt is not publicly rated, as of the date of the applicable Ratings
Review Letter indicating such change, or (B) if the Index Debt is publicly
rated, as of the date on which such change is first announced by the applicable
rating agency. Each change in the Spread shall apply during the period
commencing on the effective date of such change and ending on the date
immediately preceding the effective date of the next such change. If the rating
system of S&P or Moody's shall change, or if any such rating agency shall cease
to be in the business of rating corporate debt obligations, the Borrower and the
Lenders, acting through the Agent, shall negotiate in good faith to amend the
references to specific ratings in this definition to reflect such changed rating
system or the nonavailability of ratings from such rating agency, and pending
agreement on such amendment, the Spread most recently determined in accordance
with this definition shall continue in effect.
"Statutory Reserves" shall mean a fraction (expressed as a
decimal), the numerator of which is the number one and the denominator of which
is the number one minus the aggregate of the maximum reserve percentages
(including any marginal, special, emergency or supplemental reserves) expressed
as a decimal established by the Board and any other banking authority to which
The Chase Manhattan Bank is subject for new negotiable nonpersonal time deposits
in Dollars of over $100,000 with maturities approximately equal to three months.
Statutory Reserves shall be adjusted automatically on and as of the effective
date of any change in any reserve percentage.
"subsidiary" shall mean, with respect to any Person (herein
referred to as the "parent"), any corporation, partnership, association or other
business entity (a) of which securities or other ownership interests
representing more than 50% of the equity or more than 50% of the ordinary voting
power or more than 50% of the general partnership interests are, at the time any
determination is being made, owned, controlled or held, other than in a
fiduciary capacity, or (b) which is, at the time any determination is made,
otherwise Controlled by the parent or one or more subsidiaries of the parent or
by the parent and one or more subsidiaries of the parent.
"Subsidiary" shall mean any subsidiary of the Borrower;
provided, however, that any special purpose subsidiary of the Borrower organized
and operated solely to facilitate or conduct Securitizations which is not a
consolidated subsidiary of the Borrower under RAP shall not be deemed to be a
Subsidiary hereunder.
<PAGE> 19
19
"Tangible Net Worth" with respect to any Person at any date
shall mean all amounts which would be included as "total equity capital" on a
balance sheet of such Person prepared as of such date in accordance with RAP
less the aggregate amount of Intangibles that would be reflected as assets on
such balance sheet.
"Total Commitment" shall mean at any time the aggregate amount
of the Lenders' Commitments, as in effect at such time.
"Type", when used in respect of any Loan or Borrowing, shall
refer to the Rate by reference to which interest on such Loan or on the Loans
comprising such Borrowing is determined. For purposes hereof, "Rate" shall
include the LIBO Rate, the Alternate Base Rate and any fixed rate.
"Utilization Fee" shall have the meaning assigned to such term
in Section 2.06(c).
"Withdrawal Liability" shall mean liability to a Multiemployer
Plan as a result of a complete or partial withdrawal from such Multiemployer
Plan, as such terms are defined in Part I of Subtitle E of Title IV of ERISA.
SECTION 1.02. Terms Generally. The definitions in Section 1.01
shall apply equally to both the singular and plural forms of the terms defined.
Whenever the context may require, any pronoun shall include the corresponding
masculine, feminine and neuter forms. The words "include", "includes" and
"including" shall be deemed to be followed by the phrase "without limitation".
All references herein to Articles, Sections , Exhibits and Schedules shall be
deemed references to Articles and Sections of, and Exhibits and Schedules to,
this Agreement unless the context shall otherwise require.
SECTION 1.03. Accounting Terms. Except as otherwise expressly
provided herein, all terms of an accounting or financial nature shall be
construed in accordance with RAP consistently applied. In the event that any
change in RAP materially affects any provision of this Agreement, the Agent, the
Lenders and the Borrower agree that they shall negotiate in good faith in order
to amend the affected provisions in such a way as will restore the parties to
their respective positions prior to such change, and until such amendment
becomes effective the Borrower's compliance with such provisions shall be
determined on the basis of RAP as in effect immediately before such change in
RAP became effective.
<PAGE> 20
20
ARTICLE II
THE CREDITS
SECTION 2.01. Commitments. Subject to the terms and conditions
and relying upon the representations and warranties herein set forth, each
Lender agrees, severally and not jointly, to make Revolving Credit Loans to the
Borrower, at any time and from time to time on and after the date hereof and
until the earlier of the Maturity Date or the termination of the Commitment of
such Lender in accordance with the terms hereof, in an aggregate principal
amount at any time outstanding not to exceed such Lender's Commitment minus the
amount by which the Competitive Loans outstanding at such time shall be deemed
to have used such Commitment pursuant to Section 2.16, subject, however, to the
conditions that (a) at no time shall (i) the sum of (x) the outstanding
aggregate principal amount of all Revolving Credit Loans plus (y) the
outstanding aggregate principal amount of all Competitive Loans exceed (ii) the
Total Commitment and (b) at all times the outstanding aggregate principal amount
of all Revolving Credit Loans made by each Lender shall equal the product of (i)
the percentage which its Commitment represents of the Total Commitment times
(ii) the outstanding aggregate principal amount of all Revolving Credit Loans
made pursuant to Section 2.04 (plus, if applicable, the amount of any Revolving
Credit Loans which would be outstanding had a Lender not defaulted in its
obligation to make such Loans hereunder). Each Lender's initial Commitment is
set forth opposite its respective name in Schedule 2.01. Such Commitments may be
terminated or reduced or increased from time to time pursuant to Sections 2.11
and 9.04(b).
Within the foregoing limits, the Borrower may borrow, pay or
prepay and reborrow hereunder, on and after the Closing Date and prior to the
Maturity Date, subject to the terms, conditions and limitations set forth
herein.
SECTION 2.02. Loans. (a) Each Revolving Credit Loan shall be
made as part of a Borrowing consisting of Loans made by the Lenders ratably in
accordance with their Commitments; provided, however, that the failure of any
Lender to make any Revolving Credit Loan shall not in itself relieve any other
Lender of its obligation to lend hereunder (it being understood, however, that
no Lender shall be responsible for the failure of any other Lender to make any
Loan required to be made by such other Lender). Each Competitive Loan shall be
made in accordance with the
<PAGE> 21
21
procedures set forth in Section 2.03. The Revolving Credit Loans or Competitive
Loans comprising any Borrowing shall be in an aggregate principal amount which
is an integral multiple of $1,000,000 and not less than $5,000,000.
(b) Each Competitive Borrowing shall be comprised of
Eurodollar Competitive Loans or Fixed Rate Loans, and each Revolving Credit
Borrowing shall be comprised of Eurodollar Revolving Credit Loans or ABR Loans,
as the Borrower may request pursuant to Section 2.03 or 2.04, as applicable.
Each Lender may at its option make any Eurodollar Loan by causing any domestic
or foreign branch or Affiliate of such Lender to make such Loan; provided that
any exercise of such option shall not affect the obligation of the Borrower to
repay such Loan in accordance with the terms of this Agreement. Borrowings of
more than one Type may be outstanding at the same time and may be requested and
effective on the same day; provided, however, that the Borrower shall not be
entitled to request any Borrowing which, if made, would result in an aggregate
of more than 15 separate Eurodollar Revolving Credit Loans of any Lender being
outstanding hereunder at any one time. For purposes of the foregoing, Loans
having different Interest Periods, regardless of whether they commence or end on
the same date, shall be considered separate Loans.
(c) Subject to Section 2.05 and paragraph (d) below, each
Lender shall make each Loan to be made by it hereunder on the proposed date
thereof by wire transfer of immediately available funds to the Agent in New
York, New York, not later than 1:00 p.m., New York City time, and the Agent
shall by 3:00 p.m., New York City time, credit or wire transfer the amounts so
received to the general deposit account of the Borrower with the Agent or to
such other account as the Borrower may designate or, if a Borrowing shall not
occur on such date because any condition precedent herein specified shall not
have been met, return the amounts so received to the respective Lenders.
Competitive Loans shall be made by the Lender or Lenders whose Competitive Bids
therefor are accepted pursuant to Section 2.03 in the amounts so accepted and
Revolving Credit Loans shall be made by the Lenders pro rata in accordance with
Section 2.16. Unless the Agent shall have received notice from a Lender prior to
the date (or, in the case of ABR Borrowings, on the date) of any Borrowing that
such Lender will not make available to the Agent such Lender's portion of such
Borrowing, the Agent may assume that such Lender has made such portion available
to the Agent on the date of such Borrowing in accordance with this paragraph (c)
and the Agent may, in reliance upon such assumption, make available to the
Borrower on such date a corresponding amount. If and
<PAGE> 22
22
to the extent that such Lender shall not have made such portion available to the
Agent, such Lender and the Borrower severally agree to repay to the Agent
forthwith on demand such corresponding amount together with interest thereon,
for each day from the date such amount is made available to the Borrower until
the date such amount is repaid to the Agent at (i) in the case of the Borrower
the interest rate applicable at the time to the Loans comprising such Borrowing
and (ii) in the case of such Lender, the Federal Funds Effective Rate. The
Agent, after receiving knowledge of such Lender's failure to make such portion
available to the Agent, shall promptly provide notice of such to the Borrower.
If such Lender shall repay to the Agent such corresponding amount with such
interest, such amount shall constitute such Lender's Loan as part of such
Borrowing (from the date such Loan was made by the Agent on behalf of such
Lender to the Borrower) for purposes of this Agreement.
(d) Notwithstanding any other provision of this Agreement, the
Borrower shall not be entitled to request any Borrowing if the Interest Period
requested with respect thereto would end after the Maturity Date.
SECTION 2.03. Competitive Bid Procedure. (a) In order to
request Competitive Bids, the Borrower shall hand deliver or telecopy to the
Agent a duly completed Competitive Bid Request in the form of Exhibit A-1, to be
received by the Agent (i) in the case of a Eurodollar Competitive Borrowing, not
later than 10:00 a.m., New York City time, four Business Days before a proposed
Competitive Borrowing and (ii) in the case of a Fixed Rate Borrowing, not later
than 10:00 a.m., New York City time, one Business Day before a proposed
Competitive Borrowing. No ABR Loan shall be requested in, or made pursuant to, a
Competitive Bid Request. A Competitive Bid Request that does not conform
substantially to the format of Exhibit A-1 may be rejected in the Agent's sole
discretion, and the Agent shall promptly notify the Borrower of such rejection
by telecopier. Such request shall in each case refer to this Agreement and
specify (x) whether the Borrowing then being requested is to be a Eurodollar
Borrowing or a Fixed Rate Borrowing, (y) the date of such Borrowing (which shall
be a Business Day) and the aggregate principal amount thereof which shall be in
a minimum principal amount of $5,000,000 and in an integral multiple of
$1,000,000, and (z) the Interest Period with respect thereto (which may not end
after the Maturity Date). Promptly after its receipt of a Competitive Bid
Request that is not rejected as aforesaid, the Agent shall invite by telecopier
(in the form set forth in Exhibit A-2) the Lenders to bid, on the terms and
conditions of this Agreement, to make Competitive Loans
<PAGE> 23
23
pursuant to such Competitive Bid Request.
(b) Each Lender may, in its sole discretion, make one or more
Competitive Bids to the Borrower responsive to a Competitive Bid Request. Each
Competitive Bid by a Lender must be received by the Agent via telecopier, in the
form of Exhibit A-3, (i) in the case of a Eurodollar Competitive Borrowing, not
later than 9:30 a.m., New York City time, three Business Days before a proposed
Competitive Borrowing and (ii) in the case of a Fixed Rate Borrowing, not later
than 9:30 a.m., New York City time, on the day of a proposed Competitive
Borrowing. Multiple Competitive Bids will be accepted by the Agent. Competitive
Bids that do not conform substantially to the format of Exhibit A-3 may be
rejected by the Agent after conferring with, and upon the instruction of, the
Borrower, and the Agent shall notify the Lender making such nonconforming
Competitive Bid of such rejection as soon as practicable. Each Competitive Bid
shall refer to this Agreement and specify (x) the principal amount (which shall
be in a minimum principal amount of $5,000,000 and in an integral multiple of
$1,000,000 and which may equal the entire principal amount of the Competitive
Borrowing requested by the Borrower) of the Competitive Loan or Loans that the
applicable Lender is willing to make to the Borrower, (y) the Competitive Bid
Rate or Rates at which such Lender is prepared to make the Competitive Loan or
Loans and (z) the Interest Period and the last day thereof. If any Lender shall
elect not to make a Competitive Bid, such Lender shall so notify the Agent via
telecopier (I) in the case of Eurodollar Competitive Loans, not later than 9:30
a.m., New York City time, three Business Days before a proposed Competitive
Borrowing, and (II) in the case of Fixed Rate Loans, not later than 9:30 a.m.,
New York City time, on the day of a proposed Competitive Borrowing; provided,
however, that failure by any Lender to give such notice shall not cause such
Lender to be obligated to make any Competitive Loan as part of such Competitive
Borrowing. A Competitive Bid submitted by a Lender pursuant to this paragraph
(b) shall be irrevocable.
(c) The Agent shall promptly (but in no event later than 10:00
a.m., New York City time) notify the Borrower by telecopier of all the
Competitive Bids made in accordance with paragraph (b) above, the Competitive
Bid Rate and the principal amount of each Competitive Loan in respect of which a
Competitive Bid was made and the identity of the Lender that made each
Competitive Bid. The Agent shall send a copy of all Competitive Bids to the
Borrower for its records as soon as practicable after completion of the bidding
process set forth in this Section 2.03.
<PAGE> 24
24
(d) The Borrower may in its sole and absolute discretion,
subject only to the provisions of this paragraph (d), accept or reject any
Competitive Bid referred to in paragraph (c) above. The Borrower shall notify
the Agent by telephone, confirmed by telecopier in the form of a Competitive Bid
Accept/Reject Letter in the form of Exhibit A-4, whether and to what extent it
has decided to accept or reject any of or all the Competitive Bids referred to
in paragraph (c) above, (x) in the case of a Eurodollar Competitive Borrowing,
not later than 1:00 p.m., New York City time, three Business Days before a
proposed Competitive Borrowing, and (y) in the case of a Fixed Rate Borrowing,
not later than 10:30 a.m., New York City time, on the day of a proposed
Competitive Borrowing; provided, however, that (i) the failure by the Borrower
to give such notice shall be deemed to be a rejection of all the Competitive
Bids referred to in paragraph (c) above, (ii) the Borrower shall not accept a
Competitive Bid made at a particular Competitive Bid Rate if the Borrower has
decided to reject a Competitive Bid made at a lower Competitive Bid Rate, (iii)
the aggregate amount of the Competitive Bids accepted by the Borrower shall not
exceed the principal amount specified in the related Competitive Bid Request,
(iv) if the Borrower shall accept a Competitive Bid or Competitive Bids made at
a particular Competitive Bid Rate but the amount of such Competitive Bid or
Competitive Bids shall cause the total amount of Competitive Bids to be accepted
by the Borrower to exceed the amount specified in the related Competitive Bid
Request, then the Borrower shall accept a portion of such Competitive Bid or
Competitive Bids in an amount equal to the amount specified in the related
Competitive Bid Request less the amount of all other Competitive Bids accepted
with respect to such related Competitive Bid Request, which acceptance, in the
case of multiple Competitive Bids at such Competitive Bid Rate, shall be made
pro rata in accordance with the amount of each such Competitive Bid at such
Competitive Bid Rate, and (v) except pursuant to clause (iv) above, no
Competitive Bid shall be accepted for a Competitive Loan unless such Competitive
Loan is in a minimum principal amount of $5,000,000 and an integral multiple of
$1,000,000; provided further, however, that if a Competitive Loan must be in an
amount less than $5,000,000 because of the provisions of clause (iv) above, such
Competitive Loan may be for a minimum of $1,000,000 or any integral multiple
thereof, and in calculating the pro rata allocation of acceptances of portions
of multiple Competitive Bids at a particular Competitive Bid Rate pursuant to
clause (iv) the amounts shall be rounded to integral multiples of $1,000,000 in
a manner which shall be in the discretion of the Borrower. A notice given by the
Borrower pursuant to this paragraph (d)
<PAGE> 25
25
shall be irrevocable.
(e) The Agent shall promptly notify each bidding Lender
whether or not its Competitive Bid has been accepted (and if so, in what amount
and at what Competitive Bid Rate) by telecopy sent by the Agent, and each
successful bidder will thereupon become bound, subject to the other applicable
conditions hereof, to make the Competitive Loan in respect of which its
Competitive Bid has been accepted.
(f) If the Agent shall elect to submit a Competitive Bid in
its capacity as a Lender, it shall submit such Competitive Bid directly to the
Borrower one quarter of an hour earlier than the latest time at which the other
Lenders are required to submit their Competitive Bids to the Agent pursuant to
paragraph (b) above.
(g) All notices required by this Section 2.03 shall be given
in accordance with Section 9.01.
SECTION 2.04. Revolving Credit Borrowing Procedure. In order
to request a Revolving Credit Borrowing, the Borrower shall hand deliver or
telecopy a Revolving Credit Borrowing Request to the Agent in the form of
Exhibit A-5 (a) in the case of a Eurodollar Revolving Credit Borrowing, not
later than 10:30 a.m., New York City time, three Business Days before a proposed
Revolving Credit Borrowing and (b) in the case of an ABR Borrowing, not later
than 10:00 a.m., New York City time, on the day of a proposed Revolving Credit
Borrowing. No Fixed Rate Loan shall be requested or made pursuant to a Revolving
Credit Borrowing Request. Such notice shall be irrevocable and shall in each
case specify (i) whether the Borrowing then being requested is to be a
Eurodollar Revolving Credit Borrowing or an ABR Borrowing; (ii) the date of such
Revolving Credit Borrowing (which shall be a Business Day) and the amount
thereof; and (iii) if such Borrowing is to be a Eurodollar Revolving Credit
Borrowing, the Interest Period with respect thereto. If no election as to the
Type of Revolving Credit Borrowing is specified in any such notice, then the
requested Revolving Credit Borrowing shall be an ABR Borrowing. If no Interest
Period with respect to any Eurodollar Revolving Credit Borrowing is specified in
any such notice, then the Borrower shall be deemed to have selected an Interest
Period of one month's duration. The Agent shall promptly advise the Lenders of
any notice given pursuant to this Section 2.04 and of each Lender's portion of
the requested Borrowing.
SECTION 2.05. Conversion and Continuation of Revolving Credit
Borrowings. The Borrower shall have the
<PAGE> 26
26
right at any time upon prior irrevocable notice to the Agent (i) not later than
11:00 a.m., New York City time, on the Business Day of such conversion, to
convert any Borrowing consisting of Eurodollar Revolving Credit Loans into a
Borrowing consisting of ABR Loans, (ii) not later than 10:30 a.m., New York City
time, three Business Days prior to conversion or continuation, to convert any
Revolving Credit Borrowing consisting of ABR Loans into a Borrowing consisting
of Eurodollar Revolving Credit Loans or to continue, on the last day of the
Interest Period applicable thereto, any Borrowing consisting of Eurodollar
Revolving Credit Loans for an additional Interest Period and (iii) not later
than 10:30 a.m., New York City time, three Business Days prior to conversion, to
convert the Interest Period with respect to any Borrowing consisting of
Eurodollar Revolving Credit Loans to another permissible Interest Period,
subject in each case to the following:
(a) each conversion or continuation shall be made pro rata
among the Lenders in accordance with the respective principal amounts
of the Loans comprising the converted or continued Borrowing;
(b) if less than all the outstanding principal amount of any
Borrowing shall be converted or continued, the aggregate principal
amount of such Borrowing converted or continued shall be an integral
multiple of $1,000,000 and not less than $5,000,000;
(c) accrued interest on a Loan (or portion
thereof) being converted shall be paid by the Borrower
at the time of conversion;
(d) if any Borrowing consisting of Eurodollar Revolving Credit
Loans is converted at a time other than the end of the Interest Period
applicable thereto, the Borrower shall pay, upon demand, any amounts
due to the Lenders pursuant to Section 2.15 as a result of such
conversion;
(e) any portion of a Borrowing maturing or required to be
repaid in less than one month may not be converted into or continued as
a Borrowing consisting of Eurodollar Revolving Credit Loans;
(f) any portion of a Borrowing consisting of Eurodollar
Revolving Credit Loans which cannot be continued as such by reason of
clause (e) above shall be automatically converted at the end of the
Interest Period in effect for such Borrowing into a Revolving Credit
Borrowing consisting of ABR Loans;
<PAGE> 27
27
(g) no Interest Period may be selected for any Borrowing
consisting of Eurodollar Revolving Credit Loans that would end later
than the Maturity Date; and
(h) at any time when there shall have occurred and be
continuing any Default or Event of Default, no Borrowing may be
converted into or continued as a Eurodollar Revolving Credit Borrowing.
Each notice pursuant to this Section 2.05 shall be irrevocable
and shall refer to this Agreement and specify (i) the identity and amount of the
Revolving Credit Borrowing that the Borrower requests be converted or continued,
(ii) whether such Borrowing is to be converted to or continued as a Borrowing
consisting of Eurodollar Revolving Credit Loans or ABR Loans, (iii) if such
notice requests a conversion, the date of such conversion (which shall be a
Business Day) and (iv) if such Borrowing is to be converted to or continued as a
Borrowing consisting of Eurodollar Revolving Credit Loans, the Interest Period
with respect thereto. If no Interest Period is specified in any such notice with
respect to any conversion to or continuation as a Borrowing consisting of
Eurodollar Revolving Credit Loans, the Borrower shall be deemed to have selected
an Interest Period of one month's duration. The Agent shall advise the Lenders
of any notice given pursuant to this Section 2.05 and of each Lender's portion
of any converted or continued Borrowing. If the Borrower shall not have given
notice in accordance with this Section 2.05 to continue any Borrowing into a
subsequent Interest Period (and shall not otherwise have given notice in
accordance with this Section 2.05 to convert such Borrowing), such Borrowing
shall, at the end of the Interest Period applicable thereto (unless repaid
pursuant to the terms hereof), automatically be continued into a new Interest
Period as an ABR Borrowing.
SECTION 2.06. Fees. (a) The Borrower agrees to pay to each
Lender, through the Agent, on each March 31, June 30, September 30 and December
31 and on the date on which the Commitment of such Lender shall be terminated as
provided herein, a facility fee (a "Facility Fee"), at a rate per annum equal to
the Facility Fee Percentage from time to time in effect on the amount of the
Commitment of such Lender, whether used or unused, during the preceding quarter
(or other period commencing on the date of this Agreement or ending with the
Maturity Date or any date on which the Commitment of such Lender shall be
terminated). All Facility Fees shall be computed on the basis of the actual
number of days elapsed in a year of 360 days. The
<PAGE> 28
28
Facility Fee due to each Lender shall commence to accrue on the date hereof and
shall cease to accrue on the earlier of the Maturity Date and the date of
termination of the Commitment of such Lender as provided herein.
(b) The Borrower agrees to pay the Agent, for its own account,
agent and administrative fees (the "Agent Fees") at the times and in the amounts
agreed upon in the letter agreement dated November 26, 1996 between the Borrower
and the Agent.
(c) The Borrower agrees to pay to the Lenders, through the
Administrative Agent, on each March 31, June 30, September 30, and December 31
and on each date on which the Commitment of any Lender shall be terminated or
reduced as provided herein, a utilization fee (a "Utilization Fee") at a rate
per annum of the sum of (i) 1/20 of 1% on the aggregate outstanding Loans for
each day during the quarterly or other period ending on and including such
payment date on which such outstanding Loans exceed 50% of the Total Commitment
and (ii) 1/20 of 1% on the aggregate outstanding Loans for each day during the
quarterly period or other period ending on and including such payment date on
which (A) such outstanding Loans exceed 50% of the Total Commitment and (B) the
Index Debt is rated BBB- or below by S&P and Baa3 or below by Moody's, if
applicable. All Utilization Fees shall be computed on the basis of the actual
number of days elapsed in a year of 360 days.
(d) All Fees shall be paid on the dates due, in immediately
available funds, to the Agent for distribution, if and as appropriate, among the
Lenders. Once paid, none of the Fees shall be refundable under any
circumstances.
SECTION 2.07. Repayment of Loans; Evidence of Debt. (a) The
outstanding principal balance of each Competitive Loan shall be payable on the
last day of the Interest Period applicable to such Loan, and the outstanding
principal balance of each Revolving Credit Loan shall be payable on the Maturity
Date. Each Competitive Loan and each Revolving Credit Loan shall bear interest
from the date of the Borrowing of which such Loan is a part on the outstanding
principal balance thereof as set forth in Section 2.08.
(b) Each Lender shall maintain in accordance with its usual
practice an account or accounts evidencing the indebtedness to such Lender
resulting from each Loan made by such Lender from time to time, including the
amounts of principal and interest payable and paid to such Lender from time to
time under this Agreement.
<PAGE> 29
29
(c) The Agent shall maintain accounts in which it shall record
(i) the amount of each Loan made hereunder, the Type of each Loan made and the
Interest Period applicable thereto, (ii) the amount of any principal or interest
due and payable or to become due and payable from the Borrower to each Lender
hereunder and (iii) the amount of any sum received by the Agent hereunder from
the Borrower and each Lender's share thereof.
(d) The entries made in the accounts maintained pursuant to
paragraphs (b) and (c) of this Section 2.07 shall be prima facie evidence of the
existence and amounts of the obligations therein recorded; provided, however,
that the failure of any Lender or the Agent to maintain such accounts or any
error therein shall not in any manner affect the obligations of the Borrower to
repay the Loans in accordance with their terms.
SECTION 2.08. Interest on Loans. (a) Subject to the provisions
of Section 2.09, the Loans comprising each Eurodollar Borrowing shall bear
interest (computed on the basis of the actual number of days elapsed over a year
of 360 days) at a rate per annum equal to (i) in the case of each Eurodollar
Revolving Credit Loan, (a) the LIBO Rate for the Interest Period in effect for
such Borrowing plus (b) the Spread applicable to Eurodollar Revolving Credit
Loans from time to time in effect and (ii) in the case of each Eurodollar
Competitive Loan, (a) the LIBO Rate for the Interest Period in effect for such
Borrowing plus (b) the Margin (which may be negative) offered by the Lender
making such Loan and accepted by the Borrower pursuant to Section 2.03. Interest
on each Eurodollar Borrowing shall be payable on each applicable Interest
Payment Date except as otherwise provided in this Agreement. The LIBO Rate shall
be determined by the Agent, and such determination shall be conclusive absent
manifest error. The Agent shall promptly advise the Borrower and each Lender of
such determination.
(b) Subject to the provisions of Section 2.09, the Loans
comprising each ABR Borrowing shall bear interest (computed on the basis of the
actual number of days elapsed over a year of 365 or 366 days, as the case may
be, when determined by reference to the Prime Rate and over a year of 360 days
at all other times) at a rate per annum equal to the Alternate Base Rate.
Interest on each ABR Borrowing shall be payable on each applicable Interest
Payment Date except as otherwise provided in this Agreement. The Alternate Base
Rate shall be determined by the Agent, and such determination shall be
conclusive absent manifest
<PAGE> 30
30
error. The Agent shall promptly advise the Borrower and each Lender of such
determination.
(c) Subject to the provisions of Section 2.09, each Fixed Rate
Loan shall bear interest at a rate per annum (computed on the basis of the
actual number of days elapsed over a year of 360 days) equal to the fixed rate
of interest offered by the Lender making such Loan and accepted by the Borrower
pursuant to Section 2.03. Interest on each Fixed Rate Loan shall be payable in
arrears on the Interest Payment Dates applicable to such Loan except as
otherwise provided in this Agreement.
SECTION 2.09. Default Interest. If the Borrower shall default
in the payment of the principal of or interest on any Loan or any other amount
becoming due hereunder, whether at scheduled maturity, by notice of prepayment,
acceleration or otherwise, the Borrower shall on demand from time to time from
the Agent pay interest, to the extent permitted by law, on such defaulted amount
up to (but not including) the date of actual payment (after as well as before
judgment) at a rate per annum (computed on the basis of the actual number of
days elapsed over a year of 360 days) equal to the Alternate Base Rate plus 2%
per annum.
SECTION 2.10. Alternate Rate of Interest. In the event, and on
each occasion, that on the day two Business Days prior to the commencement of
any Interest Period for a Eurodollar Borrowing the Agent shall have reasonably
determined that Dollar deposits in the principal amounts of the Eurodollar Loans
comprising such Borrowing are not generally available in the London interbank
market, or that the rates at which such Dollar deposits are being offered will
not adequately and fairly reflect the cost to any Lender of making or
maintaining its Eurodollar Loan during such Interest Period, or that reasonable
means do not exist for ascertaining the LIBO Rate, the Agent shall, as soon as
practicable thereafter, give written or telecopied notice of such determination
to the Borrower and the Lenders. In the event of any such determination, until
the Agent shall have advised the Borrower and the Lenders that the circumstances
giving rise to such notice no longer exist, (i) any request by the Borrower for
a Eurodollar Competitive Borrowing pursuant to Section 2.03 shall be of no force
and effect and shall be denied by the Agent and (ii) any request by the Borrower
for a Eurodollar Revolving Credit Borrowing pursuant to Section 2.04 shall be
deemed to be a request for an ABR Borrowing; provided, however, that any request
for such a Eurodollar Revolving Credit Borrowing may be revoked by the Borrower,
as soon as is practicable after receiving the aforementioned notice from the
Agent but in any event
<PAGE> 31
31
prior to the requested borrowing date. Each determination by the Agent hereunder
shall be conclusive absent manifest error.
SECTION 2.11. Termination, Reduction and Extension of
Commitments. (a) The Commitments shall be automatically and permanently
terminated on the Maturity Date.
(b) Upon at least three Business Days' prior irrevocable
written or telecopied notice to the Agent (which shall promptly notify each
Lender thereof), the Borrower may at any time in whole permanently terminate, or
from time to time in part permanently reduce, the Total Commitment; provided,
however, that (i) each partial reduction of the Total Commitment shall be in an
integral multiple of $1,000,000 and in a minimum principal amount of $5,000,000
and (ii) no such termination or reduction shall be made which would reduce the
Total Commitment to an amount less than the aggregate outstanding principal
amount of the Competitive Loans and the Revolving Credit Loans.
(c) Each reduction in the Total Commitment hereunder shall be
made ratably among the Lenders in accordance with their respective Commitments.
The Borrower shall pay to the Agent for the account of the Lenders, on the date
of each termination or reduction, the Facility Fees on the amount of the
Commitments so terminated or reduced accrued through the date of such
termination or reduction.
(d) (i) The Borrower may request, in a notice given as herein
provided to the Agent and each of the Lenders at any time prior to the Maturity
Date then in effect (the "Existing Maturity Date"), that the Maturity Date be
extended, which notice shall specify a date (which shall be not fewer than 60
and not more than 90 days after the date of such notice) as of which the
requested extension is to be effective (the "Effective Date"), and the new
Maturity Date (which may not be more than four years after the Effective Date)
to be in effect following such extension (the "Requested Maturity Date"). Each
Lender, acting in its sole discretion, shall, not later than a date 30 days
prior to the Effective Date, notify the Borrower and the Agent of its election
to extend or not to extend the Maturity Date with respect to its Commitment. Any
Lender which shall not timely notify the Borrower and the Agent of its election
to extend the Maturity Date shall be deemed to have elected not to extend the
Maturity Date with respect to its Commitment (any Lender who timely notifies the
Borrower and the Agent of an election not to extend its Commitment and any
Lender so deemed to have elected not to extend its Commitment being
<PAGE> 32
32
referred to as a "Terminating Lender"). The election of any Lender to agree to
such extension shall not obligate any other Lender to agree.
(ii) If and only if Lenders holding Commitments that aggregate
at least 66-2/3% of the aggregate amount of the Commitments on the Effective
Date (including Commitments of all Terminating Lenders on such date) shall have
agreed to extend the Existing Maturity Date, then, effective as of the Effective
Date, (A) the Commitments of the Lenders other than Terminating Lenders (the
"Continuing Lenders") shall, subject to the other provisions of this Agreement,
be extended to the Requested Maturity Date specified in the notice from the
Borrower, and as to such Lenders the term "Maturity Date", as used herein shall
on and after the Effective Date mean such Requested Maturity Date, provided that
if such date is not a Business Day, then such Requested Maturity Date shall be
the next preceding Business Day and (B) the Commitments of the Terminating
Lenders shall continue until the Existing Maturity Date, and shall then
terminate, and as to the Terminating Lenders, the term "Maturity Date", as used
herein, shall continue to mean such Existing Maturity Date; provided, however,
that notwithstanding the foregoing, the extension of the Existing Maturity Date
shall not be effective with respect to any Lender unless:
(x) no Default or Event of Default shall have occurred and be
continuing on each of the date of the notice requesting such extension
or on the Effective Date; and
(y) each of the representations and warranties set forth in
Article III (except the representations set forth in Section 3.05(b) or
3.14) shall be true and correct in all material respects on and as of
each of the date of the notice requesting such extension and the
Effective Date with the same effect as though made on and as of each
date, except to the extent such representations and warranties
expressly relate to an earlier date.
(e) In the event that the Maturity Date shall have been
extended for the Continuing Lenders in accordance with Section 2.11(d) and, in
connection with such extension, there are Terminating Lenders, the Borrower may,
at its own expense, require any Terminating Lender to transfer and assign in
whole or in part, without recourse (in accordance with Section 9.04) all or part
of its interests, rights and obligations under this Agreement to an assignee
(which assignee may be another Lender, if another Lender accepts
<PAGE> 33
33
such assignment) that shall assume such assigned obligations and that shall
agree that its Commitment will expire on the Maturity Date in effect for
Continuing Lenders pursuant to Section 2.11(d); provided, however, that (i) the
Borrower shall have received a written consent of the Agent in the case of an
assignee that is not a Lender, which consent shall not unreasonably be withheld,
and (ii) the assigning Lender shall have received from the Borrower or such
assignee full payment in immediately available funds of the principal of and
interest accrued to the date of such payment on the Loans made by it hereunder
to the extent that such Loans are subject to such assignment and all other
amounts owed to it hereunder. Any such assignee's initial Maturity Date shall be
the Maturity Date in effect at the time of such assignment for the Continuing
Lenders. The Borrower shall not have any right to require a Lender to assign any
part of its interests, rights and obligations under this Agreement pursuant to
this paragraph (e) unless it has notified such Lender of its intention to
require the assignment thereof at least ten days prior to the proposed
assignment date.
SECTION 2.12. Prepayment. (a) The Borrower shall have the
right at any time and from time to time to prepay any Revolving Credit
Borrowing, in whole or in part, upon giving written or telecopied notice (or
telephonic notice promptly confirmed by written or telecopied notice) to the
Agent (which shall promptly notify each Lender thereof): (i) before 10:30 a.m.,
New York City time, three Business Days prior to prepayment, in the case of
Eurodollar Revolving Credit Loans; and (ii) before 10:00 a.m., New York City
time, one Business Day prior to prepayment in the case of ABR Loans; provided,
however, that each partial prepayment shall be in an amount which is an integral
multiple of $1,000,000 and not less than $5,000,000. The Borrower shall not have
the right to prepay any Competitive Borrowing.
(b) On the date of any termination or reduction of the
Commitments pursuant to Section 2.11, the Borrower shall pay or prepay so much
of the Revolving Credit Borrowings as shall be necessary in order that the
aggregate principal amount of the Competitive Loans and Revolving Credit Loans
outstanding will not exceed the Total Commitment after giving effect to such
termination or reduction.
(c) Each notice of prepayment shall specify the prepayment
date and the principal amount of each Borrowing (or portion thereof) to be
prepaid, shall be irrevocable and shall commit the Borrower to prepay such
Borrowing (or
<PAGE> 34
34
portion thereof) by the amount stated therein on the date stated therein. All
prepayments under this Section 2.12 shall be subject to Section 2.15 but
otherwise without premium or penalty. All prepayments under this Section 2.12
shall be accompanied by accrued interest on the principal amount being prepaid
to the date of payment.
SECTION 2.13. Reserve Requirements; Change in Circumstances.
(a) If any Lender shall give notice to the Agent and the Borrower at any time to
the effect that Eurocurrency Reserve Requirements are, or are scheduled to
become, effective and that such Lender is or will be generally subject to such
Eurocurrency Reserve Requirements as a result of which such Lender will incur
additional costs, then such Lender shall, for each day from the later of the
date of such notice and the date on which such Eurocurrency Reserve Requirements
become effective, be entitled to additional interest on each Eurodollar Loan
made by it at a rate per annum determined for such day (rounded upward to the
nearest 100th of 1%) equal to the remainder obtained by subtracting (i) the LIBO
Rate for such Eurodollar Loan from (ii) the rate obtained by dividing such LIBO
Rate by a percentage equal to 100% minus the then-applicable Eurocurrency
Reserve Requirements. Such additional interest will be payable in arrears to the
Agent, for the account of such Lender, on each Interest Payment Date relating to
such Eurodollar Loan and on any other date when interest is required to be paid
hereunder with respect to such Loan. Any Lender which gives a notice under this
paragraph (a) shall promptly withdraw such notice (by written notice of
withdrawal given to the Agent and the Borrower) in the event Eurocurrency
Reserve Requirements cease to apply to it or the circumstances giving rise to
such notice otherwise cease to exist.
(b) Notwithstanding any other provision herein, if after the
date of this Agreement any change in applicable law, rule or regulation or in
the interpretation or administration thereof by any Governmental Authority
charged with the interpretation or administration thereof (whether or not having
the force of law) shall result in the imposition, modification or applicability
of any reserve, special deposit or similar requirement against assets of,
deposits with or for the account of or credit extended by any Lender (except for
any such reserve requirement which is included in Eurocurrency Reserve
Requirements covered by paragraph (a) of this Section ), or shall change the
basis of taxation of payments to any Lender of the principal of or interest on
any Eurodollar Loan or Fixed Rate Loan or any Fees or other amounts payable
hereunder (other than changes in respect of taxes imposed on the overall net
income of
<PAGE> 35
35
such Lender), or shall result in the imposition on any Lender or the London
interbank market of any other condition affecting this Agreement, such Lender's
Commitment or any Eurodollar Loan or Fixed Rate Loan made by such Lender, and
the result of any of the foregoing shall be to increase the cost to such Lender
of making or maintaining any Eurodollar Loan or Fixed Rate Loan or to reduce the
amount of any sum received or receivable by such Lender hereunder with respect
to Eurodollar Loans or Fixed Rate Loans (whether of principal, interest or
otherwise) by an amount deemed by such Lender to be material, then such
additional amount or amounts as will compensate such Lender for such additional
costs or reduction will be paid by the Borrower to such Lender upon demand.
Notwithstanding the foregoing, no Lender shall be entitled to request
compensation under this paragraph with respect to any Competitive Loan if the
change giving rise to such request was applicable to such Lender at the time of
submission of the Competitive Bid pursuant to which such Competitive Loan was
made.
(c) If any Lender shall have determined that the adoption
after the date hereof of any law, rule, regulation or guideline regarding
capital adequacy, or any change in any of the foregoing or in the interpretation
or administration of any of the foregoing by any Governmental Authority charged
with the interpretation or administration thereof, or compliance by any Lender
(or any lending office of such Lender) or any Lender's holding company with any
request or directive regarding capital adequacy (whether or not having the force
of law) made or promulgated after the date hereof by any such Governmental
Authority has or would have the effect of reducing the rate of return on such
Lender's capital or on the capital of such Lender's holding company, if any, as
a consequence of this Agreement or the Loans made by such Lender pursuant hereto
to a level below that which such Lender or such Lender's holding company could
have achieved but for such applicability, adoption, change or compliance (taking
into consideration such Lender's policies and the policies of such Lender's
holding company with respect to capital adequacy) by an amount deemed by such
Lender to be material, then the Borrower shall pay to such Lender upon such
Lender's request such additional amount or amounts as will compensate such
Lender or such Lender's holding company for any such reduction suffered, using
such method of calculation as is used by such Lender with respect to similarly
situated borrowers.
(d) If any Lender becomes entitled to claim any additional
amounts pursuant to this Section 2.13, it shall promptly notify the Borrower,
through the Agent, of the event by reason of which it has become so entitled. A
<PAGE> 36
36
certificate of a Lender, delivered through the Agent, setting forth such amount
or amounts as shall be necessary to compensate such Lender as specified in
paragraph (b) or (c) above, as the case may be, and, in reasonable detail, the
method by which such amount or amounts shall have been determined, shall be
delivered to the Borrower and shall be conclusive absent manifest error. The
Borrower shall pay each Lender the amount shown as due on any such certificate
delivered by it within 10 days after the receipt of the same.
(e) Failure on the part of any Lender to demand compensation
for any increased costs or reduction in amounts received or receivable or
reduction in return on capital with respect to any period shall not constitute a
waiver of such Lender's right to demand compensation with respect to such period
or any other period, provided that such demand occurs within 90 days after such
Lender has notified the Borrower of any event, which notification shall have
occurred within 90 days of the date on which it first knows (or in the exercise
of reasonable diligence should have known) of such event that will give rise to
a compensation claim. The protection of this Section shall be available to each
Lender regardless of any possible contention of the invalidity or
inapplicability of the law, rule, regulation, guideline or other change or
condition which shall have occurred or been imposed.
SECTION 2.14. Change in Legality. (a) Notwithstanding any
other provision herein, if any change in any law or regulation or in the
interpretation thereof by any Governmental Authority charged with the
administration or interpretation thereof shall make it unlawful for any Lender
to make or maintain any Eurodollar Loan or to give effect to its obligations as
contemplated hereby with respect to any Eurodollar Loan, then, by written notice
to the Borrower and to the Agent, such Lender may:
(i) declare that Eurodollar Loans will not thereafter be made
by such Lender hereunder, whereupon such Lender shall not submit a
Competitive Bid in response to a request for Eurodollar Competitive
Loans and any request by the Borrower for a Eurodollar Revolving Credit
Borrowing shall, as to such Lender only, be deemed a request for an ABR
Loan unless such declaration shall be subsequently withdrawn; and
(ii) require that all outstanding Eurodollar Loans made by it be
converted to ABR Loans, in which event all such Eurodollar Loans shall
be automatically converted to ABR Loans as of the effective date of
such
<PAGE> 37
37
notice as provided in paragraph (b) below.
In the event any Lender shall exercise its rights under (i) or (ii) above, all
payments and prepayments of principal which would otherwise have been applied to
repay the Eurodollar Loans that would have been made by such Lender or the
converted Eurodollar Loans of such Lender shall instead be applied to repay the
ABR Loans made by such Lender in lieu of, or resulting from the conversion of,
such Eurodollar Loans.
(b) For purposes of this Section 2.14, a notice to the
Borrower by any Lender shall be effective as to each Eurodollar Loan, if lawful,
on the last day of the Interest Period currently applicable to such Eurodollar
Loan; in all other cases such notice shall be effective on the date of receipt
by the Borrower.
SECTION 2.15. Indemnity. The Borrower shall indemnify each
Lender against any loss or expense which such Lender may sustain or incur as a
consequence of (a) any failure by the Borrower to fulfill on the date of any
borrowing hereunder the applicable conditions set forth in Article IV, (b) any
failure by the Borrower to borrow or to convert or continue any Loan hereunder
after irrevocable notice of such borrowing, conversion or continuation has been
given pursuant to Section 2.03, 2.04 or 2.05, (c) any payment, prepayment or
conversion of a Eurodollar Loan or Fixed Rate Loan required by any other
provision of this Agreement or otherwise made or deemed made on a date other
than the last day of the Interest Period applicable thereto, (d) any default in
payment or prepayment of the principal amount of any Loan or any part thereof or
interest accrued thereon, as and when due and payable (at the due date thereof,
whether at scheduled maturity, by acceleration, irrevocable notice of prepayment
or otherwise), or (e) any transfer or assignment pursuant to Sections 2.11(e)
and 2.20(b), including, in each such case, any loss or reasonable expense
sustained or incurred or to be sustained or incurred in liquidating or employing
deposits from third parties acquired to effect or maintain such Loan or any part
thereof as a Eurodollar Loan or Fixed Rate Loan. Such loss or expense shall
exclude any loss of margin hereunder, but shall include an amount equal to the
excess, if any, as reasonably determined by such Lender, of (i) its cost of
obtaining the funds for the Loan being paid, prepaid, converted or not borrowed,
converted or continued (assumed to be the LIBO Rate or, in the case of a Fixed
Rate Loan, the fixed rate of interest applicable thereto) for the period from
the date of such payment, prepayment or conversion or failure to borrow, convert
or continue to the
<PAGE> 38
38
last day of the Interest Period for such Loan (or, in the case of a failure to
borrow, convert or continue, the Interest Period for such Loan which would have
commenced on the date of such failure) over (ii) the amount of interest (as
reasonably determined by such Lender) that would be realized by such Lender in
reemploying the funds so paid, prepaid, converted or continued or not borrowed,
converted or continued for such period or Interest Period, as the case may be. A
certificate of any Lender setting forth any amount or amounts which such Lender
is entitled to receive pursuant to this Section and, in reasonable detail, the
method by which such amount or amounts shall have been determined, shall be
delivered to the Borrower and shall be conclusive absent manifest error.
SECTION 2.16. Pro Rata Treatment. Except as required under
Section 2.14, each Revolving Credit Borrowing, each payment or prepayment of
principal of any Revolving Credit Borrowing, each payment of interest on the
Revolving Credit Loans, each payment of Facility Fees, each reduction of the
Commitments and each conversion or continuation of any Borrowing with a
Revolving Credit Borrowing of any Type, shall be allocated pro rata among the
Lenders in accordance with their respective Commitments (or, if such Commitments
shall have expired or been terminated, in accordance with the respective
principal amounts of their outstanding Revolving Credit Loans). Each payment of
principal of any Competitive Borrowing shall be allocated pro rata among the
Lenders participating in such Borrowing in accordance with the respective
principal amounts of their outstanding Competitive Loans comprising such
Borrowing. Each payment of interest on any Competitive Borrowing shall be
allocated pro rata among the Lenders participating in such Borrowing in
accordance with the respective amounts of accrued and unpaid interest on their
outstanding Competitive Loans comprising such Borrowing. For purposes of
determining the available Commitments of the Lenders at any time, each
outstanding Competitive Borrowing shall be deemed to have utilized the
Commitments of the Lenders (including those Lenders which shall not have made
Loans as part of such Competitive Borrowing) pro rata in accordance with such
respective Commitments. Each Lender agrees that in computing such Lender's
portion of any Borrowing to be made hereunder, the Agent may, in its discretion,
round each Lender's percentage of such Borrowing to the next higher or lower
whole Dollar amount.
SECTION 2.17. Sharing of Setoffs. Each Lender agrees that if
it shall, through the exercise of a right of banker's lien, setoff or
counterclaim against the Borrower, including, but not limited to, a secured
claim under
<PAGE> 39
39
Section 506 of Title 11 of the United States Code or other security or interest
arising from, or in lieu of, such secured claim, received by such Lender under
any applicable bankruptcy, insolvency or other similar law or otherwise, or
by any other means (except pursuant to Section 2.11(e), 2.20(b) or 9.04), obtain
payment (voluntary or involuntary) in respect of any Revolving Credit Loan or
Loans as a result of which the unpaid principal portion of its Revolving Credit
Loans shall be proportionately less than the unpaid principal portion of the
Revolving Credit Loans of any other Lender, it shall be deemed simultaneously to
have purchased from such other Lender at face value, and shall promptly pay to
such other Lender the purchase price for, a participation in the Revolving
Credit Loans of such other Lender, so that the aggregate unpaid principal amount
of the Revolving Credit Loans and participations in the Revolving Credit Loans
held by each Lender shall be in the same proportion to the aggregate unpaid
principal amount of all Revolving Credit Loans then outstanding as the principal
amount of its Revolving Credit Loans prior to such exercise of banker's lien,
setoff or counterclaim or other event was to the principal amount of all
Revolving Credit Loans outstanding prior to such exercise of banker's lien,
setoff or counterclaim or other event; provided, however, that, if any such
purchase or purchases or adjustments shall be made pursuant to this Section 2.17
and the payment giving rise thereto shall thereafter be recovered, such purchase
or purchases or adjustments shall be rescinded to the extent of such recovery
and the purchase price or prices or adjustment restored without interest. The
Borrower expressly consents to the foregoing arrangements and agrees that any
Lender holding a participation in a Revolving Credit Loan deemed to have been so
purchased may exercise any and all rights of banker's lien, setoff or
counterclaim with respect to any and all moneys owing by the Borrower to such
Lender by reason thereof as fully as if such Lender had made a Revolving Credit
Loan directly to the Borrower in the amount of such participation.
SECTION 2.18. Payments. (a) The Borrower shall make each
payment (including principal of or interest on any Borrowing or any Fees or
other amounts) hereunder and under any other Loan Document not later than 12:00
(noon), New York City time, on the date when due in Dollars to the Agent at its
offices at 270 Park Avenue, New York, New York, in immediately available funds.
(b) Whenever any payment (including principal of or interest
on any Borrowing or any Fees or other amounts) hereunder or under any other Loan
Document shall become due, or otherwise would occur, on a day that is not a
Business
<PAGE> 40
40
Day, such payment may be made on the next succeeding Business Day, and such
extension of time shall in such case be included in the computation of interest
or Fees, if applicable.
SECTION 2.19. Taxes. (a) Any and all payments by the Borrower
hereunder shall be made, in accordance with Section 2.18, free and clear of and
without deduction for any and all current or future taxes, levies, imposts,
deductions, charges or withholdings, and all liabilities with respect thereto,
excluding taxes imposed on the Agent or any Lender (or any transferee or
assignee thereof, including a participation holder (any such entity a
"Transferee")) as a result of a present, former or future connection between the
jurisdiction of the Governmental Authority imposing such tax or any political
subdivision or taxing authority thereof or therein and the Agent or the Lender
(other than a connection resulting from or attributable to such Agent or Lender
having executed, delivered or performed its obligations or received a payment
under, or enforced, this Agreement or any other Loan Documents) (all such
nonexcluded taxes, levies, imposts, deductions, charges, withholdings and
liabilities, collectively or individually, "Taxes"). If the Borrower shall be
required to deduct any Taxes from or in respect of any sum payable hereunder to
any Lender (or any Transferee) or the Agent, (i) the sum payable shall be
increased by the amount (an "additional amount") necessary so that after making
all required deductions (including deductions applicable to additional sums
payable under this Section 2.19) such Lender (or Transferee) or the Agent (as
the case may be) shall receive an amount equal to the sum it would have received
had no such deductions been made, (ii) the Borrower shall make such deductions
and (iii) the Borrower shall pay the full amount deducted to the relevant
Governmental Authority in accordance with applicable law.
(b) In addition, the Borrower agrees to pay to the relevant
Governmental Authority in accordance with applicable law any current or future
stamp or documentary taxes or any other excise or property taxes, charges or
similar levies that arise from any payment made hereunder or from the execution,
delivery or registration of, or otherwise with respect to, this Agreement or any
other Loan Document ("Other Taxes").
(c) The Borrower will indemnify each Lender (or Transferee)
and the Agent for the full amount of Taxes and Other Taxes paid by such Lender
(or Transferee) or the Agent, as the case may be, and any liability (including
penalties, interest and expenses (including reasonable
<PAGE> 41
41
attorney's fees and expenses)) arising therefrom or with respect thereto (except
in the case of gross negligence or willful misconduct of such Lender (or
Transferee) or the Agent), whether or not such Taxes or Other Taxes were
correctly or legally asserted by the relevant Governmental Authority. A
certificate as to the amount of such payment or liability prepared by a Lender
(or Transferee), or the Agent, absent manifest error, shall be final, conclusive
and binding for all purposes. Such indemnification shall be made within 30 days
after the date such Lender (or Transferee) or the Agent, as the case may be,
makes written demand therefor.
(d) If the Borrower determines in good faith that a reasonable
basis exists for contesting a Tax, the relevant Lender (or Transferee), or the
Agent, as applicable, shall cooperate with the Borrower in challenging such Tax
at the Borrower's expense if requested by the Borrower. If a Lender (or
Transferee) or the Agent shall become aware that it is entitled to claim a
refund from a Governmental Authority in respect of Taxes or Other Taxes as to
which it has been indemnified by the Borrower, or with respect to which the
Borrower has paid additional amounts, pursuant to this Section 2.19, it shall
promptly notify the Borrower of the availability of such refund claim and shall,
within 30 days after receipt of a request by the Borrower, make a claim to such
Governmental Authority for such refund at the Borrower's expense. If a Lender
(or Transferee) or the Agent receives a refund (including pursuant to a claim
for refund made pursuant to the preceding sentence) in respect of any Taxes or
Other Taxes as to which it has been indemnified by the Borrower or with respect
to which the Borrower has paid additional amounts pursuant to this Section 2.19,
it shall within 30 days from the date of such receipt pay over such refund to
the Borrower (but only to the extent of indemnity payments made, or additional
amounts paid, by the Borrower under this Section 2.19 with respect to the Taxes
or Other Taxes giving rise to such refund), net of all out-of-pocket expenses of
such Lender (or Transferee) or the Agent and without interest (other than
interest paid by the relevant Governmental Authority with respect to such
refund); provided, however, that the Borrower, upon the request of such Lender
(or Transferee) or the Agent, agrees to repay the amount paid over to the
Borrower (plus penalties, interest or other charges) to such Lender (or
Transferee) or the Agent in the event such Lender (or Transferee) or the Agent
is required to repay such refund to such Governmental Authority.
(e) As soon as practicable after the date of any payment of
Taxes or Other Taxes by the Borrower to the
<PAGE> 42
42
relevant Governmental Authority, the Borrower will deliver to the Agent, at its
address referred to in Section 9.01, the original or a certified copy of a
receipt issued by such Governmental Authority evidencing payment thereof.
(f) Without prejudice to the survival of any other agreement
contained herein, the agreements and obligations contained in this Section 2.19
shall survive the payment in full of the principal of and interest on all Loans
made hereunder.
(g) Each Lender (or Transferee) that is organized under the
laws of a jurisdiction other than the United States, any State thereof or the
District of Columbia (a "Non-U.S. Lender") shall deliver to the Borrower and the
Agent two copies of either United States Internal Revenue Service Form 1001 or
Form 4224, or, in the case of a Non-U.S. Lender claiming exemption from U.S.
Federal withholding tax under Section 871(h) or 881(c) of the Code with respect
to payments of "portfolio interest", a Form W-8, or any subsequent versions
thereof or successors thereto (and, if such Non-U.S. Lender delivers a Form W-8,
a certificate representing that such Non-U.S. Lender is not a bank for purposes
of Section 881(c) of the Code, is not, to the best of its knowledge, subject to
regulatory or other legal requirements as a bank in any jurisdiction, and has
not been treated as a bank for purposes of any tax, securities law or other
filing or submission made to any Governmental Authority, any application made to
a rating agency or qualification for any exemption from tax, securities laws or
other legal requirements), is not a 10-percent shareholder (within the meaning
of Section 871(h)(3)(B) of the Code) of the Borrower and is not a controlled
foreign corporation related to the Borrower (within the meaning of Section
864(d)(4) of the Code)), properly completed and duly executed by such Non-U.S.
Lender claiming complete exemption from, or reduced rate of, U.S. Federal
withholding tax on payments by the Borrower under this Agreement and the other
Loan Documents. Such forms shall be delivered by each Non-U.S. Lender on or
before the date it becomes a party to this Agreement (or, in the case of a
Transferee that is a participation holder, on or before the date such
participation holder becomes a Transferee hereunder) and on or before the date,
if any, such Non-U.S. Lender changes its applicable lending office by
designating a different lending office (a "New Lending Office"). In addition,
each Non-U.S. Lender shall deliver such forms promptly upon the obsolescence or
invalidity of any form previously delivered by such Non-U.S. Lender.
Notwithstanding any other provision of this Section 2.19(g), a Non-U.S. Lender
shall not be required to deliver any form pursuant to this
<PAGE> 43
43
Section 2.19(g) that such Non-U.S. Lender is not legally able to deliver.
(h) The Borrower shall not be required to indemnify any
Non-U.S. Lender, or to pay any additional amounts to any Non-U.S. Lender, in
respect of United States Federal withholding tax pursuant to paragraph (a) or
(c) above to the extent that (i) the obligation to withhold amounts with respect
to United States Federal withholding tax existed on the date such Non-U.S.
Lender became a party to this Agreement (or, in the case of a Transferee that is
a participation holder, on the date such participation holder became a
Transferee hereunder) or, with respect to payments to a New Lending Office, the
date such Non-U.S. Lender designated such New Lending Office with respect to a
Loan; provided, however, that this clause (i) shall not apply to any Transferee
or New Lending Office that becomes a Transferee or New Lending Office as a
result of an assignment, participation, transfer or designation made at the
request of the Borrower; and provided further, however, that this clause (i)
shall not apply to the extent the indemnity payment or additional amounts any
Transferee, or Lender (or Transferee) through a New Lending Office, would be
entitled to receive (without regard to this clause (i)) do not exceed the
indemnity payment or additional amounts that the Person making the assignment,
participation or transfer to such Transferee, or Lender (or Transferee) making
the designation of such New Lending Office, would have been entitled to receive
in the absence of such assignment, participation, transfer or designation or
(ii) the obligation to pay such additional amounts would not have arisen but for
a failure by such Non-U.S. Lender to comply with the provisions of paragraph (g)
above.
(i) Nothing contained in this Section 2.19 shall require any
Lender (or Transferee) or the Agent to make available any of its tax returns (or
any other information that it deems to be confidential or proprietary).
(j) Each Lender (or Transferee) represents and agrees that, at
all times during the term of this Agreement, it is not and will not be a conduit
entity participating in a conduit financing arrangement (as defined in Section
7701(l) of the Code and the regulations thereunder) with respect to any
borrowings hereunder unless the Borrower has consented to such arrangement prior
thereto.
SECTION 2.20. Duty To Mitigate; Assignment of Commitments
Under Certain Circumstances. (a) Any Lender (or Transferee) claiming any
indemnity payment or additional amounts payable pursuant to Section 2.13 or
Section 2.19
<PAGE> 44
44
shall use reasonable efforts (consistent with legal and regulatory restrictions)
to file any certificate or document reasonably requested in writing by the
Borrower or to change the jurisdiction of its applicable lending office if the
making of such a filing or change would avoid the need for or reduce the amount
of any such indemnity payment or additional amounts that may thereafter accrue
or avoid the circumstances giving rise to such exercise and would not, in the
sole determination of such Lender (or Transferee), be otherwise disadvantageous
to such Lender (or Transferee).
(b) In the event that any Lender shall have delivered a notice
or certificate pursuant to Section 2.13 (other than pursuant to paragraph (a) of
Section 2.13) or 2.14, or the Borrower shall be required to make additional
payments to any Lender under Section 2.19, the Borrower shall have the right, at
its own expense, upon notice to such Lender and the Agent, to require such
Lender to transfer and assign without recourse (in accordance with and subject
to the restrictions contained in Section 9.04) all its interests, rights and
obligations under this Agreement to one or more other financial institutions
approved by the Agent (which approval shall not be unreasonably withheld) which
shall assume such obligations; provided that (i) no such assignment shall
conflict with any law, rule or regulation or order of any Governmental Authority
and (ii) the assignee shall pay to the affected Lender in immediately available
funds on the date of such assignment the principal of and interest accrued to
the date of payment on the Loans made by it hereunder and all other amounts
accrued for its account or owed to it hereunder.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants to each of the Lenders
that:
SECTION 3.01. Corporate Existence and Power.
(a) the Borrower is a national bank duly formed, validly
existing and in good standing under the National Bank Act, as amended;
(b) each Significant Subsidiary is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation;
<PAGE> 45
45
(c) the Borrower and each Significant Subsidiary have the
power and authority and all governmental licenses, authorizations,
consents and approvals to own its assets and carry on their respective
businesses as now conducted and, in the case of the Borrower, to
execute, deliver, and perform its obligations under this Agreement;
(d) the Borrower and each Significant Subsidiary are duly
qualified as a foreign corporation, licensed and in good standing under
the laws of each jurisdiction where their respective ownership, lease
or operation of property or the conduct of their respective businesses
requires such qualification; and
(e) the Borrower and each Significant Subsidiary
are in compliance in all material respects with all
Requirements of Law;
except, in each case referred to in clause (c) or clause (d), to the extent that
the failure to do so would not, in the aggregate for all such failures,
reasonably be expected to have a Material Adverse Effect.
SECTION 3.02. Corporate Authorization; No Contravention. The
execution, delivery and performance by the Borrower of this Agreement, the
borrowings hereunder and the use of proceeds thereof have been duly authorized
by all necessary corporate action, and do not and will not:
(a) contravene the terms of any of the Borrower's
Organization Documents;
(b) conflict with or result in any breach or contravention of,
or the creation of any Lien under, any document evidencing any
Contractual Obligation to which the Borrower or any Subsidiary is a
party or any order, injunction, writ or decree of any Governmental
Authority or arbitrator to which the Borrower or its property is
subject which, in the aggregate, would reasonably be expected to result
in a Material Adverse Effect; or
(c) violate any Requirement of Law.
SECTION 3.03. Governmental Authorization. No approval,
consent, exemption, authorization, or other action by, or notice to, or filing
with, any Governmental Authority is necessary or required in connection with the
execution, validity, delivery or performance by, or enforcement against, the
Borrower of this Agreement.
<PAGE> 46
46
SECTION 3.04. Binding Effect. This Agreement has been duly
executed on behalf of the Borrower and constitutes the legal, valid and binding
obligation of the Borrower, enforceable against the Borrower in accordance with
its terms, except as enforceability may be limited by applicable bankruptcy,
insolvency, or similar laws affecting the enforcement of creditors' rights
generally or by equitable principles relating to enforceability (whether
enforcement is sought by proceedings in equity or at law).
SECTION 3.05. Litigation. Except as disclosed in the Parent's
most recent Annual Report on Form 10-K or in any subsequent report of the Parent
on Forms 10-Q or 8-K filed with the Securities and Exchange Commission prior to
the date hereof (or in the event the representation set forth in Section 3.05(b)
is made or deemed made as of the date of any amendment to this Agreement, filed
prior to such date), there are no litigation, investigations, actions, suits,
proceedings, claims or disputes pending, or, to the knowledge of the Borrower,
threatened or contemplated, at law, in equity, in arbitration or before any
Governmental Authority, against the Borrower or its Subsidiaries or any of its
or their respective assets or properties:
(a) which purport to affect or pertain to this
Agreement or any of the transactions contemplated
hereby; or
(b) as to which there is a reasonable possibility of an
adverse determination and which, if determined adversely to the
Borrower or its Subsidiaries, would reasonably be expected to have a
Material Adverse Effect.
No injunction, writ, temporary restraining order or any order of any nature has
been issued by any court or other Governmental Authority purporting to enjoin or
restrain the execution, delivery and performance of this Agreement, or directing
that the transactions provided for herein not be consummated as herein provided.
SECTION 3.06. No Default. No Default or Event of Default
exists or would result from the incurring of any obligations hereunder by the
Borrower. On the date of this Agreement, neither the Borrower nor any of its
Subsidiaries is in default under or with respect to any Contractual Obligation
in any respect which, individually or together with all such defaults, would
reasonably be expected to have a Material Adverse Effect.
<PAGE> 47
47
SECTION 3.07. Employee Benefit Plans. Each of the Borrower and
its ERISA Affiliates is in compliance in all respects with the applicable
provisions of ERISA and the Code and the regulations and published
interpretations thereunder where a failure to comply, individually or in the
aggregate, could result in a Material Adverse Effect. No Reportable Event has
occurred in respect of any Plan. The present value of all accrued benefit
liabilities determined on a termination basis under all underfunded Plans (based
on those assumptions used to fund such Plans) did not, as of the last annual
valuation date applicable thereto, exceed the value of the assets of such Plans
by an amount that could have a Material Adverse Effect. Neither the Borrower nor
any ERISA Affiliate is required to contribute to any Multiemployer Plan or has
withdrawn from any Multiemployer Plan where such withdrawal has resulted or
would result in any Withdrawal Liability that has not been fully paid.
SECTION 3.08. Use of Proceeds. The proceeds of the Loans are
intended to be and shall be used solely for general corporate purposes and in
compliance with Section 6.05.
SECTION 3.09. Taxes. The Borrower and its Subsidiaries (or a
Controlling Affiliate of the Borrower which is part of the same consolidated
group as the Borrower for tax purposes) have filed all Federal and other
material tax returns and reports required to be filed, and have paid all Federal
and other material taxes, assessments, fees and other government charges levied
or imposed upon them or their properties, income or assets otherwise due and
payable, except those which are being contested in good faith by appropriate
proceedings and for which adequate reserves have been provided in accordance
with RAP. No notice of Lien (other than a Lien that attaches before taxes with
respect to such Lien are due) has been filed or recorded. There is no proposed
tax assessment against the Borrower or any of its Subsidiaries (or any entity
within the Borrower's consolidated group for tax purposes) which would, if the
assessment were made, have a Material Adverse Effect.
SECTION 3.10. Financial Condition. (a) The "Consolidated
Reports of Condition and Income for a Bank with Domestic and Foreign Offices"
(FFIEC 031) (the "Consolidated Reports") of the Borrower and its Subsidiaries
dated September 30, 1996 for the fiscal quarter ended on such date:
(i) were prepared in accordance with RAP, consistently applied
throughout the period covered
<PAGE> 48
48
thereby, including the related schedules and notes thereto, except as
otherwise expressly noted therein;
(ii) fairly present the financial condition of the Borrower and
its Subsidiaries as of the date thereof and results of operations for
the period covered thereby; and
(iii) show all material indebtedness and other liabilities, direct
or contingent, of the Borrower and its consolidated Subsidiaries as of
the date thereof including liabilities for taxes, and material
commitments, all to the extent required by RAP.
(b) From September 30, 1996 to the Closing Date there has been
no Material Adverse Effect.
SECTION 3.11. Regulated Entities. None of the Borrower, any
Person Controlling the Borrower, or any Subsidiary, is (a) an "investment
company", or a company "controlled" by an "investment company", within the
meaning of the Investment Company Act of 1940, as amended, or (b) a "holding
company" as defined in, or subject to regulation under, the Public Utility
Holding Company Act of 1935, as amended.
SECTION 3.12. Federal Reserve Regulations. (a) Neither the
Borrower nor any of the Subsidiaries is engaged principally in the business of
extending credit for the purpose of purchasing or carrying Margin Stock.
(b) No part of the proceeds of any Loan will be used by the
Borrower or any of its Affiliates for any purpose which entails a violation of,
or which is inconsistent with, the provisions of the Regulations of the Board,
including Regulation G, U or X.
SECTION 3.13. No Material Misstatements. To the knowledge of
the Borrower, no financial statement, certificate or statement furnished on
behalf of the Borrower pursuant to Article III and Sections 5.01, 5.02, 5.03 and
5.09 delivered on or after the date hereof pursuant to any Loan Document
contains or will contain any material misstatement of fact or omits or will omit
to state any material fact necessary to make the statements therein, in the
light of the circumstances under which they were, are or will be made, not
misleading; provided that the foregoing will not apply to information furnished
pursuant to Section 5.02(b)(iv) or to portions of the Parent's Annual Report to
Stockholders or other stockholder reports that are not incorporated in its
Annual Report on Form 10-K or other
<PAGE> 49
49
periodic reports filed with the Securities and Exchange Commission.
SECTION 3.14. Environmental and Safety Matters. The Borrower
is aware of no events, conditions or circumstances involving environmental
pollution or contamination or employee health or safety that would reasonably be
expected to result in a Material Adverse Effect.
ARTICLE IV
CONDITIONS OF LENDING
The obligations of the Lenders to make Loans hereunder are
subject to the satisfaction on the date of each Borrowing of the following
conditions:
(a) The Agent shall have received a notice of such Borrowing
as required by Section 2.03 or Section 2.04, as applicable.
(b) The representations and warranties set forth in Article
III (except the representations set forth in Section 3.05(b) or Section
3.14) shall be true and correct in all material respects on and as of
the date of such Borrowing with the same effect as though made on and
as of such date, except to the extent such representations and
warranties expressly relate to an earlier date.
(c) The Borrower shall be in compliance in all material
respects with all the terms and provisions set forth herein and in each
other Loan Document on its part to be observed or performed, and at the
time of and immediately after such Borrowing no Event of Default or
Default shall have occurred and be continuing.
(d) If the date of such Borrowing is a Coverage Date, the
Coverage Ratio on such date shall equal or exceed 115% and the Borrower
shall have delivered to the Agent a certificate of a Financial Officer,
dated the date of such Borrowing, setting forth a computation, in
reasonable detail, of such Coverage Ratio.
Each Borrowing shall be deemed to constitute a representation and warranty by
the Borrower on the date of such Borrowing as to the matters specified in
paragraphs (b)
<PAGE> 50
50
and (c) of this Article IV.
ARTICLE V
AFFIRMATIVE COVENANTS
The Borrower covenants and agrees with each Lender that, so
long as this Agreement shall remain in effect or the principal of or interest on
any Loan, any Fees or any other expenses or amounts payable under any Loan
Document shall be unpaid, unless the Required Lenders shall otherwise consent in
writing, the Borrower will, and will cause each of the Subsidiaries to:
SECTION 5.01. Financial Statements. In the case
of the Borrower, furnish to the Agent:
(a) as soon as available, but not later than 120 days after
the end of each fiscal year, a copy of the Consolidated Reports of the
Borrower and its Subsidiaries for such fiscal year; and
(b) as soon as available, but not later than 60 days after the
end of each of the first three fiscal quarters of each year, a copy of
the Consolidated Reports of the Borrower and its Subsidiaries for such
fiscal quarter;
in each case certified by an appropriate Responsible Officer as being the
complete and correct copies of the statements on such forms filed by the
Borrower with the OCC.
<PAGE> 51
51
SECTION 5.02. Certificates; Other Information. In the case of
the Borrower, furnish to the Agent:
(a) concurrently with the delivery of the financial statements
referred to in Sections 5.01(a) and (b) above, a certificate of a
Responsible Officer (i) stating that, to such officer's knowledge, the
Borrower, during such period, has observed, performed and fulfilled all
of its covenants and other agreements, and satisfied every condition
contained in the Loan Documents to be observed, performed or satisfied
by it, and that such officer has obtained no knowledge of any Default
or Event of Default except as specified (by applicable Section
reference) in such certificate and (ii) showing in reasonable detail a
calculation of (x) the Loss Ratio for the period of four fiscal
quarters ending on the date of the latest balance sheet included in
such financial statements, (y) Eligible Receivables as of the date of
such balance sheet and (z) compliance with Sections 6.03 and 6.04;
(b) (i) promptly after the same are sent, copies of all
financial statements and reports which the Parent sends generally to
its shareholders in their capacities as such;
(ii) promptly after the same are filed, copies of all financial
statements and regular, periodic or special reports (except for the
Form 8-K filed monthly for entities established in connection with
Securitizations by the Parent or any of its subsidiaries) which the
Parent may make to, or file with, the Securities and Exchange
Commission or any successor or similar Governmental Authority, except
for private filings which are not publicly available;
(iii) promptly after the same are filed and to the extent not
covered by clause (i) or (ii) above, copies of all regular, periodic
reports that the Borrower may make to, or file with, the OCC, except
for private filings which are not publicly available; and
(iv) promptly, such additional public financial and other
information as the Agent may from time to time reasonably request.
SECTION 5.03. Notices. Promptly give notice to
the Agent and each Lender of:
(a) the occurrence of any Default or Event of Default;
<PAGE> 52
52
(b) the filing or commencement of any action, suit or
proceeding against the Borrower or any Subsidiary whether at law or
equity or by or before any Governmental Authority, which is reasonably
likely to result in a Material Adverse Effect; and
(c) any Material Adverse Effect.
Each notice pursuant to this Section shall be accompanied by a
written statement by a Responsible Officer of the Borrower setting forth details
of the occurrence referred to therein, and stating what action the Borrower
proposes to take with respect thereto and at what time. Each notice under
Section 5.03(a) shall describe with particularity any and all clauses or
provisions of this Agreement that have been breached or violated.
SECTION 5.04. Preservation of Corporate Existence, etc. With
respect to the Borrower, at all times be a national banking association validly
existing and in good standing under the National Bank Act or a bank chartered
under the applicable banking law of any state and be an insured bank and member
bank of the Federal Deposit Insurance Corporation, under the Federal Deposit
Insurance Act, and continue (and cause each of its Significant Subsidiaries) to
preserve and maintain in full force and effect its corporate existence and good
standing under the laws of its state or jurisdiction of incorporation.
SECTION 5.05. Books and Records. Maintain proper books of
record and account, in which full, true and correct entries in conformity with
RAP and all Requirements of Law consistently applied shall be made of all
financial transactions and matters involving the assets and business of the
Borrower and such Subsidiaries; and permit representatives of the Agent to
discuss with representatives of the Borrower and its Significant Subsidiaries
the affairs, finances, and accounts of the Borrower and such Significant
Subsidiaries, at such times during normal business hours and as often as any of
the Lenders may reasonably request.
SECTION 5.06. Compliance with Regulatory Standards. At all
times comply with all applicable regulatory guidelines, policy statements,
regulations or other Requirements of Law, except to the extent such
noncompliance does not constitute a Material Adverse Effect.
SECTION 5.07. Payment of Obligations. Pay, discharge or
otherwise satisfy at or before maturity or
<PAGE> 53
53
before they become delinquent, as the case may be, all its taxes and other
material obligations of whatever nature, except, without prejudice to the
effectiveness of paragraph (f) of Article VII, for any taxes or other
obligations when the amount or validity thereof is currently being contested in
good faith by appropriate proceedings and reserves in conformity with RAP with
respect thereto have been provided on the books of the Borrower or any
Subsidiary, as the case may be.
SECTION 5.08. Maintenance of Insurance. Substantially keep its
insurable property insured (including pursuant to self insurance) in such
minimum amounts and against at least such risks and covering such assets and at
such levels as exist as of the Closing Date and maintain public liability
insurance policies in amounts not less than $25,000,000.
SECTION 5.09. Employee Benefits. (a) Comply in all respects
with the applicable provisions of ERISA and the Code where a failure to comply,
individually or in the aggregate, could result in a Material Adverse Effect and
(b) furnish to the Agent (i) as soon as possible after, and in any event within
30 days after any Financial Officer of the Borrower or any ERISA Affiliate knows
or has reason to know that, any Reportable Event has occurred that alone or
together with any other Reportable Event could reasonably be expected to result
in liability of the Borrower to the PBGC in an aggregate amount that could have
a Material Adverse Effect, a statement of a Financial Officer of the Borrower
setting forth details as to such Reportable Event and the action that the
Borrower proposes to take with respect thereto, together with a copy of the
notice, if any, of such Reportable Event given to the PBGC, (ii) promptly after
receipt thereof, a copy of any notice that the Borrower or any ERISA Affiliate
may receive from the PBGC relating to the intention of the PBGC to terminate any
Plan or Plans (other than a Plan maintained by an ERISA Affiliate that is
considered an ERISA Affiliate only pursuant to subsection (m) or (o) of Section
414 of the Code) or to appoint a trustee to administer any such Plan or Plans
where any such terminations or trustee appointments could in the aggregate
result in a Material Adverse Effect and (iii) within 10 days after the due date
for filing with the PBGC pursuant to Section 412(n) of the Code a notice of
failure to make a required installment or other payment with respect to a Plan,
a statement of a Financial Officer of the Borrower setting forth details as to
such failure and the action that the Borrower proposes to take with respect
thereto, together with a copy of any such notice given to the PBGC.
<PAGE> 54
54
SECTION 5.10. Capital Requirements. In the case of the
Borrower at all times maintain such minimum amounts of capital as shall from
time to time be required by, and otherwise comply with, the Capital Adequacy
Regulations.
ARTICLE VI
NEGATIVE COVENANTS
The Borrower covenants and agrees with each Lender and the
Agent that, so long as this Agreement shall remain in effect or the principal of
or interest on any Loan, any Fees or any other expenses or amounts payable under
any Loan Document shall be unpaid, unless the Required Lenders shall otherwise
consent in writing, the Borrower will not, and will not cause or permit any of
the Subsidiaries to:
SECTION 6.01. Limitation on Liens. Create, incur, assume or
suffer to exist any Lien upon or with respect to any Eligible Receivables or
credit card or related plan receivables which would be Eligible Receivables but
for a failure to comply with clause (i) or (iii) of the definition of the term
"Eligible Receivables", whether now owned or hereafter acquired, provided,
however, that the foregoing shall not prohibit:
(i) any Securitization of Eligible Receivables other than the
Sellers' Retained Interests,
(ii) any Securitization of Sellers' Retained Interests, if
such Securitization qualifies for sale treatment under RAP, or
(iii) any Securitization of Sellers' Retained Interests which
does not qualify for sale treatment under RAP, provided, that, immediately after
giving effect to such Securitization, the Coverage Ratio equals or exceeds 115%.
SECTION 6.02. Prohibition of Fundamental Changes. (a) Except
with respect to Securitizations or repurchase agreements, sell, assign, lease,
convey, transfer or otherwise dispose of (whether in one or a series of
transactions) any of its assets or properties (including accounts and notes
receivable, with or without recourse) or enter into any agreement to do any of
the foregoing, if to do so would result in a Material Adverse Effect or if
clause (c) of this Section 6.02 would be contravened thereby; provided, however,
that the foregoing shall not preclude the sale of investment securities for then
current market value.
<PAGE> 55
55
(b) Merge, consolidate with or into, or convey, transfer,
lease or otherwise dispose of (whether in one transaction or in a series of
transactions) all or substantially all of its assets (whether now owned or
hereafter acquired) to or in favor of, any Person, except:
(i) any Significant Subsidiary may merge with the Borrower or
any one or more Subsidiaries of the Borrower, provided that (A) if any
transaction shall be between a Significant Subsidiary and the Borrower, the
Borrower shall be the continuing or surviving corporation and (B) if any
transaction shall be between a Subsidiary and a wholly-owned Subsidiary, the
wholly-owned Subsidiary shall be the continuing or surviving corporation; and
(ii) any Significant Subsidiary of the Borrower may sell all
or substantially all of its assets (upon voluntary liquidation or otherwise), to
the Borrower or another Subsidiary; and
(iii) the Borrower or any Significant Subsidiary may merge or
consolidate with or into any other corporation, or convey, transfer, lease or
otherwise dispose of (whether in one transaction or in a series of related
transactions), all or substantially all of the assets of the Borrower or such
Significant Subsidiary, so long as:
(A) in the case of any such merger or consolidation
involving the Borrower, clause (c) of this Section 6.02 would
not be contravened thereby, and either:
(x) the Borrower is the surviving
corporation or
(y) the corporation which is the surviving
corporation shall expressly assume the due and
punctual payment and performance of the obligations
of, and the performance of each covenant, agreement,
and condition of
this Agreement binding on, the Borrower and
Continuing Directors shall constitute a majority of
the Board of Directors of the surviving corporation,
after giving effect to such merger or consolidation;
and
(B) in the case of any such conveyance, transfer,
lease or other disposition involving the Borrower, clause (c)
of this Section 6.02 would not be contravened thereby, and the
Person to
<PAGE> 56
56
which such assets of the Borrower shall be sold shall
expressly assume the due and punctual payment and performance
of the obligations of, and the performance of each covenant,
agreement, and condition of this Agreement binding upon, the
Borrower and Continuing Directors shall constitute a majority
of the Board of Directors of the Person to which such assets
of the Borrower shall be sold after giving effect to such
conveyance, transfer, lease, or other disposition; and
(C) in the case of any merger or consolidation
involving a Significant Subsidiary, either the surviving
corporation shall be a Subsidiary after giving effect to such
merger or consolidation or the consideration received by the
Borrower and its Subsidiaries in connection with such
transaction shall equal or exceed the fair market value of the
equity interests in such Significant Subsidiary disposed of by
the Borrower in such transaction, as reasonably determined by
the Board of Directors of the Borrower; and
(D) in the case of any such conveyance, transfer,
lease or other disposition involving a Significant Subsidiary,
the consideration received by the Borrower and its
Subsidiaries in connection with such transaction shall equal
or exceed the fair market value of the assets sold or disposed
of, as reasonably determined by the Board of Directors of the
Borrower;
provided, however, that immediately after giving effect to any transaction
referred to in clause (i), (ii) or (iii) above, no Default or Event of Default
shall have occurred and be continuing.
(c) In the case of the Borrower (including any successor
pursuant to this Section 6.02) and the Borrower and its Subsidiaries taken as a
whole, as a result of any transaction covered by this Section 6.02, cease to be
predominantly engaged in the credit and other similar card business, other
consumer loan business, and businesses which are related thereto or are
reasonable extensions thereof.
SECTION 6.03. Consolidated Tangible Net Worth. Permit
Consolidated Tangible Net Worth at any time to be less than the sum of (i)
$760,000,000, plus (ii) 40% of the Borrower's consolidated net income, if
positive, for the fiscal quarter ended December 31, 1996, plus (iii) 40% of the
Borrower's consolidated net income, if positive, for
<PAGE> 57
57
each fiscal year that ends after December 31, 1996, plus (iv) if such date is
not the last day of a fiscal year, 40% of the Borrower's consolidated net
income, if positive, for the then elapsed portion of the current fiscal year
ending on the last day of the fiscal quarter (if any) ending on or before such
date.
SECTION 6.04. Past Due Receivables. Permit (x) as of the last
day of any calendar month, the aggregate amount of Managed Credit Card
Receivables that are 90 days or more past due plus (without duplication) the
aggregate amount of Managed Credit Card Receivables that are on nonaccrual
status, in each case for the Borrower and its Subsidiaries, to exceed (y) an
amount equal to 6% of the aggregate amount of Managed Credit Card Receivables as
of such day.
SECTION 6.05. Regulation U. In the event the proceeds of any
Loans are used to purchase or carry Margin Stock, permit at any time more than
25% of the value (determined in accordance with Regulation U) of the assets
which are subject to Section 6.01 or 6.02 to constitute Margin Stock.
ARTICLE VII
EVENTS OF DEFAULT
Upon the occurrence of any of the following events ("Events of
Default"):
(a) default shall be made in the payment of any principal of
any Loan when and as the same shall become due and payable, whether at
the due date thereof or at a date fixed for prepayment thereof or by
acceleration thereof or otherwise; or
(b) default shall be made in the payment of any interest on
any Loan or any Fee or any other amount (other than an amount referred
to in paragraph (a) above) due hereunder, when and as the same shall
become due and payable, and such default shall continue unremedied for
a period of five days; or
(c) any representation or warranty made or deemed made by the
Borrower herein or which is contained in any certificate, document or
financial or other statement furnished at any time under or in
connection with this Agreement shall prove to have been false or
misleading in any material respect on or as of the date
<PAGE> 58
58
made, deemed made or furnished; or
(d) the Borrower shall default in the observance
or performance of any covenant, condition or agreement
contained in Article VI; or
(e) the Borrower shall default in the observance or
performance of any other covenant, condition or agreement contained in
any Loan Document (other than those specified in (a), (b) or (d)
above), and such default shall continue unremedied for a period of 30
days after notice of such default is given by the Agent or any Lender
to the Borrower; or
(f) the Borrower or any Subsidiary shall (i) default in any
payment of any amount of principal of or interest on any Indebtedness
the aggregate principal amount of which Indebtedness is in excess of
$25,000,000, beyond the period of grace, if any, provided in the
instrument or agreement under which such Indebtedness was created; or
(ii) default in the observance or performance of any other agreement or
condition relating to any such Indebtedness (in excess of $25,000,000
in the aggregate) or contained in any instrument or agreement
evidencing, securing or relating thereto, or any other event shall
occur or condition exist, the effect of which default or other event or
condition is to cause, or to permit the holder or holders or
beneficiary or beneficiaries of such Indebtedness (or a trustee or
agent on behalf of such holder or holders or beneficiary or
beneficiaries) to cause, with the giving of notice if required, such
Indebtedness to become due prior to its stated maturity; or
(g) (i) the Borrower or any Significant Subsidiary shall
commence any case, proceeding or other action (A) under any existing or
future law of any jurisdiction, domestic or foreign, relating to
bankruptcy, insolvency, liquidation, reorganization or relief of
debtors, seeking to have an order for relief entered with respect to
it, or seeking to adjudicate it a bankrupt or insolvent, or seeking
reorganization, arrangement, adjustment, winding-up, liquidation,
dissolution, composition or other relief with respect to it or its
debts, or (B) seeking appointment of a conservator, receiver, trustee,
custodian or other similar official for it or for all or any
substantial part of its assets, or the Borrower or any Significant
Subsidiary shall make a general assignment for the benefit of its
creditors; or (ii) there shall be
<PAGE> 59
59
commenced against the Borrower or any Significant Subsidiary any case,
proceeding or other action of a nature referred to in clause (i) above
which (A) results in the entry of an order for relief or in any such
adjudication or appointment or (B) remains undismissed or undischarged
for a period of 60 days; or (iii) there shall be commenced against the
Borrower or any Significant Subsidiary any case, proceeding or other
action seeking issuance of a warrant of attachment, execution,
distraint or similar process against all or any substantial part of its
assets which results in the entry of an order for any such result which
shall not have been vacated, discharged or stayed within 60 days from
the entry thereof; or (iv) the Borrower or any Significant Subsidiary
shall take any action in furtherance of, or indicating its consent to,
approval of, or acquiescence in, any of the acts set forth in clause
(i), (ii) or (iii) above;
(h) (i) a Reportable Event or Reportable Events, or a failure
to make a required installment or other payment (within the meaning of
Section 412(n)(1) of the Code), shall have occurred with respect to any
Plan or Plans that could result in liability of the Borrower to the
PBGC or to any Plan or Plans that could reasonably result in a Material
Adverse Effect and, within 30 days after the reporting of any such
Reportable Event to the Agent or after the receipt by the Agent of a
statement required pursuant to Section 5.09(b)(iii), the Agent shall
have notified the Borrower in writing that (A) the Required Lenders
have made a determination that, on the basis of such Reportable Event
or Reportable Events or the failure to make a required payment, there
are reasonable grounds for the termination of such Plan or Plans by the
PBGC, the appointment by the appropriate United States district court
of a trustee to administer such Plan or Plans or the imposition of a
lien in favor of a Plan and (B) as a result thereof an Event of Default
exists hereunder; or (ii) a trustee shall be appointed by a United
States district court to administer any such Plan or Plans and such
appointment could reasonably result in a Material Adverse Effect; or
(iii) the PBGC shall institute proceedings (including giving notice of
intent thereof) to terminate any such Plan or Plans and such
termination could reasonably result in a Material Adverse Effect; or
(i) one or more final judgments or decrees shall be entered
against the Borrower or any Significant Subsidiary involving in the
aggregate a liability (not
<PAGE> 60
60
paid or fully covered by insurance) of $25,000,000 or more and all such
judgments or decrees shall not have been vacated, discharged or stayed
within 30 days from entry thereof; or
(j) the Comptroller of the Currency shall, pursuant to 12
U.S.C. Section 55 or any successor statute, notify the Borrower that
its capital stock has become impaired; or the Borrower shall cease to
be an insured bank under the Federal Deposit Insurance Act, as amended,
and the rules and regulations promulgated thereunder; or
(k) the Borrower shall be required (whether or not the time
allowed by the appropriate federal Bank Regulatory Authority for the
submission of such plan has been established or elapsed) to submit a
capital restoration plan of the type referred to in 12 U.S.C. Section
1831o(b)(2)(C), as amended, reenacted or redesignated from time to
time;
then, and in any such event, (a) if such event is an Event of Default specified
in clause (i) or (ii) of paragraph (g) above with respect to the Borrower, the
Commitments shall immediately and automatically terminate and the Loans
hereunder (with accrued interest thereon) and all other amounts owing under any
Loan Document shall immediately become due and payable, and (b) if such event is
any other Event of Default, either or both of the following actions may be
taken: (i) with the consent of the Required Lenders, the Agent may, or upon the
request of the Required Lenders, the Agent shall, by notice to the Borrower
declare the Commitments to be terminated forthwith, whereupon the Commitments
shall immediately terminate; and (ii) with the consent of the Required Lenders,
the Agent may, or upon the request of the Required Lenders, the Agent shall,
declare the Loans hereunder (with accrued interest thereon) and all other
amounts owing under the Loan Documents to be due and payable forthwith,
whereupon the same shall immediately become due and payable, in the case of each
of (a) and (b), without presentment, demand, protest or any other notice of any
kind, all of which are hereby expressly waived notwithstanding anything
contained herein or in any other Loan Document.
<PAGE> 61
61
ARTICLE VIII
THE AGENT
In order to expedite the transactions contemplated by this
Agreement, The Chase Manhattan Bank is hereby appointed to act as Agent on
behalf of the Lenders. Each of the Lenders hereby irrevocably authorizes the
Agent to take such actions on behalf of such Lender or holder and to exercise
such powers as are specifically delegated to the Agent by the terms and
provisions hereof, together with such actions and powers as are reasonably
incidental thereto. The Agent is hereby expressly authorized by the Lenders,
without hereby limiting any implied authority, (a) to receive on behalf of the
Lenders all payments of principal of and interest on the Loans and all other
amounts due to the Lenders hereunder, and promptly to distribute to each Lender
its proper share of each payment so received; (b) to give notice on behalf of
each of the Lenders to the Borrower of any Event of Default of which the Agent
has actual knowledge acquired in connection with its agency hereunder; and (c)
to distribute to each Lender copies of all notices, financial statements and
other materials delivered by the Borrower pursuant to this Agreement as received
by the Agent.
Neither the Agent nor any of its directors, officers,
employees or agents shall be liable as such for any action taken or omitted by
any of them except for its or his or her own gross negligence or willful
misconduct, or be responsible for any statement, warranty or representation
herein or the contents of any document delivered in connection herewith, or be
required to ascertain or to make any inquiry concerning the performance or
observance by the Borrower of any of the terms, conditions, covenants or
agreements contained in this Agreement. The Agent shall not be responsible to
the Lenders for the due execution, genuineness, validity, enforceability or
effectiveness of this Agreement or other such instruments or agreements. The
Agent may deem and treat the Lender which makes any Loan as the holder of the
indebtedness resulting therefrom for all purposes hereof until it shall have
received notice from such Lender, given as provided herein, of the transfer
thereof. The Agent shall in all cases be fully protected in acting, or
refraining from acting, in accordance with written instructions signed by the
Required Lenders and, except as otherwise specifically provided herein, such
instructions and any action or inaction pursuant thereto shall be binding on all
the Lenders. The Agent shall, in the absence of knowledge to the contrary, be
entitled to rely on any instrument or document believed by it in good
<PAGE> 62
62
faith to be genuine and correct and to have been signed or sent by the proper
person or persons. Neither the Agent nor any of its directors, officers,
employees or agents shall have any responsibility to the Borrower on account of
the failure of or delay in performance or breach by any Lender of any of its
obligations hereunder or to any Lender on account of the failure of or delay in
performance or breach by any other Lender or the Borrower of any of their
respective obligations hereunder or in connection herewith.
The Agent may execute any and all duties hereunder by or through agents or
employees and shall be entitled to rely upon the advice of legal counsel
selected by it with respect to all matters arising hereunder and shall not be
liable for any action taken or suffered in good faith by it in accordance with
the advice of such counsel.
The Lenders hereby acknowledge that the Agent shall be under
no duty to take any discretionary action permitted to be taken by it pursuant to
the provisions of this Agreement unless it shall be requested in writing to do
so by the Required Lenders.
Subject to the appointment and acceptance of a successor Agent
as provided below, the Agent may resign at any time by notifying the Lenders and
the Borrower. Upon any such resignation, the Required Lenders shall have the
right to appoint a successor Agent acceptable to the Borrower. If no successor
shall have been so appointed by the Required Lenders and shall have accepted
such appointment within 30 days after the retiring Agent gives notice of its
resignation, then the retiring Agent shall, on behalf of the Lenders, appoint a
successor Agent which shall be a bank with an office in New York, New York,
having a combined capital and surplus of at least $500,000,000 reasonably
acceptable to the Borrower. Upon the acceptance of any appointment as Agent
hereunder by a successor bank, such successor shall succeed to and become vested
with all the rights, powers, privileges and duties of the retiring Agent and the
retiring Agent shall be discharged from its duties and obligations hereunder.
After the Agent's resignation, the provisions of this Article shall continue in
effect for its benefit in respect of any actions taken or omitted to be taken by
it while it was acting as Agent.
With respect to the Loans made by it hereunder, the Agent in
its individual capacity and not as Agent shall have the same rights and powers
as any other Lender and may exercise the same as though it were not the Agent,
and the Agent and its Affiliates may accept deposits from, lend money to and
generally engage in any kind of business with the Borrower or any Subsidiary or
other Affiliate thereof as
<PAGE> 63
63
if it were not the Agent.
Each Lender agrees (i) to reimburse the Agent, on demand, in
the amount of its pro rata share (based on its Commitment hereunder or, if the
Commitments shall have been terminated, the amount of its outstanding Loans) of
any expenses incurred for the benefit of the Lenders by the Agent, including
counsel fees and compensation of agents and employees paid for services rendered
on behalf of the Lenders, which shall not have been reimbursed by the Borrower
and (ii) to indemnify and hold harmless the Agent and any of its directors,
officers, employees or agents, on demand, in the amount of such pro rata share,
from and against any and all liabilities, taxes, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind or nature whatsoever which may be imposed on, incurred by or asserted
against it in its capacity as the Agent in any way relating to or arising out of
this Agreement or any action taken or omitted by it under this Agreement to the
extent the same shall not have been reimbursed by the Borrower; provided that no
Lender shall be liable to the Agent for any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements resulting from the gross negligence or willful
misconduct of the Agent or any of its directors, officers, employees or agents.
Each Lender acknowledges that it has, independently and
without reliance upon the Agent or any other Lender and based on such documents
and information as it has deemed appropriate, made its own credit analysis and
decision to enter into this Agreement. Each Lender also acknowledges that it
will, independently and without reliance upon the Agent or any other Lender and
based on such documents and information as it shall from time to time deem
appropriate, continue to make its own decisions in taking or not taking action
under or based upon this Agreement or any related agreement or any document
furnished hereunder or thereunder. The Co-Syndication Agents, the Co-Arrangers
and the Co-Agents, in their capacities as such, shall have no duties or
responsibilities, and shall incur no liabilities, under this Agreement.
<PAGE> 64
64
ARTICLE IX
MISCELLANEOUS
SECTION 9.01. Notices. Notices and other communications
provided for herein shall be in writing and shall be delivered by hand or
overnight courier service, mailed or sent by telecopy as follows:
(a) if to the Borrower, to it at MBNA America Bank, N.A., 400
Christiana Road, Newark, DE 19713, Attention of Vernon H. C. Wright
(Telecopy No. 302-456-8348) and Treasury Operations (Telecopy No.
302-456-8545);
(b) if to the Agent, to it at One Chase Manhattan Plaza, New
York, New York 10081, Attention of Debra Mitchell, Loan and Agency
Services Group, 8th Floor (Telecopy No. 212-552-5642); and
(c) if to a Lender, to it at its address (or telecopy number)
set forth in the Administrative Questionnaire delivered to the Agent by
such Lender in connection with the execution of this Agreement or in
the Assignment and Acceptance pursuant to which such Lender shall have
become a party hereto or at such other address as shall be specified in
writing by such Lender to the Agent from time to time.
All notices and other communications given to any party hereto in accordance
with the provisions of this Agreement shall be deemed to have been given on the
date of receipt if delivered by hand or overnight courier service or sent by
telecopy, or on the date five Business Days after dispatch by certified or
registered mail if mailed, in each case delivered, sent or mailed (properly
addressed) to such party as provided in this Section 9.01 or in accordance with
the latest unrevoked direction from such party given in accordance with this
Section 9.01.
SECTION 9.02. Survival of Agreement. All covenants,
agreements, representations and warranties made by the Borrower herein and in
the certificates or other instruments prepared or delivered in connection with
or pursuant to this Agreement or any other Loan Document shall be considered to
have been relied upon by the Lenders and shall survive the making by the Lenders
of the Loans, regardless of any investigation made by the Lenders or on their
behalf, and shall continue in full force and effect as long as the principal of
or any accrued interest on any Loan or any Fee or any other amount payable under
this Agreement
<PAGE> 65
65
or any other Loan Document is outstanding and unpaid and so long as the
Commitments have not been terminated.
SECTION 9.03. Binding Effect. This Agreement shall become
effective when it shall have been executed by the Borrower and the Agent and
when the Agent shall have received copies hereof which, when taken together,
bear the signatures of each Lender, and thereafter shall be binding upon and
inure to the benefit of the Borrower, the Agent and each Lender and their
respective successors and assigns, except that the Borrower shall not have the
right to assign its rights hereunder or any interest herein without the prior
consent of all the Lenders.
SECTION 9.04. Successors and Assigns. (a) Whenever in this
Agreement any of the parties hereto is referred to, such reference shall be
deemed to include the successors and assigns of such party; and all covenants,
promises and agreements by or on behalf of the Borrower, the Agent or the
Lenders that are contained in this Agreement shall bind and inure to the benefit
of their respective successors and assigns.
(b) Each Lender may assign to one or more assignees all or a
portion of its interests, rights and obligations under this Agreement (including
all or a portion of its Commitment and the Loans at the time owing to it);
provided, however, that (i) except in the case of an assignment to a Lender or
an Affiliate of a Lender (other than any such Affiliate substantially all the
business of which is a credit card business), the Borrower and the Agent must
give their prior written consent to such assignment (which consent shall not be
unreasonably withheld), (ii) each such assignment shall be of a constant, and
not a varying, percentage of all the assigning Lender's rights and obligations
under this Agreement, (iii) the amount of the Commitment of the assigning Lender
subject to each such assignment (determined as of the date the Assignment and
Acceptance with respect to such assignment is delivered to the Agent) shall not
be less than $5,000,000 and the amount of the Commitment of such Lender
remaining after such assignment shall not be less than $5,000,000 or shall be
zero, (iv) the parties to each such assignment shall execute and deliver to the
Agent an Assignment and Acceptance, and a processing and recordation fee of
$2,500 and (v) the assignee, if it shall not be a Lender, shall deliver to the
Agent an Administrative Questionnaire. Upon acceptance by the Agent of any such
Assignment and Acceptance, from and after the effective date specified in such
Assignment and Acceptance, which effective date shall be at least five Business
Days after the execution thereof, (A) the assignee
<PAGE> 66
66
thereunder shall be a party hereto and, to the extent of the interest assigned
by such Assignment and Acceptance, have the rights and obligations of a Lender
under this Agreement, (B) the assigning Lender thereunder shall, to the extent
of the interest assigned by such Assignment and Acceptance, be released from its
obligations under this Agreement (and, in the case of an Assignment and
Acceptance covering all or the remaining portion of an assigning Lender's rights
and obligations under this Agreement, such Lender shall cease to be a party
hereto (but shall continue to be entitled to the benefits of Sections 2.13,
2.15, 2.19 and 9.05, as well as to any Fees accrued for its account hereunder
and not yet paid)) and (C) Schedule 2.01 shall be deemed amended to give effect
to the assignment effected thereby. Notwithstanding the foregoing, any Lender
assigning its rights and obligations under this Agreement may retain any
Competitive Loans made by it outstanding at such time, and in such case shall
retain its rights hereunder in respect of any Loans so retained until such Loans
have been repaid in full in accordance with this Agreement.
(c) By executing and delivering an Assignment and Acceptance,
the assigning Lender thereunder and the assignee thereunder shall be deemed to
confirm to and agree with each other and the other parties hereto as follows:
(i) such assigning Lender warrants that it is the legal and beneficial owner of
the interest being assigned thereby free and clear of any adverse claim created
by it, (ii) except as set forth in (i) above, such assigning Lender makes no
representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with this
Agreement or any other instrument or document furnished pursuant hereto, or the
execution, legality, validity, enforceability, genuineness, sufficiency or value
of this Agreement or any other instrument or document furnished pursuant hereto
or the financial condition of the Borrower or the performance or observance by
the Borrower of any obligations under this Agreement or any other instrument or
document furnished pursuant hereto; (iii) such assignee represents and warrants
that it is legally authorized to enter into such Assignment and Acceptance; (iv)
such assignee confirms that it has received a copy of this Agreement, together
with copies of the most recent financial statements delivered pursuant to
Section 5.01 and such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into such
Assignment and Acceptance; (v) such assignee will independently and without
reliance upon the Agent, such assigning Lender or any other Lender and based on
such documents and information as it shall deem appropriate at
<PAGE> 67
67
the time, continue to make its own credit decisions in taking or not taking
action under this Agreement; (vi) such assignee appoints and authorizes the
Agent to take such action as agent on its behalf and to exercise such powers
under this Agreement as are delegated to the Agent by the terms hereof, together
with such powers as are reasonably incidental thereto; and (vii) such assignee
agrees that it will perform in accordance with their terms all the obligations
which by the terms of this Agreement are required to be performed by it as a
Lender.
(d) The Agent shall maintain at one of its offices in The City
of New York a copy of each Assignment and Acceptance delivered to it and a
register for the recordation of the names and addresses of the Lenders, and the
Commitment of, and the principal amount of the Loans owing to, each Lender
pursuant to the terms hereof from time to time (the "Register"). The entries in
the Register shall be conclusive in the absence of manifest error and the
Borrower, the Agent and the Lenders may treat each Person whose name is recorded
in the Register pursuant to the terms hereof as a Lender hereunder for all
purposes of this Agreement. The Register shall be available for inspection by
each party hereto, at any reasonable time and from time to time upon reasonable
prior notice.
(e) Upon its receipt of a duly completed Assignment and
Acceptance executed by an assigning Lender and an assignee together with an
Administrative Questionnaire completed in respect of the assignee (unless the
assignee shall already be a Lender hereunder), the processing and recordation
fee referred to in paragraph (b) above and, if required, the written consent of
the Borrower to such assignment, the Agent shall (i) accept such Assignment and
Acceptance and (ii) record the information contained therein in the Register.
(f) Each Lender may sell participations to one or more banks
or other entities in all or a portion of its rights and obligations under this
Agreement (including all or a portion of its Commitment and the Loans owing to
it); provided, however, that (i) such Lender's obligations under this Agreement
shall remain unchanged, (ii) such Lender shall remain solely responsible to the
other parties hereto for the performance of such obligations, (iii) each
participating bank or other entity shall be entitled to the benefit of the cost
protection provisions contained in Sections 2.13, 2.14, 2.15 and 2.19 to the
same extent as if it were the selling Lender (and limited to the amount that
could have been claimed by the selling Lender had it continued to hold the
interest of such participating bank or
<PAGE> 68
68
other entity), except that all claims made pursuant to such Sections shall be
made through such selling Lender, and (iv) the Borrower, the Agent and the other
Lenders shall continue to deal solely and directly with such selling Lender in
connection with such Lender's rights and obligations under this Agreement, and
such Lender shall retain the sole right to enforce the obligations of the
Borrower relating to the Loans and to approve, without the consent of or
consultation with any participant, any amendment, modification or waiver of any
provision of this Agreement (other than amendments, modifications or waivers
which would decrease the Fees payable hereunder or increase the amount of
principal of or decrease the rate at which interest is payable on the Loans, or
extend the dates fixed for payments of principal of or interest on the Loans or
Fees).
(g) Any Lender or participant may, in connection with any
assignment or participation or proposed assignment or participation pursuant to
this Section , disclose to the assignee or participant or proposed assignee or
participant any information relating to the Borrower furnished to such Lender;
provided that, prior to any such disclosure, each such assignee or participant
or proposed assignee or participant shall execute an agreement whereby such
assignee or participant shall agree (subject to customary exceptions) to
preserve the confidentiality of any such information.
(h) The Borrower shall not assign or delegate any rights and
duties hereunder without the prior written consent of all Lenders.
(i) Any Lender may at any time pledge all or any portion of
its rights under this Agreement to a Federal Reserve Bank without the consent of
the Agent or the Borrower; provided that no such pledge shall release any Lender
from its obligations hereunder or substitute any such Federal Reserve Bank for
such Lender as a party hereto. In order to facilitate such an assignment to a
Federal Reserve Bank, the Borrower shall, at the request of the assigning
Lender, duly execute and deliver to the assigning Lender a promissory note or
notes evidencing the Loans made to the Borrower by the assigning Lender
hereunder.
SECTION 9.05. Expenses; Indemnity. (a) The Borrower agrees to
pay all reasonable out-of-pocket expenses incurred by the Agent in connection
with the preparation, negotiation, execution and delivery of this Agreement or
any amendments, modifications or waivers of the provisions hereof, or incurred
by the Agent or any Lender in connection with the enforcement or protection of
their rights in
<PAGE> 69
69
connection with this Agreement or any other Loan Document or in connection with
the Loans made hereunder, including the reasonable fees and disbursements of
counsel for the Agent and an additional counsel for the other Lenders
(including, the reasonable allocated costs of in-house counsel) and, in
addition, fees and disbursements of appropriate local counsel.
(b) The Borrower agrees to indemnify the Agent, each Lender,
each of their Affiliates and the directors, officers, employees and agents of
the foregoing (each such Person being called an "Indemnitee") against, and to
hold each Indemnitee harmless from, any and all losses, claims, damages,
liabilities and related expenses, including reasonable counsel fees and expenses
(including the reasonable allocated costs of in-house counsel), incurred by or
asserted against any Indemnitee arising out of (i) the execution or delivery of
this Agreement or any other Loan Document or any agreement or instrument
contemplated hereby or thereby, the performance by the parties hereto or thereto
of their respective obligations hereunder or thereunder or the consummation of
the transactions contemplated hereby or thereby, (ii) the use of the proceeds of
the Loans or (iii) any claim, litigation, investigation or proceeding relating
to any of the foregoing, whether or not any Indemnitee is a party thereto;
provided that such indemnity shall not, as to any Indemnitee, be available to
the extent that such losses, claims, damages, liabilities or related expenses
are finally determined by a court of competent jurisdiction to have resulted
from the gross negligence or willful misconduct of such Indemnitee or arose as a
result of a dispute between the Agent or any of the Lenders or any litigation
brought by any securityholder of the Agent or the Lenders in its capacity as
such.
(c) The provisions of this Section and of Sections 2.13(b),
2.13(c), 2.13(d), 2.13(e) and 2.15 shall remain operative and in full force and
effect regardless of the expiration of the term of this Agreement, the
consummation of the transactions contemplated hereby, the repayment of any of
the Loans, the invalidity or unenforceability of any term or provision of this
Agreement or any investigation made by or on behalf of the Agent or any Lender.
All amounts due under this Section shall be payable on written demand therefor.
SECTION 9.06. APPLICABLE LAW. THIS AGREEMENT SHALL BE
CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.
SECTION 9.07. Waivers; Amendment. (a) No
<PAGE> 70
70
failure or delay of the Agent or any Lender in exercising any power or right
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise of any such right or power, or any abandonment or discontinuance of
steps to enforce such a right or power, preclude any other or further exercise
thereof or the exercise of any other right or power. The rights and remedies of
the Agent and the Lenders hereunder are cumulative and are not exclusive of any
rights or remedies which they would otherwise have. No waiver of any provision
of this Agreement or consent to any departure therefrom shall in any event be
effective unless the same shall be permitted by paragraph (b) below, and then
such waiver or consent shall be effective only in the specific instance and for
the purpose for which given. No notice or demand on the Borrower or any
Subsidiary in any case shall entitle such party to any other or further notice
or demand in similar or other circumstances.
(b) Neither this Agreement nor any provision hereof may be
waived, amended or modified except pursuant to an agreement or agreements in
writing entered into by the Borrower and the Required Lenders; provided,
however, that no such agreement shall (i) decrease the principal amount of, or
extend the maturity of or any scheduled principal payment date or date for the
payment of any interest on any Loan, or waive or excuse any such payment or any
part thereof, or decrease the rate of interest on any Loan, without the prior
written consent of each Lender affected thereby, (ii) increase or extend the
duration of the Commitment or decrease the amount or extend the date of payment
of the Facility Fee of any Lender without the prior written consent of such
Lender, or (iii) amend or modify the provisions of Section 2.11(d), 2.16 or
9.04(h), the provisions of this Section or the definition of "Required Lenders",
in each case without the prior written consent of each Lender; provided further,
however, that no such agreement shall amend, modify or otherwise affect the
rights or duties of the Agent hereunder without the prior written consent of the
Agent. Each Lender shall be bound by any waiver, amendment or modification
authorized by this Section and any consent by any Lender pursuant to this
Section shall bind any prospective assignee or participant of its rights and
interests hereunder.
SECTION 9.08. Entire Agreement. This Agreement constitutes the
entire contract among the parties relative to the subject matter hereof. Any
previous agreement among the parties with respect to the subject matter hereof
is superseded by this Agreement. Nothing in this Agreement, expressed or
implied, is intended to confer upon any party other than the parties hereto any
rights, remedies,
<PAGE> 71
71
obligations or liabilities under or by reason of this Agreement.
SECTION 9.09. Severability. In the event any one or more of
the provisions contained in this Agreement should be held invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein shall not in any way be affected or
impaired thereby. The parties shall endeavor in good-faith negotiations to
replace the invalid, illegal or unenforceable provisions with valid provisions
the economic effect of which comes as close as possible to that of the invalid,
illegal or unenforceable provisions.
SECTION 9.10. Counterparts. This Agreement may be executed in
two or more counterparts, each of which shall constitute an original but all of
which when taken together shall constitute but one contract, and shall become
effective as provided in Section 9.03.
SECTION 9.11. Headings. Article and Section headings and the
Table of Contents used herein are for convenience of reference only, are not
part of this Agreement and are not to affect the construction of, or to be taken
into consideration in interpreting, this Agreement.
SECTION 9.12. Right of Setoff. If an Event of Default shall
have occurred and be continuing and the Loans shall have been accelerated
pursuant to Article VII, each Lender is hereby authorized at any time and from
time to time, to the fullest extent permitted by law, to set off and apply any
and all deposits (general or special, time or demand, provisional or final) at
any time held and other indebtedness at any time owing by such Lender to or for
the credit or the account of the Borrower against any and all the obligations of
the Borrower now or hereafter existing under this Agreement held by such Lender,
irrespective of whether or not such Lender shall have made any demand under this
Agreement and although such obligations may be unmatured. Each Lender agrees
promptly to notify the Borrower after such setoff and application made by such
Lender, but the failure to give such notice shall not affect the validity of
such setoff and application. The rights of each Lender under this Section are in
addition to other rights and remedies (including, without limitation, other
rights of setoff) which such Lender may have.
SECTION 9.13. Jurisdiction; Consent to Service of Process. (a)
The Borrower hereby irrevocably and unconditionally submits, for itself and its
property, to the nonexclusive jurisdiction of any New York State court or
<PAGE> 72
72
Federal court of the United States of America sitting in New York City, and any
appellate court from any thereof, in any action or proceeding arising out of or
relating to this Agreement, or for recognition or enforcement of any judgment,
and each of the parties hereto hereby irrevocably and unconditionally agrees
that all claims in respect of any such action or proceeding may be heard and
determined in such New York State or, to the extent permitted by law, in such
Federal court. Each of the parties hereto agrees that a final judgment in any
such action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
Subject to the foregoing and to paragraph (b) below, nothing in this Agreement
shall affect any right that any party hereto may otherwise have to bring any
action or proceeding relating to this Agreement against any other party hereto
in the courts of any jurisdiction.
(b) The Borrower hereby irrevocably and unconditionally
waives, to the fullest extent it may legally and effectively do so, any
objection which it may now or hereafter have to the laying of venue of any suit,
action or proceeding arising out of or relating to this Agreement in any New
York State or Federal court. Each of the parties hereto hereby irrevocably
waives, to the fullest extent permitted by law, the defense of an inconvenient
forum to the maintenance of such action or proceeding in any such court.
(c) Each party to this Agreement irrevocably consents to
service of process in the manner provided for notices in Section 9.01. Nothing
in this Agreement will affect the right of any party to this Agreement to serve
process in any other manner permitted by law.
<PAGE> 73
73
SECTION 9.14. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE
TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING
OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT. EACH PARTY HERETO (A)
CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES
THAT IT AND OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT
BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATION IN THIS SECTION.
SECTION 9.15 Confidentiality. Each Lender agrees (a) to keep
confidential any written or oral information (i) provided to it by or on behalf
of the Borrower or any of its Subsidiaries pursuant to or in connection with
this Agreement or (ii) obtained by such Lender based on a review of the books
and records of the Borrower or any of its Subsidiaries and (b) to use such
information on its own behalf solely in connection with such Lender's
administration of its Commitment and Loans; provided that nothing herein shall
prevent any Lender from disclosing any such information (i) to the Agent or any
other Lender, (ii) to any prospective transferee which agrees to comply with the
provisions of this Section and, in the case of a prospective assignee, the
Borrower shall have consented to such prospective assignment pursuant to Section
9.04(b), (iii) to its employees, directors, agents, attorneys, accountants and
other professional advisors, (iv) to such of the officers, directors, employees,
agents, independent auditors and representatives of such Lender or any of its
Affiliates as need to know such information in connection with such Lender's
administration of its Commitment and Loans (provided such persons referred to in
the foregoing clauses (b)(i), (ii), (iii) and (iv) are informed of the
confidential nature of the information and the restrictions imposed by this
subsection), (v) upon the request or demand of any Governmental Authority having
jurisdiction over such
<PAGE> 74
74
Lender, (vi) in response to any order of any court or other Governmental
Authority or as may otherwise be required pursuant to any Requirement of Law or
(vii) to the extent necessary or advisable in connection with any suit, action
or proceeding in connection with the enforcement of rights hereunder, provided
that such Lender shall give the Borrower prior notification of such disclosure
to the extent the Borrower is not a party to such proceeding.
IN WITNESS WHEREOF, the Borrower, the Agent and the Lenders
have caused this Agreement to be duly executed by their respective authorized
officers as of the day and year first above written.
MBNA AMERICA BANK, N.A.,
by
/s/ Thomas D. Wren
--------------------
Name: Thomas D. Wren
Title: Senior Executive
Vice President and
Treasurer
THE CHASE MANHATTAN BANK,
individually and as Agent,
by
/s/ Roger A. Parker
----------------------
Name: Roger A. Parker
Title: Vice President
<PAGE> 75
75
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
individually and as Co-
Syndication Agent,
by
/s/ Charlene A. Davidson
------------------------
Name: Charlene A. Davidson
Title: Managing Director
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, individually and
as Co-Syndication Agent,
by
/s/ James Dwyer
-----------------------
Name: James Dwyer
Title: Vice President
THE BANK OF NEW YORK,
individually and as Co-
Arranger,
by
/s/ David C. Dobbins
-----------------------
Name: David C. Dobbins
Title: Vice President
BARCLAYS BANK PLC,
individually and as Co-
Arranger,
by
/s/ Karen M. Wagner
-----------------------
Name: Karen M. Wagner
Title: Associate Director
<PAGE> 76
76
DEUTSCHE BANK AG, NEW YORK
AND/OR CAYMAN ISLAND BRANCHES,
individually and as Co-
Arranger,
by
/s/ Gayma Z. Shivnarain
-------------------------
Name: Gayma Z. Shivnarain
Title: Vice President
by
/s/ Dale F. Oberst
-----------------------
Name: Dale F. Oberst
Title: Associate
NATIONSBANK OF TEXAS, N.A.,
individually and as Co-
Arranger,
by
/s/ Kate Galletly
-----------------------
Name: Kate Galletly
Title: Senior Vice
President
ABN AMRO BANK N.V. NEW YORK
BRANCH, individually and as
Co-Agent,
by
/s/ Victor J. Fennon
-----------------------
Name: Victor J. Fennon
Title: Vice President
by
/s/ David W. Eastep
-----------------------
Name: David W. Eastep
Title: Assistant Vice
President
CAISSE NATIONALE DE CREDIT
AGRICOLE,
by
/s/ Katherine L. Abbott
-----------------------
Name: Katherine L. Abbott
Title: First Vice President
<PAGE> 77
77
CIBC, INC., individually and
as Co-Agent,
by
/s/ Gerald Girardi
---------------------------------
Name: Gerald Girardi
Title: Director, CIBC Wood
Gundy Securities
Corp. as Agent
COMMERZBANK
AKTIENGESELLSCHAFT,
individually and as Co-Agent,
by
/s/ Juergen Schmieding
Name: Juergen Schmieding
Title: Vice President
by
/s/ Andrew R. Campbell
Name: Andrew R. Campbell
Title: Assistant Treasurer
CREDIT LYONNAIS NEW YORK
BRANCH, individually and as
Co-Agent,
by
/s/ Renaud d'Herbes
------------------------------
Name: Renaud d'Herbes
Title: Senior Vice
President
CREDIT LYONNAIS CAYMAN ISLAND
BRANCH, individually and as
Co-Agent,
by
-----------------------------
Name:
Title:
<PAGE> 78
78
THE FIRST NATIONAL BANK OF
CHICAGO, individually and as
Co-Agent,
by
/s/ Robert E. O'Connell
------------------------------
Name: Robert E. O'Connell
Title: Authorized Agent
Vice President
LLOYDS BANK, PLC, individually
and as Co-Agent,
by
/s/ Theodore R. Walser
------------------------------
Name: Theodore R. Walser
Title: Senior Vice
President
by
/s/ Stephen J. Attree
------------------------------
Name: Stephen J. Attree
Title: Assistant Vice
President
BANK OF TOYKO-MITSUBISHI TRUST
COMPANY, individually and as
Co-Agent,
by
/s/ J. Bruce Meredith
------------------------------
Name: J. Bruce Meredith
Title: Senior Vice
President and
Manager
THE NORINCHUKIN BANK,
individually and as Co-Agent,
by
/s/ Ichiro Uchida
------------------------------
Name: Ichiro Uchida
Title: Joint General
Manager
<PAGE> 79
79
SOCIETE GENERALE, individually and
as Co-Agent,
by
/s/ Emilio L. Martinez
---------------------------------
Name: Emilio L. Martinez
Title: Vice President
UNION BANK OF SWITZERLAND, NEW
YORK BRANCH, individually and
as Co-Agent,
by
/s/ Didier Magloire
---------------------------------
Name: Didier Magloire
Title: Vice President
by
/s/ Robert Mendeles
---------------------------------
Name: Robert Mendeles
Title: Vice President
THE BANK OF NOVA SCOTIA,
by
/s/ Paul A. Schultz
---------------------------------
Name: Paul A. Schultz
Title: Vice President
BANKERS TRUST COMPANY,
by
/s/ Cynthia Berge-O'Keeffe
---------------------------------
Name: Cynthia Berge-
O'Keeffe
Title: Managing Director
<PAGE> 80
80
BAYERISCHE LANDESBANK CAYMAN
ISLANDS BRANCH,
by
/s/ Wilfried Freudenberger
--------------------------
Name: Wilfried
Freudenberger
Title: Executive Vice
President and
General Manager
by
/s/ Peter Obermann
--------------------------
Name: Peter Obermann
Title: Senior Vice
President Manager
Lending Division
BAYERISCHE VEREINSBANK AG
NEW YORK BRANCH,
by
/s/ David McCollum
--------------------------
Name: David McCollum
Title: Vice President
by
/s/ Mark Sadok
--------------------------
Name: Mark Sadok
Title: Vice President
CORESTATES BANK, N.A.,
by
/s/ Ward S. Johnson
--------------------------
Name: Ward S. Johnson
Title: Vice President
<PAGE> 81
81
CREDIT SUISSE,
by
/s/ Bruce T. Miller
--------------------------
Name: Bruce T. Miller
Title: Member of Senior
Management
by
/s/ Jay Chall
--------------------------
Name: Jay Chall
Title: Director
THE DAI-ICHI KANGYO BANK,
LIMITED, CHICAGO BRANCH,
by
/s/ Seiichiro Ino
--------------------------
Name: Seiichiro Ino
Title: Vice President
DEN DANSKE BANK,
by
/s/ Sonia Kataria
--------------------------
Name: Sonia Kataria
Title: Vice President
DG BANK DEUTSCHE
GENOSSENSCHAFTSBANK,
by
/s/ Bruce Ritz
--------------------------
Name: Bruce Ritz
Title: Vice President
by
/s/ Karen A. Brinkman
--------------------------
Name: Karen A. Brinkman
Title: Vice President
<PAGE> 82
82
DRESDNER BANK AG,
by
/s/ Jonathan J. Wallin
--------------------------
Name: Jonathan J. Wallin
Title: Assistant Vice
President
by
/s/ Richard G. Reilly
--------------------------
Name: Richard G. Reilly
Title: Vice President
FIRST NATIONAL BANK OF
MARYLAND,
by
/s/ Marion I. Knott
--------------------------
Name: Marion I. Knott
Title: Vice President
THE FUJI BANK LIMITED,
by
/s/ Masanobu Kobayashi
--------------------------
Name: Masanobu Kobayashi
Title: Vice President and
Manager
THE INDUSTRIAL BANK OF JAPAN
LIMITED,
by
/s/ Masahiro Ito
--------------------------
Name: Masahiro Ito
Title: Senior Vice
President
KREDIETBANK N.V.,
by
/s/ Robert Snauffer
--------------------------
Name: Robert Snauffer
Title: Vice President
by
/s/ Patrick J. Owens
--------------------------
Name: Patrick J. Owens
Title: Vice President
<PAGE> 83
83
MELLON BANK, N.A.,
by
/s/ Gilbert B. Mateer
--------------------------
Name: Gilbert B. Mateer
Title: Vice President
BANK OF MONTREAL,
by
/s/ Inba Ponnusamy
--------------------------
Name: Inba Ponnusamy
Title: Director
BANCA MONTE DEI PASCHI DI
SIENA, SPA,
by
/s/ G. Natalicchi
--------------------------
Name: G. Natalicchi
Title: Senior Vice
President and
General Manager
by
/s/ Brian R. Landy
--------------------------
Name: Brian R. Landy
Title: Vice President
THE NORTHERN TRUST COMPANY,
by
/s/ James F. T. Monhart
--------------------------
Name: James F. T. Monhart
Title: Vice President
PNC BANK, N.A.,
by
/s/ Emery D. Holloway
--------------------------
Name: Emery D. Holloway
Title: Vice President
<PAGE> 84
84
ROYAL BANK OF CANADA,
by
/s/ John F. Hopper
--------------------------
Name: John F. Hopper
Title: Manager
ROYAL BANK OF SCOTLAND, PLC,
by
/s/ Derek Bonnar
--------------------------
Name: Derek Bonnar
Title: Vice President
THE SAKURA BANK, LIMITED,
by
/s/ Yasumasa Kikuchi
--------------------------
Name: Yasumasa Kikuchi
Title: Senior Vice
President
THE SANWA BANK LIMITED,
by
/s/ Frank Dattalo
--------------------------
Name: Frank Dattalo
Title: Assistant Vice
President
THE SUMITOMO BANK, LIMITED,
NEW YORK BRANCH,
by
/s/ Yoshinori Kawamura
--------------------------
Name: Yoshinori Kawamura
Title: Joint General
Manager
<PAGE> 85
85
WESTDEUTSCHE LANDESBANK
GIROZENTRALE, NEW YORK AND CAYMAN
ISLAND BRANCHES,
by
/s/ Lillian Tung Lum
--------------------------
Name: Lillian Tung Lum
Title: Vice President
by
/s/ Laura Spichiger
--------------------------
Name: Laura Spichiger
Title: Associate
THE YASUDA TRUST AND BANKING
COMPANY, LIMITED,
by
/s/ Rohn Laudenschlager
--------------------------
Name: Rohn Laudenschlager
Title: Senior Vice
President
<PAGE> 86
EXHIBIT A TO
AMENDMENT AGREEMENT
AMENDED AND RESTATED
COMPETITIVE ADVANCE AND
REVOLVING CREDIT FACILITY AGREEMENT
Dated as of January 15, 1997
Among
MBNA AMERICA BANK, N.A.,
THE LENDERS NAMED HEREIN,
and
THE CHASE MANHATTAN BANK, as Agent
<PAGE> 87
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Article Section Page
- - ------- ------- ----
<S> <C> <C> <C>
I. DEFINITIONS
1.01 Defined Terms ................................................... 1
1.02 Terms Generally.................................................. 20
1.03 Accounting Terms................................................. 20
II. THE CREDITS
2.01 Commitments ..................................................... 21
2.02 Loans ........................................................... 22
2.03 Competitive Bid Procedure 23
2.04 Revolving Credit Borrowing
Procedure ..................................................... 26
2.05 Conversion and Continuation
of Revolving Credit Borrowings ................................ 27
2.06 Fees ............................................................ 29
2.07 Repayment of Loans; Evidence
of Debt ....................................................... 30
2.08 Interest on Loans ............................................... 31
2.09 Default Interest ................................................ 32
2.10 Alternate Rate of Interest ...................................... 32
2.11 Termination, Reduction and
Extension of Commitments....................................... 33
2.12 Prepayment ...................................................... 35
2.13 Reserve Requirements; Change in
Circumstances ................................................. 36
2.14 Change in Legality............................................... 38
2.15 Indemnity ....................................................... 39
2.16 Pro Rata Treatment............................................... 40
2.17 Sharing of Setoffs............................................... 41
2.18 Payments......................................................... 42
2.19 Taxes............................................................ 42
2.20 Duty to Mitigate; Assignment of Commitments Under Certain
Circumstances ................................................. 46
III. REPRESENTATIONS AND WARRANTIES
3.01 Corporate Existence and Power ................................... 47
3.02 Corporate Authorization;
No Contravention .............................................. 48
3.03 Governmental Authorization....................................... 48
3.04 Binding Effect .................................................. 48
</TABLE>
<PAGE> 88
<TABLE>
<CAPTION>
Article Section Page
- - ------- ------- ----
<S> <C> <C> <C>
3.05 Litigation ....................................... 49
3.06 No Default ...................................... 49
3.07 Employee Benefit Plans............................ 49
3.08 Use of Proceeds .................................. 50
3.09 Taxes ............................................ 50
3.10 Financial Condition............................... 50
3.11 Regulated Entities................................ 51
3.12 Federal Reserve Regulations....................... 51
3.13 No Material Misstatements......................... 51
3.14 Environmental and Safety Matters.................. 52
IV. CONDITIONS OF LENDING................................... 52
V. AFFIRMATIVE COVENANTS
5.01 Financial Statements.............................. 53
5.02 Certificates; Other
Information .................................... 53
5.03 Notices........................................... 54
5.04 Preservation of Corporate
Existence, etc.................................. 55
5.05 Books and Records................................. 55
5.06 Compliance with Regulatory 55
Standards.......................................
5.07 Payment of Obligations............................ 55
5.08 Maintenance of Insurance.......................... 56
5.09 Employee Benefits................................. 56
5.10 Capital Requirements.............................. 56
VI. NEGATIVE COVENANTS
6.01 Limitation on Liens............................... 57
6.02 Prohibition of Fundamental
Changes......................................... 57
6.03 Consolidated Tangible
Net Worth.......................................
60
6.04 Past Due Receivables.............................. 60
6.05 Regulation U...................................... 60
VII. EVENTS OF DEFAULT ...................................... 60
VIII. THE AGENT .............................................. 64
IX. MISCELLANEOUS
9.01 Notices........................................... 67
9.02 Survival of Agreement............................. 68
</TABLE>
<PAGE> 89
<TABLE>
<CAPTION>
Article Section Page
- - ------- ------- ----
<S> <C> <C> <C>
9.03 Binding Effect.................................... 68
9.04 Successors and Assigns............................ 68
9.05 Expenses; Indemnity............................... 72
9.06 Applicable Law.................................... 73
9.07 Waivers; Amendment................................ 73
9.08 Entire Agreement.................................. 74
9.09 Severability...................................... 74
9.10 Counterparts...................................... 75
9.11 Headings.......................................... 75
9.12 Right of Setoff................................... 75
9.13 Jurisdiction; Consent to Service
of Process ..................................... 75
9.14 Waiver of Jury Trial.............................. 76
9.15 Confidentiality .................................. 76
</TABLE>
Exhibits
- - --------
Exhibit A-1 Form of Competitive Bid Request
Exhibit A-2 Form of Notice of Competitive Bid Request
Exhibit A-3 Form of Competitive Bid
Exhibit A-4 Form of Competitive Bid Accept/Reject Letter
Exhibit A-5 Form of Revolving Credit Request
Exhibit B Form of Administrative Questionnaire
Exhibit C Form of Assignment and Acceptance
Schedules
- - ---------
Schedule 2.01 Lenders and Commitments
<PAGE> 90
Schedule 2.01
MBNA ALLOCATIONS
Lender Commitment
- - ------ ----------
The Chase Manhattan Bank $80,000,000
Bank of America NT&SA 70,000,000
Morgan Guaranty Trust Company of New York 70,000,000
The Bank of New York 65,000,000
Barclays Bank PLC 65,000,000
Commerzbank AG 65,000,000
Deutsche Bank AG 65,000,000
Lloyds Bank Plc 65,000,000
NationsBank 65,000,000
ABN AMRO Bank N.V 60,000,000
Bank of Tokyo - Mitsubishi Trust Company 60,000,000
CIBC, Inc. 60,000,000
Credit Lyonnais 60,000,000
The First National Bank of Chicago 60,000,000
The Norinchukin Bank 60,000,000
Societe Generale 60,000,000
Union Bank of Switzerland 60,000,000
The Sakura Bank, Limited 50,000,000
The Sumitomo Bank, Limited 50,000,000
Westdeutsche Landesbank Girozentrale 50,000,000
Bankers Trust Company 45,000,000
Caisse Nationale de Credit Agricole 45,000,000
Dresdner Bank AG 45,000,000
The Industrial Bank of Japan, Limited 45,000,000
Mellon Bank, N.A 40,000,000
The Royal Bank of Scotland plc 40,000,000
Bayerische Landesbank 35,000,000
<PAGE> 91
Lender Commitment
- - ------ ----------
The Dai-Ichi Kangyo Bank, Ltd. 35,000,000
DG Bank 35,000,000
The First National Bank of Maryland 35,000,000
The Fuji Bank, Limited 35,000,000
Kredietbank NV 35,000,000
The Yasuda Trust & Banking Co., Ltd. 35,000,000
Banca Monte dei Paschi di Siena SpA 25,000,000
Bank of Montreal 25,000,000
Bayerische Vereinsbank AG 25,000,000
CoreStates Bank, N.A 25,000,000
Credit Suisse 25,000,000
Den Danske Bank 25,000,000
PNC Bank, N.A 25,000,000
Royal Bank of Canada 25,000,000
The Sanwa Bank, Limited 25,000,000
The Bank of Nova Scotia 15,000,000
The Northern Trust Company 15,000,000
--------------
Total $2,000,000,000
<PAGE> 92
EXHIBIT A-1
FORM OF COMPETITIVE BID REQUEST
The Chase Manhattan Bank, as Agent for
the Lenders referred to below,
270 Park Avenue
New York, N.Y. 10017
[Date]
Attention:
Dear Ladies and Gentlemen:
The undersigned, MBNA America Bank, N.A. (the "Borrower"), refers to
the Amended and Restated Competitive Advance and Revolving Credit Facility
Agreement dated as of January 15, 1997 (as it may be amended, modified, extended
or restated from time to time, the "Credit Agreement"), among the Borrower, the
Lenders parties thereto and The Chase Manhattan Bank, as Agent. Capitalized
terms used herein and not otherwise defined herein shall have the meanings
assigned to such terms in the Credit Agreement. The Borrower hereby gives you
notice pursuant to Section 2.03(a) of the Credit Agreement that it requests a
Competitive Borrowing under the Credit Agreement, and in that connection sets
forth below the terms on which such Competitive Borrowing is requested to be
made:
(A) Date of Competitive Borrowing
(which is a Business Day) ____________________
(B) Principal Amount of
Competitive Borrowing 1/ ____________________
(C) Interest rate basis 2/ ____________________
(D) Interest Period and the last
day thereof 3/ ____________________
Upon acceptance of any or all of the Loans offered by the Banks in
response to this request, the Borrower shall be deemed to have represented and
warranted that the conditions to lending specified in Section 4.01(b) and (c) of
the Credit Agreement have been satisfied.
Very truly yours,
MBNA America Bank, N.A.
by
_____________________________
Title: [Responsible Officer]
__________________
1/ Not less than $5,000,000 (and in integral multiples of $1,000,000) and
not greater than the Total Commitment then available.
2/ Eurodollar Loan or Fixed Rate Loan.
3/ Which shall be subject to the definition of "Interest Period" and end
not later than the Maturity Date.
<PAGE> 93
EXHIBIT A-2
FORM OF NOTICE OF COMPETITIVE BID REQUEST
[Name of Lender]
[Address]
[Date]
Attention:
Dear Ladies and Gentlemen:
Reference is made to the Amended and Restated Competitive Advance and
Revolving Credit Facility Agreement dated as of January 15, 1997 (as it may be
amended, modified, extended or restated from time to time, the "Credit
Agreement"), among MBNA America Bank, N.A. (the "Borrower"), the Lenders parties
thereto and The Chase Manhattan Bank, as Agent. Capitalized terms used herein
and not otherwise defined herein shall have the meanings assigned to such terms
in the Credit Agreement. The Borrower made a Competitive Bid Request on [ ],
199[ ], pursuant to Section 2.03(a) of the Credit Agreement, and in that
connection you are invited to submit a Competitive Bid by [Date]/[Time]. 4/ Your
Competitive Bid must comply with Section 2.03(b) of the Credit Agreement and the
terms set forth below on which the Competitive Bid Request was made:
(A) Date of Competitive Borrowing ____________________
(B) Principal amount of
Competitive Borrowing ____________________
(C) Interest rate basis ____________________
(D) Interest Period and the last
day thereof ____________________
Very truly yours,
THE CHASE MANHATTAN BANK, as Agent,
by ________________________________
Title:
__________________
4/ The Competitive Bid must be received by the Agent (i) in the case of
Eurodollar Loans, not later than 9:30 a.m., New York City time, three
Business Days before a proposed Competitive Borrowing, and (ii) in the
case of Fixed Rate Loans, not later than 9:30 a.m., New York City time,
on the Business Day of a proposed Competitive Borrowing.
<PAGE> 94
EXHIBIT A-3
FORM OF COMPETITIVE BID
The Chase Manhattan Bank, as Agent for
the Lenders referred to below,
270 Park Avenue
New York, N.Y. 10017
[Date]
Attention:
Dear Ladies and Gentlemen:
The undersigned, [Name of Lender], refers to the Amended and Restated
Competitive Advance and Revolving Credit Facility Agreement dated as of January
15, 1997 (as it may be amended, modified, extended or restated from time to
time, the "Credit Agreement"), among MBNA America Bank, N.A. (the "Borrower"),
the Lenders parties thereto and The Chase Manhattan Bank, as Agent. Capitalized
terms used herein and not otherwise defined herein shall have the meanings
assigned to such terms in the Credit Agreement. The undersigned hereby makes a
Competitive Bid pursuant to Section 2.03(b) of the Credit Agreement, in response
to the Competitive Bid Request made by the Borrower on [ ], 199[ ], and in that
connection sets forth below the terms on which such Competitive Bid is made:
(A) Principal Amount 5/ ____________________
(B) Competitive Bid Rate 6/ ____________________
(C) Interest Period and last
day thereof ____________________
The undersigned hereby confirms that it is prepared, subject to the
conditions set forth in the Credit Agreement, to extend credit to the Borrower
upon acceptance by the Borrower of this Competitive Bid in accordance with
Section 2.03(d) of the Credit Agreement.
Very truly yours,
[NAME OF LENDER],
by ________________________________
Title:
__________________
5/ Not less than $5,000,000 and not greater than the requested Competitive
Borrowing and in integral multiples of $1,000,000. Multiple bids will be
accepted by the Agent.
6/ i.e., LIBO Rate + or - [ ]%, in the case of Eurodollar Loans or [ ]%, in
the case of Fixed Rate Loans.
<PAGE> 95
EXHIBIT A-4
FORM OF COMPETITIVE BID ACCEPT/REJECT LETTER
[Date]
The Chase Manhattan Bank, as Agent for
the Lenders referred to below
270 Park Avenue
New York, N.Y. 10017
Attention: [ ]
Dear Ladies and Gentlemen:
The undersigned, MBNA America Bank, N.A. (the "Borrower"), refers to
the Amended and Restated Competitive Advance and Revolving Credit Facility
Agreement dated as of January 15, 1997 (as it may be amended, modified, extended
or restated from time to time, the "Credit Agreement"), among the Borrower, the
Lenders parties thereto and The Chase Manhattan Bank, as Agent for the Lenders.
In accordance with Section 2.03(c) of the Credit Agreement, we have
received a summary of Competitive Bids in connection with our Competitive Bid
Request dated [ ], 199[ ] and in accordance with Section 2.03(d) of the Credit
Agreement, we hereby accept the following Competitive Bids for maturity on
[date]:
Principal Amount Fixed Rate/Margin Lender
- - ---------------- ----------------- ------
$ [%]/[+/-. %]
$
We hereby reject the following Competitive Bids:
Principal Amount Fixed Rate/Margin Lender
- - ---------------- ----------------- ------
$ [%]/[+/-. %]
$
The $ should be deposited in the Borrower's account
[account number] on [date].
Very truly yours,
MBNA AMERICA BANK, N.A.
by ________________________________
Name:
Title:
<PAGE> 96
EXHIBIT A-5
FORM OF REVOLVING CREDIT BORROWING REQUEST
The Chase Manhattan Bank, as Agent for the
Lenders referred to below,
270 Park Avenue
New York, N.Y. 10017
[Date]
Attention:
Dear Ladies and Gentlemen:
The undersigned, MBNA America Bank, N.A. (the "Borrower"), refers to
the Amended and Restated Competitive Advance and Revolving Credit Facility
Agreement dated as of January 15, 1997 (as it may be amended, modified, extended
or restated from time to time, the "Credit Agreement"), among the Borrower, the
Lenders parties thereto and The Chase Manhattan Bank, as Agent. Capitalized
terms used herein and not otherwise defined herein shall have the meanings
assigned to such terms in the Credit Agreement. The Borrower hereby gives you
notice pursuant to Section 2.04 of the Credit Agreement that it requests a
Revolving Credit Borrowing under the Credit Agreement, and in that connection
sets forth below the terms on which such Revolving Credit Borrowing is requested
to be made:
(A) Date of Revolving Credit ____________________
Borrowing (which is a Business
Day)
(B) Principal Amount of Revolving ____________________
Credit Borrowing 7/
(C) Interest rate basis 8/ ____________________
(D) Interest Period and the last day ____________________
thereof 9/
Upon acceptance of any or all of the Loans made by the Lenders in
response to this request, the Borrower shall be deemed to have represented and
warranted that the conditions to lending specified in Section 4.01(b) and (c) of
the Credit Agreement have been satisfied.
Very truly yours,
MBNA America Bank, N.A.
by ________________________________
Title: [Responsible Officer]
__________________
7/ Not less than $5,000,000 (and in integral multiples of $1,000,000) and
not greater than the Total Commitment then available.
8/ Eurodollar Loan or ABR Loan.
9/ Which shall be subject to the definition of "Interest Period" and end
not later than the Maturity Date.
<PAGE> 97
EXHIBIT B
The Chase Manhattan Bank
One Chase Manhattan Plaza
8th Floor
New York, NY 10081
212/552-7400
Fax 212/552-5658
Telex 353006 ABSC NYK
MBNA AMERICA BANK, N.A.
ADMINISTRATIVE QUESTIONNAIRE
Please accurately complete the following information and return via FAX to the
attention of Katherine Wolf at The Chase Manhattan Bank as soon as possible.
FAX Number: 212-552-5658
LEGAL NAME TO APPEAR IN DOCUMENTATION:
________________________________________________________________________________
GENERAL INFORMATION - DOMESTIC LENDING OFFICE:
Institution Name: _____________________________________________________________
Street Address: _______________________________________________________________
City, State, Zip Code: ________________________________________________________
GENERAL INFORMATION - EURODOLLAR LENDING OFFICE:
Institution Name: _____________________________________________________________
Street Address: _______________________________________________________________
City, State, Zip Code: ________________________________________________________
CONTACTS/NOTIFICATION METHODS:
CREDIT CONTACTS:
Primary Contact: ______________________________________________________________
Street Address: _______________________________________________________________
City, State, Zip Code: ________________________________________________________
Phone Number: _________________________________________________________________
FAX Number: ___________________________________________________________________
Backup Contact: _______________________________________________________________
Street Address: _______________________________________________________________
City, State, Zip Code: ________________________________________________________
Phone Number: _________________________________________________________________
FAX Number: ___________________________________________________________________
TAX WITHHOLDING:
Non Resident Alien _____ Y* _____ N
* Form 4224 Enclosed
Tax ID Number ___________
<PAGE> 98
CONTACTS/NOTIFICATION METHODS:
ADMINISTRATIVE CONTACTS - BORROWINGS, PAYDOWNS, INTEREST, FEES, ETC.
Contact: ______________________________________________________________________
Street Address: _______________________________________________________________
City, State, Zip Code: ________________________________________________________
Phone Number: _________________________________________________________________
FAX Number: ___________________________________________________________________
BID LOAN NOTIFICATION:
Contact: _______________________________________________________________________
Street Address: _______________________________________________________________
City, State, Zip Code: ________________________________________________________
Phone Number: _________________________________________________________________
FAX Number: ___________________________________________________________________
PAYMENT INSTRUCTIONS:
Name of Bank where funds are to be transferred:
________________________________________________________________________________
Routing Transit/ABA number of Bank where funds are to be transferred:
________________________________________________________________________________
Name of Account, if applicable:
________________________________________________________________________________
Account Number: ______________________________________________________________
Additional Information: _____________________________________________________
________________________________________________________________________________
MAILINGS:
Please specify who should receive financial information:
Name: _________________________________________________________________________
Street Address: _______________________________________________________________
City, State, Zip Code: ________________________________________________________
It is very important that all of the above information is accurately filled in
and returned promptly. If there is someone other than yourself who should
receive this questionnaire, please notify us of their name and FAX number and we
will FAX them a copy of the questionnaire. If you have any questions, please
call me on 212-552-7340.
<PAGE> 99
EXHIBIT C
[FORM OF]
ASSIGNMENT AND ACCEPTANCE
Reference is made to the Amended and Restated Competitive
Advance and Revolving Credit Facility Agreement dated as of January 15, 1997 (as
in effect on the date hereof, the "Credit Agreement"), among MBNA America Bank,
N.A., a Delaware corporation (the "Borrower"), the lenders parties thereto (the
"Lenders") and The Chase Manhattan Bank, as agent for the Banks (in such
capacity, the "Agent"). Terms defined in the Credit Agreement are used herein
with the same meanings.
1. The Assignor hereby sells and assigns, without recourse, to
the Assignee, and the Assignee hereby purchases and assumes, without recourse,
from the Assignor, effective as of the Effective Date set forth on the second
page hereof, the interests set forth on the second page hereof (the "Assigned
Interest") in the Assignor's rights and obligations under the Credit Agreement,
including, without limitation, the interests set forth on the second page hereof
in the Commitment of the Assignor on the Effective Date and the Competitive
Loans and Revolving Credit Loans owing to the Assignor which are outstanding on
the Effective Date, together with unpaid interest accrued on the assigned Loans
to the Effective Date and the amount, if any, set forth on the second page
hereof of the Fees accrued to the Effective Date for the account of the
Assignor. Each of the Assignor and the Assignee hereby makes and agrees to be
bound by all the representations, warranties and agreements set forth in Section
9.04(c) of the Credit Agreement, a copy of which has been received by each such
party. From and after the Effective Date (i) the Assignee shall be a party to
and be bound by the provisions of the Credit Agreement and, to the extent of the
interests assigned by this Assignment and Acceptance, have the rights and
obligations of a Lender thereunder and under the other Loan Documents and (ii)
the Assignor shall, to the extent of the interests assigned by this Assignment
and Acceptance, relinquish its rights and be released from its obligations under
the Credit Agreement.
2. This Assignment and Acceptance is being delivered to the
Agent together with (i) if the Assignee is organized under the laws of a
jurisdiction outside the United States, the forms specified in Section 2.19(g)
of the Credit Agreement, duly completed and executed by such Assignee, (ii) if
the Assignee is not already a Lender under the Credit Agreement, an
Administrative Questionnaire in the form of Exhibit B to the Credit Agreement
and (iii) a processing and recordation fee of $2,500.
3. This Assignment and Acceptance shall be governed by and
construed in accordance with the laws of the State of New York.
Date of Assignment:
Legal Name of Assignor:
Legal Name of Assignee:
Assignee's Address for Notices:
<PAGE> 100
Effective Date of Assignment
(may not be fewer than 5 Business
Days after the Date of Assignment):
<TABLE>
<CAPTION>
Percentage Assigned of
Facility/Commitment (set forth,
to at least 8 decimals, as a
Principal Amount Assigned (and percentage of the Facility and
identifying information as to the aggregate Commitments of all
Facility individual Competitive Loans) Lenders thereunder)
-------- ------------------------------ --------------------------------
<S> <C> <C>
Commitment Assigned: $ %
Revolving Credit Loans:
Competitive Loans:
Fees Assigned (if any):
The terms set forth above and
on the reverse side
hereof are hereby agreed to: Accepted */
_______________, as Assignor THE CHASE MANHATTAN BANK, as Agent,
By:__________________________ By:__________________________
Name: Name:
Title: Title:
_______________, as Assignee MBNA AMERICA BANK, N.A.,
as Borrower,
By:__________________________ By:__________________________
Name: Name:
Title: Title:
</TABLE>
__________________
*/ To be completed only if consents are required under Section 9.04(a).
<PAGE> 101
EXHIBIT B TO
AMENDMENT AGREEMENT
[FORM OF]
OPINION
MBNA America Bank N.A.
January 15, 1997
The Lenders Named in Schedule 2.01
to the Credit Agreement referred to below
The Chase Manhattan Bank,
as Agent under the Credit Agreement
270 Park Avenue
New York, New York 10017
Ladies and Gentlemen:
I am Executive Vice President, General Counsel, and Secretary
of MBNA Corporation ("MBNA") and Senior Executive Vice President, General
Counsel and Secretary of MBNA America Bank, N.A. (the "Bank") and in that
capacity have acted as counsel to the Bank in connection with (i) the Amendment
Agreement (the "Agreement"), dated as of January 15, 1997, among the Bank, the
Lenders listed in Schedule 2.01 thereto, and The Chase Manhattan Bank, as Agent,
and (ii) the Amended and Restated Competitive Advance and Revolving Credit
Facility Agreement attached as Exhibit A to the Agreement (the "Amended Credit
Agreement"). This opinion is rendered to the Lenders and The Chase Manhattan
Bank pursuant to Section 4(b) of the Agreement. Capitalized terms used herein
but not otherwise defined have the meanings given such terms in the Agreement
and the Amended Credit Agreement.
In my capacity as such counsel, I have examined and relied
upon such records, documents, certificates, opinions and other matters as are in
my judgment necessary or appropriate to render the opinions expressed herein.
With respect to all documents examined by me I have assumed (i) the due
authorization, execution and delivery by each of the parties thereto, other than
the Bank, of the documents to which each is a party, and that each of such
parties has the power and authority to execute, deliver and perform its
obligations under each such document, (ii) the authenticity of all documents
submitted to me as originals, (iii) the genuineness of all signatures, other
than those of the Bank, on all documents I have examined, and (iv) that all
documents submitted to me as copies conform with the original copies of those
documents. In rendering the opinion set forth in paragraph 3 below I have
assumed that the Agreement and the Amended Credit Agreement are valid and
binding obligations of
<PAGE> 102
the parties thereto, except the Bank, and are enforceable against the parties
thereto, except the Bank, in accordance with their terms.
Based on the foregoing and subject to the qualifications set
forth herein, I am of the opinion that:
1. The Bank (i) is a national bank duly formed and validly
existing under the laws of the United States, (ii) has all requisite power and
authority to own its assets and to carry on its business as now conducted,
except to the extent that the failure to do so would not have a Material Adverse
Effect, (iii) is qualified to do business in every jurisdiction within the
United States where such qualification is required, except to the extent that
the failure to do so would not have a Material Adverse Effect, and (iv) has all
requisite corporate power and authority to execute, deliver and perform its
obligations under the Agreement and the Amended Credit Agreement and to borrow
funds thereunder.
2. The execution, delivery and performance by the Bank of the
Agreement and the Amended Credit Agreement and the borrowings of the Bank
thereunder (collectively, the "Transactions") will not (i) violate any
requirement of law applicable to the Bank or any order known to me of any
Governmental Authority, (ii) conflict with, or result in a breach of, any
provision of any indenture, agreement or other instrument to which the Bank is a
party or by which it or its property is or may be bound, which in the aggregate
would reasonably be expected to have a Material Adverse Effect or (iii) result
in the creation or imposition of any lien upon any property or assets of the
Bank.
3. The Agreement and the Amended Credit Agreement have been
duly authorized by all requisite corporate action of the Bank, and have been
duly executed and delivered by the Bank and constitute valid and legally binding
obligations of the Bank, enforceable against the Bank in accordance with their
terms, subject to the effects of bankruptcy, insolvency, liquidation,
receivership, conservatorship, fraudulent conveyance, reorganization, moratorium
and other similar laws relating to or affecting the rights of creditors
generally, or of creditors of banks the accounts of which are insured by the
Federal Deposit Insurance Corporation, general equitable principles (whether
considered in a proceeding in equity or at law) and an implied covenant of good
faith and fair dealing.
4. No action, consent or approval of, registration or filing
with, or any other action by, any Governmental Authority
<PAGE> 103
is or will be required in connection with the Transactions, except such as have
been made or obtained and are in full force and effect.
5. Neither the Bank nor any of its subsidiaries is (i) an
"investment company" as defined in, or subject to regulation under, the
Investment Company Act of 1940 or (ii) a "holding company" as defined in, or
subject to regulation under, the Public Utility Holding Company Act of 1935.
6. No litigation, investigation or proceeding of or before any
arbitrator or Governmental Authority is pending or to my knowledge threatened
against the Bank or any Subsidiary or against any of its or their respective
properties (i) with respect to the Agreement, the Amended Credit Agreement or
any other Loan Document or any of the transactions contemplated thereby or (ii)
except as disclosed in MBNA's Annual Report on Form 10-K dated December 31,
1995, or in any subsequent report of MBNA on Form 10-Q or 8-K filed prior to the
date of the Agreement, as to which there is a reasonable possibility of an
adverse determination, which if determined adversely to the Bank, would
reasonably be expected to result in a Material Adverse Effect.
In rendering the opinion set forth in paragraph 3 above I have
relied as to matters of New York law solely upon the opinion of Simpson Thacher
& Bartlett, subject to the qualifications set forth therein.
I am admitted to practice in the State of Maryland and express
no opinion as to the laws of any other jurisdiction other than the federal laws
of the United States of America.
This opinion may be relied upon by the Lenders and The Chase
Manhattan Bank, as Agent. A copy of this opinion may be made available to a
regulatory authority entitled to receive it or pursuant to a lawful subpoena.
Without my prior written consent, this opinion may not be furnished to or quoted
to, or relied upon by, any other person or entity for any purpose.
Very truly yours,
John W. Scheflen
<PAGE> 104
EXHIBIT C TO
AMENDMENT AGREEMENT
[FORM OF]
OPINION
Simpson Thacher & Bartlett
January 15, 1997
To: The Lenders named in Schedule I that are parties
to the Credit Agreement referred to below
The Chase Manhattan Bank, as Agent under said Credit
Agreement
Ladies and Gentlemen:
We have acted as special New York counsel to MBNA America
Bank, N.A., a national banking association (the "Borrower"), in connection with
the preparation, execution and delivery of (i) the Amendment Agreement dated as
of January 15, 1997 (the "Agreement"), among the Borrower, the Lenders parties
thereto and The Chase Manhattan Bank, as Agent, and (ii) the Amended and
Restated Competitive Advance and Revolving Credit Facility Agreement attached as
Exhibit A to the Agreement (the "Amended Credit Agreement").
This opinion is delivered to you pursuant to Section 4(b) of
the Agreement. Unless otherwise defined herein, terms defined in the Agreement
and the Amended Credit Agreement and used herein shall have the meanings given
to them in the Agreement and the Amended Credit Agreement.
In arriving at the opinion expressed below, we have examined
the following documents:
(a) counterparts of (i) the Agreement and (ii) the Amended
Credit Agreement, each signed by the Borrower and the Administrative Agent;
(b) a copy of the opinion letter of John W. Scheflen, Esq.,
Senior Executive Vice President, Cashier and Secretary of the Borrower,
addressed to you and dated the date hereof, in respect of the Agreement, the
Amended Credit Agreement and the other Loan Documents.
In rendering the opinion expressed below, we have assumed,
with your permission, without independent investigation or inquiry, (i) the
authenticity of all documents submitted to us
<PAGE> 105
Simpson Thacher & Bartlett 2
The Lenders Named in Schedule I, et al. January 15, 1997
as originals, (ii) the genuineness of all signatures on all documents that we
examined and (iii) the conformity to authentic originals of documents submitted
to us as certified, conformed or photostatic copies.
Insofar as our opinion expressed below relates to the matters
set forth in paragraphs 1, 2, 3 (as to the due authorization, execution and
delivery of the Agreement and the Amended Credit Agreement by the Borrower) and
4 of the above-mentioned opinion letter of John W. Scheflen, Esq., we have
assumed without independent investigation the correctness of the matters set
forth in such opinion, and our opinion is subject to the assumptions,
qualifications and limitations set forth in such opinion letter.
Based upon the foregoing, and subject to the qualifications
and comments stated herein, we are of the opinion that, insofar as the law of
the State of New York is concerned, the Agreement and the Amended Credit
Agreement constitute valid and legally binding obligations of the Borrower,
enforceable against the Borrower in accordance with their terms, subject to the
effects of bankruptcy, insolvency, liquidation, receivership, conservatorship,
fraudulent conveyance, reorganization, moratorium and other similar laws
relating to or affecting the rights of creditors generally or of creditors of
banks the accounts of which are insured by the Federal Deposit Insurance
Corporation, general equitable principles (whether considered in a proceeding in
equity or at law) and an implied covenant of good faith and fair dealing.
Our opinion is subject to the following qualifications:
1. We express no opinion as to Section 9.13(b) of the Credit
Agreement insofar as it relates to an action brought in the United States
District Court for the Southern District of New York and note that such matters
may be raised by such court,
2. We express no opinion as to any indemnification obligations
of the Borrower under the Credit Agreement to the extent such obligations might
be deemed to be inconsistent with public policy.
3. We express no opinion as to the provisions of Sections 2.17
and 9.04(f) of the Credit Agreement purporting to grant to participants a right
to set-off.
4. We express no opinion as to any provision of the Agreement
or the Amended Credit Agreement that purports to establish an evidentiary
standard for determinations by the
<PAGE> 106
Simpson Thacher & Bartlett 3
The Lenders Named in Schedule I, et al. January 15, 1997
Lenders or the Agent.
We are members of the Bar of the State of New York and we do
not express any opinion herein concerning any law other than the law of the
State of New York.
This opinion has been rendered solely for your benefit in
connection with the Credit Agreement and the transactions contemplated thereby
and may not be relied upon by you for any other purpose, or relied upon by or
furnished to any other Person, firm or corporation without our prior written
consent (except that this opinion may be furnished to any regulatory authority
which is entitled to obtain it, and may be furnished pursuant to a lawful
subpoena).
Very truly yours,
<PAGE> 107
CONFORMED COPY
AMENDMENT AGREEMENT dated as of January 15,
1997, to the Competitive Advance and Revolving Credit
Facility Agreement dated as of February 15, 1995, and
as amended by the First Amendment dated as of
December 27, 1995, (as amended, the "Credit
Agreement") among MBNA AMERICA BANK, N.A. (the
"Borrower"), the lenders listed in Annex I hereto
under the captions "Departing Lenders" (the
"Departing Lenders"), "Continuing Lenders (the
"Continuing Lenders") and "Additional Lenders" (the
"Additional Lenders" and, collectively, with the
Departing Lenders and the Continuing Lenders, the
"Lenders") and THE CHASE MANHATTAN BANK (formerly
known as Chemical Bank) as agent for the Lenders (in
such capacity, the "Agent").
A. The Borrower, the Continuing Lenders, the Departing Lenders
and the Agent are parties to the Credit Agreement.
B. The Departing Lenders wish to terminate all of their
Commitments under the Credit Agreement and any applicable rights relating
thereto except as otherwise specified herein.
C. The Borrower has requested, and the Continuing Lenders and
the Additional Lenders have agreed, subject to the terms and conditions hereof,
to amend and restate the Credit Agreement in the form of the credit agreement
attached hereto as Exhibit A (the "Amended Credit Agreement").
D. Capitalized terms used and not otherwise defined herein
shall have the meanings assigned to such terms in the Amended Credit Agreement.
Accordingly, the parties hereto hereby agree as follows:
SECTION 1. Amendment of Credit Agreement. The Credit Agreement
(including all Exhibits and Schedules thereto) is hereby amended and restated,
effective as of the Restatement Effective Date (as hereinafter defined), to read
in its entirety as set forth in Exhibit A.
SECTION 2. Termination of Certain Commitments.
<PAGE> 108
2
On and as of the Restatement Effective Date, subject to the conditions referred
to in Section 4 hereof, (i) the Commitments of the then Departing Lenders shall
automatically terminate, so that after giving effect to all such terminations,
the Commitments will be held by the Continuing Lenders and Additional Lenders
ratably in accordance with their Commitments, respectively, as set forth in
Schedule 2.01 of the Amended Credit Agreement, and (ii) the Departing Lenders
shall cease to be parties to the Credit Agreement and shall be released from all
further obligations thereunder and the Borrower shall be released from all
further obligations to such Departing Lenders under the terms of the Credit
Agreement. The foregoing shall not constitute a release of the obligations, that
by their terms survive the repayment of the Loans and the termination of the
Commitments, described in Sections 2.13(b), 2.13(c), 2.13(d), 2.13(e), 2.15 and
9.05 of the Credit Agreement.
SECTION 3. Representations and Warranties. The Borrower hereby
represents and warrants to each Lender, on and as of the Restatement Effective
Date, as follows:
(a) The representations and warranties set forth in Article
III of the Amended Credit Agreement are true and correct in all
material respects as of the date hereof with the same effect as if made
on and as of such date, except to the extent such representations and
warranties expressly relate to an earlier date.
(b) Immediately before and immediately after the effectiveness
of this Amendment Agreement and the Amended Credit Agreement, no
Default has occurred and is continuing.
(c) This Amendment Agreement and the Amended Credit Agreement
(collectively, the "Amendment Documents") have been duly authorized,
executed and delivered by the Borrower, and the Amendment Documents
will, upon the Restatement Effective Date, be the legal, valid and
binding obligations of the Borrower, enforceable against the Borrower
in accordance with their terms, subject to the effects of bankruptcy,
insolvency, liquidation, receivership, conservatorship, fraudulent
conveyance, reorganization, moratorium and other similar laws relating
to or affecting the rights of creditors generally, or of creditors of
banks the accounts of which are insured by the Federal Deposit
Insurance Corporation, general equitable principles
<PAGE> 109
3
(whether considered in a proceeding in equity or at law) and an
implied covenant of good faith and fair dealing.
SECTION 4. Effectiveness. This Amendment Agreement shall become
effective on January 15, 1997 (the "Restatement Effective Date") upon the
satisfaction of the following conditions precedent:
(a) The Agent shall have received counterparts of this
Amendment Agreement and the Amended Credit Agreement that, when taken
together, bear the signatures of all the parties hereto and thereto.
(b) The Agent shall have received a favorable written opinion
of John W. Scheflen, Esq., Senior Executive Vice President, General
Counsel, Cashier and Secretary of the Borrower, and Simpson Thacher &
Bartlett, counsel to the Borrower ("Borrower's Counsel"), each dated
the Restatement Effective Date and addressed to the Lenders and
satisfactory to the Lenders and to Cravath, Swaine & Moore, counsel for
the Agent, to the effect set forth in Exhibit B and Exhibit C,
respectively, and the Borrower hereby instructs such counsel to deliver
such opinion to the Agent.
(c) All legal matters incident to this Amendment Agreement and
the Amended Credit Agreement and the borrowings thereunder shall be
reasonably satisfactory to the Lenders, the Borrower's Counsel and to
Cravath, Swaine & Moore, counsel for the Agent.
(d) The Agent shall have received certified copies of the
resolutions of the Board of Directors of the Borrower approving or
authorizing approval of the execution and delivery of the Amendment
Documents and the performance of the Credit Agreement as amended
hereby.
(e) The Agent shall have received a certificate of the
Secretary or an Assistant Secretary of the Borrower certifying the
incumbency and signatures of the officer or officers of the Borrower
signing the Amendment Documents.
(f) The Agent shall have received a certificate, dated the
Restatement Effective Date and signed by a Financial Officer of the
Borrower, confirming
<PAGE> 110
4
compliance with the conditions precedent set forth in paragraphs (b)
and (c) of Article IV of the Amended Credit Agreement.
(g) The Agent shall have received all Fees and other amounts
due and payable on or prior to the Restatement Effective Date.
(h) No Loans shall be outstanding under the Credit Agreement
as of the Restatement Effective Date.
SECTION 5. APPLICABLE LAW. THIS AMENDMENT AGREEMENT SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK.
SECTION 6. Expenses. The Borrower shall pay all reasonable
out-of-pocket expenses incurred by the Administrative Agent in connection with
the preparation, negotiation, execution, delivery and enforcement of this
Amendment Agreement, including, but not limited to, the reasonable fees and
disbursements of Cravath, Swaine & Moore. The agreement set forth in this
Section 6 shall survive the termination of this Amendment Agreement and the
Amended Credit Agreement and shall be subject to the provisions of the letter
agreements, dated as of November 26, 1996, among the Borrower, the Agent and
Chase Securities Inc.
SECTION 7. Counterparts. This Amendment Agreement may be
executed in any number of counterparts, each of which shall constitute an
original but all of which when taken together shall constitute but one
agreement. Delivery of an executed counterpart of a signature page by
<PAGE> 111
5
facsimile transmission shall be effective as delivery of a manually executed
counterpart of this Amendment Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment Agreement to be duly executed by their duly authorized officers, all
as of the date first above written.
MBNA AMERICA BANK, N.A.,
by /s/ Thomas D. Wren
-----------------------------------
Name: Thomas D. Wren
Title: Senior Executive Vice
President and Treasurer
THE CHASE MANHATTAN BANK,
by
/s/ Roger A. Parker
-----------------------------------
Name: Roger A. Parker
Title: Vice President
<PAGE> 112
6
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
individually and as
Co-Syndication Agent,
by /s/ Charlene A. Davidson
-----------------------------------
Name: Charlene A. Davidson
Title: Managing Director
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, individually and as
Co-Syndication Agent,
by /s/ James Dwyer
-----------------------------------
Name: James Dwyer
Title: Vice President
THE BANK OF NEW YORK, individually
and as Co-Arranger,
by /s/ David G. Dobbins
-----------------------------------
Name: David G. Dobbins
Title: Vice President
BARCLAYS BANK PLC, individually and
as Co-Arranger,
by /s/ Karen M. Wagner
-----------------------------------
Name: Karen M. Wagner
Title: Associate Director
<PAGE> 113
7
DEUTSCHE BANK AG, NEW YORK
AND/OR CAYMAN ISLAND BRANCHES,
individually and as Co-Arranger,
by /s/ Gayma Z. Shivnarain
-----------------------------------
Name: Gayma Z. Shivnarain
Title: Vice President
by /s/ Dale F. Oberst
-----------------------------------
Name: Dale F. Oberst
Title: Associate
NATIONSBANK OF TEXAS, N.A.,
individually and as Co-Arranger,
by /s/ Kate Galletly
-----------------------------------
Name: Kate Galletly
Title: Senior Vice President
ABN AMRO BANK N.V. NEW YORK
BRANCH, individually and as
Co-Agent,
by /s/ Victor J. Fennon
-----------------------------------
Name: Victor J. Fennon
Title: Vice President
by
/s/ David W. Eastep
-----------------------------------
Name: David W. Eastep
Title: Assistant Vice President
CAISSE NATIONALE DE CREDIT
AGRICOLE,
by /s/ Katherine L. Abbott
-----------------------------------
Name: Katherine L. Abbott
Title: First Vice President
<PAGE> 114
8
CIBC, INC., individually and as
Co-Agent,
by /s/ Gerald J. Girardi
-----------------------------------
Name: Gerald J. Girardi
Title: Director, CIBC Wood Gundy
COMMERZBANK AKTIENGESELLSCHAFT,
individually and as Co-Agent,
by /s/ Juergen Schmieding
-----------------------------------
Name: Juergen Schmieding
Title: Vice President
by /s/ Andrew R. Campbell
-----------------------------------
Name: Andrew R. Campbell
Title: Assistant Treasurer
CREDIT LYONNAIS NEW YORK BRANCH,
individually and as Co-Agent,
by /s/ Renaud d'Herbes
-----------------------------------
Name: Renaud d'Herbes
Title: Senior Vice President
CREDIT LYONNAIS CAYMAN ISLAND
BRANCH, individually and as
Co-Agent,
by
-----------------------------------
Name:
Title:
<PAGE> 115
9
THE FIRST NATIONAL BANK OF
CHICAGO, individually and as
Co-Agent,
by /s/ Robert E. O'Connell
-----------------------------------
Name: Robert E. O'Connell
Title: Authorized Agent
Vice President
LLOYDS BANK, PLC, individually and
as Co-Agent,
by /s/ Theodore R. Walser
-----------------------------------
Name: Theodore R. Walser
Title: Senior Vice President
by /s/ Stephen J. Attree
-----------------------------------
Name: Stephen J. Attree
Title: Assistant Vice President
BANK OF TOKYO-MITSUBISHI TRUST
COMPANY, individually and as
Co-Agent,
by /s/ J. Bruce Meredith
-----------------------------------
Name: J. Bruce Meredith
Title: Senior Vice President
and Manager
THE NORINCHUKIN BANK, individually
and as Co-Agent,
by /s/ Ichiro Uchida
-----------------------------------
Name: Ichiro Uchida
Title: Joint General Manager
<PAGE> 116
10
SOCIETE GENERALE, individually and
as Co-Agent,
by /s/ Emilio L. Martinez
-----------------------------------
Name: Emilio L. Martinez
Title: Vice President
UNION BANK OF SWITZERLAND, NEW
YORK BRANCH, individually and as
Co-Agent,
by /s/ Didier Magloire
-----------------------------------
Name: Didier Magloire
Title: Vice President
by /s/ Robert Mendeles
-----------------------------------
Name: Robert Mendeles
Title: Vice President
THE BANK OF NOVA SCOTIA,
by /s/ Paul A. Schultz
-----------------------------------
Name: Paul A. Schultz
Title: Vice President
BANKERS TRUST COMPANY,
by /s/ Cynthia Berge-O'Keefe
-----------------------------------
Name: Cynthia Berge-O'Keefe
Title: Managing Director
<PAGE> 117
11
BAYERISCHE LANDESBANK CAYMAN
ISLANDS BRANCH,
by /s/ Wilfried Freudenberger
-----------------------------------
Name: Wilfried Freudenberger
Title: Executive Vice President
and General Manager
by /s/ Peter Obermann
-----------------------------------
Name: Peter Obermann
Title: Senior Vice President
Manager Lending Division
BAYERISCHE VEREINSBANK AG
NEW YORK BRANCH,
by /s/ David McCollum
-----------------------------------
Name: David McCollum
Title: Vice President
by /s/ Mark Sadok
-----------------------------------
Name: Mark Sadok
Title: Vice President
CORESTATES BANK, N.A.,
by /s/ Ward S. Johnson
-----------------------------------
Name: Ward S. Johnson
Title: Vice President
<PAGE> 118
12
CREDIT SUISSE,
by /s/ Bruce T. Miller
-----------------------------------
Name: Bruce T. Miller
Title: Member of Senior
Management
by /s/ Jay Chall
-----------------------------------
Name: Jay Chall
Title: Director
THE DAI-ICHI KANGYO BANK,
LIMITED, CHICAGO BRANCH,
by /s/ Seiichiro Ino
-----------------------------------
Name: Seiichiro Ino
Title: Vice President
DEN DANSKE BANK,
by /s/ John A. O'Neill
-----------------------------------
Name: John A. O'Neill
Title: Vice President
by /s/ Sonia Kataria
-----------------------------------
Name: Sonia Kataria
Title: Vice President
DG BANK DEUTSCHE
GENOSSENSCHAFTSBANK,
by /s/ Bruce Ritz
-----------------------------------
Name: Bruce Ritz
Title: Vice President
by /s/ Karen A. Brinkman
-----------------------------------
Name: Karen A. Brinkman
Title: Vice President
<PAGE> 119
13
DRESDNER BANK AG,
by /s/ Jonathan J. Wallin
-----------------------------------
Name: Jonathan J. Wallin
Title: Assistant Vice President
by /s/ Richard G. Reilly
-----------------------------------
Name: Richard G. Reilly
Title: Vice President
FIRST NATIONAL BANK OF MARYLAND,
by /s/ Marion I. Knott
-----------------------------------
Name: Marion I. Knott
Title: Vice President
THE FUJI BANK LIMITED,
by /s/ Masanobu Kobayashi
-----------------------------------
Name: Masanobu Kobayashi
Title: Vice President and
Manager
THE INDUSTRIAL BANK OF JAPAN
LIMITED,
by /s/ Masahiro Ito
-----------------------------------
Name: Masahiro Ito
Title: Senior Vice President
<PAGE> 120
14
KREDIETBANK N.V.,
by /s/ Robert Snauffer
-----------------------------------
Name: Robert Snauffer
Title: Vice President
by /s/ Patrick Owens
-----------------------------------
Name: Patrick Owens
Title: Vice President
MELLON BANK, N.A.,
by /s/ Gilbert Mateer
-----------------------------------
Name: Gilbert Mateer
Title: Vice President
BANK OF MONTREAL,
by /s/ Inba Ponnusamy
-----------------------------------
Name: Inba Ponnusamy
Title: Director
BANCA MONTE DEI PASCHI DI SIENA,
SPA,
by /s/ G. Natalicchi
-----------------------------------
Name: G. Natalicchi
Title: Senior Vice President
and General Manager
by /s/ Brian R. Landy
-----------------------------------
Name: Brian R. Landy
Title: Vice President
<PAGE> 121
15
THE NORTHERN TRUST COMPANY,
by /s/ James F. T. Monhart
-----------------------------------
Name: James F. T. Monhart
Title: Vice President
PNC BANK, N.A.,
by /s/ Emery D. Holloway
-----------------------------------
Name: Emery D. Holloway
Title: Vice President
ROYAL BANK OF CANADA,
by /s/ John F. Hopper
-----------------------------------
Name: John F. Hopper
Title: Manager
ROYAL BANK OF SCOTLAND, PLC,
by /s/ Derek Bonnar
-----------------------------------
Name: Derek Bonnar
Title: Vice President
THE SAKURA BANK, LIMITED,
by /s/ Yasumasa Kikuchi
-----------------------------------
Name: Yasumasa Kikuchi
Title: Senior Vice President
THE SANWA BANK LIMITED,
by /s/ Frank Dattalo
-----------------------------------
Name: Frank Dattalo
Title: Assistant Vice President
<PAGE> 122
16
THE SUMITOMO BANK, LIMITED,
NEW YORK BRANCH,
by /s/ Yoshinori Kawamura
-----------------------------------
Name: Yoshinori Kawamura
Title: Joint General Manager
WESTDEUTSCHE LANDESBANK
GIROZENTRALE, NEW YORK AND
CAYMAN ISLAND BRANCHES,
by /s/ Lillian Tung Lum
-----------------------------------
Name: Lillian Tung Lum
Title: Vice President
by /s/ Laura Spichiger
-----------------------------------
Name: Laura Spichiger
Title: Associate
THE YASUDA TRUST AND BANKING
COMPANY, LIMITED,
by /s/ Rohn Laudenschlager
-----------------------------------
Name: Rohn Laudenschlager
Title: Senior Vice President
WELLS FARGO BANK, formerly First
Interstate Bank of California, as
Departing Lender,
by /s/ David E. Grimes
-----------------------------------
Name: David E. Grimes
Title: Vice President
<PAGE> 123
17
BANQUE PARIBAS, as Departing
Lender,
by /s/ Michel Priou
-----------------------------------
Name: Michel Priou
Title: Vice President
<PAGE> 124
ANNEX I TO
AMENDMENT AGREEMENT
Departing Lenders
Banque Paribas
Wells Fargo Bank
Continuing Lenders
The Chase Manhattan Bank
Bank of America NT&SA
Morgan Guaranty Trust Company of New York
The Bank of New York
Barclays BAnk PLC
Commerzbank AG Deutsche Bank AG
Lloyds Bank Plc NationsBank
ABN AMRO Bank N.V.
Bank of Tokyo-Mitsubishi Trust Company
CIBC, Inc. Credit Lyonnais The First
National Bank of Chicago
The Norinchukin Bank
Societe Generale Union Bank of Switzerland
The Sakura Bank, Limited
The Sumitomo Bank, Limited Westdeutsche
Landesbank Girozentrale Bankers Trust Company
The Industrial Bank of Japan, Limited
Mellon Bank, N.A.
The Royal Bank of Scotland plc
Bayerische Landesbank
The Dai-Ichi Kangyo Bank, Ltd.
DG Bank
The First National Bank of Maryland
The Fuji Bank, Limited
Kredietbank NV
The Yasuda Trust & Banking Co., Ltd.
Banca Monte dei Paschi di Siena SpA
Bank of Montreal
Bayerische Vereinsbank AG
Corestates Bank, N.A.
Credit Suisse
PNC Bank N.A.
Royal Bank of Canada
The Sanwa Bank, Limited
The Bank of Nova Scotia
The Northern Trust Company
<PAGE> 125
19
Additional Lenders
Caisse Nationale de Credit Agricole
Den Danske Bank
Dresdner Bank AG
<PAGE> 1
SECOND AMENDMENT TO CREDIT AGREEMENT
THIS SECOND AMENDMENT TO CREDIT AGREEMENT (the "Amendment"), dated as
of April 10, 1996, is entered into by and between MBNA Corporation, a Maryland
corporation (the "Company") and Bank of America National Trust and Savings
Association (the "Bank").
RECITALS
A. The Company and the Bank are parties to a Credit Agreement dated as
of April 13, 1994 and amended by a First Amendment to Credit Agreement dated as
of April 7, 1995 between the Company and the Bank (as in effect as of the
opening of business on the date of this Amendment, the "Credit Agreement")
pursuant to which the Bank has extended a credit facility to the Company.
B. The Company has requested that the Bank agree to certain amendments
of the Credit Agreement.
C. The Bank is willing to amend the Credit Agreement subject to the
terms and conditions of this Amendment.
NOW, THEREFORE, for valuable consideration, the receipt and adequacy of
which are hereby acknowledged, the parties hereto hereby agree as follows:
1. Defined Terms. Unless otherwise defined herein, capitalized terms
used herein shall have the meanings, if any, assigned to them in the Credit
Agreement.
2. Amendments to Credit Agreement. From and after the Effective Date of
this Amendment:
(a) Section 1.01 of the Credit Agreement is amended as
follows:
(i) The definition of "Termination Date" is amended
in its entirety to provide:
"Termination date" means the earlier to occur of
(a) April 8, 1997 (or the later date agreed to between the
Bank and the Company as specified in Section 2.01(B)); and
(b) the date on which the Commitment shall terminate in
accordance with the provisions of this Agreement.
(b) The first sentence of Section 2.01(b) of the Credit
Agreement is amended in its entirety to provide as follows:
<PAGE> 2
"The Company may, during the period commencing on the forty-fifth day
prior to the then current Termination Date and ending on the thirtieth
day prior to the then current Termination Date, request the Bank in
writing for an extension of the Termination Date to a date which is not
later than 364 days after the then current Termination Date."
(c) Section 2.09(b) of the Credit Agreement is amended by
deleting "0.1250%" in the second line of the subsection and replacing it with
"0.1000%".
(d) The first six lines of Section 5.05 of the Credit
Agreement is amended to provide as follows:
5.05 Litigation. Except as specifically disclosed in the
Company's 1995 Form 10-K dated as of March 22, 1996, to the best
knowledge of the Company there are no actions, suits, proceedings,
claims or disputes pending, or threatened or contemplated, at law, in
equity, in arbitration or before any Governmental Authority, against
the Company, or its Subsidiaries or any of their respective Properties
which:
(e) Section 5.10 of the Credit Agreement is amended by
replacing the date "December 31, 1994" which appears in subsections (a) and (b)
of Section 5.10 with the date "December 31, 1995".
(f) Section 7.06 of the Credit Agreement is amended in its
entirety to provide:
7.06 Consolidated Tangible Net Worth. The Company shall not
permit its consolidated Tangible Net Worth at any time during any
fiscal quarter to be less than $775,000,000.
3. Representations and Warranties. The Company hereby represents and
warrants to the Bank as follows:
(a) No Default or Event of Default has occurred and is
continuing.
(b) The execution, delivery and performance by the Company of
this Amendment have been duly authorized by all necessary corporate and other
action and do not and will not require any registration with, consent or
approval of, notice to or action by, any Person (including any Governmental
Authority) in order to be effective and enforceable. The Credit Agreement as
amended by this Amendment constitutes the legal, valid and binding obligations
of the Company, enforceable against it in accordance with its respective terms,
without defense, counterclaim or offset.
(c)
1 After giving effect to this Amendment all representations
and warranties of the Company contained in the Credit Agreement are true and
correct in all material respects.
<PAGE> 3
2 The Company is entering into this Amendment on the basis of
its own investigation and for its own reasons, without reliance upon the Bank or
any other Person.
1 Effective Date. This Amendment will become effective as of April 9,
1996 (the "Effective Date"), provided that each of the following conditions
precedent are satisfied on or before April 10, 1996:
1 The Bank has received from the Company a duly executed
original (or, if elected by the Bank, an executed facsimile copy) of this
Amendment.
2 The Bank has received from the Company a copy of a
resolution passed by the board of directors of the Company, certified by the
Secretary or an Assistant Secretary of the Company as being in full force and
effect on the date hereof, authorizing the execution, delivery and performance
of this Amendment.
2 Reservation of Rights. The Company acknowledges and agrees that the
execution and delivery by the Bank of this Amendment shall not be deemed to
create a course of dealing or otherwise obligate the Bank to forbear or execute
similar amendments under the same or similar circumstances in the future.
3 Miscellaneous.
1 Except as herein expressly amended, all terms, covenants and
provisions of the Credit Agreement are and shall remain in full force and effect
and all references therein to such Credit Agreement shall henceforth refer to
the Credit Agreement as amended by this Amendment. This Amendment shall be
deemed incorporated into, and a part of, the Credit Agreement.
2 This Amendment shall be binding upon and inure to the
benefit of the parties hereto and thereto and their respective successors and
assigns. No third party beneficiaries are intended in connection with this
Amendment.
3 This Amendment shall be governed by and construed in
accordance with the law of the State of California.
4 This Amendment may be executed in any number of
counterparts, each of which shall be deemed an original, but all such
counterparts together shall constitute but one and the same instrument. Each of
the parties hereto understands and agrees that this document (and any other
document required herein) may be delivered by any party thereto either in the
form of an executed original or an executed original sent by facsimile
transmission to be followed promptly by mailing of a hard copy original, and
that receipt by the Bank of a facsimile transmitted document purportedly bearing
the signature of the Company shall bind the Company with the same force and
effect as the delivery
<PAGE> 4
of a hard copy original. Any failure by the Bank to receive the hard copy
executed original of such document shall not diminish the binding effect of
receipt of the facsimile transmitted executed original of such document which
hard copy page was not received by the Bank.
5 This Amendment may not be amended except in accordance with
the provisions of Section 9.01(a) of the Credit Agreement.
6 If any term or provision of this Amendment shall be deemed
prohibited by or invalid under any applicable law, such provision shall be
invalidated without affecting the remaining provisions of this Amendment or the
Credit Agreement, respectively.
IN WITNESS WHEREOF, the parties hereto have executed and
delivered this Amendment as of the date first above written.
MBNA CORPORATION BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
By: By:
-------------------------- --------------------------------
Name: Vernon H.C. Wright Name: Charlene A. Davidson
Title: Executive Vice Title: Managing Director
President
By:
--------------------------
Name:
Title:
<PAGE> 5
THIRD AMENDMENT TO CREDIT AGREEMENT
THIS THIRD AMENDMENT TO CREDIT AGREEMENT (the "Amendment"), dated as of
February 27, 1997 is entered into by and between MBNA Corporation, a Maryland
corporation (the "Company") and Bank of America National Trust and Savings
Association (the "Bank").
RECITALS
A. The Company and the Bank are parties to a Credit Agreement dated as
of April 13, 1994 and amended by a First Amendment to Credit Agreement dated as
of April 7, 1995 and a Second Amendment to Credit Agreement dated as of April
10, 1996, in each case between the Company and the Bank (as in effect as of the
opening of business on the date of this Amendment, the "Credit Agreement")
pursuant to which the Bank has extended a credit facility to the Company.
B. The Company has requested that the Bank agree to an extension of the
"Termination Date", as defined in the Credit Agreement.
C. The Bank is willing to extend the Termination Date subject to the
terms and conditions of this Amendment.
NOW, THEREFORE, for valuable consideration, the receipt and adequacy of
which are hereby acknowledged, the parties hereto hereby agree as follows:
1. Defined Terms. Unless otherwise defined herein, capitalized terms
used herein shall have the meanings, if any, assigned to them in the Credit
Agreement.
2. Amendments to Credit Agreement. From and after the Effective Date of
this Amendment:
(a) Section 1.01 of the Credit Agreement is amended by
amending the definition of "Termination Date" in its entirety to provide:
"Termination Date" means the earlier to occur of
(a) March 2, 1998 (or the later date agreed to between the
Bank and the Company as specified in Section 2.01(b)); and
(b) the date on which the Commitment shall terminate in
accordance with the provisions of this Agreement.
3. Representations and Warranties. The Company hereby represents and
warrants to the Bank as follows:
(a) No Default or Event of Default has occurred and is
<PAGE> 6
continuing.
(b) The execution, delivery and performance by the Company of
this Amendment have been duly authorized by all necessary corporate and other
action and do not and will not require any registration with, consent or
approval of, notice to or action by, any Person (including any Governmental
Authority) in order to be effective and enforceable. The Credit Agreement as
amended by this Amendment constitutes the legal, valid and
binding obligations of the Company, enforceable against it in accordance with
its respective terms, without defense, counterclaim or offset.
(c) After giving effect to this Amendment all representations
and warranties of the Company contained in the Credit Agreement are true and
correct in all material respects.
(d) The Company is entering into this Amendment on the basis
of its own investigation and for its own reasons, without reliance upon the Bank
or any other Person.
4. Effective Date. This Amendment will become effective as of March 3,
1997 (the "Effective Date"), provided that each of the following conditions
precedent are satisfied on or before March 3, 1997:
(a) The Bank has received from the Company a duly executed
original (or, if elected by the Bank, an executed facsimile copy) of this
Amendment.
(b) The Bank has received from the Company a copy of a
resolution passed by the board of directors of the Company, certified by the
Secretary or an Assistant Secretary of the Company as being in full force and
effect on the date hereof, authorizing the execution, delivery and performance
of this Amendment.
5. Reservation of Rights. The Company acknowledges and agrees that the
execution and delivery by the Bank of this Amendment shall not be deemed to
create a course of dealing or otherwise obligate the Bank to forbear or execute
similar amendments under the same or similar circumstances in the future.
6. Miscellaneous.
(a) Except as herein expressly amended, all terms, covenants
and provisions of the Credit Agreement are and shall remain in full force and
effect and all references therein to such Credit Agreement shall henceforth
refer to the Credit Agreement as amended by this Amendment. This Amendment shall
be deemed incorporated into, and a part of, the Credit Agreement.
(b) This Amendment shall be binding upon and inure to the
benefit of the parties hereto and thereto and their respective successors and
assigns. No third party beneficiaries are intended in connection with this
Amendment.
<PAGE> 7
(c) This Amendment shall be governed by and construed in
accordance with the law of the State of California.
(d) This Amendment may be executed in any number of
counterparts, each of which shall be deemed an original, but all such
counterparts together shall constitute but one and the same instrument. Each of
the parties hereto understands and agrees that this document (and any other
document required herein) may be delivered by any party thereto either in the
form of an executed original or an executed original sent by facsimile
transmission to be followed promptly by mailing of a hard copy original, and
that receipt by the Bank of a facsimile transmitted document purportedly bearing
the signature of the Company shall bind the Company with the same force and
effect as the delivery of a hard copy original. Any failure by the Bank to
receive the hard copy executed original of such document shall not diminish the
binding effect of receipt of the facsimile transmitted executed original of such
document which hard copy page was not received by the Bank.
(e) This Amendment may not be amended except in accordance
with the provisions of Section 9.01(a) of the Credit Agreement.
(f) If any term or provision of this Amendment shall be deemed
prohibited by or invalid under any applicable law, such provision shall be
invalidated without affecting the remaining provisions of this Amendment or the
Credit Agreement, respectively.
IN WITNESS WHEREOF, the parties hereto have executed and
delivered this Amendment as of the date first above written.
MBNA CORPORATION BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
By: By:
-------------------------- --------------------------------
Name: Vernon H.C. Wright Name: Kurt A. Cardoza
Title: Senior Executive Vice Title: Vice President
President
<PAGE> 1
AMENDMENT
AMENDMENT (this "Amendment") dated as of October 2, 1996 between MBNA
CORPORATION, a Maryland corporation (the "Company"), and THE BANK OF NEW YORK, a
New York corporation (the "Bank").
W I T N E S S E T H:
WHEREAS, the Company and the Bank are parties to a certain Credit
Agreement dated as of October 5, 1994, as amended October 5, 1994, as of October
4, 1995 and as of June 28, 1996 (the "Credit Agreement"); and
WHEREAS, the Company and the Bank desire to amend the Credit Agreement
in certain respects;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein contained, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
1. All capitalized terms used herein shall have the meanings
assigned to such terms in the Credit Agreement.
2. As used in the Credit Agreement, each reference to the
Credit Agreement shall mean the Credit Agreement as amended by this Amendment
and as the same may from time to time be further amended, supplemented or
otherwise modified.
3. The definition of "Termination Date" in Section 1.01 of the
Credit Agreement is hereby amended in its entirety to read as follows:
"'Termination Date' shall mean the earlier to occur
of:
(a) October 1, 1997 (or any later date
agreed to between the Bank and the Company as specified in
Section 2.01(b)); and
(b) the date on which the Commitment shall
terminate in accordance with the provisions of this
Agreement."
4. Section 2.01(b) of the Credit Agreement is hereby amended
by changing "initial" where it appears on the second, third and fifth lines
thereof to "then".
5. The Company represents and warrants to the Bank as follows:
<PAGE> 2
2
(a) The Company has all requisite power and authority
to execute and deliver this Amendment and to incur the obligations
provided for in this Amendment and in the Credit Agreement as amended
by this Amendment (the "Amended Credit Agreement"), which execution,
delivery and incurrence have been duly authorized by all necessary and
proper action. Except for the consents and approvals previously
delivered to the Bank, no consent or approval or the taking of any
other action (including, without limitation, of or by shareholders or
of or by any governmental department, commission, board, bureau,
instrumentality or agency) is required as a condition to the execution,
delivery, performance, validity or enforceability of this Amendment or
the Amended Credit Agreement.
(b) This Amendment has been duly executed and
delivered by the Company. Each of this Amendment and the Amended Credit
Agreement constitutes the valid and legally binding obligation of the
Company, enforceable against the Company in accordance with its terms,
except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the rights of
creditors generally or by equitable principles relating to
enforceability.
(c) The execution, delivery and performance by the
Company of this Amendment and of the Amended Credit Agreement do not
(i) violate any provision of the Company's Organization Documents, (ii)
violate any order, decree or judgment, or any provision of any statute,
rule or regulation, (iii) violate or conflict with, result in a breach
of or constitute (with notice or lapse of time or both) a default under
any Contractual Obligation to which the Company is a party, or (iv)
result in the creation or imposition of any lien, charge or encumbrance
of any nature whatsoever upon any property or asset of the Company.
(d) All of the representations and warranties set
forth in the Amended Credit Agreement are true and correct in all
material respects on and as of the date hereof as if made on the date
hereof.
(e) As of the date hereof, there exists no Default or
Event of Default which has occurred and is continuing.
6. Simultaneously with the execution and delivery of this
Amendment, the Company will execute and deliver to the Bank (a) a certificate of
the Secretary or an Assistant Secretary of the Company (the "Certificate") which
states that attached thereto or set forth therein is a true and correct copy of
all action taken by the Company (which action has not been modified, amended or
rescinded and is in full force and effect) to
<PAGE> 3
3
authorize the execution, delivery and performance by the Company of this
Amendment (including, without limitation, the extension of the Termination Date
effected by this Amendment) and the performance of the Amended Credit Agreement
and (b) a favorable written opinion of John W. Scheflen, General Counsel of the
Company, dated the date of this Amendment and in the form of Annex 1 attached to
this Amendment (the "Opinion").
7. The amendments of the Credit Agreement set forth in this
Amendment are limited precisely as written, and, except as expressly amended by
this Amendment, nothing contained in this Amendment shall be deemed (a) to be a
waiver, amendment, modification or other change of any term, condition or
provision of the Credit Agreement (or a consent to any such waiver, amendment,
modification or other change), (b) to prejudice any right or rights which the
Bank may have under the Credit Agreement, or (c) to entitle the Company to a
waiver, amendment, modification or other change of any term, condition or
provision of the Credit Agreement (or a consent to any such waiver, amendment,
modification or other change), or to a consent, in similar or different
circumstances.
8. Except as expressly amended by this Amendment, the terms
and provisions of the Credit Agreement shall remain in full force and effect.
9. THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
10. This Amendment may be executed in two or more
counterparts, each of which shall constitute but one instrument, and shall be
effective as of October 2, 1996 when copies hereof, which, when taken together,
bear the signatures of each of the parties hereto, shall be delivered to the
Bank, together with the Certificate and the Opinion.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their duly authorized officers as of the date first written above.
MBNA CORPORATION
By: _________________________
Name: __________________
Title: __________________
THE BANK OF NEW YORK
By: _________________________
Name: __________________
Title: __________________
<PAGE> 4
4
ANNEX 1
FORM OF OPINION OF JOHN W. SCHEFLEN
October 2, 1996
The Bank of New York
One Wall Street
New York, New York 10286
Ladies and Gentlemen:
I am General Counsel for MBNA Corporation (the "Company") and in that
capacity have acted as counsel to the Company in connection with the Credit
Agreement (the "Credit Agreement") dated as of October 5, 1994, as heretofore
amended, between the Company and The Bank of New York (the "Bank") and the
Amendment thereto dated as of October 2, 1996 between the Bank and the Company
(the "Amendment"; the Credit Agreement as amended by the Amendment is referred
to herein as the "Amended Credit Agreement"). This opinion is rendered to the
Bank pursuant to Paragraph 6(b) of the Amendment. Capitalized terms used in this
opinion without definition have the same meanings as in the Amended Credit
Agreement.
In my capacity as such counsel, I have examined and relied upon such
records, documents, certificates, opinions and other matters as are in my
judgment necessary or appropriate to enable me to render the opinion expressed
herein. Based on the foregoing, I am of the opinion that:
1. Corporate Existence and Power. The Company and each of its
Significant Subsidiaries:
(a) Is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation;
(b) Has the power and authority and all governmental licenses,
authorization, consents and approvals to own its assets, carry on its business,
execute and deliver the Amendment and execute, deliver, and perform its
obligations under the Amended Credit Agreement;
(c) Is duly qualified as a foreign corporation, licensed and
in good standing under the laws of each jurisdiction where its ownership, lease
or operation of property or the conduct of its business requires such
qualification; and
(d) Is in compliance with all Requirements of Law;
<PAGE> 5
5
except, in each case referred to in clause (c) or clause (d), to the extent that
the failure to do so would not reasonably be expected to have a Material Adverse
Effect.
2. Corporate Authorization; No Contravention. The execution and
delivery by the Company of the Amendment and the execution, delivery and
performance by the Company of the Amended Credit Agreement have been duly
authorized on behalf of the Company by all necessary corporate action, and do
not and will not:
(a) Contravene the terms of any of the Company's Organization
Documents;
(b) Conflict with or result in any breach or contravention of,
or the creation of any lien under, any document known to me evidencing any
Contractual Obligation to which the Company is a party or any order, injunction,
writ or decree of any Governmental Authority to which the Company or its
Property is subject which, in the aggregate, would be reasonably likely to
result in a Material Adverse Effect; or
(c) Violate any Requirement of Law.
3. Governmental Authorization. No approval, consent, exemption,
authorization, or other action by, or notice to, or filing with, any
Governmental Authority is necessary or required in connection with the
execution, delivery or performance by, or validity of or enforcement against,
the Company of the Amendment or the Amended Credit Agreement.
4. Regulated Entities. None of the Company, any Person controlling the
Company or any Subsidiary of the Company, is an "Investment Company" within the
meaning of the Investment Company Act of 1940.
I am admitted to the bar of the State of Maryland and express no
opinion as to the laws of any jurisdiction other than the laws of the State of
Maryland and the federal laws of the United States of America.
The opinion may be relied upon by the Bank and by Participants and
Assignees. A copy of this opinion may also be made available to governmental or
regulatory authorities. Without my prior written consent, this opinion may not
be furnished or quoted to, or relied upon by, any other person or entity for any
purpose.
Very truly yours,
John W. Scheflen
Executive Vice President
General Counsel and Secretary
<PAGE> 6
AMENDMENT
AMENDMENT (this "Amendment") dated as of June 28, 1996 between MBNA
CORPORATION, a Maryland corporation (the "Company"), and THE BANK OF NEW YORK, a
New York corporation (the "Bank").
W I T N E S S E T H:
WHEREAS, the Company and the Bank are parties to a certain Credit
Agreement dated as of October 5, 1994, as amended October 5, 1994 and as of
October 5, 1995 (the "Credit Agreement"); and
WHEREAS, the Company and the Bank desire to amend the Credit Agreement
in certain respects;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein contained, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
1. All capitalized terms used herein shall have the meanings
assigned to such terms in the Credit Agreement.
2. As used in the Credit Agreement, each reference to the
Credit Agreement shall mean the Credit Agreement as amended by this Amendment
and as the same may from time to time be further amended, supplemented or
otherwise modified.
3. Section 5.05 of the Credit Agreement is hereby amended by
inserting the following in lieu of the words "Except as specifically disclosed
in Schedule 5.05":
"Except as disclosed in the Company's most recent Annual
Report on Form 10-K or in any subsequent report of the Company
on Form 10-Q or 8-K dated prior to the date of this Agreement
or any subsequent amendment hereto"
4. The Company represents and warrants to the Bank as follows:
(a) The Company has all requisite power and authority
to execute and deliver this Amendment and to incur the obligations
provided for in this Amendment and in the Credit Agreement as amended
by this Amendment (the "Amended Credit Agreement"), which execution,
delivery and incurrence have been duly authorized by all necessary and
proper action. Except for the consents and approvals previously
delivered to the Bank, no consent or approval or the taking of any
other action (including, without limitation, of or by
<PAGE> 7
shareholders or of or by any governmental department, commission,
board, bureau, instrumentality or agency) is required as a condition to
the execution, delivery, performance, validity or enforceability of
this Amendment or the Amended Credit Agreement.
(b) This Amendment has been duly executed and
delivered by the Company. Each of this Amendment and the Amended Credit
Agreement constitutes the valid and legally binding obligation of the
Company, enforceable against the Company in accordance with its terms,
except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the rights of
creditors generally or by equitable principles relating to
enforceability.
(c) The execution, delivery and performance by the
Company of this Amendment and of the Amended Credit Agreement do not
(i) violate any provision of the Company's Organization Documents, (ii)
violate any order, decree or judgment, or any provision of any statute,
rule or regulation, (iii) violate or conflict with, result in a breach
of or constitute (with notice or lapse of time or both) a default under
any Contractual Obligation to which the Company is a party, or (iv)
result in the creation or imposition of any lien, charge or encumbrance
of any nature whatsoever upon any property or asset of the Company.
(d) All of the representations and warranties set
forth in the Amended Credit Agreement are true and correct in all
material respects on and as of the date hereof as if made on the date
hereof.
(e) As of the date hereof, there exists no Default or
Event of Default which has occurred and is continuing.
5. The amendments of the Credit Agreement set forth in this
Amendment are limited precisely as written, and, except as expressly amended by
this Amendment, nothing contained in this Amendment shall be deemed (a) to be a
waiver, amendment, modification or other change of any term, condition or
provision of the Credit Agreement (or a consent to any such waiver, amendment,
modification or other change), (b) to prejudice any right or rights which the
Bank may have under the Credit Agreement, or (c) to entitle the Company to a
waiver, amendment, modification or other change of any term, condition or
provision of the Credit Agreement (or a consent to any such waiver, amendment,
modification or other change), or to a consent, in similar or different
circumstances.
6. Except as expressly amended by this Amendment, the terms
and provisions of the Credit Agreement shall remain in full force and effect.
<PAGE> 8
7. THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
8. This Amendment may be executed in two or more counterparts,
each of which shall constitute but one instrument, and shall be effective as of
June __, 1996 when copies hereof, which, when taken together, bear the
signatures of each of the parties hereto, shall be delivered to the Bank.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their duly authorized officers as of the date first written above.
MBNA CORPORATION
By: _________________________
Name: __________________
Title: __________________
THE BANK OF NEW YORK
By: _________________________
Name: __________________
Title: __________________
<PAGE> 1
2/96 Performance Options
MBNA CORPORATION
STOCK OPTION AGREEMENT
THIS AGREEMENT made this 3rd day of April 1996, by and between MBNA
Corporation, a Maryland corporation (the "Company"), and [name] ("Grantee").
The parties hereto agree as follows:
1. Grant of Stock Option. The Company confirms its grant on February
29, 1996 (the "Grant Date"), to the Grantee of non-qualified stock
options to purchase up to [shares] shares of the Company's Common
Stock pursuant to the Company's 1991 Long Term Incentive Plan (the
"Plan").
2. Exercise Price. The exercise price per share shall be $28.25.
3. Term of Option. The options granted hereunder shall terminate on
the earlier of February 28, 2006, or the date determined in
accordance with the Plan.
4. Exercise. The options will become exercisable to the extent set
forth below when the Company achieves both the net income and stock
price objectives set forth below.
<TABLE>
<CAPTION>
Net Income Stock Price Percent Exercisable
---------- ----------- -------------------
<C> <C> <C>
$600 million $36 25%
$750 million $45 35% additional
$900 million $55 40% additional
</TABLE>
Net income for purposes of the grants means consolidated net income
of the Company for a fiscal year before preferred stock dividends,
extraordinary items and the cumulative effect of accounting
changes. The Compensation Committee may adjust the net income
objectives for changes in federal or applicable state income taxes.
The share price objective will be met only if the closing price of
the shares of the Company's Common Stock of the New York Stock
Exchange equals or exceeds the objective for at least 20 trading
days in any consecutive 30 day trading period following attainment
of the applicable net income objective. The Compensation Committee
may adjust the share price objectives for stock splits or
combinations, stock dividends and similar events.
If required to ensure that the Company may deduct for federal
income tax purposes the gain to the holder on exercise of the
options, no installment of the options may be exercised until the
Compensation Committee has certified that the applicable objectives
have been met for that installment.
If these conditions are not satisfied, the options shall become
exercisable on the 27th day of February 2006, and shall expire if
not exercised on that date.
The options will vest even if the net income and stock price
objectives are not met, in the event of a change in control as
defined in the Plan. In addition, the options will become
immediately exercisable in the event of the death, disability or
retirement of the holder.
<PAGE> 2
2/96 Performance Options
The options may be exercised, in whole or in part, by delivering
written notice to the Company specifying the number of shares for
which the options are being exercised. The exercised price will be
paid in cash.
5. Option Subject to Plan and Laws. The options are subject to the
Plan and any applicable federal or state laws, rules, or
regulations.
6. Entire Agreement; Modification. This Agreement and the Plan contain
the entire agreement between the parties with respect to the
subject matter contained herein and may not be modified except as
provided in the Plan or in a written document signed by each of the
parties hereto.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
MBNA CORPORATION
BY: ______________________
______________________
[name]
<PAGE> 3
7/96 Immediately Exercisible Options
MBNA CORPORATION
STOCK OPTION AGREEMENT
THIS AGREEMENT made this 5th day of August, 1996, by and between MBNA
Corporation, a Maryland corporation (the "Company"), and [Name] ("Grantee").
The parties hereto agree as follows:
1. Grant of Stock Option. The Company confirms its grant on July 30,
1996 (the "Grant Date"), to the Grantee of options to purchase up
to [amount] shares of the Company's Common Stock pursuant to the
Company's 1991 Long Term Incentive Plan (the "Plan"). The options
granted hereunder shall be incentive stock options to the extent
permitted by law. The remainder of the options shall be
non-qualified stock options.
2. Exercise Price. The exercise price per share shall be $27.50.
3. Term of Option. The options granted hereunder shall terminate on
the earlier of July 29, 2006, or the date determined in accordance
with the Plan.
4. Exercise. The options may be exercised at any time and from time to
time, in whole or in part, by delivering written notice to the
Company specifying the number of shares for which the options are
being exercised.
5. Option Subject to Plan and Laws. The options are subject to the
Plan and any applicable federal or state laws, rules, or
regulations. The Grantee agrees that these options are subject to
the Plan as currently in effect, including all amendments.
6. Entire Agreement; Modification. This Agreement and the Plan contain
the entire agreement between the parties with respect to the
subject matter contained herein and may not be modified except as
provided in the Plan or in a written document signed by each of the
parties hereto.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
MBNA CORPORATION
BY: ______________________
______________________
[Name]
<PAGE> 4
7/96 Performance Options
MBNA CORPORATION
STOCK OPTION AGREEMENT
THIS AGREEMENT made this 5th day of August 1996, by and between MBNA
Corporation, a Maryland corporation (the "Company"), and [name] ("Grantee").
The parties hereto agree as follows:
1. Grant of Stock Option. The Company confirms its grant on July 30,
1996 (the "Grant Date"), to the Grantee of non-qualified stock
options to purchase up to [shares] shares of the Company's Common
Stock pursuant to the Company's 1991 Long Term Incentive Plan (the
"Plan").
2. Exercise Price. The exercise price per share shall be $27.50.
3. Term of Option. The options granted hereunder shall terminate on
the earlier of July 30, 2006, or the date determined in accordance
with the Plan.
4. Exercise. The options will become exercisable to the extent set
forth below when the Company achieves both the net income and stock
price objectives set forth below and the Compensation Committee
certifies that the objectives have been achieved.
<TABLE>
<CAPTION>
Net Income Stock Price Percent Exercisable
---------- ----------- -------------------
<C> <C> <C>
$700 million $43 20%
$850 million $52 30% additional
$1,000million $60 50% additional
</TABLE>
Net income for purposes of the grants means consolidated net income
of the Company for a fiscal year before extraordinary items and the
cumulative effect of accounting changes. The Compensation Committee
may adjust the net income objectives for changes in federal or
applicable state income taxes.
The share price objective will be met only if the closing price of
the shares of the Company's Common Stock of the New York Stock
Exchange equals or exceeds the objective for at least 20 trading
days in any consecutive 30 day trading period following attainment
of the applicable net income objective. The Compensation Committee
may adjust the share price objectives for stock splits or
combinations, stock dividends and similar events.
If required to ensure that the Company may deduct for federal
income tax purposes the gain to the holder on exercise of the
options, no installment of the options may be exercised until the
Compensation Committee has certified that the applicable objectives
have been met for that installment.
If these conditions are not satisfied, the options shall become
exercisable on the 29th day of July 2006, and shall expire if not
exercised on that date.
<PAGE> 5
7/96 Performance Options
The Committee may accelerate vesting of the options, even if the
net income and stock price objectives are not met, in the event of
a change in control as defined in the Plan. In addition, the
options will become immediately exercisable in the event of the
death, disability or retirement of the holder.
The options may be exercised, in whole or in part, by delivering
written notice to the Company specifying the number of shares for
which the options are being exercised. The exercised price will be
paid in cash.
5. Option Subject to Plan and Laws. The options are subject to the
Plan and any applicable federal or state laws, rules, or
regulations.
6. Entire Agreement; Modification. This Agreement and the Plan contain
the entire agreement between the parties with respect to the
subject matter contained herein and may not be modified except as
provided in the Plan or in a written document signed by each of the
parties hereto.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
MBNA CORPORATION
BY: ______________________
______________________
[name]
<PAGE> 1
MBNA CORPORATION
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
(As Amended through November 12, 1996 and Restated)
<PAGE> 2
ARTICLE I
Title and Effective Date
1.01 This Plan shall be known as the MBNA Corporation Supplemental
Executive Retirement Plan (hereinafter referred to as the "Plan).
1.02 The Plan was adopted by the Board of Directors effective January
29, 1991, and was subsequently amended. As restated, the Plan includes all
amendments through November 12, 1996.
<PAGE> 3
ARTICLE II
Definitions
As used herein, the following words and phrases shall have the meanings
specified below unless a different meaning is clearly required by the context.
2.01 The term "Attained Age" shall mean the age of a Member as of his
or her last birthday, except to the extent provided in Section 4.01.
2.02 The term "Average Monthly Earnings" shall mean the highest average
base salary paid to the Member for any twelve (12) consecutive month period
during the seventy-two (72) month period immediately preceding the termination
of the Member's employment. For this purpose, employment with MNC Financial,
Inc. ("MNC") or any of its subsidiaries at any time shall be examined to
determine if average base salary paid by MNC produces the highest average. If
so, it shall be included in determining Average Monthly Earnings. Annual salary
for purposes of determining Average Monthly Earnings shall be limited as set
forth in the benefit schedules attached to the Plan as from time to time
amended."
2.03 The term "Beneficiary" or "Contingent Beneficiary" shall mean any
person, persons, trust or estate of a Member entitled to receive any benefits
under this Plan.
2.04 The term "Board of Directors" shall mean the Board of Directors of
the Corporation.
2.05 The term "Cause" shall mean the occurrence of one of the
following:
(a) A conviction of the Member of (i) a felony or (ii) any
lesser crime or offense than a felony involving the property of the Employer,
provided that such lesser crime or offense causes demonstrable and serious
injury to the Employer, monetarily or otherwise.
(b) The willful engaging by the Member in conduct which has
caused demonstrable and serious injury to the Employer, monetary or otherwise,
as evidenced by a determination in a binding and final judgment, order or decree
of a court or administrative
2
<PAGE> 4
agency of competent jurisdiction, in effect after exhaustion or lapse of all
rights of appeal, in an action, suit or proceeding, whether civil, criminal,
administrative or investigative.
(c) Willful gross neglect of his duties, gross dereliction of
duty or other grave misconduct by the Member and failure to cure such situation
within thirty (30) days after receipt of notice thereof from the Chief Executive
Officer of the Employer. If the Member who receives such a notice is the Chief
Executive Officer of the Employer, it shall be received from the Board of
Directors as authorized by not less than two-thirds (2/3) of all of the members
thereof. For purposes of this Plan, no act, or failure to act, by a Member shall
be deemed "willful" unless done, or omitted to be done, not in good faith and
without reasonable belief that his action or omission was in the best interest
of the Employer. Notwithstanding the foregoing, a Member shall not be deemed to
have been terminated for Cause unless and until there shall have been delivered
to the Member a copy of a resolution duly adopted by the affirmative vote of not
less than three-quarters (3/4) of the entire membership of the Board of
Directors at a meeting of the Board of Directors called and held for such
purpose (after reasonable notice to the Member and an opportunity for the
Member, together with Member's counsel, to be heard before the Board of
Directors), finding that in the good faith opinion of the Board of Directors the
Member is guilty of conduct set forth above in clauses (a), (b), or (c) of this
Subsection 2.05 and specifying the particulars thereof in detail.
2.06 Change of Control shall mean the occurrence of either (i), (ii) or
(iii), as hereinafter set forth:
(i) a change of a nature that would be required to be reported
in response to item 6(3) of Schedule 14A of Regulation 14A, or any successor
provisions thereto, promulgated under the Securities Exchange Act of l934
("Exchange Act"); provided that, without limitation, a Change of Control shall
be deemed to have occurred if any "person" or "group" (as those terms are used
in Sections l3(d) and l4(d), respectively, of the Exchange Act), other than a
trustee or other fiduciary holding securities under an employee benefit plan of
the Corporation, or a corporation owned, directly or indirectly, by the
stockholders of the Corporation in substantially
3
<PAGE> 5
the same proportions as their ownership of stock of the Corporation, is or
becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of securities of the Corporation representing
forty percent (40%) or more of the combined voting power of the Corporation's
then outstanding securities; or
(ii) during any period of two (2) consecutive years (not
including any period prior to the execution of this Agreement), individuals who
at the beginning of such period constitute the board of Directors and any new
director (other than a director designated by a person who has entered into an
agreement with the Corporation to effect a transaction described in clauses (i)
or (iii) of this Subsection) whose election by the Board of Directors or
nomination for election by the Corporation's stockholders was approved by a vote
of at least two-thirds (2/3) of the directors then still in office who either
were directors at the beginning of the period or whose election or nomination
for election was previously so approved, cease for any reason to constitute a
majority thereof; or
(iii) the shareholders of the Corporation approve a merger or
consolidation of the Corporation with any other corporation, other than a merger
or consolidation which would result in the voting securities of the Corporation
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) at least eighty percent (80%) of the combined voting power of
the voting securities of the Corporation or such surviving entity outstanding
immediately after such merger or consolidation, or the shareholders of the
Corporation approve a plan of complete liquidation of the Corporation or an
agreement for the sale or disposition by the Corporation of all or substantially
all the Corporation's assets.
2.07 The term "Committee" shall mean the committee appointed by the
Board of Directors to administer the Plan.
2.08 The term "Competition" shall be deemed to apply if a Member who is
no longer employed by the Corporation obtains a position as director, trustee,
officer or employee, or acts as a consultant or advisor to, or acquires an
ownership interest in excess of five percent (5%) in,
4
<PAGE> 6
any corporation, partnership, firm or other business entity that engages in any
business which competes with the business of the Corporation.
2.09 "Corporation" shall mean MBNA Corporation, and any successor.
2.10 The term "Death Benefit" shall mean any benefit paid to a
Beneficiary or Contingent Beneficiary as provided under Article V of the Plan.
2.11 The term "Disability Retirement Date" shall mean the first day of
the month immediately following the date a Disabled Member retires due to
Disability.
2.12 The term "Disability" or "Disabled" shall mean eligibility for
disability benefits under the terms of the Employer's Long-Term Disability Plan
in effect at the time the Member becomes disabled.
2.13 The term "Employer" shall mean the Corporation, its successors and
assigns, MBNA America Bank, N.A., any other subsidiary or affiliated
organizations authorized by the Board of Directors of the Corporation to
participate in this Plan with respect to their Members, and, subject to the
provisions of Article IX, any organization into which the Employer may be merged
or consolidated or to which all or substantially all of its assets may be
transferred.
2.14 Good Reason shall mean the occurrence of one of the following
events:
(a) Without the express written consent of the Executive, the
assignment of the Executive to any duties materially inconsistent with the
Executive's positions, duties, responsibilities and status with the Corporation
and its subsidiaries immediately prior to the occurrence of a Change of Control,
or a material change in the Executive's titles, offices or reporting
responsibilities as in effect immediately prior to such Change of Control, or
any removal of the Executive from or any failure to re-elect the Executive to
any of such positions, except in connection with the termination of the
Executive's employment for Cause, death, Disability, Retirement or by the
Executive for other than Good Reason, which situation is not remedied within
thirty (30) days after receipt by the Corporation of written notice by the
Executive:
5
<PAGE> 7
(b) Without the express written consent of the Executive, a
reduction in the Executive's total compensation (including base salary, bonus,
and incentive compensation) in effect immediately prior to such Change of
Control which is not remedied within thirty (30) days after receipt by the
Corporation of written notice by the Executive;
(c) Without the express written consent of the Executive, the
Employer requires the Executive to be based anywhere other than (i) his office
location immediately preceding the occurrence of a Change of Control, or (ii)
one of the Corporation's principal executive offices, provided that such office
is located within fifty (50) miles of the location specified in the preceding
clause (i) except for required travel on the Employer's business to an extent
substantially consistent with the business travel obligations of the Executive
immediately preceding the occurrence of the Change of Control;
(d) Without the express written consent of the Executive, the
failure by the Employer to continue in effect any benefit or compensation plan,
stock ownership plan, stock purchase plan, stock option plan, life insurance
plan, health- and-accident plan or disability plan in which the Executive is
participating at the time of a Change of Control (or plans providing
substantially similar benefits), the taking of any action by the Employer which
would adversely affect the participation in or materially reduce the benefits
under any of such plans either in terms of the amount of benefits provided or
the level of the Executive's participation relative to other participants or
deprive the Executive of material fringe benefit enjoyed by the Executive at the
time of the Change of Control, or the failure by the Employer to provide the
number of paid vacation days to which the Executive was then entitled in
accordance with the Employer's normal vacation policy in effect immediately
prior to said Change of Control, which is not remedied within thirty (30) days
after receipt by the Employer of written notice by the Executive;
(e) A breach by the Employer of any provision of the Plan not
embraced within the foregoing clauses (a), (b), (c) and (d) of this Section
which is not remedied within thirty (30) days after receipt by the Employer of
written notice from the Executive.
6
<PAGE> 8
(f) The liquidation, dissolution, consolidation or merger of
the Employer or transfer of all or a significant portion of its assets, unless a
successor or successors (by merger, consolidation or otherwise) to which all or
a significant portion of its assets have been transferred assumes all duties and
obligations of the Employer under this Agreement.
(g) In the event a breach embraced within the foregoing
clauses (a), (b), (c), (d), or (e) of this Section 2.l4 is cured within the
thirty (30) day period specified in such clauses, any subsequent breach of any
provision embraced within the clauses of this Section 2.l4 shall immediately be
deemed to constitute Good Reason and there shall be no provision for a thirty
(30) day remedial period.
2.15 The term "Member" shall mean an employee who is part of a select
group of management and has become a Member as provided in Article III hereof.
2.16 The term "Monthly Retirement Income" shall mean a monthly income
due a Retired Member which shall commence as of his Retirement Date, or the
commencement of benefit payments under Article V or Article VI hereof, and
continue for the period provided herein.
2.17 The term "Plan" shall mean the MBNA Corporation Supplemental
Executive Retirement Plan.
2.18 The term "Primary Social Security" shall mean the estimated
Primary Insurance Amount (payable monthly) available to a Member at an age as
provided herein under the Social Security law in effect at the Member's
Retirement Date.
2.19 The term "Qualified Plan" shall mean the MBNA Corporation Pension
Plan or any successor plan thereto.
2.20 The term "Retired Member" shall mean any Member of the Plan who
has terminated employment with the Employer for any reason other than Cause,
death or Disability and who is eligible to receive a Monthly Retirement Income
under this Plan.
7
<PAGE> 9
2.21 The term "Retirement Date" shall mean, subject to the provisions
of Section 4.02, the first day of the month coinciding with or immediately
following the month the Member, who is eligible to receive a Monthly Retirement
Income under this Plan, terminates employment with the Employer for any reason
other than Cause, death or Disability.
8
<PAGE> 10
ARTICLE III
Membership in the Plan
3.01 Eligibility for membership in this Plan shall be determined by the
Committee in its sole discretion. The Committee shall also have the right to
remove a Member from the Plan at any time in its sole discretion and for any
reason; provided, however, that a person who has been a Member for a period of
five (5) or more years may not be removed from the Plan. Notwithstanding the
foregoing, a member whose employment is terminated for Cause shall be removed
from the Plan and immediately shall forfeit all rights and entitlements under
the Plan. For purposes of this provision, a person who has been at any time a
Member of the MNC Financial, Inc. Supplemental Early Retirement Plan shall have
those years of membership counted towards the five years used in determining
whether a Member may be removed.
3.02 If a Retired Member is eligible to receive benefits under this
Plan, such benefits shall terminate in their entirety and the Retired Member
shall no longer be eligible to receive any benefits under the Plan if:
(a) the Retired Member engages in Competition with the
Employer unless (i) the Member has received written consent to engage in
Competition from the Board of Directors, (ii) the Member's employment was
terminated without Cause after a Change of Control, or (iii) the Member
terminated employment for Good Reason after a Change of Control;
(b) at any time following the Member's termination of
employment, the Retired Member is convicted of a felony or for any lesser crime
or offense than a felony involving the property of an Employer, provided that
such lesser crime or offense causes demonstrable and serious injury to the
Employer, monetarily or otherwise.
3.03 The payment of benefits to the Member or his Beneficiary under
this Plan is conditioned upon the continuous employment of the Member by the
Employer (including period of disability and authorized leaves of absence) from
the date of the Member's participation in the plan until the Member's Retirement
Date (not taking into account any delay in the Member's
9
<PAGE> 11
Retirement Date beyond his termination of employment pursuant to Section 4.02),
Disability or death, whichever first occurs.
10
<PAGE> 12
ARTICLE IV
Monthly Retirement Income
4.01 When a Member terminates his employment with the Employer for any
reason other than Cause, death or Disability, he shall be entitled to receive a
Monthly Retirement Income under this Plan, provided that a Member who
voluntarily terminates employment with the Corporation other than for Good
Reason without giving at least l2 months written notice of termination to the
Corporation shall not be entitled to receive any benefit under this Plan except
as otherwise determined by the Board of Directors. The amount of a Member's
Monthly Retirement Income shall be a percentage of his Average Monthly Earnings,
determined in accordance with the applicable benefits schedule attached hereto,
reduced by the amounts set forth in Sections 4.01(a), 4.01(b) and 4.01(c),
below; provided, however, if within two (2) years beginning as of the date of a
Change of Control a Member ceases to perform services for the Employer because
his service with the Employer is terminated either (i) by the Employer without
Cause or (ii) by the Employee with Good Reason, the Member's Attained Age Upon
Termination, for purposes of determining the Member's Monthly Retirement Income
under the schedule contained in this Section 4.01, shall be increased by the
lesser of (i) three (3) years or (ii) the number of years (if any) by which
sixty (60) exceeds the Member's actual attained age at the time he ceases to
perform services for the Employer. The applicable benefits schedule shall be
determined for each participant by the Board of Directors. No participant in
SERP I, SERP II or SERP III may receive any Monthly Retirement Income benefit
under this Section 4.01 if the participant's Attained Age Upon Termination is
less than 60, unless otherwise approved by the Compensation Committee (other
than a participant whose consent to the amendment adding this requirement to the
Plan is required, and who has not so consented).
(a) One hundred percent (100%) of his Primary Social Security
benefit payable for his age on the Retirement Date, but no less than age
sixty-two (62), under the Social
11
<PAGE> 13
Security law in effect on his Retirement Date, but said reduction shall not
begin until the Member attains age sixty-two (62).
(b) One hundred percent (100%) of his monthly income
calculated in the form of a straight life annuity under the Qualified Plan as of
his Retirement Date.
(c) One hundred percent (100%) of benefits received from the
qualified pension plans of any previous employers. Such amounts shall be
actuarially determined as a life annuity payable in equal monthly installments,
regardless of the actual form of payment.
4.02 The basic form of Monthly Retirement Income (to which the formula
indicated in Section 4.01 applies) shall be a monthly income commencing on the
later of the Member's attainment of age sixty (60) or the Member's Retirement
Date and shall continue for his life; provided, however, if the Member's actual
age at the time he terminates employment is less than the Attained Age Upon
Termination used for purposes of calculating his Monthly Retirement Income
pursuant to the first paragraph of Section 4.01, his Retirement Date shall not
occur until he has attained the age used to calculate his Monthly Retirement
Income.
12
<PAGE> 14
ARTICLE V
Death Benefits
5.01 In the event of the death of a Member (other than a Retired Member
or a Disabled Member), the Member's Beneficiary shall be entitled to receive a
Death Benefit in the form of a Monthly Retirement Income. The Death Benefit
shall be equal to one hundred percent (l00%) of the Member's Average Monthly
Earnings for the first ten years and fifty percent (50%) of the Member's Average
Monthly Earnings thereafter, if applicable. The Death Benefit shall be payable
monthly to the Member's Beneficiary for one hundred twenty (l20) consecutive
months or until the Member would have attained age sixty (60), whichever is
longer, commencing on the first day of the month subsequent to the Member's
death; provided, however, that if the Beneficiary is the Member's surviving
spouse, then after the expiration of the benefit provided above, the Beneficiary
shall be entitled to receive a Monthly Retirement Income payable for life equal
to 50% of the Member's Average Monthly Earnings.
5.02 In the event of the death of a Retired Member or a Disabled Member
who is receiving a Monthly Retirement Income under this Plan, benefits shall
continue to be paid to the Member's surviving spouse on the same payment
schedule and in an amount equal to one hundred percent (l00%) of the Monthly
Retirement Income Benefit until the tenth anniversary of the Member's retirement
or Disability and thereafter equal to fifty percent (50%) of the Monthly
Retirement Income Benefit that would have been payable to the Member while he
was living had there been no reductions pursuant to Sections 4.0l(a), 4.0l(b)
and 4.0l(c) hereof; provided, however, that the monthly Retirement Income
benefit payable to the Member as determined by Section 4.0l above, shall be
reduced by:
(a) One hundred percent (l00%) of the Social Security survivor
income monthly benefit payable to the Member's surviving spouse (not including
benefits for minor children), and
13
<PAGE> 15
(b) One hundred percent (l00%) of the monthly income payable
to the Member's surviving spouse under the standard joint and survivor annuity
benefit from the Qualified Plan. Such an amount shall be offset without regard
to whether the Member elected the standard joint and survivor annuity benefit as
his form of payment for benefits from the Qualified Plan.
Benefits payable under Section 5.02 shall be paid for the life
of the surviving spouse.
14
<PAGE> 16
ARTICLE VI
Disability Benefits
6.01 If a Member is determined to be Disabled, the Disabled Member
shall be entitled to receive a Monthly Retirement Income for his life equal,
until age 65, to l00% of the Member's Average Monthly Earnings and, thereafter,
to 80% of the Member's Average Monthly Earnings, reduced by Sections 6.0l(a),
6.0l(b), 6.0l(c), 6.0l(d) and 6.01(e).
(a) Until the Disabled Member attains age sixty-five (65), one
hundred percent (100%) of his monthly Long-Term Disability Benefit, as defined
below, said reduction shall occur even if the Member does not actually purchase
said benefit. The Long-Term Disability Benefit shall be the total of the benefit
under the Employer's Long-Term Disability Plan and Social Security Act
disability payments.
(b) One hundred percent of any disability benefits actually
received by the Disabled Member pursuant to any disability income policy or plan
under which the Disabled Member is insured if obtained and maintained by the
Corporation and for which the Corporation pays all premiums.
(c) Then, upon the later of the Disabled Member attaining age
sixty-five (65) or when Long-Term Disability Benefits paid to the Disabled
Member cease (or would have ceased, as the case may be), one hundred percent
(100%) of the primary Social Security Benefits payable to the Member under the
Social Security law in effect at the time benefits cease (or would have ceased,
as the case may be). This offset shall occur without regard to whether the
Member actually receives said benefits.
(d) One hundred percent (100%) of his monthly income
calculated in the form of a straight life annuity under the Qualified Plan as of
his Disability Retirement Date to the extent benefits are actually received.
15
<PAGE> 17
(e) One hundred percent (100%) of benefits received from the
qualified pension plans of any previous employers. Such amounts shall be
actuarially determined as a life annuity payable in equal monthly installments,
regardless of the actual form of payment.
16
<PAGE> 18
ARTICLE VII
Plan Administration
7.01 The Board of Directors shall appoint a Committee to administer the
Plan and keep records of individual Member benefits.
7.02 The Committee shall have the authority to interpret the Plan, to
adopt and review rules relating to the Plan and to make any other determination
for the administration of the Plan, subject to the terms of the Plan.
7.03 The Committee may employ such counsel, accountants, actuaries and
other agents as it shall deem advisable. The Employer shall pay the fees and
costs of such counsel, accountants, actuaries and other agents and any other
expenses incurred by the Committee in the administration of the Plan.
17
<PAGE> 19
ARTICLE VIII
Named Fiduciary and Claims Procedure
8.01 The Named Fiduciary of the Plan for purposes of the claims
procedure is the Committee.
(a) The business address and telephone number of the Named
Fiduciary is:
The Pension and 401(K) Plan Committee
c/o Mr. John W. Scheflen
MBNA America Bank, N.A.
Wilmington, Delaware 19884-0616
Telephone: (302) 432-1100
(b) The Employer shall have the right to change the Named
Fiduciary of the Plan. The Employer shall give the Members written notice of any
change of the Named Fiduciary or any change in the address and telephone number
of the Named Fiduciary.
8.02 Benefits shall be paid in accordance with the provisions of this
Plan. The Member, his Beneficiary or Contingent Beneficiary (hereinafter
collectively referred to as the "Claimant") shall make a written request for the
benefits provided under this Plan. This written claim shall be mailed or
delivered to the Named Fiduciary by registered mail.
8.03 If the claim is denied, either totally or partially, notice of the
decision shall be sent by registered mail to the Claimant within a reasonable
time period. This time period shall not exceed ninety (90) days after the
receipt of the claim by the Named Fiduciary. The notice shall set forth the
following information:
(a) The specific reasons for the denial,
(b) the specific reference to pertinent Plan visions on which
the denial is based,
(c) a description of any additional material or information
necessary for the Claimant to perfect the claim and an explanation of why such
material or information is necessary, and
18
<PAGE> 20
(d) appropriate information and explanation of the claims
procedure under this Plan to permit the Claimant to submit his claim for review.
8.04 The claims procedure under this Plan shall allow the Claimant a
reasonable opportunity to appeal a denied claim and to get a full and fair
review of that decision from the Board of Directors.
(a) The Claimant shall exercise his right of appeal by
submitting a written request for a review of the denied claim to the Named
Fiduciary. This written request for review must be submitted to the Named
Fiduciary within sixty (60) days after receipt by the Claimant of the written
notice of denial.
(b) The Claimant shall the following rights under this appeal
procedure:
(1) to request a review by the Committee upon written
application to the Named Fiduciary,
(2) to review pertinent documents with regard to the
Plan,
(3) to submit issues and comments in writing,
(4) to request an extension of time to make a written
submission of issues and comments, and
(5) to request that a hearing be held before the
Board of Directors to consider Claimant's Appeal.
8.05 The decision on the review of the denied claim shall promptly be
provided by the Committee --
(a) within forty-five (45) days after the receipt of the
request for review if no hearing is held, or
(b) within ninety (90) days after the receipt of the request
for review if an extension of time is necessary in order to hold a hearing.
(1) If an extension of time is necessary in order to
hold a hearing, the Committee shall give the Claimant written notice of the
extension of time. This notice shall be given prior to any extension.
19
<PAGE> 21
(2) The written notice of extension shall indicate
that an extension of time will occur in order to hold a hearing on Claimant's
appeal. The notice shall also specify the place, date and time of that hearing
and the Claimant's opportunity to participate in the hearing. It may also
include any other information the Committee believes may be important or useful
to the Claimant in connection with the appeal.
8.06 The decision to hold a hearing to consider the Claimant's appeal
of the denied claim shall be within the sole discretion of the Committee,
whether or not the Claimant requests such a hearing.
8.07 The Committee's decision on review shall be made in writing and
provided to the Claimant within the specified time periods. This written
decision on review shall contain the following information:
(a) the decision(s)
(b) the reasons for the decision(s) and
(c) specific references to the provisions of the Plan on which
the decision(s) is/are based.
All of this information shall be written in a manner calculated to be understood
by the Claimant.
20
<PAGE> 22
ARTICLE IX
Miscellaneous
9.01 Nothing contained in this Plan shall be deemed to give any Member
or employee the right to be retained in the service of the Employer or to
interfere with the right of the Employer to discharge any Member or employee at
any time regardless of the effect which such discharge shall have upon him as a
Member of the Plan.
9.02 The rights of the Member, the Beneficiary of the Member, or any
other person claiming through the Member under this Plan, shall be solely those
of an unsecured general creditor of the Employer.
9.03 The Plan does not involve a reduction in salary for the Member or
the foregoing of an increase in future salary by the Member.
9.04 A Retired Member shall not be considered an employee for any
purposes under the law.
9.05 If no Beneficiary or Contingent Beneficiary has been designated or
survives a Member, any amounts to be paid to the Member's Beneficiary shall be
paid to the Member's surviving spouse, or if there is no surviving spouse, then
in equal proportions to the Member's surviving children. If the Member is not
survived by a spouse or children, then such amounts shall be paid to the estate
of the Member.
9.06 Except insofar as this provision may be contrary to applicable
law, no sale, transfer, alienation, assignment, pledge, collateralization or
attachment of any benefits under this Plan shall be valid or recognized by the
Committee.
9.07 The Employer reserves the right at any time and from time to time,
by action of its Board of Directors to terminate, modify or amend, in whole or
in part, any or all of the provisions of the Plan, including specifically the
right to make any such amendments effective retroactively, provided that no such
action shall (i) reduce the benefits of any Disabled or Retired Member or his
Beneficiary or Contingent Beneficiary or (ii) adversely affect any Member who
21
<PAGE> 23
has been a Member for a period of five (5) or more years. In addition, the
Employer may amend or modify any provision of this Plan as to any particular
Member by Agreement with such Member, provided that such Agreement is in
writing, is executed by both the Employer and the Member, and is filed with the
Plan records. The provisions of any amendment or modification made by Agreement
between a Member and the Employer shall apply only to the Member so agreeing and
no other.
9.08 The Employer shall not merge into, be acquired by, or consolidate
with any other Employer unless and until such other Employer agrees to assume
all rights and obligations set forth in this Plan.
9.09 A Member shall have the right to change his designated Beneficiary
or Contingent Beneficiary by notifying the Committee of such in writing. Such
change shall become effective upon written acknowledgment of same by the
Committee. Any payments made by the Employer to a Beneficiary or Contingent
Beneficiary in good faith and under the terms of the Plan shall fully discharge
the Employer from all further obligations with respect to such payments.
9.10 This Plan shall be binding upon and inure to the benefit of the
Employer, its successors and assigns and each Member and his heirs, executors,
administrators and legal representatives.
9.11 This Plan shall be governed by the laws of Maryland without regard
to the principles of conflict of laws.
9.12 Any benefits that are paid under this Plan shall be subject to any
applicable payroll or other taxes required to be withheld by law.
9.13 Any words herein used in the masculine shall be read and construed
in the feminine where they would so apply. Words in the singular shall be read
and construed as though used in the plural in all cases where they would so
apply.
22
<PAGE> 24
BENEFITS SCHEDULES
SERP I
Attained Age Upon
Termination Percentage
----------------- ----------
Less than 50 0%
50 30%
51 35%
52 40%
53 45%
54 50%
55 55%
56 60%
57 65%
58 70%
59 75%
60 80%
61 80%
62 80%
63 80%
64 80%
65 80%
More than 65 80%
The annual salary of a Member for purposes of determining the
Member's retirement benefits under SERP I (but not disability or survivor
benefits) shall not exceed $1,250,000, except as otherwise provided by the Board
of Directors. This limitation will be reviewed periodically by the Board of
Directors.
23
<PAGE> 25
BENEFITS SCHEDULES
SERP II
Attained Age Upon
Termination Percentage
- - ---------------- ----------
Less than 55 0%
55 30%
56 36%
57 42%
58 48%
59 54%
60 60%
61 64%
62 68%
63 72%
64 76%
65 80%
More than 65 80%
The annual salary of a Member for purposes of determining the
Member's benefits under SERP II, including retirement, disability and survivor
benefits, shall not exceed $600,000. This limitation will be reviewed
periodically by the Board of Directors.
24
<PAGE> 26
BENEFITS SCHEDULES
SERP III
Attained Age Upon
Termination Percentage
- - ----------------- ----------
Less than 55 0%
55 20%
56 24%
57 28%
58 32%
59 36%
60 40%
61 44%
62 48%
63 52%
64 56%
65 60%
More than 65 60%
The annual salary of a Member for purposes of determining the Member's benefits
under SERP III, including retirement, disability and survivor benefits, shall
not exceed $300,000. This limitation will be reviewed periodically by the Board
of Directors.
25
<PAGE> 1
Exhibit 11: Computation of Earnings Per Common Share
(in thousands, except per share data)
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
PRIMARY
Average common shares outstanding.............. 334,139 334,151 334,151
Net effect of dilutive stock options--based
on the treasury stock method using average
market price.................................. 11,849 8,278 4,744
--------- --------- ---------
Total........................................ 345,988 342,429 338,895
========= ========= =========
Net income..................................... $ 474,495 $ 353,099 $ 266,593
Less: preferred stock dividend requirements.... 14,055 1,469 -
--------- --------- ---------
Net income applicable to common stock.......... $ 460,440 $ 351,630 $ 266,593
========= ========= =========
Per common share amount........................ $ 1.33 $ 1.03 $ .79
========= ========= =========
FULLY DILUTED
Average common shares outstanding.............. 334,139 334,151 334,151
Net effect of dilutive stock options--based
on the treasury stock method using the higher
of ending or average market prices............ 15,222 9,976 4,833
--------- --------- ---------
Total........................................ 349,361 344,127 338,984
========= ========= =========
Net income..................................... $ 474,495 $ 353,099 $ 266,593
Less: preferred stock dividend requirements.... 14,055 1,469 -
--------- --------- ---------
Net income applicable to common stock.......... $ 460,440 $ 351,630 $ 266,593
========= ========= =========
Per common share amount........................ $ 1.32 $ 1.02 $ .79
========= ========= =========
</TABLE>
Earnings per common share is based on the weighted average number of common
shares outstanding during the period after consideration of the dilutive effect
of common stock options. Primary earnings per common share assumes the maximum
dilutive effect of common stock equivalents, using average market prices. Fully
diluted earnings per common share assumes the maximum dilutive effect of common
stock equivalents, using the higher of ending or average market prices.
<PAGE> 2
To the extent stock options are exercised or restricted shares are awarded
from time to time under the Corporation's 1991 Long-Term Incentive Plan, the
Board of Directors has approved the purchase on the open market or in privately
negotiated transactions of the number of shares issued.
For comparative purposes, earnings per common share and weighted average
common shares outstanding and common stock equivalents have been restated to
reflect the three-for-two split of the Corporation's Common Stock, effected in
the form of a dividend, issued January 1, 1997, to stockholders of record as of
December 16, 1996.
<PAGE> 1
EXHIBIT 12: COMPUTATION OF RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND
PREFERRED STOCK DIVIDENDS
(dollars in thousands)
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------------------------
1996 (b) 1995 1994 1993 (c) 1992
-------------------------------------------------------------
INCLUDING INTEREST ON DEPOSITS
<S> <C> <C> <C> <C> <C>
EARNINGS:
Income before income taxes .....................................$ 731,294 $ 584,601 $441,101 $190,624 $272,019
Fixed charges .................................................. 755,884 609,742 316,647 183,148 250,027
Interest capitalized during period, net of
amortization of previously capitalized interest .............. (2,370) (3,409) (683) (1,146) (440)
-------------------------------------------------------------
Earnings, for computation purposes .............................$1,484,808 $1,190,934 $757,065 $372,626 $521,606
=============================================================
FIXED CHARGES AND PREFERRED STOCK DIVIDENDS:
Interest on deposits, short-term borrowings,
and long-term debt and bank notes,
expensed or capitalized .......................................$ 746,008 $ 600,047 $308,242 $179,647 $237,287
Portion of rents representative of the interest factor ......... 9,876 9,695 8,405 3,501 12,740
-------------------------------------------------------------
Fixed charges .................................................. 755,884 609,742 316,647 183,148 250,027
Preferred stock dividend requirements (a) ...................... 23,269 2,432 -- -- --
-------------------------------------------------------------
Fixed charges and preferred stock dividends,
including interest on deposits, for computation purposes ......$ 779,153 $ 612,174 $316,647 $183,148 $250,027
=============================================================
Ratio of earnings to combined fixed charges and preferred stock
dividends including interest on deposits .................... 1.91 1.95 2.39 2.03 2.09
EXCLUDING INTEREST ON DEPOSITS
EARNINGS:
Income before income taxes .....................................$ 731,294 $ 584,601 $441,101 $190,624 $272,019
Fixed charges .................................................. 227,999 171,585 94,495 38,100 18,526
Interest capitalized during period net of
amortization of previously capitalized interest .............. (2,391) (3,430) -- (760) --
-------------------------------------------------------------
Earnings, for computation purposes .............................$ 956,902 $ 752,756 $535,596 $227,964 $290,545
=============================================================
FIXED CHARGES AND PREFERRED STOCK DIVIDENDS:
Interest on short-term borrowings,
and long-term debt and bank notes,
expensed or capitalized .......................................$ 218,123 $ 161,890 $ 86,090 $ 34,599 $ 5,786
Portion of rents representative of the interest factor ......... 9,876 9,695 8,405 3,501 12,740
-------------------------------------------------------------
Fixed charges .................................................. 227,999 171,585 94,495 38,100 18,526
Preferred stock dividend requirements (a) ...................... 23,269 2,432 -- -- --
-------------------------------------------------------------
Fixed charges and preferred stock dividends,
excluding interest on deposits, for computation purposes ......$ 251,268 $ 174,017 $ 94,495 $ 38,100 $ 18,526
=============================================================
Ratio of earnings to combined fixed charges and preferred stock
dividends excluding interest on deposits ..................... 3.81 4.33 5.67 5.98 15.68
</TABLE>
(a) Preferred stock dividend requirements are adjusted to represent a pretax
earnings basis.
(b) Income before income taxes for the year ended December 31, 1996, includes a
charge of $54.3 million related to the launch of the MBNA Platinum Plus
Visa and MasterCard program. Without the charge, the ratio of earnings to
combined fixed charges dividend requirements, including and excluding
interest on deposits, would have been 1.98 and 4.02, respectively.
(c) 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 of earnings to
combined fixed charges and preferred stock dividend requirements, including
and excluding interest on deposits, would have each been 2.85 and 9.92,
respectively.
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 have been 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.
<PAGE> 1
[MBNA CORPORATION LOGO]
- - --------------------------------------------------------------------------------
[PHOTO]
Platinum Plus Credit Cards
SUCCESS IS GETTING THE RIGHT CUSTOMERS . . .
AND KEEPING THEM.
- - --------------------------------------------------------------------------------
1996 ANNUAL REPORT
- - - - - -
<PAGE> 2
[MBNA CORPORATION LOGO]
- - --------------------------------------------------------------------------------
MBNA Is A Company Of People Committed To:
-----------------------------------------
Providing the Customer with the finest products backed by
consistently top-quality service.
-
Delivering these products and services efficiently, thus ensuring fair prices to
the Customer and a sound investment for the stockholder.
-
Treating the Customer as we expect to be treated--
putting the Customer first every day--and meaning it.
-
Being leaders in innovation, quality, efficiency, and Customer satisfaction.
Being known for doing the little things and the big things well.
-
Expecting and accepting from ourselves nothing short of the best. Remembering
that each of us, the people of MBNA, makes the unassailable difference.
Getting the right Customers and keeping them is the foundation of our business.
It demands a single-minded commitment to Customer satisfaction. Meeting this
commitment requires tough standards, good people, and constant attention to the
importance of each individual Customer. It means having an attitude. Introduced
during the summer of 1986, the precepts above express our attitude. They are
displayed throughout the company, and each person carries a copy. These words
have been reviewed every year since they were written and have never been
changed. They are simple and straightforward, and we mean every single word.
- - --------------------------------------------------------------------------------
<PAGE> 3
[PHOTO] Collage of Credit Cards
CONTENTS
- - --------------------------------------------------------------------------------
2 Financial Highlights
3 To Our Stockholders
4 Where We Are Today
6 Unique Marketing Proposition
8 MBNA's Business Development Sectors
10 Regionalization
11 How We Market
12 Credit
13 Technology
14 Putting Technology to Work
16 MBNA in the Community
18 MBNA Regional Centers
19 Financials
63 Senior Executives
64 Directors and Officers
<PAGE> 4
Earnings per Common Share Net Income
Earnings Income
(dollars) (millions)
87 0.22 87 74.7
88 0.27 88 90.1
89 0.31 89 104.1
90 0.39 90 129.1
91 0.44 91 149.2
92 0.51 92 172.7
93 0.62 93 207.8
94 0.79 94 266.6
95 1.03 95 353.1
96 1.33 96 474.5
Managed Loans (ending) Sales and Cash Advance Volume
Loans Loans
(billions) (billions)
87 3.2 87 5.3
88 4.5 88 7.3
89 5.7 89 9.1
90 7.4 90 11.5
91 8.8 91 12.9
92 9.9 92 14.5
93 12.4 93 17.9
94 18.7 94 25.1
95 26.7 95 34.3
96 38.6 96 48.7
- - --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1996 1995 1994 1993 1992
- - --------------------------------------------------------------------------------------------------------------------
(dollars in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C>
PER COMMON SHARE DATA FOR THE YEAR (a)
- - --------------------------------------------------------------------------------------------------------------------
Earnings ............................. $ 1.33 $ 1.03 $ .79 $ .62 $ .51
Dividends (b) ........................ .43 .37 .32 .28 .26
Book value ........................... 4.20 3.34 2.75 2.30 1.98
RATIOS
- - --------------------------------------------------------------------------------------------------------------------
Return on average assets ............. 3.26% 3.09% 3.16% 3.15% 2.96%
Return on average stockholders' equity 34.46 35.51 32.70 30.01 28.55
Stockholders' equity to total assets . 10.00 9.56 9.51 10.51 10.25
FINANCIAL STATEMENT DATA FOR THE YEAR
- - --------------------------------------------------------------------------------------------------------------------
Net interest income .................. $ 640,477 $ 544,226 $ 532,108 $ 474,323 $ 357,515
Other operating income ............... 1,895,923 1,424,618 1,013,580 739,968 577,505
- - --------------------------------------------------------------------------------------------------------------------
NET INCOME ........................... 474,495 353,099 266,593 207,796 172,732
- - --------------------------------------------------------------------------------------------------------------------
Deposits ............................. 10,151,686 8,608,914 6,632,489 5,241,883 4,568,791
Stockholders' equity ................. 1,704,308 1,265,058 919,578 769,131 661,290
MANAGED LOAN DATA
- - --------------------------------------------------------------------------------------------------------------------
Managed loans at year end ............ $38,623,533 $26,711,704 $18,743,864 $12,358,518 $ 9,860,129
Sales and cash advance volume ........ 48,666,129 34,272,909 25,078,918 17,889,747 14,523,570
- - --------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Per common share data has been restated to reflect the three-for-two split
of the Corporation's Common Stock, effected in the form of a dividend,
issued on January 1, 1997, to stockholders of record as of December 16,
1996.
(b) On January 14, 1997, the Board of Directors approved an increase of 12.5%
in the quarterly dividend to $.12 per common share.
[PHOTO]
Pictured left to right:
MBNA America
Vice Chairman
Bruce L. Hammonds,
John R. Cochran III,
M. Scot Kaufman,
and Lance L. Weaver.
<PAGE> 5
- - -------------------------------------------------------------------------------
TO OUR STOCKHOLDERS
This report presents MBNA's full-year results for 1996, our fifteenth year in
business. During 1996, earnings increased 34.4% to $474.5 million. Loans
outstanding grew to $38.6 billion, an $11.9 billion increase over year-end 1995.
We also added 7.5 million new accounts. Our MBNA Platinum Plus credit card,
launched in March, generated 2.8 million new Customers. The typical new MBNA
Customer during 1996 had a $60,000 average annual household income, owned a
home, was employed for 11 years, and had a 12-year history of paying bills on
time.
This year, all credit card issuers experienced rising loan losses. This is not
the first time MBNA has been through such a cycle, and it does moderately affect
us. However, our lending policies and methods remained consistent. As a result,
our losses continue to be well below the industry average. Throughout 1996, the
difference in credit quality between MBNA and others in our business became
clearer.
Over the past year, we continued to strengthen the company through investments
in new products and technologies. While much of the investment has been in our
primary business, credit card lending, significant investments were made in
several other businesses. We expanded our consumer finance business, introduced
new insurance products and formed an insurance sales subsidiary, and continued
to grow MBNA International, our bank located in the United Kingdom. MBNA
International now has more than 1 million Customers and $1.8 billion in loans.
[PHOTO]
Al Lerner and Charlie Cawley.
This year's annual report focuses on the things we did in 1996 that will
strengthen our company in the future.
Everything that happens at MBNA is the direct result of the commitment,
attitude, and hard work of each of the people who work here. We are very proud
of the people of MBNA and what they accomplished in 1996 and during the last 15
years. We're sure you are too.
We hope you enjoy this report and find it informative.
/s/ ALFRED LERNER /s/ CHARLES M. CAWLEY
Alfred Lerner Charles M. Cawley
Chairman and Chief Executive Officer President
MBNA Corporation MBNA Corporation
Chairman and Chief Executive Officer
MBNA America Bank, N.A.
<PAGE> 6
[PHOTO] Trae Ballou
MBNA is a company of people dedicated to providing top-quality products and
services. This is one way MBNA distinguishes itself in the credit card business.
- - --------------------------------------------------------------------------------
WHERE WE ARE TODAY
MBNA Corporation is a bank holding company that does business through MBNA
America Bank, N.A., and MBNA International Bank Limited. Like other national
banks, we take deposits and make loans. Our consumer finance business
(non-credit card) manages more than $3.0 billion in loans. Consumer finance
products include installment loans, home equity loans, and lines of credit
accessed by check. Our retail deposit business, which offers money market
accounts and certificates of deposit, totals $7.8 billion. We also provide
credit insurance to more than 1 million Customers and market Property and
Casualty products through our insurance agency.
But that's where the similarity to a traditional national bank ends. We don't
have a branch network. Our primary business is lending to individuals through
credit cards. Our credit card lending business has $35.3 billion in managed
loans, making MBNA the world's second-largest lender through bank credit cards.
We make loans through credit cards in the United States and the United Kingdom.
MBNA International, our subsidiary in the U.K., was started just 36 months ago
and already has extended $1.8 billion in loans to more than 1 million Customers.
Credit card lending is a good business. Credit cards free people from the need
to carry cash and let them have the things they need today while paying for them
out of future income. There is widespread demand for credit cards in the United
States and around the world. In the United States alone, there are at least 150
million people who could qualify for a credit card. And the market continually
refreshes itself as young people reach adulthood.
Credit cards are good for consumers, and they are good for the economy. Credit
cards help people pay for vacations, buy gifts, or have their cars repaired.
And, in turn, these expenditures benefit the economy by creating jobs, helping
to reduce unemployment, and stimulating economic growth.
The vast majority of people handle their credit cards perfectly--97% of people
pay their bills on time, and those who don't usually have had a disruption in
their lives such as a medical emergency or job loss. Some people have suggested
that credit card use is causing consumers to be financially irresponsible. All
too often, this discussion focuses solely on the very small percentage of people
who have had problems and not on the majority of people who use credit
responsibly.
Done right, credit card lending produces low-risk assets. MBNA's loans are
spread among millions of active borrowers. Our portfolio has no industry
concentrations, no geographic concentrations, and no individual account
concentrations.
The credit card business is very competitive, but there's plenty of room for us
to grow. Over the past six years, we've increased market share to 9% from 4% of
combined Visa and MasterCard outstanding loans.
In the credit card business, the key to success is getting the right Customers
and keeping them. If you're not good at both, nothing else matters. And we are
very good at both.
Six years ago, we became a public company. Earnings have grown to $474.5 million
in 1996 from $149.2 million in 1991, an average annual growth rate of 26%.
Successful expansion into the United Kingdom and development of non-credit card
consumer finance products here in the U.S. are broadening our Customer base.
[4] EXCELLENCE IS A POINT OF VIEW. IT ISN'T BRILLIANCE OR GETTING THE BREAKS.
IT'S CONSISTENT ATTENTION TO AND HONEST RESPECT FOR THE CUSTOMER.
<PAGE> 7
- - --------------------------------------------------------------------------------
Further, the expansion of our insurance business provides a solid opportunity
to increase non-interest income.
While growing rapidly, maintaining the quality of our loan portfolio is
essential. And we have done just that. The typical MBNA Customer has been
employed for 13 years, has an average annual household income of $60,000, has a
15-year history of paying bills promptly, and 81% own their own homes. Our
losses have remained well below industry averages--one-third less than the
losses of the typical bank credit card lender. Additionally, MBNA's Customers
continue to be very loyal. Our Customers use their cards more often and carry
balances 60% higher than the industry average.
At MBNA, we've established a solid foundation enabling us to continue producing
consistent results. We created a marketing franchise with thousands of
endorsements from membership organizations and expanded our regional marketing
centers, thus bringing us closer to Customers.
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------------------
OUR CUSTOMERS:
- USE US MORE: MBNA INDUSTRY
-------------------------------------------------------------------
<S> <C> <C>
Average account balance $3,256 $2,032
Average transactions per account 36 35
Average transaction $ 134 $ 89
- DEFAULT LESS:
-------------------------------------------------------------------
Loan losses per $1,000 of
average outstanding $ 34 $ 50
- - -----------------------------------------------------------------------------
</TABLE>
MBNA Customers are very loyal. They carry higher balances, spend more, and
demonstrate a greater willingness to repay than the typical customer of our
competitors.
Supported by an in-house advertising agency and the largest telemarketing
operation of any financial institution, we continue to find new ways to attract
Customers. We invested in technology and created state-of-the-art processing
systems dedicated solely to serving the needs of the company and its Customers.
And, most important, we continue to make credit decisions one Customer at a
time. As a result, MBNA's typical Customers have significantly better repayment
habits than the industry's typical customer.
[PHOTO] Two people completing credit card transaction.
MBNA Customers used their MBNA credit cards more than 350 million times in 1996
and spent $47 billion.
EVERYTHING STARTS WITH THE CUSTOMER. [5]
<PAGE> 8
MBNA CONSUMER FINANCE
MBNA markets consumer finance products the same way we market credit
cards--through the mail and over the phone to members of endorsing
organizations. Consumer finance products include lines of credit accessed by
check, installment loans, and home equity loans. During 1996, consumer finance
loans increased to $3.3 billion from $1.5 billion at the end of 1995. MBNA
Consumer Finance serves more than 800,000 Customers.
- - --------------------------------------------------------------------------------
UNIQUE MARKETING PROPOSITION
GETTING THE RIGHT CUSTOMERS
In 1982, we began selling our credit card products to people with a strong
common interest by marketing to members of endorsing groups. This concept is
known as affinity marketing. The first organization that endorsed MBNA's credit
card was the Georgetown University Alumni Association. Fifteen years later,
along with Georgetown's endorsement, we have the endorsement of more than 4,400
other membership organizations and financial institutions. The total membership
of these organizations and financial institutions is more than 150 million
people--a membership base that provides a marketing opportunity that is
unmatched in the credit card industry or any other industry. And these groups
endorse a variety of MBNA products, including credit cards, consumer loans,
money market accounts, certificates of deposit, and insurance. Our success in
affinity marketing has helped create an unassailable marketing franchise and
operation that generated more than 7.5 million new accounts in 1996--the most
ever added in one year by any issuer in this business.
Each day we work to strengthen the franchise. For example, we organize our sales
and market-ing efforts into 10 specific Business Development sectors. Each
sector is led by managers who have developed expertise in reaching a particular
audience, such as teachers or NFL fans. These managers work closely with their
organizations to implement marketing programs. This specialization has produced
consistent, profitable results in each of the 10 sectors.
[PHOTO]
Michelle Shepherd, Geralyn Volk, Frank Andrews, and Alan Scott
MBNA people work closely with each of the 4,400 membership organizations and
financial institutions that endorse MBNA products. Together, they develop
innovative marketing programs that target the interests of potential Customers.
[6] COMPLACENCY IS DEVASTATING.
<PAGE> 9
- - --------------------------------------------------------------------------------
[PHOTO] Collage of Credit Cards
In 1996, MBNA received the endorsement of 544 new membership organizations and
financial institutions, including 127 located in the United Kingdom.
One of the largest of these is the Professional sector. We have the endorsement
of more than 1,000 professional groups, including 35 state bar associations and
31 state medical societies. This sector generated more than 1 million accounts
in 1996. Our concentration on professionals has resulted in MBNA's credit card
being carried by 53% of all physicians, 24% of all nurses, 35% of all lawyers,
27% of all teachers, 26% of all engineers, 27% of all architects, and 60% of all
dentists in the United States.
In our Sports sector, we have almost 300 endorsements. Our focus on sports
endorsements has resulted in MBNA's credit card being the official card of the
National Football League, the National Hockey League, NASCAR, and the
Association of Tennis Professionals (ATP Tour).
MBNA is also the official card of 481 colleges and universities in the United
States. In 1996, 75 new colleges and universities, including the alumni
associations of Stanford University, the University of North Carolina at Chapel
Hill, the United States Military Academy, and Purdue University, chose to
endorse MBNA products.
The 800 endorsements in our Financial Institutions sector give us access to more
than 4,500 branches throughout the country where we market directly to
Customers.
Our International sector offers credit cards and loan products in the United
Kingdom, where we market our products the same way we do in the United States.
More than 400 organizations endorse MBNA International products. In 1996 alone,
we signed agreements with 127 new organizations. After only 36 months of
operation, we have $1.8 billion in outstanding loans.
We continue to strengthen our marketing franchise by acquiring new organizations
and financial institutions to endorse our products. In 1996, we obtained
endorsements from 544 new organizations. Accounts generated through the programs
we created in 1996 will drive our growth for years to come.
[PHOTO] Deposit Marketing Materials
MBNA also markets deposit products, such as money market accounts and
certificates of deposit, through the mail and over the telephone to members of
endorsing organizations.
ULTIMATELY, THE ONLY THING THAT REALLY COUNTS IS THE CUSTOMER. [7]
<PAGE> 10
- - --------------------------------------------------------------------------------
MBNA'S BUSINESS DEVELOPMENT SECTORS
[PHOTO] College and University Credit Cards
COLLEGES AND UNIVERSITIES More than 480 educational institutions endorse MBNA
products. Alumni and students from most of the nation's top schools, including
eight of the Big 10 and six of the PAC-10, carry MBNA credit cards. In 1996,
MBNA received the endorsement of 75 colleges and universities, including the
alumni associations of Stanford University and the University of North Carolina
at Chapel Hill.
[PHOTO] Special Interest Credit Cards
SPECIAL INTEREST MBNA markets its products to the members of 400 cause-related
and special-interest groups and has 2.4 million Customers in this sector.
Endorsements include, for example, The Nature Conservancy, the National Wildlife
Federation, and The Cleveland Clinic Foundation.
[PHOTO] International Credit Cards
INTERNATIONAL In just three years of marketing credit cards internationally,
MBNA has $1.8 billion in outstanding loans, more than 1 million Customers, and
endorsements from more than 400 organizations. New groups signed in 1996 include
Oxford Limited and The Royal College of Surgeons of England.
[PHOTO] Motorsports Credit Cards
MOTORSPORTS More than 300 motorsports groups, including NASCAR, Indianapolis
Motor Speedway, and the National Hot Rod Association, endorse MBNA. Nearly 1.5
million Customers demonstrate their loyalty by using the card of their favorite
motorsport or hobby. MBNA's sponsorship of a NASCAR team helped generate 300,000
new accounts in this sector in 1996.
[PHOTO] Professional Credit Cards
PROFESSIONAL More than 1,000 professional organizations endorse MBNA credit
cards carried by 53% of all physicians, 24% of all nurses, 35% of all lawyers,
26% of all engineers, 27% of all architects, and 60% of all dentists in the
United States. This is MBNA's largest sector with 4.5 million Customers and
almost $9.0 billion in outstanding loans.
[8] EXCELLENCE DOES NOT COME BY CHANCE . . .
<PAGE> 11
- - --------------------------------------------------------------------------------
[PHOTO] Sports Credit Cards
SPORTS Sports continues to be one of MBNA's fastest growing and most exciting
marketing sectors. We now market to the loyal fans of almost 300 sports teams,
and we are the official credit card issuer of the National Football League, the
National Hockey League, and the Association of Tennis Professionals (ATP Tour).
[PHOTO] Military and Law Enforcement Credit Cards
MILITARY AND LAW ENFORCEMENT MBNA markets to individuals associated with
military institutions and law enforcement organizations--for example, the U.S.
Naval Academy Alumni Association, the National Association of Chiefs of Police,
and the California State Firefighters Association.
[PHOTO] Financial Institution Credit Cards
FINANCIAL INSTITUTIONS MBNA offers credit cards to 17 million Customers of 800
financial institutions throughout the country. With MBNA's efficiencies and
marketing expertise, Customers of these banks have opened 1.4 million MBNA
credit card accounts.
[PHOTO] Alliance Credit Cards
ALLIANCE In 1996, MBNA formed 34 new relationships with prominent businesses,
including L.L.Bean, Gateway 2000, and Ringling Bros. and Barnum & Bailey, that
offer enhancements based on Customer loyalty. MBNA has also developed alliances
in the travel industry with American Historic Inns, The Bermuda Club, and the
Myrtle Beach credit card programs.
[PHOTO] Education Credit Cards
EDUCATORS Nearly 1.2 million or 27% of all teachers in the United States use an
MBNA credit card. More than 60 educator groups, including the National Education
Association, the National Association for the Education of Young Children, and
the National Association of Elementary School Principals, endorse MBNA products.
. . . IT COMES BY CHOICE. [9]
<PAGE> 12
[PHOTO] MBNA International Facility
MBNA INTERNATIONAL
Our European center, opened in November of 1993, is located in Chester,
England. In its first 36 months of operation, MBNA International has generated
more than 1 million Customers and $1.8 billion in outstanding loans in the
United Kingdom. MBNA products are currently endorsed by more than 400 U.K.
organizations. In late 1996, MBNA announced plans to open another international
office in Dublin, Ireland. MBNA also announced plans to open a bank in Canada
during 1997.
REGIONALIZATION
GETTING CLOSER TO OUR CUSTOMERS
In 1992, MBNA strengthened its commitment to getting the right Customers and
keeping them when we began regionalizing the company. This strategy enables us
to identify potential Customers by enhancing our familiarity with local
markets, to better understand the needs and motivations of MBNA Customers and
affinity groups, and to keep in close touch with what local competitors are
doing.
MBNA now has Northern, Southern, Southwestern, Central, and Mid-Atlantic
regional centers and sales offices in New York City, Chicago, Washington, D.C.,
and San Francisco. Because of the enthusiastic efforts of the people in those
offices, MBNA received the endorsement of many prominent groups in 1996--for
example, L.L.Bean in our Northern region, Rock and Roll Hall of Fame + Museum in
our Central region, and The General Alumni Association of the University of
North Carolina at Chapel Hill in our Southern region. During 1997, we will
expand further by adding a Western regional center in Scottsdale, Arizona.
Regional centers also enable us to identify local opportunities to develop new
Customer relationships. One such example is our "Don't mess with Texas" credit
card. The idea for the program was developed by a marketing manager in our
Southwestern regional center in Dallas. Today this program has more than 244,000
accounts. Similar success was achieved by our Southern regional center, which
began marketing an Olympic Games card in 1994 and helped us acquire 184,000
accounts--more than any other Visa issuer. Examples of other successful regional
NORTHERN
[PHOTO] Camden, Maine Facility
CAMDEN, MAINE. The Northern regional center, opened in 1993, includes a
regional marketing office located in Camden, Maine,
and an operations center located in Belfast, Maine.
SOUTHWESTERN
[PHOTO] Dallas, Texas Facility
DALLAS, TEXAS. The Southwestern regional center, located in Dallas, Texas,
includes regional marketing and MBNA Hallmark Information Services, Inc.
CENTRAL
[PHOTO] Beachwood, Ohio Facility
BEACHWOOD, OHIO. The Central regional center, opened in 1993,
is located in Beachwood, Ohio.
SOUTHERN
[PHOTO] Boca Raton, Florida Facility
BOCA RATON, FLORIDA. The Southern regional center is located in our new
facility in Boca Raton, Florida.
MID-ATLANTIC
[PHOTO] Hunt Valley, Maryland Facility
HUNT VALLEY, MARYLAND. The Mid-Atlantic regional center will be located in our
new facility in Hunt Valley, Maryland.
[10] WHAT GETS ATTENDED TO GETS DONE.
<PAGE> 13
- - --------------------------------------------------------------------------------
HOW WE MARKET
[PHOTO]
Tom McGinley and Nick Primola
MBNA's person-to-person sales efforts generated more than 400,000 new accounts
in 1996.
programs include the Great Lakes Boating and Sailing cards, the Preserve New
England card, and the Chesapeake Bay Foundation card.
All of these programs were developed through a very precise and intense focus
on Customers based on where they live. Regionalization of our marketing and
sales efforts has both strengthened our relationships with membership
organizations and provided another means to develop marketing programs targeted
at a person's interests.
AN INTEGRATED MARKETING APPROACH
Our work doesn't stop after we've signed the right group or developed a concept
to market a product based on a person's interests. It takes marketing to get the
right Customer. In 1996, we acquired more than 7.5 million new accounts. We
approach Customers in a variety of ways, including through the mail, over the
phone, through television or other media, and in person at events.
Direct mail remains one of the most effective ways of marketing. But unlike many
of our competitors who rely on a few large mailings each year, MBNA customizes
each mailing for the 4,400 groups and hundreds of common-interest and regional
programs. Because of the complexity of our needs, outside advertising agencies
find it difficult to meet MBNA's standards. So we rely on a full-service,
in-house advertising agency. MBNA Advertising developed more than 6,000 separate
mailings and more than 1,000 separate media campaigns in 1996. Internal design
and production of these programs enable the company's marketing managers to work
closely with the advertising agency. The results are creative, targeted, and
cost-effective mailings that produce very consistent results. For example, in
early 1996 we successfully launched the MBNA Platinum Plus Visa and MasterCard
program. To support this new product, MBNA Advertising produced a mail campaign
that, along with telemarketing follow-up, generated 2.8 million MBNA Platinum
Plus Customers in just nine months of marketing. The outstanding characteristics
of these Customers--$89,000 average annual household income and a 14-year
history of paying bills promptly--enhanced the already exceptional
characteristics of MBNA's existing portfolio.
We have also established the largest telephone sales operation of any financial
institution--MBNA Marketing Systems, Inc. Telephone sales units in Delaware,
Pennsylvania, Florida, Maine, Ohio, Maryland, Texas, and Georgia produced
millions of accounts in 1996. Each telephone call was customized based on the
Customer's group affiliation or interests. Additionally, we attended 4,000
events in 1996 and through person-to-person marketing efforts generated hundreds
of thousands of accounts. Success with programs like the National Football
League helped us get the endorsement of the National Hockey League.
Our success with affinity marketing goes well beyond credit cards. During 1996,
we increased marketing of consumer finance products. The combination of MBNA's
affinity franchise and diversified acquisition methods helped us increase this
portfolio to $3.3 billion in loans
MBNA INSURANCE SERVICES
MBNA Insurance Services, formed in 1996 to market new insurance products to MBNA
Customers and members of endorsing organizations, is located in Greenville,
Delaware. MBNA Insurance Services has more than 1 million insured Customers and
in 1996 generated $100 million in premiums primarily through credit insurance.
In October of 1996, Insurance Services began marketing MBNA's first Property and
Casualty product, automobile insurance, which is underwritten by TIG Insurance
with MBNA acting as an agent. We will be marketing additional insurance products
during 1997.
[PHOTO] Platinum Plus Marketing Materials
The typical MBNA Platinum Plus credit card Customer has an $89,000 average
annual household income and a 14-year history of paying bills on time.
THINK OF YOURSELF AS A CUSTOMER. [11]
<PAGE> 14
[PHOTO]
Jack Hewes
Each of the 7.5 million new loans approved in 1996 was individually evaluated by
an experienced credit analyst.
- - --------------------------------------------------------------------------------
CREDIT
LOAN LOSS COMPARISON
[CHART] Five year Loan Loss Comparison to VISA Peer and Total VISA
As a result of MBNA's ability to get the right Customers, our credit losses
remain well below industry averages.
at year-end 1996. We also began marketing new insurance products with the launch
of our first Property and Casualty product, automobile insurance. We now have
more than 1 million Customers insured through MBNA Insurance Services.
Additionally, we continue to offer money market accounts and certificates of
deposit through the mail and over the phone, with $7.8 billion in retail
deposits at year-end.
A PERSONALIZED APPROACH TO LENDING
MBNA's unique marketing proposition gets us the right applicants. The next step
in ensuring that MBNA gets the right Customers is effective lending.
Most credit card issuers use computerized scoring and evaluation processes, with
no consideration of a Customer's personal situation, when making credit
decisions. MBNA issues credit the old-fashioned way--with people. At MBNA,
credit decisions are made by combining sophisticated technology and highly
predictive models with the insight of a credit professional. This approach is a
cornerstone of our success and will continue to be in the future.
Each credit professional looks at all the factors included in an application and
makes an individual decision. Like a computer, the analyst may decide yes or no.
But unlike a computer, an analyst can decide maybe. Maybe happens about 25% of
the time. When a credit analyst says maybe, he or she calls the applicant to
develop the additional information necessary to change the answer to yes or no.
A computer would make a decision without getting this additional
information--information that is fundamental to making the right credit
decision.
This process ensures that people who should get an MBNA credit card get one--and
those who shouldn't, don't. Fewer than half of all applicants qualify for an
MBNA card. Those who do, receive the right credit lines--lines that properly fit
their specific circumstances. This personal approach to credit evaluation gets
our relationship with a new Customer off to the right start and has resulted in
lending losses that are consistently below industry-wide averages.
[12] MBNA AMERICA--15,000 PEOPLE WITH AN ATTITUDE . . .
<PAGE> 15
- - --------------------------------------------------------------------------------
TECHNOLOGY
TECHNOLOGY THAT MEETS OUR BUSINESS NEEDS
At MBNA, we develop our own systems and technology. In 1996, these systems
supported the processing of 5 billion online transactions, the generation of
125 million statements and letters, the issuance of 15 million credit cards,
and responses to 200 million telephone calls. To deal effectively with this
volume, a sophisticated technological environment is required. MBNA systems
consist of mainframe computers, more than 200 distributed computers, and 13,000
networked personal computers. These systems are backed by more than 1,000
programmers dedicated exclusively to the development and support of MBNA
systems.
We develop technology internally to ensure the reliability, quality, and
responsiveness of the computer and telecommunication systems we use to satisfy
our Customers. With MBNA's unique approach to the credit card business,
controlling which new systems or enhancements are developed and when and how
they are implemented is critical to meeting our objectives. In 1996, we made
more than 100,000 improvements to MBNA systems and invested more than $90
million in new technology.
Many of the changes we make to our systems are the result of specific programs
developed for the 4,400 organizations that endorse our products. A program
designed for Sierra Club has different marketing and service requirements than
a program for the National Hockey League. A successful affinity credit card
program requires a system flexible enough to support many customized marketing
and service strategies. For example, after signing L.L.Bean in early 1996, we
rapidly modified our internal systems to support the Customer benefits that are
part of that program.
We also further enhanced the technology we use when we make lending decisions.
We implemented an imaging system that enables credit analysts to view Customers'
applications online. This improvement, along with other enhancements to our
lending systems, helps ensure that we continue to select the right Customers.
Technology supports every aspect of MBNA's business, and we have a long-term
commitment to investing in state-of-the-art systems that enable us to satisfy
our Customers.
DIVERSIFIED FUNDING
MBNA continues to broaden and diversify its funding sources in the U.S. market
and internationally. To fund our growth, we issue bank notes, senior debt,
adjustable-rate preferred stock, trust preferred securities, and we continue to
expand our deposit base.
During 1996, asset-backed securitizations continued to be an important source
of funding. We issued more than $11.3 billion of asset-backed securities,
bringing outstanding securitizations to $28.5 billion at year-end. MBNA issued
the first 10-year floating-rate credit card asset-backed securitization and our
first deutsche mark-denominated securitization. Both of these transactions were
extremely successful, attracting many new foreign investors. MBNA sold these
securities at rates below those of our competitors as a result of the quality
of MBNA's loan portfolio and our reputation in the market.
Funding sources in the United Kingdom were also expanded to support the
continued growth of MBNA International. MBNA International completed two
sterling-denominated credit card securitizations backed by sterling
receivables.
[PHOTO] Selective Statement Insertion Machine
MBNA's selective statement insertion technology gives us the ability to
customize individual Customer statements.
. . . SATISFY THE CUSTOMER. [13]
<PAGE> 16
- - --------------------------------------------------------------------------------
PUTTING TECHNOLOGY TO WORK
[PHOTO] Electronic Imaging System
ELECTRONIC IMAGING MBNA images credit applications, monthly statements, and
Customer correspondence, making them instantly available on our computer systems
and enabling us to reduce significantly the time it takes to process a credit
application, research a billing dispute with a merchant, or verify a
transaction. MBNA uses this technology in Customer-contact areas to streamline
procedures and enable operating areas to communicate more effectively with the
Customer and each other.
[PHOTO] Technology Centers
TECHNOLOGY CENTERS MBNA develops and maintains its technology in-house,
ensuring the highest levels of responsiveness, quality, and control. MBNA's
mainframe computer complex is centered in our Dallas, Texas, technology
facility, and our distributed computer complexes are centered in Newark,
Delaware.
[PHOTO] Computer Equipment
DATABASE MARKETING MBNA's state-of-the-art marketing database gives us the
capability to design specific marketing programs for the 4,400 organizations
that endorse our products.
[PHOTO] Customized Cards
CUSTOMIZED CARDS MBNA produced more than 15 million highly individualized cards
from our stock of 12,000 card types and our Customer-selected picture card
technology. This type of mass customization is essential when marketing to our
affinity groups.
[PHOTO] Neural Network
NEURAL NETWORKS MBNA's neural network instantly analyzes thousands of credit
card transactions every day to help identify and prevent fraud. Our systems
track billions of transactions providing Customer Satisfaction representatives
with crucial real-time data.
[14] IT IS ALWAYS THE THOUSANDS OF LITTLE THINGS DONE RIGHT THAT ADD UP TO THE
UNASSAILABLE ADVANTAGE.
<PAGE> 17
- - --------------------------------------------------------------------------------
[PHOTO] MBNA's Web Site
INTERNET MBNA's Web site address is www.mbnainternational.com. We market our
products through our 4,400 affinity relationships and take applications directly
online from interested applicants. And we supply our toll-free telesales number
for Customers to call for additional information.
[PHOTO] Telecommunication Wires
TELECOMMUNICATIONS MBNA's advanced telecommunications network uses
state-of-the-art voice and data technology, a key component in being able to
provide the ultimate levels of service to our Customers. In 1996, this network
handled 200 million telephone calls in the support of our Customer service and
telesales areas.
[PHOTO] Systems Management Facility
SYSTEMS MANAGEMENT MBNA's highly sophisticated twin command centers in Texas
and Delaware continually monitor system performance--24 hours a day, 7 days a
week, 365 days a year. We have more than 1,000 in-house programmers all
dedicated to the development and support of MBNA systems.
[PHOTO] Customer Satisfaction Workstation
CUSTOMER SATISFACTION WORKSTATION MBNA's Customer Satisfaction Super Station
lets telephone representatives see a caller's account without having to ask for
the complete account number and consolidates a wide variety of Customer
information from multiple systems. For example, the Super Station automatically
alerts representatives if the caller qualifies for an instant credit line
increase or is a candidate for access checks.
[PHOTO] Customized Statement
CUSTOMIZED STATEMENT In 1996, MBNA produced 125 million individualized
statements and letters using our selective statement insertion system.
Customized statement inserts provide endorsing groups another way of communi-
cating with their members.
ABOVE ALL, WE WANT A REPUTATION FOR DOING THE LITTLE THINGS WELL . . . [15]
AND THE BIG THINGS WILL FOLLOW.
<PAGE> 18
- - --------------------------------------------------------------------------------
MBNA IN THE COMMUNITY
A COMPANY OF PEOPLE WHO LIKE PEOPLE
MBNA is a company of people who like people. So, it follows logically that MBNA
people get enthusiastically involved in the communities where they live and
work. Participation in community activities on company time is actively
encouraged. Volunteering is the right thing to do, and we know the benefit to
the company far exceeds the cost of the volunteers' time away from work.
How do we choose the organizations we support? Our decisions are inspired by a
question posed by a remarkable man named Brother Ronald Giannone, O.F.M.
Capuchin. Brother Ronald simply asks, "Who needs help the most?" Asking that
question led him to found The Ministry of Caring Inc., which today encompasses
11 specific ministries in Delaware that provide immediate solutions for such
problems as hunger and homelessness. MBNA people contribute their time to each
of these ministries and to countless other community groups. In all, MBNA
people spent more than 150,000 hours in 1996 assisting people in need,
including children, the homeless, and the elderly.
[PHOTO]
Michael Scanlan, Paul Parris, Brian Lofink
Education is an important part of MBNA's commitment to the community and its
people. Pictured above is Michael Scanlan, Director of Community Relations,
meeting with recent recipients of MBNA college scholarships. Both students are
currently attending the University of Delaware.
Much of our community involvement is focused on supporting educational
initiatives. The MBNA Scholars Foundation provides college scholarships and
educational grants to economically disadvantaged students in Delaware. In
collaboration with the University of Delaware, MBNA participates in the Fortune
2000 program that offers scholarships, MBNA internships, and mentoring to
minority students studying business.
MBNA also supports St. Benedict's Preparatory School in Newark, New Jersey.
Students there are given an opportunity, at the completion of their junior year,
to participate in educational, summer workstudy, and graduate workshop programs.
Many receive summer internships throughout college and begin their careers at
MBNA following graduation. In Chicago, MBNA people mentor Daniel Murphy
Scholarship Foundation recipients--economically disadvantaged eighth-grade
students who demonstrate high academic potential. More than two dozen MBNA
people tutor fifth- and sixth-grade students in Cleveland's Randallwood
Elementary School. MBNA people in Camden, Maine, act as Big Brothers and Big
Sisters to students at Camden-Rockport High School, helping them with career
goals, applying to colleges, and scholarship opportunities. MBNA people in
Belfast, Maine, assisted parents in renovating the Peirce School playground. And
at the Howard High School of Technology in Wilmington, MBNA people participated
in several programs in support of education for students and teachers.
Wherever you find MBNA people, you'll find them lending a helping hand. MBNA
people in Cleveland volunteered at the Special Needs Festival, an Olympic-style
competition for specially challenged athletes. Camden and Belfast, Maine,
volunteers set up dining rooms serving hot meals and developed friendships with
the homebound elderly.
[16] IF EVERY COMPANY IS A PORTRAIT OF ITS PEOPLE . . .
<PAGE> 19
- - --------------------------------------------------------------------------------
[PHOTO]
Fred Wittig, a Francis X. Norton Community Service Award recipient, reads with
children through the Child, Inc., program. The award was named in honor of the
MBNA person who has dedicated his life to serving people.
In Baltimore, the Ark Daycare Center received assistance from MBNA people who
read during story time to the children in local shelters. At The Ministry of
Caring Child Care Center in Wilmington, MBNA scholarships allow students to
participate in early-childhood programs while their parents pursue educational
and employment opportunities.
People from our Orono, Maine, telesales office organized a telemarketing effort
for the Children's Miracle Network Telethon and a ski-a-thon for the Greater
Bangor Area Homeless Shelter. MBNA International people work with the Blacon
Project, a self-help program in Chester, England. In Dover, Delaware, MBNA
people serve as mentors for clients of Mom's House, a licensed day care center
that offers free child care to infants and toddlers so their parents can return
to school.
Bryan's House in Dallas provides child care and family services to those who are
affected by HIV/AIDS. MBNA volunteers participate in Bryan's Little Socks of
Love campaign and prepare lunch for the children twice a month.
And through the Meals on Wheels program, MBNA people served more than 10,000 hot
meals to the homebound elderly in Delaware, Texas, Maine, and Ohio in 1996.
These are a few examples of the many ways the people of MBNA support their
communities with volunteer time and financial aid. Some might call this level
of commitment extraordinary. At MBNA, it's business as usual.
MBNA SCHOLARS FOUNDATION
The MBNA Scholars Foundation was created as part of our commitment to help
provide education in settings that promote achievement and success. These
programs are designed to further MBNA's continuing dedication to support
education.
The foundation, which has initial five-year financing of $30 million in
contributions from the Corporation and its individual officers, has two major
components. The MBNA Excellence In Education Grants Program provides grants to
teachers and schools for the development of results-oriented academic
initiatives. The MBNA College Scholarship Program provides college scholarships
to help ensure that students acquire higher education regardless of financial
status.
Additionally, a new college and career counseling and mentoring service offered
by MBNA complements the scholarship and grants programs to further assist
students outside the classroom.
. . . MBNA IS A MASTERPIECE. [17]
<PAGE> 20
- - --------------------------------------------------------------------------------
MBNA
[MAP] Map indicating MBNA's Headquarter's, Regional Centers and District Sales
Offices.
HEADQUARTERS
X MBNA Headquarters
Wilmington, DE 19884
(800) 441-7048
REGIONAL CENTERS
* Northern Region
32 Washington St.
Camden, ME 04843
(800) 386-6262
* Central Region
25875 Science Park Dr.
Beachwood, OH 44122
(800) 410-6262
* Mid-Atlantic Region
11333 McCormick Rd.
Hunt Valley, MD 21030
* Southern Region
1501 Yamato Rd.
Boca Raton, FL 33431
(800) 841-6845
* Southwestern Region
16001 N. Dallas Pkwy.
Dallas, TX 75248
(800) 435-9672
* Western Region
Scottsdale, AZ
(To open in 1997)
* European Region
Stansfield House
Chester Business Park
Wrexham Rd.
Chester, Cheshire
CH49QQ
United Kingdom
(011) 44-1244-672000
DISTRICT SALES OFFICES
+ 676 North Michigan Ave.
Chicago, IL 60611
(800) 906-6262
+ 9 W. 57th St.
New York, NY 10019
(800) 746-6262
+ 800 Connecticut Ave., NW
Washington, DC 20006
(800) 789-6262
+ 44 Montgomery St.
San Francisco, CA 94104
(800) 585-4956
+ 86 Jermyn St.
London SW1Y6JD
United Kingdom
(011) 44-171-389-6200
+ Dublin, Ireland
(To open in 1997)
KEY
X Headquarters
* Regional Centers
+ Sales Offices
[18]
<PAGE> 21
[PHOTO] Financial Market
MBNA Corporation and Subsidiaries
FINANCIAL CONTENTS
20 Ten-Year Statistical Summary
22 Glossary of Financial Terms
23 Management's Discussion and Analysis of Financial Condition and Results of
Operations
36 Supplemental Financial Information
37 Management's Report on Consolidated Financial Statements and Internal
Control
38 Consolidated Statements of Financial Condition
39 Consolidated Statements of Income
40 Consolidated Statements of Changes in Stockholders' Equity
41 Consolidated Statements of Cash Flows
42 Notes to the Consolidated Financial Statements
60 Report of Independent Auditors
61 Quarterly Data
62 Stock Price Ranges and Dividends
<PAGE> 22
MBNA CORPORATION AND SUBSIDIARIES
TEN-YEAR STATISTICAL SUMMARY
- - --------------------------------------------------------------------------------
(dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
- - ----------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1996 1995 1994 1993
- - ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCOME STATEMENT DATA FOR THE YEAR
Net interest income......................... $ 640,477 $ 544,226 $ 532,108 $ 474,323
Provision for possible credit losses........ 178,224 138,176 108,477 98,795
Other operating income...................... 1,895,923 1,424,618 1,013,580 739,968
Other operating expense..................... 1,572,551 1,246,067 996,110 774,872
Net income (a).............................. 474,495 353,099 266,593 207,796
PER COMMON SHARE DATA FOR THE YEAR (b)
Earnings (c)................................ $ 1.33 $ 1.03 $ .79 $ .62
Dividends................................... .43 .37 .32 .28
Book value.................................. 4.20 3.34 2.75 2.30
RATIOS
Return on average total assets.............. 3.26% 3.09% 3.16% 3.15%
Return on average stockholders' equity...... 34.46 35.51 32.70 30.01
Average receivables to average deposits..... 92.50 91.60 93.05 85.34
Stockholders' equity to total assets........ 10.00 9.56 9.51 10.51
Loan portfolio:
Delinquency (e).......................... 3.59 3.11 2.60 3.03
Net credit losses........................ 1.98 1.91 1.96 2.43
Managed loans (f):
Delinquency.............................. 4.28 3.70 3.03 3.27
Net credit losses........................ 3.35 2.74 2.59 2.97
Net interest margin (g).................. 7.62 7.42 8.16 8.47
MANAGED LOAN DATA (f)
At year end:
Loans held for securitization............ $ 2,469,974 $ 3,168,427 $ 2,299,026 $ 741,869
Loan portfolio........................... 7,659,078 4,967,491 3,407,974 3,725,509
Securitized loans........................ 28,494,481 18,575,786 13,036,864 7,891,140
------------- ------------- ------------- -------------
Total managed loans................... $ 38,623,533 $ 26,711,704 $ 18,743,864 $ 12,358,518
============= ============= ============= =============
Average:
Loans held for securitization............ $ 2,529,484 $ 2,269,362 $ 1,330,011 $ 642,750
Loan portfolio........................... 6,174,095 4,792,536 4,000,271 3,425,935
Securitized loans........................ 22,514,014 15,440,499 9,462,401 6,596,387
------------- ------------- ------------- -------------
Total managed loans................... $ 31,217,593 $ 22,502,397 $ 14,792,683 $ 10,665,072
============= ============= ============= =============
For the year:
Sales and cash advance volume.............. $ 48,666,129 $ 34,272,909 $ 25,078,918 $ 17,889,747
BALANCE SHEET DATA AT YEAR END
Investment securities and money market
instruments ............................... $ 3,194,664 $ 2,669,402 $ 2,269,081 $ 1,440,684
Loans held for securitization............... 2,469,974 3,168,427 2,299,026 741,869
Credit card loans........................... 5,722,299 4,090,553 2,882,232 2,949,995
Other consumer loans........................ 1,936,779 876,938 525,742 775,514
------------- ------------- ------------- -------------
Total loans.............................. 7,659,078 4,967,491 3,407,974 3,725,509
Reserve for possible credit losses.......... (118,427) (104,886) (101,519) (97,580)
------------- ------------- ------------- -------------
Net loans................................ 7,540,651 4,862,605 3,306,455 3,627,929
Total assets................................ 17,035,342 13,228,889 9,671,858 7,319,756
Total deposits.............................. 10,151,686 8,608,914 6,632,489 5,241,883
Long-term debt and bank notes............... 3,950,358 2,657,600 1,687,357 779,553
Stockholders' equity........................ 1,704,308 1,265,058 919,578 769,131
AVERAGE BALANCE SHEET DATA
Investment securities and money market
instruments................................ $ 2,927,351 $ 2,451,783 $ 1,684,316 $ 1,364,350
Loans held for securitization............... 2,529,484 2,269,362 1,330,011 642,750
Credit card loans........................... 4,907,814 4,160,230 3,207,110 2,735,191
Other consumer loans........................ 1,266,281 632,306 793,161 690,744
------------- ------------- ------------- -------------
Total loans.............................. 6,174,095 4,792,536 4,000,271 3,425,935
Reserve for possible credit losses.......... (111,041) (103,568) (99,175) (97,580)
------------- ------------- ------------- -------------
Net loans................................ 6,063,054 4,688,968 3,901,096 3,328,355
Total assets................................ 14,571,288 11,425,721 8,432,511 6,596,419
Total deposits.............................. 9,408,843 7,709,840 5,728,432 4,767,669
Long-term debt and bank notes............... 3,029,250 2,212,591 1,199,520 537,609
Stockholders' equity........................ 1,377,072 994,287 815,243 692,460
Weighted average common shares outstanding and
common stock equivalents (000) (b)......... 345,988 342,429 338,895 337,830
- - ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The consolidated financial statements for the years ended prior to December 31,
1991, reflect the combined results of the "Credit Card and Certain Related
Banking Activities of MBNAAmerica Bank, N.A., and Certain Affiliates" prior to
the organization of MBNA Corporation ("the Corporation"). The consolidated
financial statements for the years ended December 31, 1991, and thereafter
reflect the independent Corporation.
(a) Net income for the year ended December 31, 1996, includes a $32.8 million
tax benefit related to deductions for the amortization of Customer-based
intangible assets acquired in connection with the 1991 initial public
offering of the Corporation's Common Stock, and a charge of $32.8 million
net of tax ($54.3 million pretax) related to the launch of the MBNA
Platinum Plus Visa and MasterCard program. Net income for the year ended
December 31, 1993, includes an $89.8 million tax benefit related to the
recognition of tax deductions for the amortization of Customer-based
intangible assets acquired in connection with the 1991 initial public
offering of the Corporation's Common Stock. Net income for the year ended
December 31, 1993, also includes a charge of $150.0 million ($92.9 million,
net of tax) for the termination of a marketing agreement with an
independent third-party marketing organization.
(b) Per common share data and weighted average common shares outstanding and
common stock equivalents have been restated to reflect the three-for-two
split of the Corporation's Common Stock, effected in the form of a
dividend, issued January 1, 1997, to stockholders of record as of the close
of business on December 16, 1996.
[20]
<PAGE> 23
MBNA CORPORATION AND SUBSIDIARIES
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- - ----------------------------------------------------------------------------------------------------------------------------
1992 1991 1990 1989 1988 1987
- - ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 357,515 $ 239,599 $ 164,315 $ 116,754 $ 149,641 $ 172,062
97,534 86,723 57,951 43,319 63,262 65,859
577,505 540,708 451,863 343,551 254,828 168,281
565,467 459,035 354,462 258,357 203,853 145,822
172,732 149,213 128,998 104,109 90,065 74,697
$ .51 $ .44 $ .39 $ .31 $ .27 $ .22
.26 .24 (d) (d) (d) (d)
1.98 1.77 (d) (d) (d) (d)
2.96% 2.79% 3.87% 4.13% 3.55% 3.01%
28.55 28.55 (d) (d) (d) (d)
69.98 71.77 103.51 124.73 153.30 218.10
10.25 9.86 (d) (d) (d) (d)
3.78 4.39 4.15 3.52 3.33 3.64
2.87 2.65 1.79 1.77 1.99 2.10
3.99 4.40 4.52 3.66 3.59 3.00
3.33 3.05 2.21 1.97 1.85 2.04
7.22 6.36 6.55 5.77 6.56 6.40
$ 678,000 $ 600,000 $ 567,000 $ 418,800 $ - $ -
3,300,650 2,886,405 2,672,733 1,842,473 1,906,947 2,503,479
5,881,479 5,327,901 4,137,950 3,456,587 2,600,182 682,172
- - ------------- ------------- ------------- ------------- ------------- -------------
$ 9,860,129 $ 8,814,306 $ 7,377,683 $ 5,717,860 $ 4,507,129 $ 3,185,651
============= ============= ============= ============= ============= =============
$ 733,473 $ 560,447 $ 707,632 $ 215,223 $ - $ -
2,659,305 2,707,535 1,907,208 1,782,051 2,280,480 2,357,752
5,528,394 4,563,279 3,798,409 2,898,169 1,360,452 197,175
- - ------------- ------------- ------------- ------------- ------------- -------------
$ 8,921,172 $ 7,831,261 $ 6,413,249 $ 4,895,443 $ 3,640,932 $ 2,554,927
============= ============= ============= ============= ============= =============
$ 14,523,570 $ 12,915,104 $ 11,541,181 $ 9,075,967 $ 7,256,735 $ 5,335,784
$ 1,345,995 $ 1,768,048 $ 540,660 $ 151,973 $ 97,386 $ 26,262
678,000 600,000 567,000 418,800 - -
2,659,007 2,299,912 2,216,604 1,587,652 1,743,292 2,391,039
641,643 586,493 456,129 254,821 163,655 112,440
- - ------------- ------------- ------------- ------------- ------------- -------------
3,300,650 2,886,405 2,672,733 1,842,473 1,906,947 2,503,479
(97,580) (97,580) (97,580) (82,098) (74,152) (56,303)
- - ------------- ------------- ------------- ------------- ------------- -------------
3,203,070 2,788,825 2,575,153 1,760,375 1,832,795 2,447,176
6,454,511 6,009,028 4,579,514 2,858,924 2,276,114 2,674,348
4,568,791 5,094,011 4,202,159 1,743,969 1,521,907 1,232,278
470,601 - - - - -
661,290 592,230 214,098 256,904 203,980 178,013
$ 1,572,911 $ 1,401,469 $ 160,356 $ 182,254 $ 35,547 $ 17,322
733,473 560,447 707,632 215,223 - -
2,050,487 2,176,144 1,529,759 1,584,368 2,146,851 2,253,874
608,818 531,391 377,449 197,683 133,629 103,878
- - ------------- ------------- ------------- ------------- ------------- -------------
2,659,305 2,707,535 1,907,208 1,782,051 2,280,480 2,357,752
(97,580) (93,284) (76,509) (73,120) (64,110) (41,524)
- - ------------- ------------- ------------- ------------- ------------- -------------
2,561,725 2,614,251 1,830,699 1,708,931 2,216,370 2,316,228
5,829,052 5,347,990 3,330,155 2,519,192 2,538,968 2,478,064
4,847,911 4,553,186 2,526,109 1,601,225 1,487,568 1,081,057
116,301 - - - - -
605,079 522,721 258,719 274,991 230,510 147,742
337,861 336,256 334,125 334,125 334,125 334,125
- - ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(c) Earnings per common share are computed using net income applicable to
common stock and weighted average common shares outstanding (including
common stock equivalents). For comparative purposes, earnings per common
share for the years ended prior to December 31, 1991, are presented on a
pro forma basis.
(d) During 1991, MBNA Corporation became an independent corporation traded
publicly on the New York Stock Exchange. Accordingly, dividends per common
share, book value per common share, and equity ratios have not been
presented for years ended prior to December 31, 1991.
(e) Loan portfolio delinquency does not include loans held for securitization
or securitized loans.
(f) Managed loans include the Corporation's loans held for securitization, loan
portfolio, and securitized loans.
(g) Managed net interest margin is presented on a fully taxable equivalent
basis.
[21]
<PAGE> 24
MBNA CORPORATION AND SUBSIDIARIES
GLOSSARY OF FINANCIAL TERMS
- - --------------------------------------------------------------------------------
The following definitions may be helpful when reading Management's Discussion
and Analysis of Financial Condition and Results of Operations of MBNA
Corporation ("the Corporation").
ASSET SECURITIZATION
Asset securitization removes loan receivables from the consolidated statements
of financial condition by selling them, generally to a trust. Asset
securitization converts interest income, interchange, and other fees in excess
of interest paid to Certificateholders; credit losses; and other trust expenses
into loan servicing fees, while reducing the Corporation's on-balance-sheet
assets.
CREDIT CARD FEES
Credit card fees include annual, late, overlimit, returned check, and cash
advance transaction fees.
DIRECT DEPOSITS
Direct deposits are deposits marketed to and received from individual Customers
without the use of a third-party intermediary.
FULLY TAXABLE EQUIVALENT (FTE) BASIS
FTE basis represents the adjusted income on total interest-earning assets that
is either tax-exempt or taxed at a reduced rate, adjusted to give effect to the
prevailing incremental federal income tax rate, and adjusted for nondeductible
carrying costs and state income taxes, where applicable. Yield calculations,
where appropriate, include these adjustments.
INTERCHANGE INCOME
Interchange income is a fee paid by a merchant bank to the card-issuing bank
through the interchange network as compensation for risk, grace period, and
other operating costs. Such fees are set annually by MasterCard International
and Visa International.
INTEREST RATE SENSITIVE ASSETS/LIABILITIES
Interest rate sensitive assets/liabilities have yields or rates that can change
within a designated time period, due either to their maturity during this
period or to the contractual ability of the Corporation to change the
yield/rate during this period.
INVESTMENT SECURITIES
Investment securities include both those available-for-sale and those
held-to-maturity.
LOAN PORTFOLIO
Loan portfolio includes credit card and other consumer loans, excluding loans
held for securitization, as reported on the consolidated statements of
financial condition.
LOAN RECEIVABLES
Loan receivables consist of the Corporation's loan portfolio and loans held for
securitization.
MANAGED LOANS
Managed loans consist of the Corporation's loan portfolio, loans held for
securitization, and securitized loans.
MONEY MARKET INSTRUMENTS
Money market instruments include interest-earning time deposits in other banks
and federal funds sold and securities purchased under resale agreements.
NET INTEREST INCOME
Net interest income represents interest income on total interest-earning
assets, on an FTE basis where appropriate, reduced by interest expense on total
interest-bearing liabilities.
NET INTEREST MARGIN
Net interest margin represents net interest income on an FTE basis expressed as
a percentage of average total interest-earning assets.
OFF-BALANCE-SHEET FINANCIAL INSTRUMENTS
Off-balance-sheet financial instruments include interest rate swap agreements,
forward exchange contracts, and foreign exchange swap agreements. The
Corporation has used interest rate swap agreements to change fixed-rate funding
sources to floating-rate funding sources to better match the rate sensitivity
of the Corporation's assets.
The Corporation uses forward exchange contracts and foreign exchange swap
agreements to reduce its exposure to foreign currency exchange rate risk
primarily related to MBNA International Bank Limited ("MBNA International"), a
foreign bank subsidiary in the United Kingdom.
The Corporation does not hold or issue off-balance-sheet financial instruments
for trading purposes.
[22]
<PAGE> 25
MBNA CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
- - --------------------------------------------------------------------------------
This discussion is intended to further the reader's understanding of the
consolidated financial condition and results of operations of MBNA Corporation.
It should be read in conjunction with the consolidated financial statements,
notes, tables, and glossary of financial terms included in this report.
INTRODUCTION
MBNA Corporation, a bank holding company, is the parent company of MBNA America
Bank, N.A., ("the Bank") a national bank. 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 makes other consumer loans and offers various deposit
products.
NET INCOME
(millions)
94 266.6
95 353.1
96 474.5
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.
On October 15, 1996, the Board of Directors approved a three-for-two split of
the Corporation's Common Stock effected in the form of a dividend. In
connection with this transaction, one additional share of common stock was
issued on January 1, 1997, for every two shares of common stock held by
stockholders of record as of the close of business on December 16, 1996. All
common share and per common share data in the following discussion includes the
effect of all the Corporation's stock splits.
EARNINGS SUMMARY
Net income for 1996 increased 34.4% to $474.5 million or $1.33 per common share
from 1995's net income of $353.1 million or $1.03 per common share. The overall
growth in earnings was primarily attributable to the growth in managed loans
outstanding, which increased $11.9 billion to $38.6 billion at December 31,
1996, as the Corporation acquired 544 new endorsements from organizations and
added 7.5 million new accounts. The Corporation's average managed loans
increased 38.7% or $8.7 billion to $31.2 billion in 1996 from 1995.
Net income for 1995 increased 32.4% to $353.1 million or $1.03 per common share
from $266.6 million or $.79 per common share in 1994. Average managed loans in
1995 increased 52.1% to $22.5 billion from $14.8 billion in 1994 and was the
primary reason for the increase in net income.
RETURN ON AVERAGE TOTAL ASSETS
percent
94 3.16
95 3.09
96 3.26
RETURN ON AVERAGE
STOCKHOLDERS EQUITY
percent
94 32.79
95 35.51
96 34.46
The Corporation continues to be an active participant in the asset
securitization market. Securitization converts interest income, interchange,
and other fees in excess of interest paid to Certificateholders; credit losses;
and other trust expenses into loan servicing fees, while reducing the
Corporation's on-balance-sheet assets.
Table 1 reflects the trends of the Corporation's return on average total
assets, stockholders' equity, and other equity ratios.
The return on average total assets for 1996 increased primarily as a result of
the percentage growth in net income, which exceeded the increase in average
total assets. The return on average total assets for 1995 declined primarily as
a result of an increase in average total assets, which exceeded the percentage
growth in net income. The return on average stockholders' equity for 1996
decreased primarily as a result of an increase in average stockholders' equity
related to the Corporation's issuance of $150.0 million of 7 1/2% Cumulative
Preferred Stock, Series A, in November 1995 and $150.0 million of Adjustable
Rate Cumulative Preferred Stock, Series B, in September 1996, which offset the
percentage growth in net income. The return on average stockholders' equity
for 1995 increased primarily as a result of an increase in net income partially
offset by the growth in average stockholders' equity.
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------------------------------------
TABLE 1: RETURN ON AVERAGE TOTAL ASSETS AND STOCKHOLDERS' EQUITY
YEAR ENDED DECEMBER 31, 1996 1995 1994
- - -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Return on average total assets............... 3.26% 3.09% 3.16%
Return on average stockholders' equity....... 34.46 35.51 32.70
Average stockholders' equity to average
total assets................................ 9.45 8.70 9.67
Dividend payout ratio........................ 32.33 35.92 40.51
- - -----------------------------------------------------------------------------------------------
</TABLE>
[23]
<PAGE> 26
MBNA CORPORATION AND SUBSIDIARIES
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------------------------------------------------------------------------
TABLE 2: STATEMENTS OF AVERAGE BALANCES, YIELDS AND RATES, INCOME OR EXPENSE
- - -----------------------------------------------------------------------------------------------------------------------------------
(dollars in thousands, yields and rates on a fully taxable equivalent basis)
- - -----------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1996 1995 1994
- - -----------------------------------------------------------------------------------------------------------------------------------
Average Yield/ Income Average Yield/ Income Average Yield/ Income
Amount Rate or Expense Amount Rate or Expense Amount Rate or Expense
------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Interest-earning assets:
Money market instruments:
Interest-earning time deposits
in other banks................... $ 531,132 5.56% $ 29,528 $ 261,999 6.04% $ 15,832 $ 104,180 4.91% $ 5,115
Federal funds sold and securities
purchased under resale agreements 184,347 5.39 9,935 129,657 5.96 7,727 117,725 4.78 5,626
----------- --------- ----------- --------- ---------- ---------
Total money market instruments.. 715,479 5.52 39,463 391,656 6.02 23,559 221,905 4.84 10,741
Investment securities (a):
Taxable........................... 2,126,411 5.79 123,054 1,980,322 6.03 119,322 1,384,352 5.69 78,753
Tax-exempt (b).................... 85,461 5.99 5,116 79,805 6.41 5,116 78,059 6.04 4,717
----------- --------- ----------- --------- ---------- ---------
Total investment securities..... 2,211,872 5.79 128,170 2,060,127 6.04 124,438 1,462,411 5.71 83,470
Loans held for securitization....... 2,529,484 14.08 356,120 2,269,362 14.06 319,009 1,330,011 13.96 185,708
Loans:
Credit card....................... 4,907,814 13.94 684,015 4,160,230 14.15 588,704 3,207,110 13.85 444,179
Other consumer.................... 1,266,281 14.00 177,290 632,306 13.74 86,896 793,161 14.78 117,195
----------- --------- ----------- --------- ---------- ---------
Total loans..................... 6,174,095 13.95 861,305 4,792,536 14.10 675,600 4,000,271 14.03 561,374
----------- --------- ----------- --------- ---------- ---------
Total interest-earning assets... 11,630,930 11.91 1,385,058 9,513,681 12.01 1,142,606 7,014,598 11.99 841,293
Cash and due from banks................ 350,463 197,374 141,565
Premises and equipment, net............ 931,455 685,022 467,250
Other assets........................... 1,769,481 1,133,212 908,273
Reserve for possible credit losses..... (111,041) (103,568) (99,175)
----------- ----------- ----------
Total assets.................... $14,571,288 $11,425,721 $8,432,511
=========== =========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest-bearing liabilities:
Interest-bearing deposits:
Time deposits (c)................. $ 6,644,737 5.89 391,567 $ 5,647,517 5.78 326,509 $4,101,534 3.88 159,139
Money market deposit accounts..... 2,540,850 5.30 134,777 1,903,931 5.79 110,244 1,514,307 4.11 62,219
Interest-bearing transaction
accounts......................... 23,504 4.58 1,077 19,212 5.10 980 15,178 3.52 535
Savings accounts.................. 10,181 4.56 464 8,401 5.05 424 7,539 3.44 259
----------- --------- ----------- --------- ---------- ---------
Total interest-bearing deposits. 9,219,272 5.73 527,885 7,579,061 5.78 438,157 5,638,558 3.94 222,152
Borrowed funds:
Federal funds purchased and
securities sold under repurchase
agreements....................... 67,712 5.39 3,648 49,141 6.01 2,952 167,012 3.82 6,375
Other short-term borrowings....... 269,538 5.51 14,849 148,804 6.14 9,143 271,589 4.92 13,361
Long-term debt and bank notes (c). 3,029,250 6.48 196,408 2,212,591 6.61 146,337 1,199,520 5.47 65,646
----------- --------- ----------- --------- ---------- ---------
Total borrowed funds............ 3,366,500 6.38 214,905 2,410,536 6.57 158,432 1,638,121 5.21 85,382
----------- --------- ----------- --------- ---------- ---------
Total interest-bearing
liabilities.................... 12,585,772 5.90 742,790 9,989,597 5.97 596,589 7,276,679 4.23 307,534
Demand deposits........................ 189,571 130,779 89,874
Other liabilities...................... 418,873 311,058 250,715
----------- ----------- ----------
Total liabilities............... 13,194,216 10,431,434 7,617,268
Stockholders' equity................... 1,377,072 994,287 815,243
----------- ----------- ----------
Total liabilities and
stockholders' equity........... $14,571,288 $11,425,721 $8,432,511
=========== --------- =========== --------- ========== ---------
Net interest income............. $ 642,268 $ 546,017 $ 533,759
========= ========= =========
Net interest margin............. 5.52 5.74 7.61
Interest rate spread............ 6.01 6.04 7.76
- - -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Average amounts for investment securities available-for-sale are based on
market values; if these securities were carried at amortized cost, there
would be no impact on the net interest margin.
(b) The fully taxable equivalent adjustment for the years ended December 31,
1996, 1995, and 1994, was $1,791, $1,791, and $1,651, respectively.
(c) Includes the impact of interest rate swap agreements used to change
fixed-rate funding sources to floating-rate funding sources.
[24]
<PAGE> 27
MBNA CORPORATION AND SUBSIDIARIES
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- - ------------------------------------------------------------------------------------------------------------------------------------
TABLE 3: RATE-VOLUME VARIANCE ANALYSIS (a)
- - ------------------------------------------------------------------------------------------------------------------------------------
(dollars in thousands)
- - ------------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1996 COMPARED TO 1995 1995 COMPARED TO 1994
- - ------------------------------------------------------------------------------------------------------------------------------------
Volume Rate Total Volume Rate Total
-----------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INTEREST-EARNING ASSETS
Money market instruments:
Interest-earning time deposits in other banks.................. $ 15,056 $ (1,360) $ 13,696 $ 9,300 $ 1,417 $ 10,717
Federal funds sold and securities purchased under
resale agreements............................................. 3,005 (797) 2,208 611 1,490 2,101
--------- --------- --------- --------- --------- ---------
Total money market instruments............................... 18,061 (2,157) 15,904 9,911 2,907 12,818
Investment securities:
Taxable........................................................ 8,576 (4,844) 3,732 35,667 4,902 40,569
Tax-exempt (b)................................................. 350 (350) - 107 292 399
--------- --------- --------- --------- --------- ---------
Total investment securities.................................. 8,926 (5,194) 3,732 35,774 5,194 40,968
Loans held for securitization..................................... 36,621 490 37,111 132,038 1,263 133,301
Loans:
Credit card.................................................... 104,316 (9,005) 95,311 134,678 9,847 144,525
Other consumer................................................. 88,732 1,662 90,394 (22,532) (7,767) (30,299)
--------- --------- --------- --------- --------- ---------
Total loans.................................................. 193,048 (7,343) 185,705 112,146 2,080 114,226
--------- --------- --------- --------- --------- ---------
Total interest income........................................ 256,656 (14,204) 242,452 289,869 11,444 301,313
INTEREST-BEARING LIABILITIES
Interest-bearing deposits:
Time deposits.................................................. 58,656 6,402 65,058 72,764 94,606 167,370
Money market deposit accounts.................................. 34,405 (9,872) 24,533 18,538 29,487 48,025
Interest-bearing transaction accounts.......................... 204 (107) 97 166 279 445
Savings accounts............................................... 84 (44) 40 32 133 165
--------- --------- --------- --------- --------- ---------
Total interest-bearing deposits.............................. 93,349 (3,621) 89,728 91,500 124,505 216,005
Borrowed funds:
Federal funds purchased and securities sold under
repurchase agreements......................................... 1,025 (329) 696 (5,923) 2,500 (3,423)
Other short-term borrowings.................................... 6,738 (1,032) 5,706 (7,010) 2,792 (4,218)
Long-term debt and bank notes.................................. 53,004 (2,933) 50,071 64,714 15,977 80,691
--------- --------- --------- --------- --------- ---------
Total borrowed funds......................................... 60,767 (4,294) 56,473 51,781 21,269 73,050
--------- --------- --------- --------- --------- ---------
Total interest expense....................................... 154,116 (7,915) 146,201 143,281 145,774 289,055
--------- --------- --------- --------- --------- ---------
Net interest income.......................................... $ 102,540 $ (6,289) $ 96,251 $ 146,588 $(134,330) $ 12,258
========= ========= ========= ========= ========= =========
- - -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) The rate-volume variance for each category has been allocated on a
consistent basis between rate and volume variances based on the percentage
of the rate or volume variance to the sum of the two absolute variances.
(b) Tax-exempt investment securities are presented on a fully taxable
equivalent basis.
NET INTEREST INCOME
Net interest income, on a fully taxable equivalent basis, increased 17.6% or
$96.3 million to $642.3 million in 1996 from 1995, as shown in Table 2. The
increase in net interest income in 1996 is primarily a result of a $2.1 billion
increase in average interest-earning assets from 1995, offset by a 22 basis
point decline in the net interest margin and a $2.6 billion increase in average
interest-bearing liabilities for the same period. The growth in average
interest-earning assets reflects a $1.6 billion increase in average loan
receivables combined with a $475.6 million increase in average investment
securities and money market instruments. The increase in interest-bearing
liabilities resulted primarily from funding the increase in interest-earning
assets.
Net interest income, on a fully taxable equivalent basis, increased 2.3% or
$12.3 million to $546.0 million in 1995 from 1994, as also shown in Table 2.
The increase in net interest income in 1995 was primarily a result of a $2.5
billion increase in average interest-earning assets from 1994, offset by a 187
basis point decline in the net interest margin and a $2.7 billion increase in
average interest-bearing liabilities for the same period. The growth in average
interest-earning assets reflects a $1.7 billion increase in average loan
receivables and a $767.5 million increase in average investment securities and
money market instruments.
Table 3 illustrates the impact that rate and volume fluctuations had on the
Corporation's net interest income for the years presented.
The net interest margin, on a fully taxable equivalent basis, was 5.52% for
1996, compared to 5.74% and 7.61% for 1995 and 1994, respectively. The decline
in the net interest margin for 1996 is primarily a result of an increase in
average interest-bearing liabilities that was partially used to fund the growth
of non-interest-earning assets combined with a 10 basis point decrease in rates
received on interest-earning assets. The decline in the net interest margin for
1995 is primarily a result of a 174 basis point increase in rates paid on
interest-bearing liabilities, as actions by the Federal Reserve Board impacted
overall market interest rates.
NET INTEREST INCOME
(fully taxable equivalent basis)
(millions)
94 533.8
95 546
96 642.3
[25]
<PAGE> 28
MBNA CORPORATION AND SUBSIDIARIES
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- - ------------------------------------------------------------------------------------------------------------------------------------
TABLE 4: INVESTMENT SECURITIES
- - ------------------------------------------------------------------------------------------------------------------------------------
(dollars in thousands, yields on a fully taxable equivalent basis)
- - ------------------------------------------------------------------------------------------------------------------------------------
ESTIMATED MATURITIES AT DECEMBER 31, 1996
- - ------------------------------------------------------------------------------------------------------------------------------------
Within 1 Year 1-5 Years 6-10 Years Over 10 Years Total
Book Yield Book Yield Book Yield Book Yield Book Yield
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AVAILABLE-FOR-SALE
U.S. Treasury and other U.S. government
agencies obligations.................. $ 604,884 5.37% $ - -% $ - -% $ - -% $ 604,884 5.37%
State and political subdivisions of the
United States.......................... 72,748 6.46 14,853 6.55 - - - - 87,601 6.47
Asset-backed and other securities....... 87,340 5.79 863,520 5.79 73,360 5.87 3,025 5.78 1,027,245 5.79
--------- --------- -------- --------- ----------
Total investment securities
available-for-sale................. $ 764,972 5.51 $ 878,373 5.80 $ 73,360 5.87 $ 3,025 5.78 $1,719,730 5.68
========= ========= ======== ========= ==========
HELD-TO-MATURITY
U.S. Treasury and other U.S. government
agencies obligations..................$ 262,451 5.78 $ 194,868 5.17 $ - - $ 49,027 6.10 $ 506,346 5.59
State and political subdivisions of the
United States......................... - - - - - - 454 7.54 454 7.54
Asset-backed and other securities....... 36,032 6.65 45,071 5.79 1,000 6.81 9,417 6.00 91,520 6.16
--------- --------- -------- --------- ----------
Total investment securities
held-to-maturity....................$ 298,483 5.89 $ 239,939 5.29 $ 1,000 6.81 $ 58,898 6.10 $ 598,320 5.67
========= ========= ======== ========= ==========
- - ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
INVESTMENT SECURITIES AND MONEY MARKET INSTRUMENTS
Interest income on investment securities, on a fully taxable equivalent basis,
increased $3.7 million to $128.2 million in 1996 from 1995. This increase is
the result of a $151.7 million increase in average investment securities,
offset by a 25 basis point decrease in yields earned on these securities.
Interest income on money market instruments increased $15.9 million to $39.5
million in 1996 from 1995. The increase in 1996 is primarily the result of an
increase of $323.8 million in average money market instruments from 1995,
offset by a 50 basis point decrease in the yields earned on these instruments.
In 1995, interest income on investment securities, on a fully taxable
equivalent basis, increased $41.0 million to $124.4 million from 1994. The
increase in 1995 was primarily the result of a $597.7 million increase in
average investment securities, combined with a 33 basis point increase in
yields earned on these securities. Interest income on money market instruments
increased $12.8 million to $23.6 million in 1995 from 1994. The increase in
1995 was primarily the result of an increase of $169.8 million in average money
market instruments from 1994, combined with a 118 basis point increase in the
yields earned on these instruments.
The Corporation uses its holdings of investment securities and money market
instruments to provide liquidity and flexibility. The increases in average
investment securities and average money market instruments are primarily a
result of the timing of the receipt of funds from asset securitizations. As a
result of continued loan growth, the Corporation securitized $11.3 billion of
loan receivables during 1996 and $6.2 billion during 1995. Funds received from
these securitizations typically are invested in investment securities
available-for-sale and money market instruments until they are needed to fund
loan growth.
Average investment securities and money market instruments as a percentage of
average interest-earning assets remained relatively constant at 25.2% for 1996,
compared to 25.8% in 1995 and 24.0% in 1994. Table 4 reflects the estimated
maturities of the Corporation's investment securities and weighted average
yields, on a fully taxable equivalent basis, at December 31, 1996. Note B to
the audited consolidated financial statements provides further detail regarding
the Corporation's investment securities.
LOAN RECEIVABLES
Interest income generated by the Corporation's loan receivables increased
$222.8 million to $1.2 billion in 1996. The increase is the result of a $1.6
billion increase in average loan receivables, offset by a decrease of 9 basis
points in the average yields earned on these receivables.
INTEREST INCOME FROM
LOAN RECEIVABLES
(millions)
94 747.1
95 994.6
96 1,217.4
Interest income on loan receivables increased $247.5 million to $994.6 million
in 1995. The increase in interest income during 1995 was the result of a $1.7
billion increase in average loan receivables, combined with a 6 basis point
increase in the average yields earned on these receivables.
[26]
<PAGE> 29
MBNA CORPORATION AND SUBSIDIARIES
- - --------------------------------------------------------------------------------
Table 5 presents the Corporation's period-end loan receivables distribution by
loan type, excluding securitized loans, and the percentage of loan receivables
represented by type of loan. Loan receivables increased 24.5% to $10.1 billion
at December 31, 1996, compared to $8.1 billion and $5.7 billion at December 31,
1995 and 1994, respectively.
During 1996, credit card loan receivables increased to $8.2 billion at December
31, 1996, compared to $7.3 billion and $4.8 billion at December 31, 1995 and
1994, respectively. The increases in credit card loan receivables for 1996 and
1995 were a result of the Corporation's successful marketing programs, such as
the introduction of the MBNA Platinum Plus Visa and MasterCard program, as well
as competitive pricing strategies. In addition, the Corporation continues to
offer variable-rate credit card loans as well as variable-rate home equity
loans to certain new and existing Customers. These variable-rate loans made up
42.1% of total managed loans at December 31, 1996, compared to 39.9% of total
managed loans at December 31, 1995. These variable-rate loans are indexed to
the U.S. Prime Rate published in The Wall Street Journal and generally reprice
quarterly.
During 1996, other consumer loan receivables, consisting primarily of unsecured
lines of credit accessed by check and home equity loans, increased 120.9% to
$1.9 billion at December 31, 1996. The increase in other consumer loans is a
result of the Corporation's increased efforts to originate other consumer loans
combined with the acquisition of other consumer loan portfolios. Additionally,
the Bank securitized $841.6 million of other consumer loans during 1996 through
a private multi-seller commercial paper conduit.
In 1995, other consumer loan receivables decreased $48.8 million to $876.9
million from 1994. The decrease in other consumer loan receivables is a result
of the Corporation's securitizing $400.0 million of other consumer loans during
1995.
Note C to the audited consolidated financial statements provides further detail
regarding the Corporation's loan receivables.
<TABLE>
<CAPTION>
- - ----------------------------------------------------------------------------------------------------------------------------------
TABLE 5: LOAN RECEIVABLES DISTRIBUTION
- - ----------------------------------------------------------------------------------------------------------------------------------
(dollars in thousands)
- - ----------------------------------------------------------------------------------------------------------------------------------
DECEMBER 31, 1996 1995 1994 1993 1992
- - ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Loans held for securitization:
Credit card.................. $ 2,469,974 24.4% $3,168,427 38.9% $1,899,026 33.3% $ 741,869 16.6% $678,000 17.0%
Other consumer............... - - - - 400,000 7.0 - - - -
----------- ----- ---------- ----- ---------- ----- ---------- ----- ----------- -----
Total loans held for
securitization............ 2,469,974 24.4 3,168,427 38.9 2,299,026 40.3 741,869 16.6 678,000 17.0
Loan portfolio:
Credit card.................. 5,722,299 56.5 4,090,553 50.3 2,882,232 50.5 2,949,995 66.0 2,659,007 66.9
Other consumer............... 1,936,779 19.1 876,938 10.8 525,742 9.2 775,514 17.4 641,643 16.1
----------- ----- ---------- ----- ---------- ----- ---------- ----- ----------- -----
Total loan portfolio....... 7,659,078 75.6 4,967,491 61.1 3,407,974 59.7 3,725,509 83.4 3,300,650 83.0
----------- ----- ---------- ----- ---------- ----- ---------- ----- ----------- -----
Total loan receivables..... $10,129,052 100.0% $8,135,918 100.0% $5,707,000 100.0% $4,467,378 100.0% $ 3,978,650 100.0%
=========== ===== ========== ===== ========== ===== ========== ===== =========== =====
- - ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
DEPOSITS
Total interest expense on deposits was $527.9 million for 1996, compared to
$438.2 million and $222.2 million for 1995 and 1994, respectively. The increase
in interest expense of $89.7 million during 1996 is primarily the result of a
$1.6 billion increase in average interest-bearing deposits offset by a 5 basis
point decrease in rates paid on average interest-bearing deposits.
The increase in interest expense on deposits of $216.0 million during 1995 was
the result of a 184 basis point increase in rates paid on average
interest-bearing deposits, combined with a $1.9 billion increase in average
interest-bearing deposits from 1994.
The increases in average interest-bearing deposits for 1996 and 1995 are a
result of the Corporation's continued emphasis on marketing certificates of
deposit and money market deposit accounts to fund loan growth and diversify
funding sources.
BORROWED FUNDS
Interest expense on short-term borrowings increased $6.4 million to $18.5
million during 1996. The increase in interest expense on short-term borrowings
for 1996 is primarily the result of a $139.3 million increase in average
short-term borrowings from 1995, offset by a 63 basis point decrease in the
rates paid on these average short-term borrowings.
Interest expense on short-term borrowings decreased $7.6 million to $12.1
million during 1995. The decrease in 1995 was primarily the result of a $240.7
million decrease in average short-term borrowings from 1994, offset by a 161
basis point increase in the rates paid on these average short-term borrowings.
Note F to the audited consolidated financial statements provides further detail
regarding the Corporation's short-term borrowings.
[27]
<PAGE> 30
MBNA CORPORATION AND SUBSIDIARIES
- - --------------------------------------------------------------------------------
During 1996 and 1995, the Corporation continued to increase its funding
provided by long-term debt and bank notes to add diversity to the Corporation's
funding sources, to fund loan growth, to acquire premises and equipment, and
for other general corporate purposes. As a result, interest expense related to
long-term debt and bank notes increased $50.1 million to $196.4 million in 1996
from 1995. This increase is primarily the result of an increase of $816.7
million in average long-term debt and bank notes to $3.0 billion, offset by a
decrease of 13 basis points in rates paid on these funds.
In 1995, interest expense related to long-term debt and bank notes increased
$80.7 million to $146.3 million from 1994. This increase was primarily the
result of an increase in average long-term debt and bank notes of $1.0 billion
to $2.2 billion, combined with an increase of 114 basis points in the rates
paid on these funds.
Note G to the audited consolidated financial statements provides further detail
regarding the Corporation's long-term debt and bank notes.
OTHER OPERATING INCOME
Total other operating income increased 33.1% or $471.3 million to $1.9 billion
in 1996 from 1995. The increase in other operating income during 1996 is
primarily attributable to an increase of 37.8% or $452.6 million in loan
servicing fees for the period. Loan servicing fees, generated by securitized
loans, consist of interest income, interchange, and other fees in excess of
interest paid to Certificateholders; credit losses; and other trust expenses.
The increase in loan servicing fees is a direct result of an increase in
average securitized loans of $7.1 billion during 1996. In addition, credit card
fees increased $20.3 million to $102.6 million during 1996. This increase is
primarily the result of increases in late and overlimit fees.
OTHER OPERATING INCOME
(millions)
94 1.0
95 1.4
96 1.9
Processing fees in 1996 declined $13.7 million from 1995. The decline in
processing fees is primarily a result of MBNA Hallmark Information Services,
Inc., (formerly known as MBNA Information Services, Inc.) the Corporation's
information processing subsidiary, not renewing contracts with external
Customers in order to increase their focus on providing information technology
support and services to the Bank and its affiliates.
In 1995, total other operating income increased 40.6% or $411.0 million to $1.4
billion from 1994. The increase in 1995 was primarily attributable to an
increase of 45.1% or $371.8 million in loan servicing fees for the period. The
increase in loan servicing fees was the direct result of an increase in average
securitized loans of $6.0 billion. In addition, credit card fees increased
$34.3 million to $82.3 million during 1995. This increase is primarily the
result of increases in annual fee income, late fees, and cash advance
transaction fees.
OTHER OPERATING EXPENSE
Total other operating expense increased 26.2% to $1.6 billion in 1996 from $1.2
billion in 1995, compared to an increase of 25.1% in 1995 from 1994. The growth
in other operating expense reflects the continued investment in business
development to enhance the ability of the Corporation to attract and retain
Customers. As a result of these increased business development activities, new
accounts originated during 1996 were 7.5 million, compared to 6.0 million in
1995.
Note O to the audited consolidated financial statements provides further detail
regarding the Corporation's other operating expenses.
In October 1995, Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation" (Statement No. 123), was issued. This
statement, effective for fiscal years beginning after December 15, 1995,
defines a fair-value-based method of accounting for an employee stock option or
similar equity instrument. However, it allows a company to continue to measure
compensation cost for those instruments using the intrinsic-value-based method
of accounting prescribed by Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" (APB Opinion No. 25). Statement No.
123 requires certain additional disclosures about stock-based employee
compensation arrangements regardless of the method used to account for them. As
permitted by Statement No. 123, in 1996 the Corporation elected to retain its
present accounting for stock option grants in accordance with APB Opinion No.
25. The adoption of Statement No. 123 had no impact on the Corporation's
consolidated financial statements. Note K to the audited consolidated financial
statements provides further detail regarding the Corporation's stock option
plans.
SPECIAL MARKETING PROGRAM
During the year ended December 31, 1996, the Corporation charged $32.8 million
net of tax ($54.3 million pretax) to earnings related to the launch of the
MBNAPlatinum Plus Visa and MasterCard program. This item was recognized by the
Corporation during the three months ended March 31, 1996.
[28]
<PAGE> 31
MBNA CORPORATION AND SUBSIDIARIES
- - --------------------------------------------------------------------------------
INCOME TAXES
Applicable income taxes were $289.6 million in 1996, compared to $231.5 million
in 1995 and $174.5 million in 1994. This represents an effective tax rate of
39.6% for 1996, 1995, and 1994. Applicable income taxes for 1996 exclude the
effect of the tax benefit from Customer-based intangible assets described
below. Note Q to the audited consolidated financial statements reconciles
reported applicable income taxes to the amount computed by applying the federal
statutory rate to income before income taxes.
Net income for the year ended December 31, 1996, includes a $32.8 million tax
benefit related to the recognition of tax deductions for the amortization of
Customer-based intangible assets acquired in connection with the Corporation's
1991 initial public offering. The initial public offering resulted in certain
Customer-based intangible assets being recorded for income tax purposes only,
creating future tax deductions relating to these intangible assets. The
Corporation did not initially recognize, for financial statement purposes, any
tax benefit related to those assets because there were uncertainties concerning
the tax treatment of such assets. During the second quarter of 1993, the U.S.
Supreme Court in the "Newark Morning Ledger" case affirmed that Customer-based
intangible assets may be amortized for tax purposes, and the Corporation
recognized $89.8 million of the tax benefit related to the Customer-based
intangible assets. During the three months ended March 31, 1996, the Internal
Revenue Service completed an audit of the Corporation's 1991 and 1992 tax
returns and entered into a final agreement with the Corporation regarding the
tax treatment of the intangible assets. As a result, the Corporation recognized
the remaining tax benefit relating to the intangible assets, $32.8 million,
during the three-month period ended March 31, 1996.
<TABLE>
<CAPTION>
- - ------------------------------------------------------------------------------------------------------------------------------------
TABLE 6: DELINQUENT LOANS
- - ------------------------------------------------------------------------------------------------------------------------------------
(dollars in thousands)
- - ------------------------------------------------------------------------------------------------------------------------------------
DECEMBER 31, 1996 1995 1994 1993 1992
- - ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Loan portfolio............. $7,659,078 $4,967,491 $3,407,974 $3,725,509 $3,300,650
Loans delinquent:
30 to 59 days........... $ 114,382 1.49% $ 65,651 1.32% $ 38,912 1.14% $ 41,501 1.11% $ 48,724 1.48%
60 to 89 days........... 52,857 .69 30,162 .61 17,962 .53 20,984 .56 23,489 .71
90 or more days......... 107,679 1.41 58,894 1.18 31,804 .93 50,477 1.36 52,709 1.59
---------- ----- ---------- ---- ---------- ---- ---------- ---- ---------- -----
Total................. $ 274,918 3.59% $ 154,707 3.11% $ 88,678 2.60% $ 112,962 3.03% $ 124,922 3.78%
========== ===== ========== ==== ========== ==== ========== ==== ========== =====
- - ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
ASSET QUALITY
The Corporation's asset quality at any time reflects, among other factors, the
quality of the credit card loans and other consumer loans, the average
seasoning of the Corporation's accounts, the success of the Corporation's
collection efforts, and the general economic conditions.
DELINQUENCIES
An account is contractually delinquent if the minimum payment is not received
by the specified date on the Customer's statement. However, the Corporation
generally continues to accrue interest until the loan is either paid or charged
off. Delinquency as a percentage of the Corporation's loan portfolio was 3.59%
at December 31, 1996, compared with 3.11% at December 31, 1995. The
Corporation's delinquency, as a percentage of managed loans, was 4.28% at
December 31, 1996, compared to 3.70% at December 31, 1995. The Corporation
believes that several factors, including general economic conditions, increased
consumer debt levels, and the seasoning of the Corporation's loans, contributed
to the increase in delinquency. As new accounts season, the delinquency rate on
these accounts generally rises and stabilizes. Table 6 presents the delinquency
of the Corporation's loan portfolio, excluding loans held for securitization.
NET CREDIT LOSSES
Net credit losses during 1996 were $172.7 million, compared to $134.7 million
for 1995 and $104.6 million for 1994. Net credit losses do not include credit
losses from securitized loans, which are charged to the related trusts, in
accordance with their respective contractual agreements. The increases in net
credit losses in 1996 and 1995 reflect increases in the Corporation's
outstanding loan receivables, the general economic conditions, and the
seasoning of the Corporation's accounts.
The Corporation's policy is generally to charge off accounts when they become
180 days contractually past due. From time to time, the Corporation sells
certain previously charged-off receivables. The proceeds received by the
Corporation from these sales are recorded as recoveries and thus reduce net
credit losses.
[29]
<PAGE> 32
MBNA CORPORATION AND SUBSIDIARIES
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- - ----------------------------------------------------------------------------------------------------------------------------------
TABLE 7: RESERVE FOR POSSIBLE CREDIT LOSSES
- - ----------------------------------------------------------------------------------------------------------------------------------
(dollars in thousands)
- - ----------------------------------------------------------------------------------------------------------------------------------
DECEMBER 31, 1996 1995 1994 1993 1992
- - ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Reserve balance, beginning of year.............................$ 104,886 $ 101,519 $ 97,580 $ 97,580 $ 97,580
Reserves acquired........................................... 7,553 - - - -
Provision for possible credit losses........................ 178,224 138,176 108,477 98,795 97,534
Foreign currency translation................................ 488 (90) 21 - -
Credit losses:
Credit card............................................... (230,894) (164,340) (98,963) (88,099) (84,483)
Other consumer............................................ (23,523) (10,553) (33,331) (30,332) (27,790)
----------- ---------- ---------- ---------- ----------
Total credit losses..................................... (254,417) (174,893) (132,294) (118,431) (112,273)
Recoveries:
Credit card............................................... 77,255 37,901 26,063 18,577 14,033
Other consumer............................................ 4,438 2,273 1,672 1,059 706
----------- ---------- ---------- ---------- ----------
Total recoveries........................................ 81,693 40,174 27,735 19,636 14,739
----------- ---------- ---------- ---------- ----------
Net credit losses........................................... (172,724) (134,719) (104,559) (98,795) (97,534)
----------- ---------- ---------- ---------- ----------
Reserve balance, end of year...................................$ 118,427 $ 104,886 $ 101,519 $ 97,580 $ 97,580
=========== ========== ========== ========== ==========
Net credit losses as a % of average loan receivables........... 1.98% 1.91% 1.96% 2.43% 2.87%
Net credit losses as a % of beginning reserve.................. 164.68 132.70 107.15 101.25 99.95
Reserve balance as a % of ending loan receivables.............. 1.17 1.29 1.78 2.18 2.45
Ending loan receivables........................................$10,129,052 $8,135,918 $5,707,000 $4,467,378 $3,978,650
Average loan receivables....................................... 8,703,579 7,061,898 5,330,282 4,068,685 3,392,778
- - ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Annual net credit losses as a percentage of average loan receivables increased
to 1.98% during 1996, compared to 1.91% for 1995 and 1.96% for 1994. The
Corporation's annual managed credit losses as a percentage of average managed
loans for 1996 was 3.35%, compared to 2.74% and 2.59% for 1995 and 1994,
respectively. Excluding the sale of certain previously charged-off receivables,
annual managed credit losses as a percentage of average managed loans for 1996
would have been 3.43%.
RESERVE AND PROVISION FOR POSSIBLE CREDIT LOSSES
An analysis of the Corporation's reserve for possible credit losses is
presented in Table 7. The loan portfolio is regularly reviewed to determine an
appropriate range for the reserve for possible credit losses based upon the
impact of economic conditions on the borrowers' ability to repay, past
collection experience, the risk characteristics of the portfolio, and other
factors that deserve current recognition. A provision is charged to operating
expense to maintain the reserve level within this range. The reserve for
possible credit losses, however, does not include an allocation for credit risk
related to securitized loans, which is absorbed directly by the related trusts
under their respective contractual agreements, thus reducing loan servicing
fees rather than the reserve for possible credit losses. The provision for
possible credit losses for the year ended December 31, 1996, increased $40.0
million or 29.0% from 1995, compared to a $29.7 million or 27.4% increase in
1995 from 1994. The increases in the Corporation's provision for possible
credit losses for the years ended December 31, 1996 and 1995, primarily reflect
the increases in the Corporation's net credit losses for the same period.
While the reserve for possible credit losses is available to absorb potential
losses in the Corporation's outstanding loan receivables, its composition is
internally allocated between credit card and other consumer loans, as presented
in Table 8.
<TABLE>
<CAPTION>
- - ------------------------------------------------------------------------------------------
TABLE 8: ALLOCATION OF RESERVE FOR POSSIBLE CREDIT LOSSES
- - ------------------------------------------------------------------------------------------
(dollars in thousands)
- - ------------------------------------------------------------------------------------------
DECEMBER 31, 1996 1995 1994 1993 1992
- - ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Credit card.............. $ 99,981 $ 86,877 $ 80,828 $ 78,766 $ 81,539
Other consumer........... 18,446 18,009 20,691 18,814 16,041
-------- -------- -------- -------- --------
Total................. $118,427 $104,886 $101,519 $ 97,580 $ 97,580
======== ======== ======== ======== ========
- - ------------------------------------------------------------------------------------------
</TABLE>
[30]
<PAGE> 33
MBNA CORPORATION AND SUBSIDIARIES
- - --------------------------------------------------------------------------------
LIQUIDITY AND INTEREST RATE SENSITIVITY
The financial condition of the Corporation is managed with a focus on
maintaining high-quality credit standards and prudent levels of liquidity and
interest rate risk.
LIQUIDITY MANAGEMENT
Liquidity management is the process by which the Corporation manages its access
to various funding sources to meet its current and future operating needs.
These needs change as loans grow, deposits mature, and payments on obligations
are made. Because the characteristics of the Corporation's assets and
liabilities change, liquidity management is a dynamic process, affected by
pricing and maturity of loans, deposits, and other assets and liabilities. This
process also is affected by changes in the relationship between short-term and
long-term interest rates.
To facilitate liquidity management, the Corporation uses a variety of funding
sources to establish a maturity pattern that provides a prudent mixture of
short- and long-term funds. Funding sources are available to the Corporation
through programs established by the Corporation and the Bank.
During 1996, the Corporation issued $200.0 million in Senior Medium-Term Notes,
compared to $175.0 million issued in 1995. As of December 31, 1996, the
Corporation had $765.5 million in Senior Medium-Term Notes outstanding that
mature from 1997 to 2003, as compared to $590.5 million at December 31, 1995.
In addition, the Corporation had $250.0 million in Senior Notes outstanding at
December 31, 1996 and 1995, that mature in 1999 and 2005. The net proceeds were
used to fund growth in other consumer loans, to purchase premises and
equipment, and for other general corporate purposes. The Corporation expects to
pay the interest on both the Senior Notes and Senior Medium-Term Notes from
dividend, lease, and other payments received primarily from the Bank.
The Corporation has two one-year revolving credit facilities totaling $50.0
million. These credit facilities were renewed during 1996 with $25.0 million
expiring in April 1997 and $25.0 million expiring in October 1997. The
Corporation may take advances under these facilities subject to certain
conditions, including requirements for tangible net worth. These facilities may
be used for general corporate purposes and were not drawn upon as of December
31, 1996.
In April 1995, the Corporation established a $100.0 million commercial paper
program that allows the Corporation to issue commercial paper with a maturity
of 270 days or less. At December 31, 1996, there was no commercial paper
outstanding.
In December 1996, the Corporation issued $250.0 million of guaranteed preferred
beneficial interests in Corporation's junior subordinated deferrable interest
debentures. The securities qualify as regulatory capital for the Corporation,
and the proceeds were contributed as additional capital to the Bank.
In September 1996, the Corporation issued 6.0 million shares of Adjustable Rate
Cumulative Preferred Stock, Series B, with a $25 stated value per share. The
shares of the Series B Preferred Stock are redeemable, in whole or in part,
solely at the option of the Corporation on or after October 15, 2001. The
Series B Preferred Stock may also be redeemed in whole at the option of the
Corporation in the event of certain amendments to the Internal Revenue Code of
1986 with respect to the dividends-received deduction.
In November 1995, the Corporation issued 6.0 million shares of 7 1/2%
Cumulative Preferred Stock, Series A, with a $25 stated value per share. The
shares of the Series A Preferred Stock are redeemable, in whole or in part,
solely at the option of the Corporation on or after January 15, 2001.
Shares of the Series AandB Preferred Stock are not convertible into any other
securities of the Corporation. Dividends on the preferred stock are cumulative
from the date of original issue and are payable quarterly. Note L to the
audited consolidated financial statements provides further detail regarding the
Corporation's Preferred Stock.
The Corporation may also issue additional Senior or Subordinate Debt securities
and preferred stock under an existing S-3 shelf registration statement filed
with the Securities and Exchange Commission.
Funding sources available to the Corporation through programs established by
the Bank include deposits, bank notes, deposit notes, and committed credit
facilities.
Deposits generated by the Bank are a major source of funds for the Corporation.
Total deposits at December 31, 1996, were $10.2 billion, compared with $8.6
billion and $6.6 billion at December 31, 1995 and 1994, respectively. The
increase in deposits from 1995 is primarily the result of a $1.6 billion
increase in direct deposits. The increase in 1995 deposits of $2.0 billion from
1994 is the result of a $2.2 billion increase in direct deposits. These
increases in direct deposits were primarily the result of the Corporation's
emphasis on marketing certificates of deposit and offering competitive rates.
Table 9 provides the maturities of the Corporation's deposits at December 31,
1996.
<TABLE>
<CAPTION>
- - ----------------------------------------------------------------------------------------------------------------------------------
TABLE 9: MATURITIES OF DEPOSITS
- - ----------------------------------------------------------------------------------------------------------------------------------
(dollars in thousands)
- - ----------------------------------------------------------------------------------------------------------------------------------
DECEMBER 31, 1996 DIRECT DEPOSITS OTHER DEPOSITS TOTAL DEPOSITS
- - ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Three months or less................................................... $3,900,518 $ 339,006 $ 4,239,524
Over three months through twelve months................................ 1,756,728 610,397 2,367,125
Over one year through five years....................................... 2,088,879 1,448,790 3,537,669
Over five years........................................................ 4,857 2,511 7,368
---------- ----------- -----------
Total deposits...................................................... $7,750,982 $ 2,400,704 $10,151,686
========== =========== ===========
- - ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
[31]
<PAGE> 34
MBNA CORPORATION AND SUBSIDIARIES
- - --------------------------------------------------------------------------------
Funding Sources
(dollars in millions)
<TABLE>
<CAPTION>
DECEMBER 31, 1996 DECEMBER 31, 1995
<S> <C> <C>
Other deposits $ 2,400.7 $ 2,463.9
Direct deposits $ 7,751.0 $ 6,145.0
Borrowed funds $ 4,643.7 $ 2,947.1
Equity $ 1,704.3 $ 1,265.1
</TABLE>
An additional source of funding for the Bank is provided by a medium-term bank
note/deposit note program. These notes may be issued in maturities ranging from
nine months to fifteen years from the date of issue. During 1996, the Bank
issued $860.0 million of bank notes, compared to $770.9 million issued in 1995.
As of December 31, 1996 and 1995, the Bank had $2.4 billion and $1.6 billion,
respectively, issued and outstanding under this program.
The Bank can also obtain funding through the issuance of short-term bank notes,
with maturities ranging from seven days to one year from the date of issue. The
Bank had $459.0 million of short-term bank notes outstanding at December 31,
1996. The Bank had no short-term bank notes outstanding at December 31, 1995.
In addition to these funding sources, the Bank has $200.0 million of 7.25%
Subordinated Notes outstanding at December 31, 1996 and 1995, which mature in
September 2002. These Subordinated Notes qualify as regulatory capital under
the Comptroller of the Currency's guidelines and enhance the Bank's regulatory
capital level, in addition to providing a long-term source of funds.
In January 1997, the Bank extended its $2.0 billion committed syndicated
revolving credit facility through February 2001. Advances are subject to
covenants and conditions customary in a transaction of this kind. These
conditions include requirements for tangible net worth of at least $760.0
million, increased by 40% of the Bank's net income earned after September 30,
1996, and managed loan receivables 90 days or more past due plus nonaccrual
receivables not to exceed 6% of managed credit card receivables. Should managed
credit card losses equal or exceed 5% for a period of four consecutive
quarters, a ratio of qualifying loan receivables to outstanding borrowings
under the facility of at least 115% is required. The facility may be used for
general corporate purposes and was not drawn upon as of December 31, 1996.
MBNA International has issued Pound Sterling 34.0 million (approximately $58.2
million at December 31, 1996) of Subordinated Guaranteed Floating-Rate Notes
priced between 100 basis points and 145 basis points over the three-month
Sterling London Interbank Offered Rate (LIBOR) for the first five years, with a
50 basis point increase for the last five years, maturing in 2005. Interest on
these notes is payable quarterly or semiannually.
MBNA International has also entered into six bilateral credit facilities,
ranging from one to five years, totaling Pound Sterling 60.0 million
(approximately $102.8 million, at December 31, 1996). MBNA International may
take advances under the facilities subject to certain conditions, including
requirements for tangible net worth. The facilities may be used for general
corporate purposes. At December 31, 1996, MBNA International had Pound Sterling
30.0 million (approximately $51.4 million at December 31, 1996) outstanding.
In addition, MBNA International also has a four-year, Pound Sterling 300.0
million (approximately $513.8 million at December 31, 1996) multi-currency
committed syndicated revolving credit facility which expires in October 2000.
This facility was increased by MBNA International during 1996 from Pound
Sterling 200.0 million to Pound Sterling 300.0 million. MBNA International may
take advances under the facility subject to certain conditions, including
requirements for tangible net worth, outstanding loan receivables, and account
delinquencies. The facility may be used for general corporate purposes and was
not drawn upon as of December 31, 1996.
The Corporation also held $2.3 billion in investment securities and $876.6
million in money market instruments at December 31, 1996, compared to $2.1
billion in investment securities and $573.6 million in money market securities
at December 31, 1995. The investment securities primarily consist of
high-quality, AAA-rated securities, most of which can be used as collateral
under repurchase agreements. Of the investment securities at December 31, 1996,
$1.1 billion is anticipated to mature within 12 months. During 1996, the
Corporation changed its investment securities portfolio strategy from holding a
higher level of held-to-maturity securities to investing in more
available-for-sale securities. At December 31, 1996, the Corporation had $1.7
billion of investment securities available-for-sale. These investment
securities and money market instruments provide increased liquidity and
flexibility to support the Corporation's funding requirements.
INVESTMENT SECURITIES AND MONEY MARKET INSTRUMENTS
(dollars in millions)
<TABLE>
<CAPTION>
DECEMBER 31, 1996 DECEMBER 31, 1995
<S> <C> <C>
Interest-earning time deposits in other banks $ 621.6 $ 448.6
Federal funds sold and securities purchased under
resale agreements $ 255.0 $ 125.0
Investment securities available-for-sale $ 1,719.7 $ 912.1
Investment securities held-to-maturity $ 598.3 $ 1,183.7
</TABLE>
[32]
<PAGE> 35
MBNA CORPORATION AND SUBSIDIARIES
- - --------------------------------------------------------------------------------
INTEREST RATE SENSITIVITY
Interest rate sensitivity refers to the volatility in earnings resulting from
fluctuations in interest rates, variability in spread relationships, and the
mismatch of repricing intervals between assets and liabilities. Interest rate
sensitivity management attempts to maximize earnings growth by minimizing the
effects of changing market rates, asset and liability mix, and prepayment
trends. The interest rate sensitivity schedule presented in Table 10 uses the
static gap methodology to measure interest rate risk. This method reports the
difference between rate-sensitive assets and liabilities at a specific point in
time. Fixed- and variable-rate loans have been distributed among the various
periods based on management's estimate of their repricing characteristics.
Results of the gap analysis show that, within one year, the Corporation's
liabilities reprice faster than its assets. Management has the flexibility to
respond to current market conditions by lengthening or shortening this
sensitivity through credit card repricings and changing its funding mix.
Although the static gap methodology is widely accepted for its simplicity, it
ignores repricing timing differences and market spread adjustments. For these
reasons, the Corporation utilizes simulation modeling to monitor its interest
rate risk. These simulations take into consideration changes in balance sheet
composition, liability pricing spreads, and loan repricing assumptions.
Management reviews the Corporation's interest rate sensitivity position on an
ongoing basis and prepares strategies to adjust that sensitivity as
appropriate. As part of those strategies, the Corporation offers variable-rate
credit cards and home equity loans, which provide an additional vehicle for
managing interest rate sensitivity. Variable-rate loans were 42.1% of total
managed loans at December 31, 1996.
For the Corporation, interest rate risk is not limited to on-balance-sheet
activities, but includes the interest rate sensitivity of loan servicing fees
from securitized loans and the impact of off-balance-sheet financial
instruments. For this reason, the Corporation's interest rate sensitivity
analysis includes a managed adjustment to quantify and capture the full impact
of interest rate risk on the Corporation's earnings.
<TABLE>
<CAPTION>
- - ---------------------------------------------------------------------------------------------------------------------------------
TABLE 10: INTEREST RATE SENSITIVITY SCHEDULE
- - ---------------------------------------------------------------------------------------------------------------------------------
(dollars in thousands)
- - ---------------------------------------------------------------------------------------------------------------------------------
DECEMBER 31, 1996 SUBJECT TO REPRICING
- - ---------------------------------------------------------------------------------------------------------------------------------
Within 1 Year 1-5 Years After 5 Years Total
- - ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INTEREST-EARNING ASSETS
Interest-earning time deposits in other banks.......................... $ 621,614 $ - $ - $ 621,614
Federal funds sold and securities purchased under resale agreements.... 255,000 - - 255,000
Investment securities (a):
Available-for-sale.................................................. 1,696,501 23,229 - 1,719,730
Held-to-maturity.................................................... 300,483 238,939 58,898 598,320
Loans held for securitization.......................................... 2,469,974 - - 2,469,974
Loans:
Credit card......................................................... 5,120,098 602,201 - 5,722,299
Other consumer...................................................... 1,222,966 537,756 176,057 1,936,779
----------- ----------- ---------- -----------
Total loans....................................................... 6,343,064 1,139,957 176,057 7,659,078
----------- ----------- ---------- -----------
Total interest-earning assets..................................... 11,686,636 1,402,125 234,955 13,323,716
INTEREST-BEARING LIABILITIES
Interest-bearing deposits:
Time deposits....................................................... 3,614,403 3,537,669 7,368 7,159,440
Money market deposit accounts....................................... 2,719,545 - - 2,719,545
Interest-bearing transaction accounts............................... 27,995 - - 27,995
Savings accounts.................................................... 10,821 - - 10,821
----------- ----------- ---------- -----------
Total interest-bearing deposits................................... 6,372,764 3,537,669 7,368 9,917,801
Borrowed funds:
Short-term borrowings............................................... 693,387 - - 693,387
Long-term debt and bank notes....................................... 2,006,070 1,075,240 869,048 3,950,358
----------- ----------- ---------- -----------
Total borrowed funds.............................................. 2,699,457 1,075,240 869,048 4,643,745
----------- ----------- ---------- -----------
Total interest-bearing liabilities................................ 9,072,221 4,612,909 876,416 14,561,546
----------- ----------- ---------- -----------
Gap before managed adjustments......................................... 2,614,415 (3,210,784) (641,461) (1,237,830)
Managed adjustments (b)................................................ (3,440,931) 4,316,415 171,466 1,046,950
----------- ----------- ---------- -----------
Gap after managed adjustments.......................................... $ (826,516) $ 1,105,631 $ (469,995) $ (190,880)
=========== =========== ========== ===========
Cumulative gap after managed adjustments............................... $ (826,516) $ 279,115 $ (190,880)
=========== =========== ==========
Cumulative gap after managed adjustments
as a percent of total managed assets (c).............................. (1.82)% .61% (.42)%
- - ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Investment securities are presented using estimated maturities.
(b) Managed adjustments reflect the impact interest rates have on securitized
loans and off-balance-sheet financial instruments.
(c) Total managed assets at December 31, 1996, were $45,529,823.
[33]
<PAGE> 36
MBNA CORPORATION AND SUBSIDIARIES
- - --------------------------------------------------------------------------------
CAPITAL ADEQUACY
The Corporation is subject to risk-based capital guidelines adopted by the
Federal Reserve Board for bank holding companies. The Bank is also subject to
similar capital requirements adopted by the Office of the Comptroller of the
Currency. Under these requirements, the regulatory agencies have set minimum
thresholds for Tier 1 capital, Total capital, and Leverage ratios. At December
31, 1996, both the Corporation's and the Bank's capital exceeded all minimum
regulatory requirements, and the Bank was "well-capitalized" as defined in the
regulations issued pursuant to the FDIC Improvement Act of 1991. Both the
Corporation's and the Bank's risk-based capital ratios, shown in Table 11, have
been computed in accordance with regulatory accounting policies.
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------
TABLE 11: REGULATORY CAPITAL RATIOS
MBNA MBNA AMERICA MINIMUM
DECEMBER 31, 1996 CORPORATION BANK, N.A. REQUIREMENTS
- - -----------------------------------------------------------------
<S> <C> <C> <C>
Tier 1................... 10.89% 10.01% 4.00%
Total.................... 13.22 12.31 8.00
Leverage................. 11.21 9.24 3.00
- - -----------------------------------------------------------------
</TABLE>
Note N to the audited consolidated financial statements provides further detail
regarding the Corporation's capital adequacy.
During December 1996, the Corporation issued $250.0 million of guaranteed
preferred beneficial interests in Corporation's junior subordinated deferrable
interest debentures. On October 21, 1996, the Federal Reserve announced that
cumulative preferred securities, having the characteristics of the guaranteed
preferred beneficial interests in Corporation's junior subordinated deferrable
interest debentures, could be included in 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 junior
subordinated deferrable interest debentures, will provide the Corporation with
lower-cost regulatory capital. The Corporation used the proceeds from the
issuance of guaranteed preferred beneficial interests in Corporation's junior
subordinated deferrable interest debentures as a capital contribution to the
Bank.
Also, the $150.0 million of Adjustable Rate Cumulative Preferred Stock, Series
B, issued in September 1996, and the $150.0 million of 7 1/2% Cumulative
Preferred Stock, Series A, issued in November 1995 by the Corporation, qualify
as Tier 1 capital under the risk-based guidelines for bank holding companies.
During 1996, the Corporation declared dividends on its preferred and common
stock of $156.6 million. The payment of preferred and common stock dividends by
the Corporation may be limited by certain factors including regulatory capital
requirements, broad enforcement powers of the federal bank regulatory agencies,
and tangible net worth maintenance requirements under the Corporation's
revolving credit facilities. In addition, if the Corporation defers interest
for 10 consecutive semiannual periods on its guaranteed preferred beneficial
interests in Corporation's junior subordinated deferrable interest debentures,
the Corporation may not be permitted to declare or pay any cash dividends on
the Corporation's capital stock or interest on debt securities that have equal
or less priority over claims as the junior subordinated deferrable interest
debentures.
The primary source of funds for payment of preferred and common stock dividends
by the Corporation is dividends received from the Bank. The amount of dividends
that a bank may declare in any year is subject to certain regulatory
restrictions. Generally, dividends declared in a given year by a national bank
are limited to its net profit, as defined by regulatory agencies, for that
year, combined with its retained net income for the preceding two years. Also,
a bank may not declare dividends if such declaration would leave the bank
inadequately capitalized. Therefore, the ability of the Bank to declare
dividends will depend on its future net income and capital requirements. At
December 31, 1996, the amount of retained earnings available for declaration of
dividends from the Bank to the Corporation was $588.9 million. Payment of
dividends by the Bank to the Corporation may, however, be further limited by
federal bank regulatory agencies.
The Bank's payment of dividends to the Corporation may also be limited by a
tangible net worth requirement under the Bank's revolving credit facility. This
facility was not drawn upon as of December 31, 1996. If this facility were
drawn upon as of December 31, 1996, the amount of retained earnings available
for declaration of dividends would have been limited to $409.4 million.
SECURITIZATION
Securitization of the Bank's loan receivables continues to be a major funding
alternative for the Corporation. This is accomplished primarily through the
public and private issuance of asset-backed securities. As loan receivables are
securitized, the Corporation's on-balance-sheet funding needs are reduced by
the amount of loans securitized.
Securitization involves the sale, generally to a trust, of a pool of loan
receivables. These loan receivables arise from accounts whose ownership is
retained by the Bank. In addition to selling the existing loan receivables,
rights to new loan receivables, including most fees generated by and payments
made from these accounts, are sold. Certificates representing undivided
interests in the trust are issued. The Investor Certificates are sold by the
trust to investors, generally through a public offering. Interest is paid to
the Investor Certificateholders during the life of the transaction. The Seller
Certificate is retained by the Bank. The Bank continues to service the accounts
and receives a servicing fee for doing so.
During the revolving period, which generally ranges from 24 months to 108
months, no principal payments are made to the Investor Certificateholders.
Payments received on the accounts are used to pay interest to the Investor
Certificateholders and to purchase new loan receivables generated by the
accounts, so that the principal dollar amount of the Investor Certificate
remains unchanged. Once the revolving period ends, principal payments are
allocated for distribution to the Investor Certificateholders according to the
terms of the transaction. As principal payments are allocated to the Investor
Certificateholders, the Bank's loan receivables increase by the amount of any
new purchases or cash advance activity on the accounts.
During 1996, the Bank securitized loan receivables totaling $11.3 billion
through both public and private markets, including two securitizations of
Pound Sterling 500.0 million involving MBNA International. Additionally, during
December 1996, the Bank securitized
[34]
<PAGE> 37
MBNA CORPORATION AND SUBSIDIARIES
- - --------------------------------------------------------------------------------
$841.6 million of other consumer loans through a private multi-seller
commercial paper conduit. In 1995, the Bank securitized a total of $6.2 billion
of its loan receivables, including a securitization of Pound Sterling 207.5
million involving MBNAInternational. These securitizations bring the total
amount of outstanding securitized loans to $28.5 billion or 73.8% of managed
loans as of December 31, 1996, compared to $18.6 billion or 69.5%at December
31, 1995.
The Corporation's securitized loan distribution is shown in Table 12.
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------------------
TABLE 12: SECURITIZED LOAN DISTRIBUTION
- - -----------------------------------------------------------------------------
(dollars in thousands)
- - -----------------------------------------------------------------------------
DECEMBER 31, 1996 1995 1994
- - -----------------------------------------------------------------------------
<S> <C> <C> <C>
Securitized loans:
Credit card................... $27,082,046 $17,989,333 $ 12,833,489
Other consumer................ 1,412,435 586,453 203,375
----------- ----------- ------------
Total securitized loans...... $28,494,481 $18,575,786 $ 13,036,864
=========== =========== ============
- - -----------------------------------------------------------------------------
</TABLE>
In addition, $1.6 billion of previously securitized loans in existing trusts
amortized back into the Bank's loan portfolio during 1996, compared to $775.0
million in 1995. During the amortization period, new charges and cash advances
are for the account of the Bank, which increases the Corporation's
on-balance-sheet assets. Table 13 presents the amounts, at December 31, 1996,
of investor principal (face value)in securitized receivables scheduled to
amortize into the Bank's loan portfolio in future years.
Distribution of principal to the Investor Certificateholders may begin sooner
if the average annualized yield (generally including interest income,
interchange, and other fees) for three consecutive months drops below a minimum
yield (generally equal to the sum of the certificate rate payable to investors,
contractual servicing fees, and principal credit losses during the period) or
certain other events occur. Table 14 compares the average annualized yield for
the three-month period ended December 31, 1996, to the minimum yield for each
transaction. The yield for each of the transactions is presented on a cash
basis and includes various credit card or other fees as specified in the
securitization agreements.
<TABLE>
<CAPTION>
- - --------------------------------------------------------------
TABLE 13: AMORTIZATIONS OF INVESTOR PRINCIPAL (FACE VALUE)
- - --------------------------------------------------------------
(dollars in thousands)
<S> <C>
1997...............................................$ 3,071,425
1998............................................... 3,257,561
1999............................................... 5,482,747
2000............................................... 4,320,763
2001............................................... 4,099,553
Thereafter......................................... 7,809,831
------------
Total amortizations............................$ 28,041,880
============
- - --------------------------------------------------------------
</TABLE>
Due to the relatively short average life of loans, no gain or loss is recorded
at the time of a securitization. Rather, loan servicing fees (interest income,
interchange, and other fees in excess of interest paid to Certificateholders;
credit losses; and other trust expenses) are recognized monthly over the life
of the transaction when earned.
The Corporation is required to adopt Statement of Financial Accounting
Standards No. 125, "Accounting for Transfers and Servicing of Financial Assets
and Extinguishments of Liabilities" (Statement No. 125), effective for all
transactions occurring after December 31, 1996. Statement No. 125 requires
recognition of a gain at the time of the initial sale and each subsequent sale
of loan receivables in a securitization. Currently, the Corporation recognizes
this income over the life of the securitization. These gains, which are
expected to be material in 1997, will be invested in additional business
development efforts and, as a result, will have no impact on the Corporation's
1997 net income.
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------
TABLE 14: YIELDS ON SECURITIZED TRANSACTIONS (a)
THREE-MONTH AVERAGE
- - -----------------------------------------------------------------
Yield in
Annualized Minimum Excess of
Yield Yield Minimum
- - -----------------------------------------------------------------
<S> <C> <C> <C>
MasterTrust 91-1 (b)........... 22.05% 15.03% 7.02%
MasterTrust 92-1 (b)........... 18.31 13.70 4.61
MasterTrust 92-2............... 18.31 12.65 5.66
MasterTrust 92-3............... 18.31 12.39 5.92
MasterTrust 93-1............... 18.31 12.33 5.98
MasterTrust 93-2 (b)........... 29.42 14.66 14.76
MasterTrust 93-3............... 18.31 11.85 6.46
MasterTrust 93-4............... 18.31 12.28 6.03
MasterTrust 94-1............... 18.31 12.18 6.13
MasterTrust 94-2............... 18.31 12.24 6.07
MasterTrust II 94-A............ 17.04 11.65 5.39
MasterTrust II 94-B............ 17.04 11.64 5.40
MasterTrust II 94-C............ 17.04 11.74 5.30
MasterTrust II 94-D............ 17.04 11.68 5.36
MasterTrust II 94-E............ 17.04 11.62 5.42
Gold Reserve................... 19.36 14.30 5.06
MasterTrust II 95-A............ 17.04 11.76 5.28
MasterTrust II 95-B............ 17.04 11.63 5.41
MasterTrust II 95-C............ 17.04 11.69 5.35
MasterTrust II 95-D............ 17.04 11.55 5.49
MasterTrust II 95-E............ 17.04 11.70 5.34
Cards No. 1.................... 19.88 10.28 9.60
MasterTrust II 95-F............ 17.04 12.44 4.60
MasterTrust II 95-G ........... 17.04 11.69 5.35
MasterTrust II 95-H ........... 17.04 11.54 5.50
MasterTrust II 95-I............ 17.04 11.63 5.41
MasterTrust II 95-J............ 17.04 11.71 5.33
MasterTrust II 96-A............ 17.04 11.68 5.36
MasterTrust II 96-B............ 17.04 11.75 5.29
MasterTrust II 96-C............ 17.04 11.62 5.42
MasterTrust II 96-D............ 17.04 11.62 5.42
Cards No. 2.................... 19.88 10.17 9.71
MasterTrust II 96-E............ 17.04 11.65 5.39
MasterTrust II 96-F............ 17.04 11.57 5.47
MasterTrust II 96-G............ 17.04 11.69 5.35
MasterTrust II 96-H............ 17.06 11.63 5.43
MasterTrust II 96-I............ 17.03 12.59 4.44
MasterTrust II 96-J............ 17.03 12.27 4.76
- - ----------------------------------------------------------------
</TABLE>
(a) MasterTrust II 96-K issued on October 24, 1996, MasterTrust II 96-M issued
on November 26, 1996, MasterTrust II 96-L issued on December 3, 1996, Cards
No. 3 issued on December 5, 1996, and GoldOption issued on December 18,
1996, are excluded from the yields presented above as a result of their
recency.
(b) Represents a transaction that has entered its scheduled controlled
amortization period.
[35]
<PAGE> 38
MBNA CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL FINANCIAL INFORMATION
- - --------------------------------------------------------------------------------
(unaudited)
The following supplemental information presents selected line items of the
Corporation's results of operations and financial condition on a managed basis.
This information is used to evaluate the generation of revenue as well as the
impact of securitizations on a managed basis.
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------------------
MANAGED INCOME STATEMENT DATA
- - -------------------------------------------------------------------------------------
(dollars in thousands)
- - -------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1996 1995 1994
- - -------------------------------------------------------------------------------------
<S> <C> <C> <C>
CONSOLIDATED STATEMENTS OF
INCOME (AS REPORTED):
Net interest income.......................... $ 640,477 $ 544,226 $ 532,108
Provision for possible credit losses......... 178,224 138,176 108,477
Other operating income....................... 1,895,923 1,424,618 1,013,580
Other operating expense...................... 1,572,551 1,246,067 996,110
----------- ------------ -----------
Income before income taxes and
special marketing program................... $ 785,625 $ 584,601 $ 441,101
=========== ============ ===========
ADJUSTMENTS FOR SECURITIZATIONS
(SUPPLEMENTAL):
Net interest income.......................... $ 1,957,960 $ 1,305,249 $ 811,109
Provision for possible credit losses......... 872,634 482,063 278,639
Other operating income....................... (1,085,326) (823,186) (532,470)
Other operating expense...................... - - -
----------- ------------ -----------
Income before income taxes and
special marketing program................... $ - $ - $ -
=========== ============ ===========
MANAGED INCOME STATEMENTS
(SUPPLEMENTAL):
Net interest income.......................... $ 2,598,437 $ 1,849,475 $ 1,343,217
Provision for possible credit losses......... 1,050,858 620,239 387,116
Other operating income....................... 810,597 601,432 481,110
Other operating expense...................... 1,572,551 1,246,067 996,110
----------- ------------ -----------
Income before income taxes and
special marketing program................... $ 785,625 $ 584,601 $ 441,101
=========== ============ ===========
- - -------------------------------------------------------------------------------------
<CAPTION>
- - -------------------------------------------------------------------------------------
MANAGED ASSET DATA
- - -------------------------------------------------------------------------------------
(dollars in thousands)
- - -------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1996 1995 1994
- - -------------------------------------------------------------------------------------
<S> <C> <C> <C>
AT YEAR END:
Loans held for securitization............. $ 2,469,974 $ 3,168,427 $ 2,299,026
Loan portfolio............................ 7,659,078 4,967,491 3,407,974
Securitized loans......................... 28,494,481 18,575,786 13,036,864
----------- ------------ -----------
Total managed loans.................... $38,623,533 $ 26,711,704 $18,743,864
=========== =========== ===========
Total managed interest-earning
assets............................... $41,818,197 $29,381,106 $21,012,945
----------- ----------- -----------
Total managed assets................... $45,529,823 $31,804,675 $22,708,722
=========== =========== ===========
AVERAGE:
Loans held for securitization............. $ 2,529,484 $ 2,269,362 $ 1,330,011
Loan portfolio............................ 6,174,095 4,792,536 4,000,271
Securitized loans......................... 22,514,014 15,440,499 9,462,401
----------- ----------- -----------
Total managed loans.................... $31,217,593 $22,502,397 $14,792,683
=========== =========== ===========
Total managed interest-earning
assets............................... $34,144,944 $24,954,180 $16,476,999
----------- ----------- -----------
Total managed assets................... $37,085,302 $26,866,220 $17,894,912
=========== =========== ===========
MANAGED RATIOS:
Delinquency............................... 4.28% 3.70% 3.03%
Net credit losses......................... 3.35 2.74 2.59
Net interest margin (on an FTE basis)..... 7.62 7.42 8.16
- - -------------------------------------------------------------------------------------
</TABLE>
DELINQUENCY NET CREDIT LOSSES NET INTEREST MARGIN
(MANAGED) (MANAGED) (MANAGED)
percent percent percent
94 3.03 94 2.59 94 8.16
95 3.70 95 2.74 95 7.42
96 4.28 96 3.35 96 7.62
[36]
<PAGE> 39
MBNA CORPORATION AND SUBSIDIARIES
MANAGEMENT'S REPORT ON CONSOLIDATED FINANCIAL STATEMENTS AND INTERNAL CONTROL
- - --------------------------------------------------------------------------------
The accompanying consolidated financial statements were prepared by management,
who are responsible for the integrity and objectivity of the information
presented, including amounts that must necessarily be based on judgments and
estimates. The consolidated financial statements were prepared in conformity
with generally accepted accounting principles, and in situations where
acceptable alternative accounting principles exist, management selected the
method that was appropriate in the circumstance. Financial information appearing
throughout this Annual Report to Stockholders is consistent with the
consolidated financial statements.
Management depends upon MBNA Corporation's systems of internal control in
meeting its responsibilities for reliable consolidated financial statements. In
management's opinion, these systems provide reasonable assurance that assets are
safeguarded and that transactions are properly recorded and executed in
accordance with management's authorizations. Judgments are required to assess
and balance the relative cost and expected benefits of these controls. As an
integral part of the systems of internal control, the Corporation maintains a
professional staff of internal auditors who conduct operational and special
audits and coordinate audit coverage with the independent auditors.
The consolidated financial statements have been audited by the Corporation's
independent auditors, Ernst & Young LLP, whose independent professional opinion
appears separately.
The Audit Committee of the Board of Directors, composed solely of outside
directors, meets periodically with the internal auditors, the independent
auditors, and management to review the work of each and ensure that each is
properly discharging its responsibilities. The independent auditors have free
access to the Committee to discuss the results of their audit work and their
evaluations of the adequacy of internal controls and the quality of financial
reporting.
/s/ ALFRED LERNER /s/ CHARLES M. CAWLEY
Alfred Lerner Charles M. Cawley
Chairman and President
Chief Executive Officer MBNA Corporation
MBNA Corporation Chairman and
Chief Executive Officer
MBNA America Bank, N.A.
/s/ M. SCOT KAUFMAN /s/ KENNETH F. BOEHL
M. Scot Kaufman Kenneth F. Boehl
Chief Financial Officer General Auditor
MBNA Corporation MBNA Corporation
Vice Chairman
MBNA America Bank, N.A.
37
<PAGE> 40
MBNA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
- - --------------------------------------------------------------------------------
(dollars in thousands)
<TABLE>
<CAPTION>
- - ----------------------------------------------------------------------------------------------------------------------------------
DECEMBER 31, 1996 1995
- - ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Cash and due from banks......................................................................... $ 225,063 $ 291,856
Interest-earning time deposits in other banks................................................... 621,614 448,611
Federal funds sold and securities purchased under resale agreements............................. 255,000 125,000
Investment securities:
Available-for-sale (at market value, amortized cost of $1,718,643 and
$911,877 at December 31, 1996 and 1995, respectively)....................................... 1,719,730 912,064
Held-to-maturity (market value of $592,208 and $1,188,101 at December 31, 1996
and 1995, respectively)..................................................................... 598,320 1,183,727
Loans held for securitization................................................................... 2,469,974 3,168,427
Loans:
Credit card.................................................................................. 5,722,299 4,090,553
Other consumer............................................................................... 1,936,779 876,938
------------- -------------
Total loans................................................................................ 7,659,078 4,967,491
Reserve for possible credit losses........................................................... (118,427) (104,886)
------------- -------------
Net loans.................................................................................. 7,540,651 4,862,605
Premises and equipment, net..................................................................... 1,047,183 816,277
Accrued income receivable....................................................................... 98,160 93,636
Accounts receivable from securitizations........................................................ 1,777,323 951,568
Prepaid expenses and deferred charges........................................................... 204,139 139,901
Other assets.................................................................................... 478,185 235,217
------------- -------------
Total assets............................................................................... $ 17,035,342 $ 13,228,889
============= =============
LIABILITIES
Deposits:
Time deposits................................................................................ $ 7,159,440 $ 6,147,599
Money market deposit accounts................................................................ 2,719,545 2,257,565
Noninterest-bearing demand deposits.......................................................... 233,885 169,571
Interest-bearing transaction accounts........................................................ 27,995 24,514
Savings accounts............................................................................. 10,821 9,665
------------- -------------
Total deposits............................................................................. 10,151,686 8,608,914
Short-term borrowings........................................................................... 693,387 289,543
Long-term debt and bank notes................................................................... 3,950,358 2,657,600
Accrued interest payable........................................................................ 107,187 93,400
Accrued expenses and other liabilities.......................................................... 428,416 314,374
------------- -------------
Total liabilities.......................................................................... 15,331,034 11,963,831
STOCKHOLDERS' EQUITY
Preferred stock ($.01 par value, 20,000,000 shares authorized, 12,000,000
shares and 6,000,000 shares issued and outstanding at December 31, 1996
and 1995, respectively)....................................................................... 120 60
Common stock ($.01 par value, 700,000,000 shares authorized, 334,125,000 shares
issued and outstanding at December 31, 1996 and 1995, respectively)............................ 3,341 3,341
Additional paid-in capital...................................................................... 603,902 490,622
Retained earnings............................................................................... 1,096,945 771,035
------------- -------------
Total stockholders' equity................................................................. 1,704,308 1,265,058
------------- -------------
Total liabilities and stockholders' equity................................................. $ 17,035,342 $ 13,228,889
============= =============
- - ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
[38]
<PAGE> 41
MBNA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
- - --------------------------------------------------------------------------------
(dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
- - ---------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1996 1995 1994
- - ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INTEREST INCOME
Loans...................................................................... $ 861,305 $ 675,600 $ 561,374
Investment securities:
Taxable................................................................. 123,054 119,322 78,753
Tax-exempt.............................................................. 3,325 3,325 3,066
Time deposits in other banks............................................... 29,528 15,832 5,115
Federal funds sold and securities purchased under resale agreements........ 9,935 7,727 5,626
Loans held for securitization............................................. 356,120 319,009 185,708
-------------- -------------- --------------
Total interest income................................................. 1,383,267 1,140,815 839,642
INTEREST EXPENSE
Deposits................................................................... 527,885 438,157 222,152
Short-term borrowings...................................................... 18,497 12,095 19,736
Long-term debt and bank notes.............................................. 196,408 146,337 65,646
-------------- -------------- --------------
Total interest expense................................................ 742,790 596,589 307,534
-------------- -------------- --------------
NET INTEREST INCOME........................................................ 640,477 544,226 532,108
Provision for possible credit losses....................................... 178,224 138,176 108,477
-------------- -------------- --------------
Net interest income after provision for possible credit losses............. 462,253 406,050 423,631
OTHER OPERATING INCOME
Interchange................................................................ 88,191 88,051 84,965
Merchant discount.......................................................... 8,430 9,158 7,509
Credit card fees........................................................... 102,579 82,293 48,029
Loan servicing fees........................................................ 1,649,337 1,196,781 824,997
Processing fees............................................................ 9,898 23,558 27,195
Gain (loss) on investment securities....................................... - 39 (74)
Other...................................................................... 37,488 24,738 20,959
-------------- -------------- --------------
Total other operating income.......................................... 1,895,923 1,424,618 1,013,580
OTHER OPERATING EXPENSE
Salaries and employee benefits............................................. 732,971 552,538 451,191
Occupancy expense of premises.............................................. 66,536 44,915 33,906
Furniture and equipment expense............................................ 97,785 88,221 62,885
Other...................................................................... 675,259 560,393 448,128
-------------- -------------- --------------
Total other operating expense......................................... 1,572,551 1,246,067 996,110
-------------- -------------- --------------
INCOME BEFORE INCOME TAXES AND SPECIAL MARKETING PROGRAM................... 785,625 584,601 441,101
Special marketing program.................................................. 54,331 - -
-------------- -------------- --------------
INCOME BEFORE INCOME TAXES ................................................ 731,294 584,601 441,101
Applicable income taxes.................................................... 289,592 231,502 174,508
Tax benefit from Customer-based intangible assets.......................... (32,793) - -
-------------- -------------- --------------
NET INCOME................................................................. $ 474,495 $ 353,099 $ 266,593
============== ============== ==============
EARNINGS PER COMMON SHARE.................................................. $ 1.33 $ 1.03 $ .79
Weighted average common shares outstanding and common stock
equivalents (000)........................................................ 345,988 342,429 338,895
- - ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
[39]
<PAGE> 42
MBNA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
- - --------------------------------------------------------------------------------
(dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
- - ------------------------------------------------------------------------------------------------------------------------------------
OUTSTANDING SHARES
- - ------------------------------------------------------------------------------------------------------------------------------------
Preferred Common Preferred Common
(000) (000) Stock Stock
--------------------------------------------------------------------
<S> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1993.................................. - 334,125 $ - $ 3,341
Net income.................................................. - - - -
Cash dividends:
Common--$.32 per share................................... - - - -
Exercise of stock options and other awards.................. - 1,425 - 14
Acquisition and retirement of common stock.................. - (1,425) - (14)
Foreign currency translation, net of tax
(accumulated amount of $243 at December 31, 1994).......... - - - -
Net unrealized losses on investment securities
available-for-sale, net of tax............................. - - - -
----------- ----------- ----------- -----------
BALANCE, DECEMBER 31, 1994.................................. - 334,125 - 3,341
Net income.................................................. - - - -
Cash dividends:
Common--$.37 per share................................... - - - -
Preferred................................................ - - - -
Exercise of stock options and other awards.................. - 3,274 - 33
Acquisition and retirement of common stock.................. - (3,274) - (33)
Issuance of preferred stock, net of issuance costs.......... 6,000 - 60 -
Foreign currency translation, net of tax
(accumulated amount of $391 at December 31, 1995).......... - - - -
Net unrealized gains on investment securities
available-for-sale, net of tax (accumulated amount
of $189 at December 31, 1995)............................. - - - -
----------- ----------- ----------- -----------
BALANCE, DECEMBER 31, 1995.................................. 6,000 334,125 60 3,341
Net income.................................................. - - - -
Cash dividends:
Common--$.43 per share................................... - - - -
Preferred................................................ - - - -
Exercise of stock options and other awards.................. - 3,293 - 33
Acquisition and retirement of common stock.................. - (3,293) - (33)
Issuance of preferred stock, net of issuance costs.......... 6,000 - 60 -
Foreign currency translation, net of tax
(accumulated amount of $7,910 at December 31, 1996)........ - - - -
Net unrealized gains on investment securities
available-for-sale, net of tax (accumulated amount
of $723 at December 31, 1996).............................. - - - -
----------- ----------- ----------- -----------
BALANCE, DECEMBER 31, 1996.................................. 12,000 334,125 $ 120 $ 3,341
=========== =========== =========== ===========
- - ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------------------------------
Additional
Paid-in Retained Stockholders'
Capital Earnings Equity
-------------------------------------------------
<S> <C> <C> <C>
BALANCE, DECEMBER 31, 1993 ......................... $ 382,044 $ 383,746 $ 769,131
Net income ......................................... - 266,593 266,593
Cash dividends:
Common--$.32 per share .......................... - (106,920) (106,920)
Exercise of stock options and other awards ......... 6,616 - 6,630
Acquisition and retirement of common stock ......... (15,428) - (15,442)
Foreign currency translation, net of tax
(accumulated amount of $243 at December 31, 1994) . - 418 418
Net unrealized losses on investment securities
available-for-sale, net of tax .................... - (832) (832)
----------- ----------- -----------
BALANCE, DECEMBER 31, 1994 ......................... 373,232 543,005 919,578
Net income ......................................... - 353,099 353,099
Cash dividends:
Common--$.37 per share .......................... - (124,769) (124,769)
Preferred ....................................... - (1,469) (1,469)
Exercise of stock options and other awards ......... 22,176 - 22,209
Acquisition and retirement of common stock ......... (49,796) - (49,829)
Issuance of preferred stock, net of issuance costs . 145,010 - 145,070
Foreign currency translation, net of tax
(accumulated amount of $391 at December 31, 1995) . - 148 148
Net unrealized gains on investment securities
available-for-sale, net of tax (accumulated amount
of $189 at December 31, 1995) .................... - 1,021 1,021
----------- ----------- -----------
BALANCE, DECEMBER 31, 1995 ......................... 490,622 771,035 1,265,058
Net income ......................................... - 474,495 474,495
Cash dividends:
Common--$.43 per share .......................... - (142,583) (142,583)
Preferred ....................................... - (14,055) (14,055)
Exercise of stock options and other awards ......... 39,013 - 39,046
Acquisition and retirement of common stock ......... (71,880) - (71,913)
Issuance of preferred stock, net of issuance costs . 146,147 - 146,207
Foreign currency translation, net of tax
(accumulated amount of $7,910 at December 31, 1996) - 7,519 7,519
Net unrealized gains on investment securities
available-for-sale, net of tax (accumulated amount
of $723 at December 31, 1996) ..................... - 534 534
----------- ----------- -----------
BALANCE, DECEMBER 31, 1996 ......................... $ 603,902 $ 1,096,945 $ 1,704,308
=========== =========== ===========
- - --------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
[40]
<PAGE> 43
MBNA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
- - --------------------------------------------------------------------------------
(dollars in thousands)
<TABLE>
<CAPTION>
- - ----------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1996 1995 1994
- - ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income................................................................. $ 474,495 $ 353,099 $ 266,593
Adjustments to reconcile net income to net cash (used in) provided by
operating activities:
Provision for possible credit losses.................................... 178,224 138,176 108,477
Depreciation, amortization, and accretion............................... 96,602 76,584 64,967
(Gain) loss on investment securities.................................... - (39) 74
(Benefit) provision for deferred income taxes........................... (32,006) 9,633 48,392
Increase in accrued income receivable................................... (4,524) (28,560) (7,766)
Increase in accounts receivable from securitizations.................... (825,755) (218,850) (119,831)
Increase in accrued interest payable.................................... 13,787 24,797 29,665
Decrease (increase) in other operating activities....................... 63,477 (14,167) 56,166
-------------- -------------- --------------
Net cash (used in) provided by operating activities................... (35,700) 340,673 446,737
INVESTING ACTIVITIES
Net increase in money market instruments................................... (303,003) (306,036) (236,221)
Proceeds from maturities of investment securities available-for-sale....... 4,450,709 2,852,934 199,765
Purchases of investment securities available-for-sale...................... (5,234,815) (3,303,589) (700,217)
Proceeds from sale of investment securities available-for-sale............. - 35,249 99,246
Proceeds from maturities of investment securities held-to-maturity......... 604,869 357,870 629,796
Purchases of investment securities held-to-maturity........................ (19,302) (18,657) (817,429)
Proceeds from securitization of loans...................................... 11,223,917 6,180,743 6,093,287
Portfolio acquisitions..................................................... (1,475,498) (77,324) (32,803)
Amortization of securitized loans.......................................... (1,608,334) (775,000) (1,041,666)
Net loan originations...................................................... (10,540,920) (7,921,653) (6,384,567)
Net purchases of premises and equipment.................................... (303,173) (344,490) (186,423)
-------------- -------------- --------------
Net cash used for investing activities................................ (3,205,550) (3,319,953) (2,377,232)
FINANCING ACTIVITIES
Net increase in money market deposit accounts, noninterest-bearing
demand deposits, interest-bearing transaction accounts, and savings accounts 530,931 746,110 110,154
Net increase in time deposits.............................................. 1,011,841 1,230,315 1,280,452
Net increase (decrease) in short-term borrowings........................... 403,844 179,043 (200,493)
Proceeds from issuance of long-term debt and bank notes.................... 1,444,985 1,092,395 981,485
Maturity of long-term debt and bank notes.................................. (165,192) (123,000) (75,000)
Proceeds from issuance of preferred stock.................................. 146,207 145,070 -
Proceeds from exercise of stock options and other awards................... 22,869 12,780 4,033
Acquisition and retirement of common stock................................. (71,913) (49,829) (15,442)
Dividends paid............................................................. (149,115) (120,312) (103,952)
-------------- -------------- --------------
Net cash provided by financing activities............................. 3,174,457 3,112,572 1,981,237
-------------- -------------- --------------
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS........................... (66,793) 133,292 50,742
Cash and cash equivalents at beginning of year............................. 291,856 158,564 107,822
-------------- -------------- --------------
Cash and cash equivalents at end of year................................... $ 225,063 $ 291,856 $ 158,564
============== ============== ==============
SUPPLEMENTAL DISCLOSURES:
Interest expense paid...................................................... $ 728,091 $ 572,232 $ 273,894
============== ============== ==============
Income taxes paid.......................................................... $ 248,329 $ 194,364 $ 102,584
============== ============== ==============
Noncash exchange of credit card loan receivables........................... $ - $ - $ 10,188
============== ============== ==============
- - ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
[41]
<PAGE> 44
MBNA CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
- - --------------------------------------------------------------------------------
NOTE A: SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed in the
preparation of the consolidated financial statements.
BUSINESS
MBNA Corporation ("the Corporation") is a registered bank holding company,
incorporated under the laws of Maryland. It is the parent company of MBNA
America Bank, N.A., ("the Bank") a national bank. Through the Bank, the
Corporation is one of the world's largest lenders through bank credit cards.
The Corporation 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 makes other consumer
loans and offers deposit products.
BASIS OF PRESENTATION
The accompanying consolidated financial statements have been prepared in
accordance with generally accepted accounting principles that require the
Corporation's management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the consolidated financial statements as well as
the reported amount of revenues and expenses during the reporting period.
Actual results could differ from these estimates.
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include, after intercompany
elimination, the accounts of all subsidiaries of the Corporation, all of which
are wholly owned. For purposes of comparability, certain prior year amounts
have been reclassified.
FOREIGN CURRENCY TRANSLATION AND TRANSACTIONS
MBNA International Bank Limited ("MBNA International"), the Bank's foreign bank
subsidiary, issues credit cards and other consumer loans in the United Kingdom.
The financial statements of this foreign subsidiary have been translated into
U.S. dollars in accordance with generally accepted accounting principles.
Assets and liabilities have been translated using the exchange rate at year
end. Income and expense amounts have been translated using the average exchange
rate for the period in which the transaction took place. The translation gains
and losses resulting from the change in exchange rates have been reported as a
component of stockholders' equity, net of tax. The effect on the consolidated
statements of income of transaction gains and losses is immaterial for all
years presented.
INVESTMENT SECURITIES
The Corporation accounts for its investment securities portfolio using three
classifications, each of which receives different accounting treatment.
Investment securities available-for-sale are reported at market value with
unrealized gains and losses, net of tax, included as a separate component of
stockholders' equity. Investment securities held-to-maturity are reported at
cost (adjusted for amortization of premiums and accretion of discounts).
Trading securities are reported at market value, with unrealized gains and
losses included in earnings. The Corporation does not have a trading securities
portfolio.
Realized gains and losses and other-than-temporary impairments related to debt
and equity securities are determined using the specific identification method
and are reported in other operating income as gains or losses on investment
securities.
LOANS HELD FOR SECURITIZATION
Loans held for securitization are the lesser of loans eligible for
securitization or loans that management intends to securitize within one year.
These loans are carried at the lower of aggregate cost or market value.
INTEREST INCOME ON LOANS
Interest income on loans is recognized based upon the principal amount
outstanding. Interest income is generally recognized until the loan is charged
off. The accrued interest portion of the charged-off loan balance is deducted
from current period interest income, while the remaining principal balance is
charged off against the reserve for possible credit losses.
CREDIT CARD FEES AND COSTS
Credit card fees include annual, late, overlimit, returned check, and cash
advance transaction fees. These fees are assessed according to agreements with
Customers. Credit card fees recognized on charged-off accounts are deducted
from credit card fee income.
Annual credit card fees and incremental direct loan origination costs are
deferred and amortized on a straight-line basis over the one-year period to
which the fees pertain. The Corporation does not charge an annual credit card
fee during the first year the account is originated, while incremental direct
loan origination costs are deferred only in the first year. These costs are
included in prepaid expenses and deferred charges. As of December 31, 1996 and
1995, the incremental direct loan origination costs deferred were $34.7 million
and $34.2 million, respectively.
RESERVE FOR POSSIBLE CREDIT LOSSES
The Corporation makes certain estimates and assumptions that affect the
determination of the reserve for possible credit losses. The loan portfolio is
reviewed regularly to determine an appropriate reserve for possible credit
losses based upon the impact of economic conditions on the borrowers' ability
to repay, past collection experience, the risk characteristics of the
portfolio, and other factors that deserve current recognition. Significant
changes in these factors could impact the appropriate reserve for possible
credit losses. A provision is charged to operating expense to maintain the
reserve level. Loans are generally charged off when 180 days contractually past
due.
CREDIT CARD FRAUD LOSSES
The Corporation incurs credit card fraud losses from unauthorized use of
Customer credit cards and counterfeiting. These fraudulent transactions, when
identified, are reclassified to other assets from loans and reduced to
estimated net recoverable values through a charge to operating expense. The
remaining net recoverable values are generally charged off after four months
(sooner if the collectibility of the account is no longer assured). The
carrying value of fraudulent credit card transactions approximates the fair
value.
PREPAID EXPENSES AND DEFERRED CHARGES
The principal components of prepaid expenses and deferred charges include
issuance costs related to asset securitizations, long-term
[42]
<PAGE> 45
MBNA CORPORATION AND SUBSIDIARIES
- - --------------------------------------------------------------------------------
debt and bank notes, and commissions paid on brokered certificates of deposit.
These costs are deferred and amortized over the remaining life of the related
asset securitization or the remaining term of the liability.
PREMISES AND EQUIPMENT
Premises and equipment are stated at cost less accumulated depreciation and
amortization, computed principally by the straight-line method over the
estimated useful lives of the assets. Maintenance and repairs are included in
operating expense, while the cost of improvements is capitalized.
INTEREST RATE SWAP AGREEMENTS
The Corporation uses interest rate swap agreements to change fixed-rate funding
sources to floating-rate funding sources. The Corporation does not hold or
issue interest rate swap agreements for trading purposes. Interest rate swap
agreements may subject the Corporation to market risk associated with changes
in interest rates, as a result of the change to floating-rate, as well as the
risk of default by a counterparty to the agreement. Under the terms of certain
interest rate swap agreements, each party may be required to pledge certain
assets if the market value of the interest rate swap agreement exceeds an
amount set forth in the agreement or in the event of a change in its credit
rating.
Amounts paid or received related to outstanding contracts that are used in the
asset/liability management process are accrued and recognized into earnings, as
an adjustment to the related interest income or expense, over the life of the
related agreement. Gains and losses associated with the termination of interest
rate swap agreements for identified positions are deferred and amortized over
the remaining lives of the related agreements as an adjustment to the yield.
Unamortized deferred gains and losses on terminated interest rate swap
agreements are included in the underlying assets/liabilities hedged.
FOREIGN EXCHANGE SWAP AGREEMENTS
Foreign exchange swap agreements are agreements to exchange principal amounts
of different currencies, usually at a prevailing exchange rate. The Corporation
enters into foreign exchange swap agreements to reduce its exposure to foreign
currency exchange rate risk primarily related to its foreign bank subsidiary.
When the agreement matures, the underlying principal or notional amount will be
reexchanged at the agreed-upon exchange rate. The Corporation does not hold or
issue foreign exchange swap agreements for trading purposes. These foreign
exchange swap agreements are marked to market with any unrealized gains or
losses recognized in other operating income.
FORWARD EXCHANGE CONTRACTS
Forward exchange contracts are commitments to buy or sell foreign currency at a
future date for a contracted price. The Corporation enters into forward
exchange contracts to reduce its exposure to foreign currency exchange rate
risk primarily related to its foreign bank subsidiary. The Corporation does not
hold or issue forward exchange contracts for trading purposes. These financial
instruments may expose the Corporation to varying degrees of credit and market
risk and are subject to the same credit and risk limitations as those recorded
on the balance sheet. The premium paid or received for these contracts is
amortized over the life of the agreement. For contracts that are designated and
effective as hedges of its net investment in the Bank's foreign subsidiary,
gains and losses are deferred and reported in stockholders' equity, net of tax,
as an offset to translation gains and losses. Contracts, or portions thereof,
that are not effective as hedges are marked to market with any gains or losses
recognized in other operating income.
The Corporation's foreign subsidiary also enters into forward exchange
contracts to reduce its exposure to foreign currency exchange rate risk related
to its deposits. The contracts are marked to market with gains or losses
recognized in other operating income.
INCOME TAXES
The Corporation accounts for income taxes using the liability method. Under the
liability method, deferred tax assets and liabilities are determined based on
the differences between the financial statement carrying amounts and the tax
bases of existing assets and liabilities (i.e., temporary differences) and are
measured at the prevailing enacted tax rates that will be in effect when these
differences are settled or realized.
STATEMENTS OF CASH FLOWS
The Corporation has presented the consolidated statements of cash flows using
the indirect method, which involves the reconciliation of net income to net
cash flow from operating activities. In addition, the Corporation nets certain
cash receipts and cash payments relating to deposits placed with and withdrawn
from other financial institutions; time deposits accepted and repayments of
those deposits; and loans made to Customers and principal collections of those
loans. For purposes of the consolidated statements of cash flows, cash and
cash equivalents include cash and due from banks.
EARNINGS PER COMMON SHARE
Earnings per common share are computed using net income applicable to common
stock and the weighted average number of common shares outstanding during the
period after consideration of the dilutive effect of stock options.
For comparative purposes, earnings per common share and weighted average common
shares outstanding and common stock equivalents have been restated to reflect
the three-for-two split of the Corporation's Common Stock, effected in the form
of a dividend, issued January 1, 1997, to stockholders of record as of December
16, 1996.
INTANGIBLE ASSETS
Intangible assets, including the value of Customer accounts and goodwill, are
amortized over the periods the Corporation receives a benefit, not exceeding
fifteen years. Intangible assets, which are included in other assets, had a net
book value of $213.8 million and $53.0 million at December 31, 1996 and 1995,
respectively.
[43]
<PAGE> 46
MBNA CORPORATION AND SUBSIDIARIES
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NOTE B: INVESTMENT SECURITIES
- - ---------------------------------------------------------------------------------------------------------------------------------
SUMMARY OF INVESTMENT SECURITIES
- - ---------------------------------------------------------------------------------------------------------------------------------
(dollars in thousands)
- - ---------------------------------------------------------------------------------------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAINS LOSSES VALUE
- - ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
DECEMBER 31, 1996
Available-for-sale:
U.S. Treasury and other U.S. government agencies obligations... $ 605,034 $ - $ (150) $ 604,884
State and political subdivisions of the United States.......... 87,521 128 (48) 87,601
Asset-backed and other securities.............................. 1,026,088 1,821 (664) 1,027,245
------------ ------------ ------------ ------------
Total investment securities available-for-sale............... $ 1,718,643 $ 1,949 $ (862) $ 1,719,730
============ ============ ============ ============
Held-to-maturity:
U.S. Treasury and other U.S. government agencies obligations... $ 506,346 $ 368 $ (6,409) $ 500,305
State and political subdivisions of the United States.......... 454 29 (1) 482
Asset-backed and other securities................................. 91,520 373 (472) 91,421
------------ ------------ ------------ ------------
Total investment securities held-to-maturity................. $ 598,320 $ 770 $ (6,882) $ 592,208
============ ============ ============ ============
DECEMBER 31, 1995
Available-for-sale:
U.S. Treasury and other U.S. government agencies obligations... $ 209,599 $ - $ (93) $ 209,506
State and political subdivisions of the United States........ 84,519 247 (38) 84,728
Asset-backed and other securities.............................. 617,759 301 (230) 617,830
------------ ------------ ------------ ------------
Total investment securities available-for-sale............... $ 911,877 $ 548 $ (361) $ 912,064
============ ============ ============ ============
Held-to-maturity:
U.S. Treasury and other U.S. government agencies obligations... $ 1,000,869 $ 6,768 $ (3,179) $ 1,004,458
State and political subdivisions of the United States.......... 421 90 - 511
Asset-backed and other securities............................ 182,437 1,078 (383) 183,132
------------ ------------ ------------ ------------
Total investment securities held-to-maturity................. $ 1,183,727 $ 7,936 $ (3,562) $ 1,188,101
============ ============ ============ ============
DECEMBER 31, 1994
Available-for-sale:
U.S. Treasury and other U.S. government agencies obligations... $ 208,690 $ - $ (91) $ 208,599
State and political subdivisions of the United States.......... 80,554 6 (1,079) 79,481
Asset-backed and other securities.............................. 192,798 - (121) 192,677
------------ ------------ ------------ ------------
Total investment securities available-for-sale............... $ 482,042 $ 6 $ (1,291) $ 480,757
============ ============ ============ ============
Held-to-maturity:
U.S. Treasury and other U.S. government agencies obligations... $ 1,226,410 $ - $ (47,573) $ 1,178,837
State and political subdivisions of the United States.......... 393 2 (13) 382
Asset-backed and other securities.............................. 293,946 - (6,592) 287,354
------------ ------------ ------------ ------------
Total investment securities held-to-maturity................. $ 1,520,749 $ 2 $ (54,178) $ 1,466,573
============ ============ ============ ============
- - ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- - ---------------------------------------------------------------------------------------------------------
ESTIMATED MATURITIES OF INVESTMENT SECURITIES
- - ---------------------------------------------------------------------------------------------------------
(dollars in thousands)
- - ---------------------------------------------------------------------------------------------------------
DECEMBER 31, 1996 AMORTIZED MARKET
COST VALUE
- - ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Available-for-sale
Due within one year............................................. $ 752,973 $ 764,972
Due after one year through five years........................... 888,198 878,373
Due after five years through ten years.......................... 74,445 73,360
Due after ten years............................................. 3,027 3,025
---------- ----------
Total investment securities available-for-sale................ $1,718,643 $1,719,730
========== ==========
Held-to-maturity
Due within one year............................................. $ 298,483 $ 298,454
Due after one year through five years........................... 239,939 237,262
Due after five years through ten years.......................... 1,000 1,002
Due after ten years............................................. 58,898 55,490
---------- ----------
Total investment securities held-to-maturity.................. $ 598,320 $ 592,208
========== ==========
- - ---------------------------------------------------------------------------------------------------------
</TABLE>
The Corporation did not sell any investment securities during 1996. For the
year ended December 31, 1995, the Corporation sold an investment security
resulting in a realized gain of $39,000, having a net after-tax effect of
$26,000. For 1994, the Corporation had investment security transactions
resulting in realized losses of $74,000, having a net after-tax effect of
$45,000.
At December 31, 1996, $3.0 million of U.S. Treasury Notes included in
investment securities held-to-maturity were pledged by the Corporation. There
were no securities pledged at December 31, 1995.
[44]
<PAGE> 47
MBNA CORPORATION AND SUBSIDIARIES
- - --------------------------------------------------------------------------------
NOTE C: GEOGRAPHIC DIVERSIFICATION OF LOANS
The Corporation is active in originating credit card and other consumer loans
that are distributed evenly throughout the United States. The table below
details the geographic distribution of the Corporation's loan receivables,
securitized loans, and managed loans. Credit card loans of MBNA International
are included in the "Other" geographic region category.
The Corporation's loans are primarily made on an unsecured basis after
reviewing each potential Customer's credit application and evaluating the
applicant's financial history and ability and willingness to repay. The maximum
credit line to individual credit card Customers is generally $100,000, the
average line is $9,000, and the average balance outstanding per account is
$3,300 at December 31, 1996.
<TABLE>
<CAPTION>
- - ----------------------------------------------------------------------------------------------------------------------------
GEOGRAPHIC DISTRIBUTION OF LOAN RECEIVABLES, SECURITIZED LOANS, AND MANAGED LOANS
- - ----------------------------------------------------------------------------------------------------------------------------
(dollars in thousands)
- - ----------------------------------------------------------------------------------------------------------------------------
LOAN RECEIVABLES SECURITIZED LOANS MANAGED LOANS
- - ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
DECEMBER 31, 1996
Geographic Region:
Northeast.......................... $ 2,270,100 22.4% $ 6,308,313 22.1% $ 8,578,413 22.2%
Southeast.......................... 1,796,666 17.8 5,340,563 18.7 7,137,229 18.5
Central............................ 1,490,589 14.7 4,467,284 15.7 5,957,873 15.4
Midwest............................ 1,829,213 18.1 5,200,397 18.3 7,029,610 18.2
West............................... 2,110,374 20.8 5,895,947 20.7 8,006,321 20.7
Other.............................. 632,110 6.2 1,281,977 4.5 1,914,087 5.0
------------- ------ ------------- ------ ------------ ------
Total............................ $ 10,129,052 100.0% $ 28,494,481 100.0% $ 38,623,533 100.0%
============= ====== ============= ====== ============ ======
DECEMBER 31, 1995
Geographic Region:
Northeast.......................... $ 1,774,137 21.8% $ 4,172,323 22.5% $ 5,946,460 22.3%
Southeast.......................... 1,504,104 18.5 3,680,494 19.8 5,184,598 19.4
Central............................ 1,224,961 15.0 3,020,907 16.3 4,245,868 15.9
Midwest............................ 1,366,597 16.8 3,395,152 18.3 4,761,749 17.8
West............................... 1,690,414 20.8 3,943,021 21.2 5,633,435 21.1
Other.............................. 575,705 7.1 363,889 1.9 939,594 3.5
------------- ------ ------------- ------ ------------ ------
Total............................ $ 8,135,918 100.0% $ 18,575,786 100.0% $ 26,711,704 100.0%
============= ====== ============= ====== ============ ======
- - ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE D: RESERVE FOR POSSIBLE CREDIT LOSSES
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------------------------
CHANGES IN THE RESERVE FOR POSSIBLE CREDIT LOSSES
- - --------------------------------------------------------------------------------------------------
(dollars in thousands)
- - --------------------------------------------------------------------------------------------------
DECEMBER 31, 1996 1995 1994
- - --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Reserve balance, beginning of year........ $ 104,886 $ 101,519 $ 97,580
Reserves acquired...................... 7,553 - -
Provision for possible credit losses... 178,224 138,176 108,477
Foreign currency translation........... 488 (90) 21
Credit losses.......................... (254,417) (174,893) (132,294)
Recoveries............................. 81,693 40,174 27,735
----------- ----------- -----------
Net credit losses.................... (172,724) (134,719) (104,559)
----------- ----------- -----------
Reserve balance, end of year.............. $ 118,427 $ 104,886 $ 101,519
=========== =========== ===========
- - --------------------------------------------------------------------------------------------------
</TABLE>
NOTE E: PREMISES AND EQUIPMENT
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------------
SUMMARY OF PREMISES AND EQUIPMENT
- - -------------------------------------------------------------------------------
(dollars in thousands)
- - -------------------------------------------------------------------------------
DECEMBER 31, 1996 1995
- - -------------------------------------------------------------------------------
<S> <C> <C>
Land ......................................... $ 111,907 $ 73,123
Buildings and improvements ................... 731,509 590,723
Furniture and equipment ...................... 463,437 338,869
----------- -----------
Total .................................... 1,306,853 1,002,715
Less accumulated depreciation and amortization (259,670) (186,438)
----------- -----------
Balance, end of year ..................... $ 1,047,183 $ 816,277
=========== ===========
- - -------------------------------------------------------------------------------
</TABLE>
Depreciation expense for the years ended December 31, 1996, 1995, and 1994, was
$76.7 million, $67.1 million, and $46.3 million, respectively.
[45]
<PAGE> 48
MBNA CORPORATION AND SUBSIDIARIES
- - --------------------------------------------------------------------------------
The Corporation leases certain office facilities and equipment under various
operating lease agreements that provide for payment of property taxes,
insurance, and maintenance costs. These leases generally include renewal
options, with certain leases providing purchase options. Rental expense for
operating leases was $26.7 million, $25.5 million, and $20.5 million for the
years ended December 31, 1996, 1995, and 1994, respectively.
<TABLE>
<CAPTION>
- - ----------------------------------------------------------------------
FUTURE MINIMUM RENTAL PAYMENTS UNDER NONCANCELABLE OPERATING LEASES
- - ----------------------------------------------------------------------
(dollars in thousands)
<S> <C>
1997...............................................$ 26,174
1998............................................... 15,909
1999............................................... 7,628
2000............................................... 3,962
2001............................................... 3,589
Thereafter......................................... 8,364
-----------
Total minimum lease payments $ 65,626
===========
- - ----------------------------------------------------------------------
</TABLE>
NOTE F: SHORT-TERM BORROWINGS
Federal funds purchased and securities sold under repurchase agreements are
overnight borrowings providing for the short-term funding requirements of the
Bank that generally mature within one business day of the transaction date.
Other short-term borrowings consist primarily of federal funds purchased that
mature in more than one business day, short-term bank notes issued from the
short-term bank note program established by the Bank, and other transactions
with maturities greater than one business day but less than one year.
<TABLE>
<CAPTION>
- - ----------------------------------------------------------------------------------------------------
SUMMARY OF SHORT-TERM BORROWINGS
- - ----------------------------------------------------------------------------------------------------
(dollars in thousands)
- - ----------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1996 1995 1994
- - ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FEDERAL FUNDS PURCHASED AND SECURITIES
SOLD UNDER REPURCHASE AGREEMENTS
Balance at year end....................................... $ - $ 115,000 $ -
Weighted average interest rate at year end................ -% 5.63% -%
Average amount outstanding
during the year.......................................... $ 67,712 $ 49,141 $ 167,012
Maximum amount outstanding at any
month end................................................ 325,000 243,477 599,000
Weighted average interest rate during
the year................................................. 5.39% 6.01% 3.82%
OTHER SHORT-TERM BORROWINGS
Balance at year end....................................... $ 693,387 $ 174,543 $ 110,500
Weighted average interest rate at year end................ 5.66% 5.61% 5.53%
Average amount outstanding
during the year.......................................... $ 269,538 $ 148,804 $ 271,589
Maximum amount outstanding at any
month end................................................ 693,387 319,417 858,467
Weighted average interest rate during
the year................................................. 5.51% 6.14% 4.92%
- - ----------------------------------------------------------------------------------------------------
</TABLE>
NOTE G: LONG-TERM DEBT AND BANK NOTES
Long-term debt and bank notes consist of borrowings having an original maturity
of one year or more.
<TABLE>
<CAPTION>
- - ------------------------------------------------------------------------------------------------
SUMMARY OF LONG-TERM DEBT AND BANK NOTES
- - ------------------------------------------------------------------------------------------------
(dollars in thousands)
- - ------------------------------------------------------------------------------------------------
DECEMBER 31, 1996 1995
- - ------------------------------------------------------------------------------------------------
<S> <C> <C>
PARENT COMPANY
6 7/8% Senior Notes, maturing in 1999 and 2005................ $ 248,661 $ 248,390
Fixed-Rate Senior Medium-Term Notes, with a
weighted average interest rate of 6.66% for
both years, maturing in varying
amounts from 1997 through 2003............................... 405,838 405,428
Floating-Rate Senior Medium-Term Notes,
maturing in varying amounts from 1998
through 2001................................................. 356,948 182,496
----------- -----------
Total Parent Company.......................................... 1,011,447 836,314
SUBSIDIARIES
Fixed-Rate Medium-Term Bank Notes, with a
weighted average interest rate of 6.87% and
6.79%, respectively, maturing in varying
amounts from 1997 through 2005............................... 1,105,232 1,151,155
Floating-Rate Medium-Term Bank Notes,
maturing in varying amounts from 1997
through 2003................................................. 1,277,824 421,056
Fixed-Rate Bilateral Credit Facility, with an
interest rate of 7.29%, maturing in 2001..................... 17,127 -
Floating-Rate Bilateral Credit Facilities,
maturing in 1997 and 2001.................................... 34,254 -
7.25% Subordinated Notes, maturing in 2002................... 198,269 198,035
Subordinated Guaranteed Floating-Rate Notes,
maturing in 2005............................................. 56,205 51,040
Guaranteed Preferred Beneficial Interests in
Corporation's Junior Subordinated Deferrable
Interest Debentures, with an interest rate of
8.278%, maturing in 2026..................................... 250,000 -
----------- -----------
Balance, end of year....................................... $ 3,950,358 $ 2,657,600
=========== ===========
- - ------------------------------------------------------------------------------------------------
</TABLE>
6 7/8% SENIOR NOTES
These notes are direct, unsecured obligations of the Corporation and are not
subordinated to any other indebtedness of the Corporation. Interest on the
6 7/8% Senior Notes is payable semiannually. These notes may not be redeemed
prior to their stated maturity.
SENIOR MEDIUM-TERM NOTES
These notes are direct, unsecured obligations of the Corporation and are not
subordinated to any other indebtness of the Corporation. The Corporation has
$407.5 million of Fixed-Rate Senior Medium-Term Notes outstanding, with rates
ranging from 6.14% to 7.49%. Interest on the Fixed-Rate Senior Medium-Term
Notes is payable semiannually. The Corporation also has $358.0 million of
Floating-Rate Senior Medium-Term Notes outstanding. These Floating-Rate Senior
Medium-Term Notes are priced between 15 basis points and 35 basis points over
the three-month London Interbank Offered Rate (LIBOR). Interest on the
Floating-Rate Senior Medium-Term Notes is payable quarterly. At December 31,
1996, the three-month LIBOR was 5.56%.
[46]
<PAGE> 49
MBNA CORPORATION AND SUBSIDIARIES
- - --------------------------------------------------------------------------------
MEDIUM-TERM BANK NOTES
The Medium-Term Bank Notes are direct, unconditional, unsecured, and
unsubordinated obligations of the Bank. The Bank has $1.1 billion outstanding
of Fixed-Rate Medium-Term Bank Notes with rates ranging from 6.00% to 7.76%.
Interest is payable semiannually. The Bank also has $1.3 billion outstanding of
Floating-Rate Medium-Term Bank Notes, with rates priced between 5 basis points
to 30 basis points over the three-month LIBOR. Interest is payable quarterly.
BILATERAL CREDIT FACILITIES
These facilities are direct, unconditional, unsecured, and unsubordinated
obligations of MBNA International. At December 31, 1996, MBNA International has
pound sterling 10.0 million outstanding with a fixed rate of 7.29% and interest
payable monthly. MBNA International also has pound sterling 20.0 million
outstanding in floating-rate facilities at December 31, 1996. These draws were
priced from 17.5 to 22.5 basis points above the six-month Sterling LIBOR and
are payable semiannually. At December 31, 1996, the six-month Sterling LIBOR
was 6.75%.
7.25% SUBORDINATED NOTES
The 7.25% Subordinated Notes are subordinated to the claims of the depositors
and other creditors of the Bank and are not subject to redemption prior to
maturity. Interest is payable semiannually. The 7.25% Subordinated Notes were
issued by the Bank in 1992 and qualify as Tier 2 capital, which is included in
total capital, under the risk-based capital guidelines for both banks and bank
holding companies.
SUBORDINATED GUARANTEED FLOATING-RATE NOTES
MBNA International has pound sterling 34.0 million of Subordinated Guaranteed
Floating-Rate Notes. Interest on these notes is priced between 100 basis points
and 145 basis points over the three-month Sterling LIBOR for the first five
years, with a 50 basis point increase for the last five years. These notes were
issued by MBNA International in 1995. Interest on these notes is payable
quarterly or semiannually. At December 31, 1996, the three-month Sterling LIBOR
was 6.55%.
The obligations of MBNA International are unconditionally and irrevocably
guaranteed on a subordinated basis by the Bank. The obligations of the Bank,
under its guarantee, also constitute unsecured obligations, subordinated to the
claims of all senior creditors of the Bank.
Deposit liabilities have priority over the claims of other unsecured creditors
of the Bank, including the holders of obligations, such as bank notes, in the
event of liquidation.
Original issue discount and deferred issuance costs are amortized over the
terms of the related debt issuances.
The Corporation has used interest rate swap agreements to change a portion of
fixed-rate long-term debt and bank notes to floating-rate long-term debt and
bank notes to better match the rate sensitivity of the Corporation's assets.
GUARANTEED PREFERRED BENEFICIAL INTERESTS IN CORPORATION'S JUNIOR SUBORDINATED
DEFERRABLE INTEREST DEBENTURES
MBNA Capital A, the "Series A Issuer," a statutory business trust created under
the laws of the State of Delaware, issued $250.0 million of 8.278% Capital
Securities, Series A, and $7.7 million of 8.278% Common Securities, Series A,
in December 1996. MBNA Corporation is the owner of all the beneficial ownership
interests represented by the common securities 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 in
8.278% Junior Subordinated Deferrable Interest Debentures, Series A, issued by
the Corporation. The junior subordinated deferrable interest debentures are the
sole assets of the Series A Issuer, and the payments under the junior
subordinated deferrable interest debentures are the sole revenues of the Series
A Issuer. Interest on Series ACapital Securities is payable semiannually;
however, the Corporation has the right to defer payment of interest on the
junior subordinated deferrable interest debentures at any time, or from time to
time, for a period not exceeding 10 consecutive semiannual periods. If the
payment of interest is deferred on the junior subordinated deferrable interest
debentures, the distribution on the Series A securities will be deferred and
the Corporation also may not be permitted to declare or pay any cash dividends
on the Corporation's capital stock or interest on debt securities that have
equal or less priority over claims as the junior subordinated deferrable
interest debentures.
The junior subordinated deferrable interest debentures mature on December 1,
2026. The 8.278%Capital Securities are subject to mandatory redemption, in
whole or in part, upon repayment of the junior subordinated deferrable interest
debentures at their stated maturity or their earlier redemption, but are
redeemable prior to their stated maturity at the option of the Corporation, on
or after December 1, 2006, in whole at any time, or in part from time to time,
or prior to December 1, 2006, in whole only within 90 days following the
occurrence of certain tax or capital treatment events. The Series A Capital
Securities have a preference under certain circumstances with respect to cash
distributions and amounts payable on liquidation or redemption over the Series
A Common Securities.
The obligations of the Corporation, under the relevant junior subordinated
deferrable interest debentures, indenture, trust agreement, and guarantee in
the aggregate, constitute a full and unconditional guarantee by the Corporation
of all trust obligations under the capital securities issued by the trust. The
junior subordinated deferrable interest debentures are unsecured and rank
junior and are subordinate in right of payment to all senior debt obligations
of the Corporation.
For financial reporting purposes, the Series AIssuer is treated as a wholly
owned subsidiary of the Corporation. The Series A Capital Securities are
presented as "guaranteed preferred beneficial interests in Corporation's junior
subordinated deferrable interest debentures."
[47]
<PAGE> 50
<TABLE>
<CAPTION>
- - -------------------------------------------------------------
MINIMUM ANNUAL MATURITIES OF LONG-TERM DEBT AND BANK NOTES
- - -------------------------------------------------------------
(dollars in thousands)
- - -------------------------------------------------------------
PARENT
PARENT COMPANY AND
COMPANY SUBSIDIARIES
- - -------------------------------------------------------------
<S> <C> <C>
1997......................... $ 50,000 $ 307,827
1998......................... 80,000 420,000
1999......................... 305,500 829,500
2000......................... 225,000 703,000
2001......................... 120,000 564,254
- - -------------------------------------------------------------
</TABLE>
NOTE H: ASSET SECURITIZATION
The Corporation periodically securitizes and sells certain pools of loan
receivables in both public and private markets. The senior class of these
asset-backed securities are generally credit-enhanced by a third party to
provide a AAA credit rating at the time of issuance.
These securitizations are recorded as sales. Gains on the sale of loans are
limited to amounts related to loans existing at the date of sale and do not
include amounts related to future loans expected to be sold during the
revolving period. Due to the relatively short average life of loans, no gain or
loss is recorded at the time of sale. Rather, loan servicing fees (interest
income, interchange, and other fees in excess of interest paid to
Certificateholders; credit losses; and other trust expenses) are recognized
monthly over the life of the transaction when earned. Transaction expenses are
deferred and amortized over the reinvestment period of the transaction as a
reduction of loan servicing fees.
Proceeds from these transactions were approximately $11.2 billion, $6.2
billion, and $6.1 billion in 1996, 1995, and 1994, respectively. Of these
securitized loans, approximately $28.0 billion and $18.3 billion of investor
principal (face value) remained outstanding at December 31, 1996 and 1995,
respectively.
Included in accounts receivable from securitizations in the consolidated
statements of financial condition at December 31, 1996 and 1995, were $225.2
million and $201.8 million, respectively, of receivables subject to a lien by
the providers of the credit enhancement facility for individual
securitizations. The providers of the credit enhancement have no other recourse
to the Corporation. The Corporation does not receive collateral from any party
to the securitization, and the Corporation does not have any risk of
counterparty nonperformance.
The Corporation is required to adopt Statement of Financial Accounting
Standards No. 125, "Accounting for Transfers and Servicing of Financial Assets
and Extinguishments of Liabilities" (Statement No. 125), effective for all
transactions occurring after December 31, 1996. Statement No. 125 requires
recognition of a gain at the time of initial sale and each subsequent sale of
loan receivables in a securitization. Currently, the Corporation recognizes
this income over the life of the securitization. These gains, which are
expected to be material in 1997, will be invested in additional business
development efforts and, as a result, will have no impact on the Corporation's
1997 net income.
NOTE I: COMMITMENTS AND CONTINGENCIES
At December 31, 1996, the Corporation had outstanding lines of credit of $180.7
billion committed to its Customers. Of that total commitment, $142.1 billion is
unused. While this amount represents the total available lines of credit to
Customers, the Corporation has not experienced and does not anticipate that all
of its Customers will exercise their entire available line at any given point
in time. The Corporation has the right to reduce or cancel these available
lines of credit at any time.
The Corporation has two one-year revolving credit facilities totaling $50.0
million. These credit facilities were renewed in 1996 with $25.0 million
expiring in April 1997 and $25.0 million expiring in October 1997. The
Corporation may take advances under these facilities subject to certain
conditions, including requirements for tangible net worth. These facilities may
be used for general corporate purposes and were not drawn upon as of December
31, 1996.
In January 1997, the Bank extended its $2.0 billion committed syndicated
revolving credit facility through February 2001. Advances are subject to
covenants and conditions customary in a transaction of this kind. These
conditions include requirements for tangible net worth of at least $760.0
million, increased by 40% of the Bank's net income earned after September 30,
1996, and managed loan receivables 90 days or more past due plus nonaccrual
receivables not to exceed 6% of managed credit card receivables. Should
managed credit card losses equal or exceed 5% for a period of four consecutive
quarters, a ratio of qualifying loan receivables to outstanding borrowings
under the facility of at least 115% is required. The facility may be used for
general corporate purposes and was not drawn upon as of December 31, 1996.
MBNA International has six bilateral credit facilities, ranging from one to
five years, totaling pound sterling 60.0 million (approximately $102.8 million
at December 31, 1996). MBNA International may take advances under the
facilities subject to certain conditions, including requirements for tangible
net worth. The facilities may be used for general corporate purposes. At
December 31, 1996, MBNA International had pound sterling 30.0 million
(approximately $51.4 million) outstanding.
In addition, MBNA International also has a four-year, pound sterling 300.0
million (approximately $513.8 million at December 31, 1996) multicurrency
committed syndicated revolving credit facility which expires in October 2000.
This facility was increased by MBNA International during 1996 from pound
sterling 200.0 million to pound sterling 300.0 million. MBNA International may
take advances under the facility subject to certain conditions, including
requirements for tangible net worth, outstanding loan receivables, and account
delinquencies. The facility may be used for general corporate purposes and was
not drawn upon as of December 31, 1996.
[48]
<PAGE> 51
MBNA CORPORATION AND SUBSIDIARIES
- - --------------------------------------------------------------------------------
NOTE J: EMPLOYEE BENEFIT PLANS
PENSION PLAN
The Corporation has a noncontributory defined benefit pension plan covering
substantially all people employed by the Corporation who meet certain age and
service requirements. The benefits are based on years of service and the
person's compensation during the last ten years of employment. The
Corporation's funding policy is to make contributions sufficient to achieve a
target-funded ratio on an accumulated benefit obligation basis between 130% and
140%. The funded ratio, as of the plan's measurement date of September 30, may
never be less than 100%, and only tax-deductible contributions may be made.
Contributions are intended to provide not only for benefits earned to date, but
also for those expected to be earned in the future.
<TABLE>
<CAPTION>
- - ---------------------------------------------------------------------------------------
RECONCILIATION OF THE PENSION PLAN'S ACTUARIALLY DETERMINED FUNDED STATUS
- - ---------------------------------------------------------------------------------------
(dollars in thousands)
- - ---------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1996 1995
- - ---------------------------------------------------------------------------------------
<S> <C> <C>
ACCUMULATED BENEFITS
Actuarial present value of accumulated
benefit obligation:
Vested........................................... $ 28,088 $ 25,054
Nonvested........................................ 6,998 6,468
----------- -----------
Total.......................................... $ 35,086 $ 31,522
=========== ===========
PENSION ASSET
Actuarial present value of projected benefit
obligation for service rendered to date............ $ (88,108) $ (80,916)
Plan assets at fair value--primarily listed
stocks and fixed-income securities................. 71,941 49,024
----------- -----------
Plan assets less than projected benefit obligation (16,167) (31,892)
Unrecognized prior service cost..................... (1,499) (1,611)
Unrecognized net loss from past experience
different from that assumed and effects of
change in assumptions............................... 18,801 36,403
Unrecognized net assets arising at transition....... (417) (487)
----------- -----------
Pension asset.................................... $ 718 $ 2,413
=========== ===========
- - --------------------------------------------------------------------------------------
</TABLE>
The Corporation raised the discount rate used to value its projected benefit
obligation for the pension plan in 1996 to reflect the current rate
environment. This change in assumptions will not have a material impact on the
Corporation's consolidated financial statements for 1997.
In 1995, the Corporation lowered the discount rate used to value its projected
benefit obligation for the pension plan to reflect the current rate
environment. This change in assumptions did not have a material impact on the
Corporation's consolidated financial statements for 1996.
In determining the projected benefit obligation for the pension plan, the
assumed discount rate used was 7.75% in 1996 and 7.00% in 1995, while the
assumed average rate of compensation increase was 6.50% for both 1996 and 1995.
The expected long-term rate of
<TABLE>
<CAPTION>
- - ---------------------------------------------------------------------------------------------------------
COMPONENTS OF NET PERIODIC PENSION COST
- - ---------------------------------------------------------------------------------------------------------
(dollars in thousands)
- - ---------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1996 1995 1994
- - ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost--benefits earned
during the period..................................... $ 16,468 $ 9,183 $ 8,224
Interest cost on projected benefit obligation.......... 6,464 4,110 3,114
Actual return on plan assets........................... (5,798) (6,272) (1,668)
Net amortization and deferral.......................... 2,656 4,001 766
---------- ---------- ----------
Net periodic pension cost.......................... $ 19,790 $ 11,022 $ 10,436
========== ========== ==========
- - ---------------------------------------------------------------------------------------------------------
</TABLE>
return on plan assets used in determining net periodic pension cost was 9.00%
in 1996, 1995, and 1994.
401(K) PLUS SAVINGS PLAN
The MBNA Corporation 401(k) Plus Savings Plan ("the 401(k) Plan") is a defined
contribution plan that is intended to qualify under section 401(k) of the
Internal Revenue Code. The 401(k) Plan covers substantially all people who have
been employed by the Corporation for one or more years and have completed at
least one thousand hours of service in any one year. For these people, the
Corporation automatically contributes 1% of base salary. Additionally, these
people may elect to make both pretax and after-tax contributions, with
contributions up to 6% of base salary matched 50% by the Corporation. Expense
charged to operations for the 401(k) Plan was $9.9 million, $8.3 million, and
$6.2 million in 1996, 1995, and 1994, respectively.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN ("SERP")
The Corporation also maintains an unfunded plan, established in 1991, that
provides certain officers with supplemental retirement benefits in excess of
limits imposed on qualified plans by federal tax law.
<TABLE>
<CAPTION>
- - ----------------------------------------------------------------------------------------------
RECONCILIATION OF THE SERP PLAN'S ACTUARIALLY DETERMINED FUNDED STATUS
- - ----------------------------------------------------------------------------------------------
(dollars in thousands)
- - ----------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1996 1995
- - ----------------------------------------------------------------------------------------------
<S> <C> <C>
ACCUMULATED BENEFITS
Actuarial present value of accumulated
benefit obligation:
Vested................................................ $ 15,101 $ 13,304
Nonvested............................................. 10,068 8,869
----------- -----------
Total............................................... $ 25,169 $ 22,173
=========== ===========
SERP LIABILITY
Actuarial present value of projected benefit
obligation for service rendered to date................ $ (25,745) $ (25,502)
Plan assets at fair value............................... - -
----------- -----------
Plan assets less than projected benefit obligation...... (25,745) (25,502)
Unrecognized prior service cost......................... (1,922) (1,573)
Unrecognized net loss from past experience
different from that assumed and effects of
change in assumptions................................... 4,979 7,885
Unrecognized net obligation arising at transition....... 4,599 5,014
Adjustment required to recognize
minimum liability...................................... (7,080) (7,997)
----------- -----------
SERP liability....................................... $ (25,169) $ (22,173)
=========== ===========
Significant actuarial assumptions used in
determining the projected benefit obligation
are as follows:
Discount rate........................................... 7.75% 7.00%
Average rate of compensation increase................... 6.50 6.50
- - -------------------------------------------------------------------------------------------------
</TABLE>
During 1996, the Corporation raised the discount rate used to value its
projected benefit obligation for the SERP plan to reflect the current rate
environment. This assumption change will not have a material impact on the
Corporation's consolidated financial statements for 1997.
During 1995, the Corporation lowered the discount rate used to value its
projected benefit obligation for the SERP plan to reflect the current rate
environment. This assumption change did not have a material impact on the
Corporation's consolidated financial statements for 1996.
[49]
<PAGE> 52
MBNA CORPORATION AND SUBSIDIARIES
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------------------------
COMPONENTS OF NET SERP COST
- - -------------------------------------------------------------------------------------------
(dollars in thousands)
- - -------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1996 1995 1994
- - -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost--benefits earned
during the year....................................... $ 2,253 $ 2,209 $ 2,151
Interest cost on projected benefit obligation.......... 1,847 1,438 1,289
Net amortization and deferral.......................... 477 339 551
--------- --------- ---------
Net SERP cost....................................... $ 4,577 $ 3,986 $ 3,991
========= ========= =========
- - --------------------------------------------------------------------------------------------
</TABLE>
POSTRETIREMENT AND POSTEMPLOYMENT BENEFITS
The Corporation and its subsidiaries provide certain health care and life
insurance benefits for people actively employed who may continue to be eligible
for these benefits upon reaching retirement. People aged 45 and older with at
least ten years of service as of December 31, 1993, are eligible for these
benefits. The Corporation records the estimated cost of benefits provided to
its former or inactive employees after employment but before retirement on an
accrual basis. Expenses charged to other operating expense were not material to
the Corporation's consolidated financial statements.
NOTE K: STOCK OPTION PLAN
The Corporation's 1991 Long-Term Incentive Plan ("the Plan") authorizes the
issuance of 45.0 million shares of common stock pursuant to incentive and
nonqualified stock options; restricted or unrestricted share awards to selected
officers and key employees of the Corporation; and nonqualifying stock options
to nonemployee directors. This plan was amended during 1995 to increase the
shares of common stock authorized for issuance to 45.0 million shares from 30.4
million shares. As of December 31, 1996 and 1995, the amount of shares of
common stock available for future grants under the Plan was 85,000 and 3.9
million, respectively.
Substantially all stock options are granted with an exercise price that is not
less than the fair market value of the Corporation's Common Stock on the date
the option is granted, and none may be exercised more than ten years from the
date of grant. Stock options granted to selected officers and key employees of
the Corporation become exercisable for one-fifth of the common shares subject
to the options each year and continue to become exercisable for up to one-fifth
per year until they are completely exercisable after five years. Those granted
to nonemployee directors are exercisable immediately following the effective
date of the grant.
During 1996, performance-based common stock options for 1.7 million shares were
granted under the Plan. In 1995, performance-based common stock options for 1.2
million shares were granted. These options become exercisable when the
Corporation achieves certain net income and stock price targets. If these
conditions are not achieved, these options then become exercisable for one day
on the day before their termination date.
Restricted shares were issued under the Plan to the Corporation's executive
officers, contingent upon their continued employment. A total of 372,000
common shares, with an approximate aggregate market value of $9.5 million at
the time of grant, were issued in 1996. A total of 727,000 common shares, with
an approximate aggregate market value of $12.0 million at the time of grant,
were issued in 1995. The market value of these restricted shares at the date of
grant is amortized into expense over a period less than the restriction period.
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------------------------------------
SUMMARY OF STOCK OPTION PLAN ACTIVITY
- - -------------------------------------------------------------------------------------------------------
(shares in thousands)
- - -------------------------------------------------------------------------------------------------------
NUMBER WEIGHTED AVERAGE
OF SHARES EXERCISE PRICE
- - -------------------------------------------------------------------------------------------------------
<S> <C> <C>
1996
Options outstanding at beginning of year........... 25,364 $ 10.38
Granted......................................... 3,456 18.52
Exercised....................................... (2,921) 7.83
Canceled........................................ (13) 9.24
------- -------
Options outstanding at end of year................. 25,886 11.75
======= =======
Options exercisable at end of year................. 9,499
=======
Weighted average fair value of options
granted during the year........................... $ 5.34
=======
1995
Options outstanding at beginning of year........... 17,645 $ 7.94
Granted......................................... 10,276 13.22
Exercised........................................ (2,547) 5.02
Canceled........................................ (10) 7.78
------- -------
Options outstanding at end of year................. 25,364 10.38
======= =======
Options exercisable at end of year................. 7,472
=======
Weighted average fair value of options
granted during the year........................... $ 3.59
=======
- - ------------------------------------------------------------------------------------------------------
</TABLE>
Excluded from the Summary of Stock Option Plan Activity are 24,000 options that
were granted subject to shareholder approval of a new stock option plan.
To the extent stock options are exercised and restricted shares are awarded
from time to time under the Plan, the Board of Directors has approved the
purchase, on the open market or in privately negotiated transactions, of the
number of common shares issued.
In October 1995, Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation" (Statement No. 123), was issued. This
statement, effective for fiscal years beginning after December 15, 1995,
defines a fair-value-based method of accounting for an employee stock option or
similar equity instrument. However, it allows an entity to continue to measure
compensation cost for those instruments using the intrinsic-value-based method
of accounting prescribed by Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" (APB Opinion No. 25). Statement No.
123 requires certain additional disclosures about stock-based employee
compensation arrangements regardless of the method used to account for them. As
permitted by Statement No. 123, in 1996 the Corporation elected to retain its
present accounting for stock option grants in accordance with APB Opinion No.
25. The adoption of Statement No. 123 had no impact on the Corporation's
consolidated financial statements.
The fair value of each option grant is estimated on the date of grant using the
Black-Scholes option-pricing model with the following weighted average
assumptions used for grants in 1996 and 1995, respectively: dividend yield of
2.71% and 3.10%; expected volatility of 28.74% and 29.42%; risk-free interest
rates of 6.46% and 6.41%; and expected lives of 5.4 years and 5.1 years.
The Black-Scholes model is only one technique allowed to determine the fair
value of options in accordance with Statement No. 123. The model uses
different assumptions that can significantly affect the fair value of the
options. In that regard, the derived fair value estimates cannot be
substantiated by comparison to independent markets.
[50]
<PAGE> 53
MBNA CORPORATION AND SUBSIDIARIES
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- - ---------------------------------------------------------------------------------------------------------------------
SUMMARY OF STOCK OPTIONS OUTSTANDING AT DECEMBER 31, 1996
- - ---------------------------------------------------------------------------------------------------------------------
(shares in thousands)
- - ---------------------------------------------------------------------------------------------------------------------
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
- - ---------------------------------------------------------------------------------------------------------------------
Weighted Average
Number Remaining Weighted Average Number Weighted Average
Range of Exercise Prices of Shares Contractual Life Exercise Price of Shares Exercise Price
- - ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$3.00 to $ 6.99 1,806 4.8 years $ 4.58 1,806 $4.58
7.00 to 9.99 8,332 6.6 8.81 4,909 8.65
10.00 to 13.99 8,083 7.6 11.04 1,069 11.29
14.00 to 16.99 4,023 8.8 16.36 1,097 16.43
17.00 to 19.99 3,574 9.4 18.38 618 18.32
25.00 to 26.99 68 9.8 26.42 - -
-------- ------
$3.00 to $26.99 25,886 9,499
======== ======
- - -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
The Corporation applies APB Opinion No. 25 and related interpretations in
accounting for the Plan. Had compensation cost for the Plan been determined
consistent with the fair-value-based method of accounting under Statement No.
123, the Corporation's net income and earnings per share on a pro forma basis
would have been as indicated in the table below. The compensation expense
recognized in pro forma net income for 1996 and 1995 may not be representative
of the effects on pro forma net income for future years.
<TABLE>
<CAPTION>
- - ---------------------------------------------------------------------------------------------------
PRO FORMA NET INCOME AND EARNINGS PER COMMON SHARE
- - ---------------------------------------------------------------------------------------------------
(dollars in thousands, except per share amounts)
- - ---------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1996 1995
- - ---------------------------------------------------------------------------------------------------
<S> <C> <C>
Net income:
As reported............................................. $ 474,495 $ 353,099
Pro forma............................................... 466,020 349,215
Earnings per common share:
As reported............................................. 1.33 1.03
Pro forma............................................... 1.31 1.02
- - --------------------------------------------------------------------------------------------------------
</TABLE>
NOTE L: STOCKHOLDERS' EQUITY
PREFERRED STOCK
The Corporation is authorized to issue 20.0 million shares of series preferred
stock with a par value of $.01 per share. On September 23, 1996, the
Corporation issued 6.0 million shares of Adjustable Rate Cumulative Preferred
Stock, Series B, with a $25 stated value per share. Dividends on the Series B
Preferred Stock are cumulative from the date of original issue and are payable
quarterly in arrears on January 15, April 15, July 15, and October 15 of each
year, commencing on October 15, 1996. The dividend rate for the initial
dividend period from September 23, 1996, to October 15, 1996, was 7.0% per
year. Thereafter, the dividend rate for any dividend period will be equal to
99.0% of the highest of the Treasury Bill Rate, the Ten-Year Constant Maturity
Rate, and the Thirty-Year Constant Maturity Rate, as determined in advance of
such dividend period, but not less than 5.5% per annum or more than 11.5% per
annum. The amount of dividends payable with respect to the Series B Preferred
Stock will be adjusted in the event of certain amendments to the Internal
Revenue Code of 1986 ("the Code") with respect to the dividends-received
deduction. The shares of the Series B Preferred Stock are redeemable, in whole
or in part, solely at the option of the Corporation on or after October 15,
2001, at a price of $25 per share, plus accrued and unpaid dividends. The
Series B Preferred Stock may also be redeemed in whole, at the option of the
Corporation, in the event of certain amendments to the Code with respect to the
dividends-received deduction.
On November 14, 1995, the Corporation issued 6.0 million shares of 7 1/2%
Cumulative Preferred Stock, Series A, with a $25 stated value per share.
Dividends on the Series A Preferred Stock are cumulative from the date of
original issue and are payable quarterly in arrears on January 15, April 15,
July 15, and October 15 of each year, commencing January 15, 1996, at a rate of
7.50% per annum. The shares of the Series A Preferred Stock are redeemable, in
whole or in part, solely at the option of the Corporation on or after January
15, 2001, at a price of $25 per share, plus accrued and unpaid dividends.
Shares of the series preferred stock are not convertible into any other
securities of the Corporation. The series preferred stock will not be entitled
to the benefits of any sinking fund. All preferred shares rank senior to common
shares both as to dividends and liquidation preference, but have no general
voting rights. In the event that the equivalent of six full quarterly dividend
periods are in arrears, the holders of the outstanding shares of the preferred
stock (voting as a single class) will be entitled to vote for the election of
two additional directors to serve until all dividends in arrears have been paid
in full.
The Corporation may, from time to time, acquire series preferred stock in the
open market by tender offer, exchange offer, or otherwise. The Corporation's
decision to make such acquisitions is dependent on many factors, including
market conditions in effect at the time of any contemplated acquisition.
The Board of Directors declared the following dividends for the Corporation's
Series A and Series B Preferred Stock.
[51]
<PAGE> 54
MBNA CORPORATION AND SUBSIDIARIES
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------------------------------------------------------------------
PREFERRED STOCK DIVIDENDS DECLARED
- - -----------------------------------------------------------------------------------------------------------------------------
DECLARATION DATE SERIES A SERIES B
- - -----------------------------------------------------------------------------------------------------------------------------
DIVIDEND DIVIDEND PER DIVIDEND DIVIDEND PER
RATE PREFERRED SHARE RATE PREFERRED SHARE
--------------------------------------------------------------------------
<S> <C> <C> <C> <C>
October 15, 1996............................... 7.50% $.46875 6.83% $ .42690
September 24, 1996............................. - - 7.00 .10690
July 11, 1996.................................. 7.50 .46875 - -
April 18, 1996................................. 7.50 .46875 - -
January 17, 1996............................... 7.50 .46875 - -
December 15, 1995.............................. 7.50 .31770 - -
- - -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
COMMON STOCK
On October 15, 1996, the Board of Directors approved a three-for-two split of
the Corporation's Common Stock, effected in the form of a dividend. In
connection with this transaction, one additional share of common stock was
issued on January 1, 1997, for every two common shares held by stockholders of
record as of the close of business on December 16, 1996.
On April 22, 1996, the stockholders of the Corporation approved an amendment to
the Corporation's charter to increase the number of authorized shares of common
stock from 390.0 million shares to 700.0 million shares. This amendment became
effective May 3, 1996.
On January 17, 1996, the Board of Directors approved a three-for-two split of
the Corporation's Common Stock, effected in the form of a dividend. In
connection with this transaction, one additional share of common stock was
issued on February 16, 1996, for every two common shares held by stockholders
of record as of the close of business on February 2, 1996.
On January 18, 1994, the Board of Directors approved a three-for-two stock
split, effected in the form of a dividend. In connection with this transaction,
one additional share of common stock was issued on February 14, 1994, for every
two common shares held by stockholders of record as of the close of business on
February 2, 1994.
Accordingly, all common share and per common share data have been restated to
reflect all of the Corporation's stock splits.
NOTE M: CASH AND DIVIDEND RESTRICTIONS
The Bank is required by the Federal Reserve Bank to maintain cash reserves
against certain categories of average deposit liabilities. During 1996 and
1995, the average amounts of these required reserves were $0 and $110,000,
respectively, after deducting currency and coin holdings.
The payment of preferred and common stock dividends by the Corporation may be
limited by certain factors, including regulatory capital requirements, broad
enforcement powers of the federal bank regulatory agencies, and tangible net
worth maintenance requirements under the Corporation's revolving credit
facilities.
The primary source of funds for payment of preferred and common stock dividends
by the Corporation is dividends received from the Bank. The amount of dividends
that a bank may declare in any year is subject to certain regulatory
restrictions. Generally, dividends declared in a given year by a national bank
are limited to its net profit, as defined by regulatory agencies, for that
year, combined with its retained net income for the preceding two years. Also,
a bank may not declare dividends if such declaration would leave the bank
inadequately capitalized. Therefore, the ability of the Bank to declare
dividends will depend on its future net income and capital requirements. At
December 31, 1996, the amount of retained earnings available for declaration of
dividends from the Bank to the Corporation was $588.9 million. Payment of
dividends by the Bank to the Corporation may, however, be further limited by
federal bank regulatory agencies.
The Bank's payment of dividends to the Corporation may also be limited by a
tangible net worth requirement under the Bank's revolving credit facility. This
facility was not drawn upon as of December 31, 1996. If this facility were
drawn upon as of December 31, 1996, the amount of retained earnings available
for declaration of dividends would have been further limited to $409.4 million.
[52]
<PAGE> 55
MBNA CORPORATION AND SUBSIDIARIES
- - --------------------------------------------------------------------------------
NOTE N: CAPITAL ADEQUACY
The Corporation and the Bank are subject to various regulatory capital
requirements administered by the federal banking agencies. Failure to meet
minimum capital requirements can initiate certain mandatory--and possibly
additional discretionary--actions by regulators that, if undertaken, could have
a direct material effect on the Corporation and the Bank's consolidated
financial statements. Under capital adequacy guidelines and the regulatory
framework for prompt corrective action, the Corporation and the Bank must meet
specific capital guidelines that involve quantitative measures of their assets,
liabilities, and certain off-balance-sheet items as calculated under regulatory
accounting practices. The Corporation and the Bank's capital amounts and
classification are also subject to qualitative judgements by the regulators
about components, risk weightings, and other factors. Quantitative measures
established by regulation to ensure capital adequacy require the Corporation
and the Bank to maintain minimum amounts and ratios (set forth in the Capital
Adequacy table below) of Tier 1and Total Capital to risk weighted assets and of
Tier 1 Capital to average assets (Leverage ratio). Management believes, as of
December 31, 1996, that the Corporation and the Bank meet all capital adequacy
requirements to which they are subject.
As of December 31, 1996, the most recent notification from the Office of the
Comptroller of the Currency ("the OCC") categorized the Bank as
"well-capitalized" under the regulatory framework for prompt corrective action.
To be categorized as "well-capitalized," the Bank must maintain minimum Tier 1
Capital, Total Capital, and Leverage ratios as set forth in the Capital
Adequacy table. There are no conditions or events since that notification that
management believes have changed the Bank's categorization by the OCC.
<TABLE>
<CAPTION>
- - ---------------------------------------------------------------------------------------------------------------------------
CAPITAL ADEQUACY
- - ---------------------------------------------------------------------------------------------------------------------------
(dollars in thousands)
- - ---------------------------------------------------------------------------------------------------------------------------
TO BE WELL-CAPITALIZED
FOR CAPITAL UNDER PROMPT CORRECTIVE
ACTUAL ADEQUACY PURPOSES ACTION PROVISIONS
- - ---------------------------------------------------------------------------------------------------------------------------
Amount Ratio Amount Ratio Amount Ratio
--------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
DECEMBER 31, 1996
Tier 1 Capital (to Risk Weighted Assets):
MBNA Corporation......................... $1,814,730 10.89% $ 666,342 4.00% N/A
MBNA America Bank, N.A................... 1,366,092 10.01 546,095 4.00 $ 819,142 6.00%
Total Capital (to Risk Weighted Assets):
MBNA Corporation......................... 2,201,934 13.22 1,332,684 8.00 N/A
MBNA America Bank, N.A................... 1,681,088 12.31 1,092,190 8.00 1,365,237 10.00
Tier 1 Capital (to Average Assets):
MBNA Corporation......................... 1,814,730 11.21 485,720 3.00 N/A
MBNA America Bank, N.A................... 1,366,092 9.24 443,390 3.00 738,983 5.00
DECEMBER 31, 1995
Tier 1 Capital (to Risk Weighted Assets):
MBNA Corporation......................... 1,257,204 11.06 454,759 4.00 N/A
MBNA America Bank, N.A................... 875,732 8.49 412,676 4.00 619,014 6.00
Total Capital (to Risk Weighted Assets):
MBNA Corporation......................... 1,560,125 13.72 909,518 8.00 N/A
MBNA America Bank, N.A................... 1,177,642 11.41 825,352 8.00 1,031,690 10.00
Tier 1 Capital (to Average Assets):
MBNA Corporation......................... 1,257,204 10.17 370,716 3.00 N/A
MBNA America Bank, N.A................... 875,732 7.73 340,039 3.00 566,731 5.00
- - --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE O: OTHER OPERATING EXPENSE
<TABLE>
<CAPTION>
OTHER EXPENSE COMPONENT OF OTHER OPERATING EXPENSE
- - -------------------------------------------------------------------------------------------------
(dollars in thousands)
- - -------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1996 1995 1994
- - -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Purchased services............... $ 177,701 $ 148,746 $ 124,681
Advertising...................... 103,407 89,020 66,722
Collection....................... 23,914 20,117 20,450
Stationery and supplies.......... 26,155 20,342 21,219
Service bureau................... 25,112 19,509 14,120
Postage and delivery............. 114,591 95,370 63,769
Telephone usage.................. 49,016 38,438 29,342
Credit card fraud losses......... 47,307 40,927 43,339
Amortization of intangible assets 14,577 9,175 11,544
Computer software................ 23,880 18,321 12,924
Other............................ 69,599 60,428 40,018
--------- --------- ---------
Total other operating expense $ 675,259 $ 560,393 $ 448,128
========= ========= =========
- - -------------------------------------------------------------------------------------------------
</TABLE>
NOTE P: SPECIAL MARKETING PROGRAM
During the year ended December 31, 1996, the Corporation charged $32.8 million
net of tax ($54.3 million pretax) to earnings related to the launch of the MBNA
Platinum Plus Visa and MasterCard program. This item was recognized by the
Corporation during the three months ended March 31, 1996.
[53]
<PAGE> 56
MBNA CORPORATION AND SUBSIDIARIES
- - --------------------------------------------------------------------------------
NOTE Q: INCOME TAXES
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------------------------
RECONCILIATION OF STATUTORY INCOME TAXES
- - -----------------------------------------------------------------------------------
(dollars in thousands)
- - -----------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1996 1995 1994
- - -----------------------------------------------------------------------------------
<S> <C> <C> <C>
Income before income taxes ........ $ 731,294 $ 584,601 $ 441,101
Statutory tax rate ................ 35% 35% 35%
--------- --------- ---------
Income tax at statutory tax rate .. 255,953 204,610 154,385
State taxes, net of federal benefit 9,751 9,133 7,501
Other ............................. 23,888 17,759 12,622
--------- --------- ---------
Applicable income taxes ........... 289,592 231,502 174,508
Tax benefit from Customer-based
intangible assets ................ (32,793) - -
--------- --------- ---------
Total income taxes ............. $ 256,799 $ 231,502 $ 174,508
--------- --------- ---------
Current taxes ..................... $ 288,805 $ 221,869 $ 126,116
Deferred taxes (benefit) .......... (32,006) 9,633 48,392
--------- --------- ---------
Total income taxes ............ $ 256,799 $ 231,502 $ 174,508
========= ========= =========
- - -----------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- - ----------------------------------------------------------------------------
SUMMARY OF NET DEFERRED TAX ASSETS
- - ----------------------------------------------------------------------------
(dollars in thousands)
- - ----------------------------------------------------------------------------
DECEMBER 31, 1996 1995
- - ----------------------------------------------------------------------------
<S> <C> <C>
Reserve for possible credit losses ......... $ 41,500 $ 36,603
Marketing expense .......................... 16,372 19,909
Customer-based intangible assets ........... 77,310 27,098
Other deferred tax assets .................. 85,960 59,367
--------- ---------
Total deferred tax assets .............. 221,142 142,977
Valuation allowance ........................ - -
--------- ---------
Total deferred tax assets less valuation
allowance ............................ 221,142 142,977
Total deferred tax liabilities ......... (121,900) (77,637)
--------- ---------
Net deferred tax assets ................ $ 99,242 $ 65,340
========= =========
- - ------------------------------------------------------------------------------
</TABLE>
Net income for the year ended December 31, 1996, includes a $32.8 million tax
benefit related to the recognition of tax deductions for the amortization of
Customer-based intangible assets acquired in connection with the Corporation's
1991 initial public offering. The initial public offering resulted in certain
Customer-based intangible assets being recorded for income tax purposes only,
creating future tax deductions relating to these intangible assets. The
Corporation did not initially recognize, for financial statement purposes, any
tax benefit related to those assets because there were uncertainties concerning
the tax treatment of such assets. During the second quarter of 1993, the U.S.
Supreme Court in the "Newark Morning Ledger" case affirmed that Customer-based
intangible assets may be amortized for tax purposes, and the Corporation
recognized $89.8 million of the tax benefit related to the Customer-based
intangible assets. During the three months ended March 31, 1996, the Internal
Revenue Service completed an audit of the Corporation's 1991 and 1992 tax
returns and entered into a final agreement with the Corporation regarding the
tax treatment of the intangible assets. As a result, the Corporation recognized
the remaining tax benefit relating to the intangible assets, $32.8 million,
during the three-month period ended March 31, 1996.
NOTE R: RELATED PARTY TRANSACTIONS
In the ordinary course of business, executive officers and directors of the
Corporation may have credit card loans issued on the same terms as those
prevailing at the time for comparable loans with unrelated persons and not
involving more than the normal risk of collectibility.
NOTE S: FAIR VALUE OF FINANCIAL INSTRUMENTS
The following discloses the fair value of financial instruments as of December
31, 1996 and 1995, whether or not recognized in the Corporation's consolidated
statements of financial condition, for which it is practicable to estimate that
value. In addition, certain financial instruments and all nonfinancial
instruments are excluded in accordance with generally accepted accounting
principles. In cases where quoted market prices are not available, fair values
are estimated using present value or other valuation techniques. These
techniques are significantly affected by the assumptions used, including the
discount rate and estimates of future cash flows. In that regard, the derived
fair value estimates cannot be substantiated by comparison to independent
markets and, in many cases, could not be realized in an immediate settlement of
the instrument. Accordingly, the aggregate fair value amounts presented do not
represent the underlying value of the Corporation.
FINANCIAL ASSETS
CASH AND DUE FROM BANKS: Cash and due from banks are carried at an amount that
approximates fair value.
MONEY MARKET INSTRUMENTS: Money market instruments include interest-earning
time deposits in other banks and federal funds sold and securities purchased
under resale agreements. As a result of the short-term nature of these
instruments, the carrying amounts reported in the consolidated statements of
financial condition approximate these assets' fair value.
INVESTMENT SECURITIES: Fair value is based on the market value of the
individual investment security without regard to any premium or discount that
may result from concentrations of ownership of a financial instrument, possible
tax ramifications, or estimated transaction costs. Market value for investment
securities is based on quoted market prices or dealer quotes.
LOANS HELD FOR SECURITIZATION: The carrying value of loans held for
securitization, reported in the consolidated statements of financial condition,
approximates its fair value due to the short-term nature of these assets.
LOAN PORTFOLIO: The carrying value of the Corporation'sloan portfolio
approximates its fair value. The loan portfolio includes variable rate loans,
which are at current market rates, and fixed-rate loans, which can be repriced
frequently at market rates.
These valuations do not include the value that relates to estimated cash flows
from new loans generated from existing Customers over the remaining life of the
portfolio or the value of established Customer relationships. Accordingly, the
aggregate fair value of the loan portfolio does not represent the underlying
value of the Corporation's loan portfolio.
[54]
<PAGE> 57
MBNA CORPORATION AND SUBSIDIARIES
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- - ----------------------------------------------------------------------------------------------------------------------------
CARRYING VALUES AND ESTIMATED FAIR VALUES OF THE CORPORATION'S FINANCIAL ASSETS
- - ----------------------------------------------------------------------------------------------------------------------------
(dollars in thousands)
- - ----------------------------------------------------------------------------------------------------------------------------
DECEMBER 31, 1996 1995
- - ----------------------------------------------------------------------------------------------------------------------------
CARRYING FAIR Carrying Fair
VALUE VALUE Value Value
----------------------------------------------------------
<S> <C> <C> <C> <C>
Financial Assets
Cash and due from banks.......................................... $ 225,063 $ 225,063 $ 291,856 $ 291,856
Money market instruments......................................... 876,614 876,614 573,611 573,611
Investment securities:
Available-for-sale............................................ 1,719,730 1,719,730 912,064 912,064
Held-to-maturity.............................................. 598,320 592,208 1,183,727 1,188,101
Loans held for securitization.................................... 2,469,974 2,469,974 3,168,427 3,168,427
Loan portfolio, net of reserve................................... 7,540,651 7,540,651 4,862,605 4,862,605
Accrued income receivable........................................ 98,160 98,160 93,636 93,636
Accounts receivable from securitizations......................... 1,777,323 1,768,000 951,568 952,000
- - -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
ACCRUED INCOME RECEIVABLE: Accrued income receivable includes interest income
earned but not yet received from investment securities, money market
instruments, loan receivables, and interest rate swap agreements. The carrying
amount reported in the consolidated statements of financial condition
approximates the fair value of these assets due to their relatively short-term
nature.
ACCOUNTS RECEIVABLE FROM SECURITIZATIONS: The fair value of accounts receivable
from securitizations was determined by discounting the future cash flows from
the securitizations using rates currently available to the Corporation for
instruments with similar terms and remaining maturities.
FINANCIAL LIABILITIES
TOTAL DEPOSITS: The fair value of noninterest-bearing demand deposits, savings
accounts, interest-bearing transaction accounts, and money market deposit
accounts is equal to the amount payable upon demand. The fair value of time
deposits was estimated by discounting the future cash flows of the stated
maturities using estimated rates currently offered for like deposits. The
valuation does not include the benefit that results from the low-cost funding
provided by the various deposit liabilities compared to the cost of borrowing
funds in the market.
SHORT-TERM BORROWINGS: Short-term borrowings include federal funds purchased
and securities sold under repurchase agreements, short-term bank notes, and
other short-term borrowings. The fair value of short-term borrowings
approximates the carrying value of these instruments based upon their
short-term nature.
LONG-TERM DEBT AND BANK NOTES: In 1996, the fair value of primarily all of the
Corporation's long-term debt and bank notes was estimated by discounting the
future cash flows of the stated maturities of the long-term debt and bank notes
using estimated rates currently offered for similar debt obligations. The fair
value of the Corporation's guaranteed preferred beneficial interests in
Corporation's junior subordinated deferrable interest debentures is based upon
its quoted market price. In 1995, the fair value of the Corporation's long-term
debt and bank notes was based upon quoted market prices or dealer quotes.
ACCRUED INTEREST PAYABLE: Accrued interest payable includes interest expensed
but not yet paid for deposits, short-term borrowings, long-term debt and bank
notes, and interest rate swap agreements. The carrying amount approximates the
fair value of these liabilities due to their relatively short-term nature.
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------------------------------------------------------------
CARRYING VALUES AND ESTIMATED FAIR VALUES OF THE CORPORATION'S FINANCIAL LIABILITIES
- - -----------------------------------------------------------------------------------------------------------------------
(dollars in thousands)
- - -----------------------------------------------------------------------------------------------------------------------
DECEMBER 31, 1996 1995
- - -----------------------------------------------------------------------------------------------------------------------
CARRYING FAIR Carrying Fair
VALUE VALUE Value Value
-----------------------------------------------------
<S> <C> <C> <C> <C>
FINANCIAL LIABILITIES
Total deposits....................................... $ 10,151,686 $ 10,243,000 $ 8,608,914 $ 8,726,000
Short-term borrowings................................ 693,387 693,387 289,543 289,543
Long-term debt and bank notes........................ 3,950,358 3,996,000 2,657,600 2,726,387
Accrued interest payable............................. 107,187 107,187 93,400 93,400
- - -----------------------------------------------------------------------------------------------------------------------
</TABLE>
[55]
<PAGE> 58
MBNA CORPORATION AND SUBSIDIARIES
- - --------------------------------------------------------------------------------
OFF-BALANCE-SHEET FINANCIAL INSTRUMENTS
The fair value of the Corporation's off-balance-sheet financial instruments is
represented by the estimated unrealized gains or losses as determined by quoted
market prices or dealer quotes. This value generally reflects the estimated
amounts that the Corporation would receive or pay to terminate the instruments
at the reporting date.
As of December 31, 1996 and 1995, the Corporation had interest rate swap
agreements with underlying notional amounts of $1.4 billion. These agreements
had a net unrealized gain of approximately $5.5 million and $29.6 million at
December 31, 1996 and 1995, respectively.
The Corporation also has forward exchange contracts and foreign exchange swap
agreements that are used to manage its foreign exchange rate risk. The notional
amounts underlying the forward exchange contracts at December 31, 1996 and
1995, were $420.3 million and $270.0 million, respectively. These contracts had
net unrealized losses of $15.7 million and $192,000 at December 31, 1996 and
1995, respectively.
The notional value underlying the Corporation's foreign exchange swap
agreements at December 31, 1996 and 1995, was $40.0 million, with a net
realizable value of zero for both periods.
NOTE T: OFF-BALANCE-SHEET FINANCIAL INSTRUMENTS
The Corporation uses interest rate swap agreements to change fixed-rate funding
sources to floating-rate funding sources to better match the rate sensitivity
of the Corporation's assets. The Corporation also uses forward exchange
contracts to reduce its exposure to foreign currency exchange rate risk
primarily related to MBNA International.
The Corporation also entered into a foreign exchange swap agreement during 1995
to facilitate the issuance of a portion of the Subordinated Guaranteed
Floating-Rate Notes by MBNA International and offset this exposure to foreign
currency exchange rate risk with an additional foreign exchange swap agreement.
These foreign exchange swap agreements have no impact on the Corporation's
consolidated income statements.
Although off-balance-sheet financial instruments do not expose the Corporation
to credit risk equal to the notional amount, the Corporation is exposed to
credit risk in an off-balance-sheet financial instrument if the counterparty
fails to perform. This credit risk is measured as the gross unrealized gain on
the financial instrument. The Corporation had gross unrealized gains on
interest rate swap agreements of $5.5 million and $29.6 million at December 31,
1996 and 1995, respectively. In addition, the Corporation had no gross
unrealized gains on forward exchange contracts at December 31, 1996, and $2.0
million of unrealized gains on forward exchange contracts at December 31, 1995.
The Corporation also had gross unrealized gains on foreign exchange swap
agreements of $1.6 million and $445,000 at December 31, 1996 and 1995,
respectively. The credit risk is reduced in these instruments by dealing only
with highly rated counterparties who have credit ratings of investment grade as
rated by the major rating agencies.
There were no securities pledged under the terms of the interest rate swap
agreements at December 31, 1996 and 1995.
<TABLE>
<CAPTION>
- - ----------------------------------------------------------------------------------------------
SUMMARY OF ACTIVITY OF OFF-BALANCE-SHEET FINANCIAL INSTRUMENTS
- - ----------------------------------------------------------------------------------------------
(dollars in thousands)
- - ----------------------------------------------------------------------------------------------
FORWARD EXCHANGE INTEREST RATE FOREIGN EXCHANGE
CONTRACTS SWAP AGREEMENTS SWAP AGREEMENTS TOTAL
- - ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1993 $ 36,988 $ 2,200,000 $ - $ 2,236,988
Additions ................ 471,308 - - 471,308
Maturities ............... (425,220) (100,000) - (525,220)
----------- ----------- ----------- -----------
BALANCE, DECEMBER 31, 1994 83,076 2,100,000 - 2,183,076
Additions ................ 1,107,469 - 40,000 1,147,469
Maturities ............... (920,572) (750,000) - (1,670,572)
----------- ----------- ----------- -----------
BALANCE, DECEMBER 31, 1995 269,973 1,350,000 40,000 1,659,973
Additions ................ 2,641,344 - - 2,641,344
Maturities ............... (2,491,062) - - (2,491,062)
----------- ----------- ----------- -----------
BALANCE, DECEMBER 31, 1996 $ 420,255 $ 1,350,000 $ 40,000 $ 1,810,255
=========== =========== =========== ===========
- - -----------------------------------------------------------------------------------------------
</TABLE>
[56]
<PAGE> 59
MBNA CORPORATION AND SUBSIDIARIES
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------------------------------------------------------------------
SIGNIFICANT CLASSES OF OFF-BALANCE-SHEET FINANCIAL INSTRUMENTS
- - -----------------------------------------------------------------------------------------------------------------------------
(dollars in thousands)
- - -----------------------------------------------------------------------------------------------------------------------------
- - -----------------------------------------------------------------------------------------------------------------------------
WEIGHTED AVERAGE
- - -----------------------------------------------------------------------------------------------------------------------------
Notional Maturity Estimated
Amount Receive Rate (a) Pay Rate (b) In Years Fair Value
-----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
DECEMBER 31, 1996
Forward exchange contracts--pounds sterling...... $420,255 1.65 1.71 .1
Gross unrealized gains...................... $ -
Gross unrealized losses .................... (15,663)
---------
Total.................................... $ (15,663)
=========
Interest rate swap agreements.................... 1,350,000 6.42% 5.54% 1.6
Gross unrealized gains...................... $ 5,457
Gross unrealized losses..................... -
----------
Total.................................... $ 5,457
==========
Foreign exchange swap agreements................. 40,000 1.71 1.71 8.4
Gross unrealized gains...................... $ (1,630)
Gross unrealized losses .................... (1,630)
----------
Total.................................... $ -
==========
DECEMBER 31, 1995
Forward exchange contracts--pounds sterling...... 269,973 1.55 1.55 .3
Gross unrealized gains...................... $ 1,988
Gross unrealized losses .................... (2,180)
----------
Total.................................... $ (192)
==========
Interest rate swap agreements.................... 1,350,000 6.42% 5.81% 2.6
Gross unrealized gains...................... $ 29,629
Gross unrealized losses..................... -
----------
Total.................................... $ 29,629
==========
Foreign exchange swap agreements................. 40,000 1.55 1.55 9.4
Gross unrealized gains...................... $ 445
Gross unrealized losses .................... (445)
----------
Total.................................... $ -
==========
- - --------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Weighted average receive rate represents the fixed rate contracted for at
the time the off-balance-sheet financial instruments were entered into.
(b) Weighted average pay rate for the forward exchange contracts represents
the spot rate at December 31, 1996 and 1995, respectively. The pay rate
for the interest rate swap agreements is generally based upon the
three-month LIBOR and is the rate in effect at December 31, 1996 and 1995,
respectively.
The Corporation's interest rate swap agreements have maturities ranging from
1997 through 2002, the forward exchange contracts have maturities ranging from
1997 through 1998, and the foreign exchange swap agreements mature in 2005.
<TABLE>
<CAPTION>
- - ----------------------------------------------------------------------------------------------------------------
EXPECTED MATURITIES OF OFF-BALANCE-SHEET FINANCIAL INSTRUMENTS
- - ----------------------------------------------------------------------------------------------------------------
(dollars in thousands)
- - ----------------------------------------------------------------------------------------------------------------
DECEMBER 31, 1996 WITHIN 1 YEAR 1-5 YEARS 6-10 YEARS TOTAL
- - ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Forward exchange contracts--pounds sterling
Notional amount ........................ $ 403,128 $ 17,127 $ - $ 420,255
Estimated fair value ................... (12,450) (3,213) - (15,663)
Interest rate swap agreements
Notional amount ........................ 1,000,000 150,000 200,000 1,350,000
Estimated fair value ................... 3,855 474 1,128 5,457
Foreign exchange swap agreements
Notional amount ........................ - - 40,000 40,000
Estimated fair value ................... - - - -
- - ---------------------------------------------------------------------------------------------------------------
</TABLE>
[57]
<PAGE> 60
MBNA CORPORATION AND SUBSIDIARIES
- - --------------------------------------------------------------------------------
NOTE U: PARENT COMPANY FINANCIAL INFORMATION
MBNA Corporation conducts its credit card operations primarily through its
wholly owned subsidiary, MBNA America Bank, N.A. As of December 31, 1996, the
Bank constituted 92.7% of the consolidated assets of MBNA Corporation. The
parent company's investment in subsidiaries represents the total equity of all
consolidated subsidiaries, using the equity method of accounting for
investments.
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------------------------------------
CONDENSED STATEMENTS OF FINANCIAL CONDITION
- - --------------------------------------------------------------------------------------------------------------
(dollars in thousands)
- - --------------------------------------------------------------------------------------------------------------
DECEMBER 31, 1996 1995
- - --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Cash and due from banks ..................................................... $ 6,032 $ 5,005
Money market instruments .................................................... 100,175 183,339
Notes receivable from non-bank subsidiaries ................................. 1,031,716 714,034
Investment in subsidiaries:
Bank ..................................................................... 1,645,011 1,060,284
Non-bank ................................................................. 176,789 134,861
Premises and equipment, net ................................................. 47,692 39,801
Accrued income receivable ................................................... 12,757 9,220
Other assets ................................................................ 41,478 26,042
---------- ----------
Total assets ........................................................... $3,061,650 $2,172,586
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Long-term debt .............................................................. $1,011,447 $ 836,314
Junior subordinated deferrable interest debentures due to non-bank subsidiary 257,732 -
Accrued interest payable .................................................... 15,039 13,637
Dividends payable ........................................................... 40,179 32,656
Accrued expenses and other liabilities ...................................... 32,945 24,921
---------- ----------
Total liabilities ...................................................... 1,357,342 907,528
Stockholders' equity ........................................................ 1,704,308 1,265,058
---------- ----------
Total liabilities and stockholders' equity ............................. $3,061,650 $2,172,586
========== ==========
- - -------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------------------------------------------------------------
CONDENSED STATEMENTS OF INCOME
- - -------------------------------------------------------------------------------------------------------------------------------
(dollars in thousands)
- - -------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1996 1995 1994
- - -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING INCOME
Interest income ................................................................. $ 66,056 $ 47,611 $ 28,074
Dividends from subsidiaries ..................................................... 148,023 134,000 119,156
Management fees from subsidiaries ............................................... 29,058 22,135 15,465
Loss on investment securities ................................................... - - (77)
Other ........................................................................... 23 24 38
--------- --------- ---------
Total operating income ..................................................... 243,160 203,770 162,656
OPERATING EXPENSE
Interest expense ................................................................ 60,605 48,102 28,210
Salaries and employee benefits .................................................. 16,320 9,812 5,309
Occupancy expense of premises ................................................... 2,233 2,165 1,540
Furniture and equipment expense ................................................. 4,860 3,847 3,564
Other ........................................................................... 2,157 3,659 3,275
--------- --------- ---------
Total operating expense .................................................... 86,175 67,585 41,898
--------- --------- ---------
Income before income taxes and equity in undistributed net income of subsidiaries 156,985 136,185 120,758
Applicable income taxes ......................................................... 2,560 920 1,074
Equity in undistributed net income (loss) of subsidiaries:
Bank ......................................................................... 326,590 218,215 150,134
Non-bank ..................................................................... (6,520) (381) (3,225)
--------- --------- ---------
NET INCOME ...................................................................... $ 474,495 $ 353,099 $ 266,593
========= ========= =========
- - -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
[58]
<PAGE> 61
MBNA CORPORATION AND SUBSIDIARIES
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- - ---------------------------------------------------------------------------------------------------------------------------------
CONDENSED STATEMENTS OF CASH FLOWS
- - ---------------------------------------------------------------------------------------------------------------------------------
(dollars in thousands)
- - ---------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1996 1995 1994
- - ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income ...................................................................... $ 474,495 $ 353,099 $ 266,593
Adjustments to reconcile net income to net cash provided by operating activities:
Equity in undistributed earnings of subsidiaries ............................. (320,070) (217,834) (146,909)
Loss on investment securities ................................................ - - 77
Provision (benefit) for deferred income taxes ................................ 371 (612) 752
Depreciation and amortization ................................................ 8,532 5,069 3,552
Decrease in other operating activities ....................................... 2,615 6,419 2,684
--------- --------- ---------
Net cash provided by operating activities .................................. 165,943 146,141 126,749
INVESTING ACTIVITIES
Net decrease (increase) in money market instruments ............................. 83,164 (122,372) 19,488
Purchases of investment securities available-for-sale ........................... - - (577)
Net increase in notes receivable from non-bank subsidiaries ..................... (317,682) (250,770) (166,264)
Net purchases of premises and equipment ......................................... (11,868) (13,368) (2,517)
Investment in subsidiaries ...................................................... (298,532) (19,940) (15,750)
--------- --------- ---------
Net cash used for investing activities ..................................... (544,918) (406,450) (165,620)
FINANCING ACTIVITIES
Proceeds from issuance of long-term debt and bank notes ......................... 199,222 273,322 154,539
Maturity of long-term debt and bank notes ....................................... (25,000) - -
Proceeds from issuance of junior subordinated deferrable interest debentures
to non-bank subsidiary ........................................................ 257,732 - -
Proceeds from issuance of preferred stock ....................................... 146,207 145,070 -
Proceeds from exercise of stock options and other awards ........................ 22,869 12,780 4,033
Acquisition and retirement of common stock ...................................... (71,913) (49,829) (15,442)
Dividends paid .................................................................. (149,115) (120,312) (103,952)
--------- --------- ---------
Net cash provided by financing activities .................................. 380,002 261,031 39,178
--------- --------- ---------
INCREASE IN CASH AND CASH EQUIVALENTS ........................................... 1,027 722 307
Cash and cash equivalents at beginning of year .................................. 5,005 4,283 3,976
--------- --------- ---------
Cash and cash equivalents at end of year ........................................ $ 6,032 $ 5,005 $ 4,283
========= ========= =========
SUPPLEMENTAL DISCLOSURES:
Interest expense paid ........................................................... $ 58,308 $ 44,521 $ 23,456
========= ========= =========
Income taxes paid ............................................................... $ - $ - $ -
========= ========= =========
- - -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
[59]
<PAGE> 62
MBNA CORPORATION AND SUBSIDIARIES
REPORT OF INDEPENDENT AUDITORS
- - --------------------------------------------------------------------------------
Board of Directors and Stockholders
MBNA Corporation
We have audited the accompanying consolidated statements of financial condition
of MBNA Corporation and subsidiaries as of December 31, 1996 and 1995, and the
related consolidated statements of income, changes in stockholders' equity, and
cash flows for each of the three years in the period ended December 31, 1996.
These financial statements are the responsibility of the Corporation's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of MBNA Corporation
and subsidiaries at December 31, 1996 and 1995, and the consolidated results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1996, in conformity with generally accepted accounting
principles.
/s/ ERNST & YOUNG LLP
Baltimore, Maryland
January 14, 1997
[60]
<PAGE> 63
MBNA CORPORATION AND SUBSIDIARIES
QUARTERLY DATA
- - --------------------------------------------------------------------------------
(unaudited)
<TABLE>
<CAPTION>
- - ----------------------------------------------------------------------------------------------------------------------
SUMMARY OF CONSOLIDATED QUARTERLY FINANCIAL INFORMATION
- - ----------------------------------------------------------------------------------------------------------------------
(dollars in thousands, except per share amounts)
- - ----------------------------------------------------------------------------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31,
- - ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1996
Interest income ........................................... $322,303 $321,814 $351,820 $387,330
Interest expense .......................................... 171,108 171,684 190,915 209,083
Net interest income ....................................... 151,195 150,130 160,905 178,247
Provision for possible credit losses ...................... 49,488 49,112 35,273 44,351
Other operating income .................................... 397,548 444,061 472,348 581,966
Other operating expense ................................... 346,532 374,020 383,538 468,461
Income before income taxes ................................ 98,392 171,059 214,442 247,401
Net income (a) ............................................ 92,222 103,320 129,523 149,430
Earnings per common share (b) ............................. .26 .29 .37 .41
Weighted average common shares outstanding and common stock
equivalents (000)(b) ................................... 344,844 345,058 345,489 348,537
1995
Interest income ........................................... $239,143 $289,599 $299,636 $312,437
Interest expense .......................................... 119,454 151,742 161,217 164,176
Net interest income ....................................... 119,689 137,857 138,419 148,261
Provision for possible credit losses ...................... 25,585 36,516 37,361 38,714
Gain on investment securities ............................. - - 39 -
Other operating income .................................... 297,231 332,602 388,978 405,768
Other operating expense ................................... 278,148 306,112 328,963 332,844
Income before income taxes ................................ 113,187 127,831 161,112 182,471
Net income ................................................ 68,725 76,835 97,327 110,212
Earnings per common share (b) ............................. .20 .22 .28 .32
Weighted average common shares outstanding and common stock
equivalents (000)(b) .................................. 339,591 342,166 343,732 344,160
- - -------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Net income for the three months ended March 31, 1996, includes a $32.8
million tax benefit related to deductions for the amortization of
Customer-based intangible assets acquired in connection with the initial
public offering of the Corporation's Common Stock, and a charge of $32.8
million net of tax ($54.3 million pretax) related to the launch of the
MBNA Platinum Plus Visa and MasterCard program.
(b) Earnings per common share and weighted average common shares outstanding
and common stock equivalents have been restated to reflect the
three-for-two split of the Corporation's Common Stock, effected in the
form of a dividend, issued January 1, 1997, to stockholders of record as
of December 16, 1996.
[61]
<PAGE> 64
MBNA CORPORATION AND SUBSIDIARIES
STOCK PRICE RANGES AND DIVIDENDS
- - --------------------------------------------------------------------------------
(unaudited)
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------
COMMON STOCK PRICE RANGE AND DIVIDENDS
DIVIDENDS
DECLARED PER
HIGH LOW COMMON SHARE
- - --------------------------------------------------------------------
<S> <C> <C> <C>
1996
First quarter............ $20 3/4 $15 1/8 $ .11
Second quarter........... 21 1/8 18 .11
Third quarter............ 23 1/8 17 3/4 .11
Fourth quarter........... 28 1/2 22 3/4 .11
1995
First quarter............ $12 7/8 $10 1/8 $ .09
Second quarter........... 15 1/2 12 5/8 .09
Third quarter............ 18 1/2 14 7/8 .09
Fourth quarter.......... 19 15 1/2 .09
- - --------------------------------------------------------------------
</TABLE>
Market price and per common share data have been restated to reflect the
three-for-two split of the Corporation's Common Stock, effected in the form of
a dividend, issued January 1, 1997, to stockholders of record as of December
16, 1996.
The Corporation's Common Stock is traded on the New York Stock Exchange under
the symbol "KRB" and is listed as "MBNA" in newspapers. At February 17, 1997,
the Corporation had 2,384 common stockholders of record. This does not include
beneficial owners for whom Cede & Co. or others act as nominees.
On January 14, 1997, the Board of Directors approved an increase in the
quarterly dividend to $.12 per common share. The cash dividend is payable April
1, 1997, to stockholders of record as of March 17, 1997.
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------
PREFERRED STOCK PRICE RANGE AND DIVIDENDS
DIVIDENDS
DECLARED PER
HIGH LOW PREFERRED SHARE
- - --------------------------------------------------------------------
<S> <C> <C> <C>
SERIES A
1996
First quarter......... $25 1/8 $24 1/8 $.46875
Second quarter........ 25 23 7/8 .46875
Third quarter......... 24 5/8 24 .46875
Fourth quarter........ 26 3/4 24 3/8 .46875
1995
Fourth quarter........ $25 1/4 $24 1/2 $.31770
SERIES B
1996
Third quarter......... $24 3/4 $24 5/8 $.10690
Fourth quarter........ 26 1/8 24 5/8 .42690
- - --------------------------------------------------------------------
</TABLE>
On September 23, 1996, the Corporation issued 6.0 million shares of Adjustable
Rate Cumulative Preferred Stock, Series B, with a $25 stated value per share.
The Series B Preferred Stock is traded on the New York Stock Exchange under the
symbol "KRBpfb."
On November 14, 1995, the Corporation issued 6.0 million shares of 7 1/2%
Cumulative Preferred Stock, Series A, with a $25 stated value per share. The
Series A Preferred Stock is traded on the New York Stock Exchange under the
symbol "KRBpfa."
On January 14, 1997, the Board of Directors declared a quarterly dividend of
$.46875 per share on the 7 1/2% Cumulative Preferred Stock, Series A, and a
quarterly dividend of $.4099 per share on the Adjustable Rate Cumulative
Preferred Stock, Series B. Both dividends are payable April 15, 1997, to
stockholders of record as of March 31, 1997.
[62]
<PAGE> 65
SENIOR EXECUTIVES
- - -------------------------------------------------------------------------------
CHARLES M. CAWLEY, 56, is chairman and chief executive officer of MBNA America
Bank, N.A., and president of MBNA Corporation. Mr. Cawley has more than 31
years of management experience in the financial services industry and was the
senior member of the management team that established MBNA in 1982. A graduate
of Georgetown University and a member of its board of directors, Mr. Cawley
also serves on the boards of the University of Delaware, the Eisenhower
Exchange Fellowships, and the American Architectural Foundation. He is chairman
of the board of The Grand Opera House in Wilmington, Delaware, and is a member
of the board and executive committee of MasterCard International.
Chief Marketing Officer JOHN R. COCHRAN III, 45, oversees all business
development and marketing activities, including sales, marketing, advertising,
regional marketing, telemarketing, Customer satisfaction, and group
administration. Mr. Cochran has 23 years of management experience in consumer
lending and was a member of the management team that established MBNA in 1982.
A graduate of Loyola College (Maryland), Mr. Cochran developed the endorsed
marketing concept that has led to MBNA signing more than 4,400 membership
groups and financial institutions. He also established what is now one of the
nation's largest financial institution telephone sales operations. Mr. Cochran
serves on MasterCard International's U.S. board of directors. He is also a
member of the board of trustees of Loyola College and a member of the board of
visitors of the Delaware Council for Economic Education.
Chief Operating Officer BRUCE L. HAMMONDS, 48, oversees MBNA's credit, loss
prevention, international, consumer finance and consumer deposit, corporate
products, and insurance services, as well as MBNA Hallmark Information
Services. Mr. Hammonds has 27 years of management experience in consumer
lending and was a member of the management team that established MBNA in 1982.
A graduate of the University of Baltimore, he is chairman of the Delaware State
Chamber of Commerce and the Delaware Housing Partnership. He serves on the
executive committee of the Delaware Workforce Development Council, the Delaware
Bankers Association, and the Delaware Business Roundtable.
Chief Financial Officer M. SCOT KAUFMAN, 47, joined the company in 1985 and
oversees MBNA's accounting, finance, treasury, and resource allocation
activities. Mr. Kaufman has 26 years of experience in the financial services
industry. A graduate of the University of Baltimore with an M.B.A. in finance,
Mr. Kaufman has held senior management positions overseeing a variety of areas
within MBNA and supervised the financial aspects of MBNA's transition to a
public company in 1991. Mr. Kaufman began his career as an internal auditor,
later becoming a corporate auditor, treasurer, and controller. He is active in
many professional associations, including the American Institute of CPAs, the
Maryland Association of CPAs, the Financial Executive Institute, and the
National Association of Accountants. He is also a member of the Delaware
Economic and Financial Advisory Council.
ALFRED LERNER, 63, is chief executive officer of MBNA Corporation and the
chairman of its board of directors. He served as chairman of the board and
chief executive officer of MNC Financial Inc. from September 1990 to July 1991
and as chairman of the board from July 1991 to October 1993. He also served as
chairman of the board of Equitable Bancorporation from July 1983 until it
merged with MNC Financial in January 1990. He has been chairman and chief
executive officer of the Town and Country trust since August 1993. A graduate
of Columbia University and a member of its board of trustees, Mr. Lerner also
is president of The Cleveland Clinic Foundation and a member of its board of
trustees. He is also a trustee of Case Western Reserve University.
Chief Administrative Officer LANCE L. WEAVER, 42, joined the company in 1991
and is responsible for personnel, facility management, medical services,
security, law, and administrative services. Mr. Weaver has 22 years of
experience in consumer lending and administration. A graduate of Georgetown
University, Mr. Weaver has had previous experience at two national banks as a
vice president and senior vice president of mortgage lending activities. He is
chairman of the United Way of Delaware fund-raising campaign and is a member of
Georgetown University's board of regents. He serves on the boards of Tower Hill
School and Wilmington 2000, a consortium of business and government planners
working toward the revitalization of downtown Wilmington and its environs.
[63]
<PAGE> 66
MBNA CORPORATION
Board of Directors
- - --------------------------------------------------------------------------------
ALFRED LERNER
Chairman and Chief Executive Officer
MBNA Corporation
CHARLES M. CAWLEY
President
MBNA Corporation
Chairman and Chief Executive Officer
MBNA America Bank, N.A.
JAMES H. BERICK, ESQ.
Chairman
Berick, Pearlman & Mills Co., L.P.A.
BENJAMIN R. CIVILETTI, ESQ.
Chairman
Venable, Baetjer and Howard, LLP
Former Attorney General
of the United States
RANDOLPH D. LERNER, ESQ.
President
R.D. Lerner Securities, Inc.
STUART L. MARKOWITZ, M.D.
Internist and Managing Partner
Drs. Markowitz, Rosenberg & Associates
Assistant Clinical Professor
Case Western Reserve University,
College of Medicine
MICHAEL ROSENTHAL, PH.D.
Professor
Columbia University
Former Associate Dean
for Academic Administration
Columbia College
MBNA AMERICA BANK, N.A.
OFFICERS
- - --------------------------------------------------------------------------------
SENIOR EXECUTIVES
................................................................................
Charles M. Cawley M. Scot Kaufman Kenneth F. Boehl
John R. Cochran III Lance L. Weaver Steve Boyden
Bruce L. Hammonds David W. Spartin
DIVISION EXECUTIVES
................................................................................
Gregg Bacchieri Terrance R. Flynn David W. Nelms
William H. Daiger, Jr. John J. Hewes Richard K. Struthers
Ronald W. Davies Janine D. Marrone Vernon H.C. Wright
OPERATING EXECUTIVES
................................................................................
Sunil F. Antani David M. Hirt John C. Richmond
Lisa F. Baughman Richard G. Huber Karen E. Rose
Patrick M. Blewett Scott A. Hudson Michael R. Scanlan
Jules J. Bonavolonta Mark Levitt John W. Scheflen
James E. Carrington Craig S. Lewis Kevin C. Schindler
Steven P. Chambers Timothy E. Love W. Craig Schroeder
Robert V. Ciarrocki Victor P. Manning Michael S. Schuck
Douglas M. Cummings David H. Maxwell Ann W. Seybolt
Brian D. Dalphon Kathleen B. McEntee Michelle D. Shepherd
Salvatore A. DeAngelo Thomas P. McGinley Stephen K. Shock
Douglas R. Denton Frank J. McKelvey III Diane C. Sievering
Joseph A. DeSantis Maureen A. McKernan Richard B. Skinner
Robert V. DeSantis Charles K. Messick April M. Stercula
Peter S.P. Dimsey Susan D. Morrison Penelope J. Taylor
Kevin A. Dolan, M.D. William P. Morrison Steven P. Walczak
K. David Elgena Edward H. Murphy Howard C. Wallace
James H. Erskine III Terri C. Murphy Todd T. Weaver
Shane G. Flynn Patrick J. O'Dwyer Charles F. Wheatley
John M. Gala Francis H. Otenasek Dena H. Williams
Joseph J. Gatti Edward G. Plummer Robert J. Wolf
Peter J. Gatti Frank W. Quillen Kevin P. Wren
Bob B. Hallmark Michael G. Rhodes Thomas D. Wren
................................................................................
THE HEIGHTS BY GREAT PEOPLE REACHED AND KEPT WERE NOT ATTAINED BY
SUDDEN FLIGHT, BUT THEY, WHILE THEIR COMPANIONS SLEPT, WERE TOILING
UPWARD IN THE NIGHT.
--HENRY WADSWORTH LONGFELLOW
[64]
<PAGE> 67
MBNA AMERICA BANK, N.A.
The principal subsidiary of MBNA Corporation, MBNA America is a national bank
with $38.2 billion in managed loans. The bank is the world's leading issuer of
the Gold MasterCard(R) and the world's second-largest lender through bank
credit cards. It also provides retail deposit, consumer loan, insurance, and
card acceptance services. MBNA America is the recognized industry leader in
affinity marketing, with endorsements from 4,400 membership organizations and
financial institutions.
MBNA INTERNATIONAL BANK LIMITED (MBNA INTERNATIONAL)
MBNA issues credit cards in the United Kingdom. MBNA International is located
in Chester, England, with a business development office in London.
MBNA INSURANCE SERVICES
MBNA Insurance Services, which markets and services credit-related Life and
Disability, personal Property and Casualty, and Life and Health insurance, is
located in Greenville, Delaware. MBNA is currently licensed to provide its
automobile insurance products in 27 states and plans to be licensed in all 50
states by the end of 1997.
MBNA MARKETING SYSTEMS, INC.
MBNA has state-of-the-art telephone sales facilities to support account
acquisition and maintains offices in Delaware, Florida, Georgia, Maine,
Maryland, Ohio, Pennsylvania, and Texas. In addition to credit cards, Marketing
Systems cross-sells consumer loan, deposit, and insurance products.
MBNA CONSUMER SERVICES, INC.
(subsidiary of MBNA Corporation)
MBNA Consumer Services, Inc., is licensed to provide home equity loans in 42
states and the District of Columbia.
MBNA HALLMARK INFORMATION SERVICES, INC.
MBNA Hallmark Information Services, Inc., headquartered in Dallas, Texas,
provides information technology support and services to MBNA America Bank,
N.A., and its affiliates.
Ernst & Young LLP
National City Bank (common stock)
The Bank of New York (preferred stock)
For further information about MBNA Corporation or its subsidiaries, please
contact:
Brian D. Dalphon
Director, Investor Relations
MBNA Corporation
Wilmington, DE 19884-0786
(800) 362-6255
(302) 432-1251
Listed on New York Stock Exchange
Stock Symbol KRB
[RECYCLED LOGO]
This annual report was printed on paper recycled from MBNA offices.
<PAGE> 68
[MBNA CORPORATION LOGO]
- - --------------------------------------------------------------------------------
Picture of Antique car.
[PHOTO]
ATTENTION TO DETAIL
DRIVES EVERYTHING WE DO.
- - --------------------------------------------------------------------------------
SUCCESS IS NEVER FINAL.
<PAGE> 1
Exhibit 21 Subsidiaries of MBNA Corporation
<TABLE>
<CAPTION>
Name Incorporated
- - ---- ------------
<S> <C>
MBNA America Bank, N.A. United States
MBNA International Bank Limited* United Kingdom
MBNA Consumer Services, Inc. Delaware
MBNA Hallmark Information Services, Inc.* Delaware
MBNA Marketing Systems, Inc.* Delaware
</TABLE>
*A subsidiary of MBNA America Bank, N.A.
<PAGE> 1
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the following Registration
Statements of MBNA Corporation, and in the related Prospectuses, of our report
dated January 14, 1997, with respect to the consolidated financial statements of
MBNA Corporation, included in the 1996 Annual Report to Stockholders of MBNA
Corporation and incorporated by reference in this Annual Report (Form 10-K) for
the year ended December 31, 1996:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Number 33-41936 on Form S-8 dated July 22, 1991
Number 33-41895 on Form S-8 dated July 24, 1991
Number 33-50498 on Form S-3 (as amended by Post-
Effective Amendment No. 1) dated August
28, 1992
Number 33-71640 on Form S-8 dated November 15, 1993
Number 33-76278 on Form S-3 (as amended by Amendment
No. 1) dated April 8, 1994
Number 33-95438 on Form S-8 dated August 4, 1995
Number 33-95600 on Form S-3 (as amended by Pre-
Effective Amendment No. 1) dated
September 1, 1995
Number 333-17187 on Form S-3 dated December 3, 1996
Number 333-15721 on Form S-3 (as amended by Amendment
No. 2) dated December 10, 1996
Number 333-21181 on form S-4 (as amended by Amendment
No. 1) dated February 25, 1997
</TABLE>
Baltimore, Maryland
March 18, 1997
Ernst & Young LLP
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MBNA
CORPORATIONS'S FORM 10-K FOR THE PERIOD ENDED DECEMBER 31, 1996 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 225,063
<INT-BEARING-DEPOSITS> 621,614
<FED-FUNDS-SOLD> 255,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 1,719,730
<INVESTMENTS-CARRYING> 598,320
<INVESTMENTS-MARKET> 592,208
<LOANS> 10,129,052<F1>
<ALLOWANCE> 118,427
<TOTAL-ASSETS> 17,035,342
<DEPOSITS> 10,151,686
<SHORT-TERM> 693,387
<LIABILITIES-OTHER> 535,603
<LONG-TERM> 3,950,358
0
120
<COMMON> 3,341
<OTHER-SE> 1,700,847
<TOTAL-LIABILITIES-AND-EQUITY> 17,035,342
<INTEREST-LOAN> 1,217,425<F1>
<INTEREST-INVEST> 126,379
<INTEREST-OTHER> 39,463
<INTEREST-TOTAL> 1,383,267
<INTEREST-DEPOSIT> 527,885
<INTEREST-EXPENSE> 742,790
<INTEREST-INCOME-NET> 640,477
<LOAN-LOSSES> 178,224
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 1,572,551
<INCOME-PRETAX> 731,294
<INCOME-PRE-EXTRAORDINARY> 731,294
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 474,495<F2>
<EPS-PRIMARY> 1.33<F3>
<EPS-DILUTED> 1.32<F3>
<YIELD-ACTUAL> 11.91<F4>
<LOANS-NON> 0
<LOANS-PAST> 107,679<F5>
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 104,886
<CHARGE-OFFS> 254,417
<RECOVERIES> 81,693
<ALLOWANCE-CLOSE> 118,427
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
<FN>
<F1>Includes Loans Held for Securitization.
<F2>Net income for the twelve months ended December 31, 1996, includes a $32.8
million tax benefit related to deductions for the amortization of
Customer-based intangible assets acquired in connection with the 1991 initial
public offering of the Corporation's Common Stock, and a charge of $32.8
million net of tax ($54.3 million pre-tax) related to the launch of the MBNA
Platinum Plus Visa and Mastercard program.
<F3>EPS-Primary and EPS-Diluted have been restated to reflect the three-for-two
split of the Corporation's Common Stock effected in the form of a dividend. In
connection with this transaction, one additional share of common stock was
issued on January 1, 1997, for every two shares of common stock held by
stockholders of record as of the close of business on December 16, 1996.
<F4>On a fully taxable equivalent basis
<F5>Excludes Loans Held for Securization.
</FN>
</TABLE>
