<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[x] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
MBNA CORPORATION
- - --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- - --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
- - --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- - --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
- - --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- - --------------------------------------------------------------------------------
(5) Total fee paid:
- - --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
- - --------------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
- - --------------------------------------------------------------------------------
(3) Filing party:
- - --------------------------------------------------------------------------------
(4) Date filed:
- - --------------------------------------------------------------------------------
<PAGE> 2
MBNA CORPORATION
WILMINGTON, DELAWARE 19884
------------------------------
NOTICE OF
ANNUAL MEETING OF STOCKHOLDERS
------------------------------
The 1997 Annual Meeting of the Stockholders of MBNA Corporation will be
held at the Corporation's international headquarters located at 11th and King
Streets, Wilmington, Delaware on April 21, 1997 at 11:00 a.m., for the following
purposes:
1. To elect seven directors to serve until the next annual meeting and
until their successors are elected and qualify;
2. To consider and act upon a proposal to approve a new 1997 Long Term
Incentive Plan;
3. To consider and act upon a proposal to approve a new Senior Executive
Performance Plan; and
4. To transact whatever other business may properly be brought before the
meeting.
Only holders of record of the Corporation's Common Stock at the close of
business on February 28, 1997 are entitled to notice of and to vote at the
meeting.
John W. Scheflen
Secretary
March 21, 1997
PLEASE MARK, SIGN, DATE, AND RETURN PROMPTLY THE ENCLOSED PROXY IN THE ENCLOSED
ENVELOPE EVEN IF YOU PLAN TO ATTEND THE MEETING. IF YOU ATTEND THE MEETING AND
WISH TO VOTE IN PERSON, YOU MAY THEN WITHDRAW YOUR PROXY.
<PAGE> 3
MBNA CORPORATION
WILMINGTON, DELAWARE 19884
------------------------------
PROXY STATEMENT
------------------------------
MBNA Corporation (the "Corporation") is a bank holding company. It is the
parent of MBNA America Bank, N.A., a national bank (the "Bank").
This Proxy Statement is furnished in connection with the solicitation by
the Corporation of proxies to be voted at its Annual Meeting of Stockholders to
be held at 11:00 a.m. on April 21, 1997, at the Corporation's international
headquarters located at 11th and King Streets, Wilmington, Delaware and at any
adjournment thereof. This Proxy Statement was first mailed or given to holders
of the Corporation's Common Stock on March 21, 1997.
Solicitation of proxies may be made by mail, personal interview, telephone
and fax by directors, officers and employees of the Corporation. The Corporation
has retained Morrow & Co., Inc. to assist in the solicitation of proxies for a
fee of up to $5,000 plus reimbursement of expenses. Expenses for such
solicitation will be borne by the Corporation. Brokers and others will be
reimbursed for their reasonable expenses in forwarding the proxy material to
their customers who have beneficial interests in the Common Stock of the
Corporation registered in names of nominees.
Any proxy may be revoked by a stockholder at any time prior to its use by
execution of another proxy bearing a later date, by written notice to the
Secretary of the Corporation at the address set forth above or by oral or
written statement at the meeting. Shares represented by any proxy properly
executed and received prior to the meeting will be voted at the meeting in
accordance with the proxy or, if the proxy does not specify, in accordance with
the recommendation of the Board of Directors.
Only holders of record of the Corporation's Common Stock at the close of
business on February 28, 1997 are entitled to notice of and to vote at the
meeting. On the record date the Corporation had 334,125,000 shares of Common
Stock outstanding. Each share of Common Stock outstanding on the record date is
entitled to one vote. There is no provision for cumulative voting.
A quorum for the meeting requires the presence in person or by proxy of
stockholders entitled to cast a majority of the votes entitled to be cast at the
meeting. The election of directors requires a plurality of the votes cast at the
meeting. The approval of the 1997 Long Term Incentive Plan requires the
affirmative vote of a majority of the votes cast on the matter (provided that at
least 50% of the shares entitled to vote are voted). The approval of the Senior
Executive Performance Plan requires the affirmative vote of a majority of the
votes cast on the matter.
Stockholders will vote at the meeting by ballot and votes cast at the
meeting in person or by proxy will be tallied by the Corporation's transfer
agent. Shares held by stockholders present at the meeting in person who do not
vote and ballots marked "abstain" or "withheld" will be counted as present at
the meeting for quorum purposes but will not be considered to be voted at the
meeting. "Broker non-votes" (i.e., shares represented by proxies, received from
a broker or nominee, indicating that the broker or nominee has not voted the
shares on a matter with respect to which the broker or nominee does not have
discretionary voting power) will be treated as abstentions -- present at the
meeting but not voted.
All Common Stock share numbers and prices included herein have been
adjusted to reflect the three-for-two split of the Corporation's Common Stock
effected as a dividend paid January 1, 1997 to stockholders of record on
December 16, 1996.
1
<PAGE> 4
SECURITY OWNERSHIP OF MANAGEMENT
AND CERTAIN BENEFICIAL OWNERS
The following table sets forth information as of February 28, 1997, with
respect to beneficial ownership of shares of the Corporation's Common Stock by
each nominee for director, by each named executive officer, by all directors and
executive officers as a group, and by each person known to the Corporation to
own beneficially 5% or more of the Common Stock.
MANAGEMENT
<TABLE>
<CAPTION>
PERCENT OF
NAME NUMBER OF SHARES OUTSTANDING
- - -------------------------------------------------------------- ---------------- -----------
<S> <C> <C>
Alfred Lerner(1).............................................. 44,355,420 13.2%
Wilmington, Delaware 19884
James H. Berick, Esq.(2)...................................... 127,125 *
Charles M. Cawley(3).......................................... 1,479,327 *
Benjamin R. Civiletti, Esq.(4)................................ 85,725 *
John R. Cochran III,(5)....................................... 955,381 *
Bruce L. Hammonds(6).......................................... 634,874 *
M. Scot Kaufman(7)............................................ 767,646 *
Randolph D. Lerner, Esq.(8)................................... 118,125 *
Stuart L. Markowitz, M.D.(9).................................. 451,792 *
Michael Rosenthal, Ph.D.(10).................................. 122,175 *
All directors and executive officers as a group(11)........... 50,688,405 14.9%
INVESTMENT ADVISORS(12)
Alliance Capital Management L.P. and affiliates(13)........... 41,274,263 12.3%
787 Seventh Avenue
New York, New York 10019
Provident Investment Counsel, Inc.(14)........................ 17,565,435 5.3%
300 North Lake Avenue
Pasadena, California 91101
Putnam Investments, Inc.(15).................................. 21,032,343 6.3%
One Post Office Square
Boston, Massachusetts 02109
</TABLE>
- - ------------------------------
* Less than 1% of the shares outstanding.
(1) Includes 517,918 restricted shares of which 77,271, 87,804 and 103,844
shares were issued in full payment of Mr. Lerner's 1995, 1994 and 1993
bonuses at his request. See "Executive Compensation -- Summary Compensation
Table." Also includes 1,087,500 shares subject to options exercisable
within 60 days; does not include 1,687,500 shares subject to options
exercisable at later dates.
(2) Includes 118,125 shares subject to options exercisable within 60 days; does
not include 23,600 shares owned by Mr. Berick's wife and sons as to which
Mr. Berick disclaims beneficial ownership.
(3) Includes 409,960 restricted shares and 991,674 shares subject to options
exercisable within 60 days; does not include 1,940,626 shares subject to
options exercisable at later dates.
(4) Includes 84,375 shares subject to options exercisable within 60 days.
(5) Includes 209,133 restricted shares and 724,873 shares subject to options
exercisable within 60 days; does not include 885,752 shares subject to
options exercisable at later dates.
(6) Includes 209,133 restricted shares and 349,499 shares subject to options
exercisable within 60 days; does not include 885,752 shares subject to
options exercisable at later dates.
(7) Includes 146,199 restricted shares and 3,375 shares owned of record by Mr.
Kaufman's daughter, 3,375 shares owned of record by his son, and 503,458
shares subject to options
2
<PAGE> 5
exercisable within 60 days; does not include 570,377 shares subject to
options exercisable at later dates.
(8) Includes 84,375 shares subject to options exercisable within 60 days.
(9) Includes 321,967 shares owned of record by Dr. Markowitz' wife, 11,025
shares total owned of record by his two daughters and 118,125 shares
subject to options exercisable within 60 days.
(10) Includes 118,125 shares subject to options exercisable within 60 days; does
not include 6,075 shares owned by Mr. Rosenthal's wife as to which Mr.
Rosenthal disclaims beneficial ownership.
(11) Includes 1,853,609 restricted shares and 5,309,512 shares subject to
options exercisable within 60 days; does not include 8,603,269 shares
subject to options exercisable at later dates. Also includes 3,375 shares
with shared voting and investment power.
(12) The beneficial owners in this category have provided Schedules 13G to the
Corporation in which they certified that they acquired the shares of the
Corporation's Common Stock in the ordinary course of business and not for
the purpose of changing or influencing the control of the Corporation.
(13) According to their report on Schedule 13G, as of December 31, 1996,
Alliance Capital Management L.P. ("Alliance") and certain affiliates of
Alliance (together with their parent corporations The Equitable Companies
Incorporated, AXA, and certain AXA affiliates) owned beneficially
41,274,263 shares of Corporation Common Stock primarily held for investment
advisory clients, including 390,150 shares with respect to which they have
the right to acquire beneficial ownership. According to the Schedule 13G,
the reporting persons had sole voting power as to 27,895,694 shares, shared
voting power as to 1,371,900 shares, and no power to vote 12,006,669 shares
and had sole dispositive power as to 41,246,420 shares, shared dispositive
power as to 23,913 shares and no dispositive power as to 3,930 shares.
(14) According to its report on Schedule 13G, as of December 31, 1996, Provident
Investment Counsel, Inc. ("Provident"), a registered investment advisor,
owned beneficially 17,565,435 shares of Corporation Common Stock held for
investment advisory clients of Provident. Provident stated in the Schedule
13G that it was deemed to own the shares beneficially because of its
discretionary authority to buy, sell and vote the shares for its investment
advisory clients. Provident did not have any economic interest in these
shares. According to the Schedule 13G, Provident had sole power to vote
13,034,620 shares and no power to vote 4,530,815 shares and had sole
dispositive power as to all the shares.
(15) According to their report on Schedule 13G, as of December 31, 1996, certain
Putnam investment managers (together with their parent corporations, Putnam
Investments, Inc. and Marsh & McLennan Companies, Inc.) are considered
beneficial owners of 21,032,343 shares of Corporation Common Stock, which
shares were acquired for investment purposes by such investment managers
for certain of their investment advisory clients. The reporting persons did
not have any economic interest in these shares. According to the Schedule
13G, the reporting persons shared voting power with each other as to
1,757,892 shares, had no power to vote 19,274,451 shares and shared
dispositive power with each other as to all the shares.
With respect to the restricted shares, the holder has sole voting power and
no investment power. Unless otherwise indicated, all other shares are owned with
sole voting and investment powers. No director or executive officer of the
Corporation beneficially owns any shares of the Corporation's preferred stock.
3
<PAGE> 6
ELECTION OF DIRECTORS
The Board of Directors has proposed seven nominees for election as
directors to serve for the coming year and until their successors are elected
and qualify. All of the nominees are currently directors of the Corporation.
Shares represented by proxies will be voted for the election of the nominees
named below unless authority to do so is withheld. The Board does not intend to
select another nominee if any current nominee should be unable to serve. All of
the Corporation's directors also serve as directors of the Bank.
<TABLE>
<CAPTION>
NAME AGE POSITION
- - ------------------------------ --- ---------------------------------------------------------
<S> <C> <C>
Alfred Lerner 63 Chairman and Chief Executive Officer of the Corporation
Charles M. Cawley 56 President of the Corporation; Chairman and Chief
Executive Officer of the Bank
James H. Berick, Esq. 63 Chairman, Berick, Pearlman & Mills Co., L.P.A., attorneys
Benjamin R. Civiletti, Esq. 61 Chairman, Venable, Baetjer and Howard, LLP, attorneys
Randolph D. Lerner, Esq. 35 President, R.D. Lerner Securities, Inc., investments
Stuart L. Markowitz, M.D. 49 Internist and Managing Partner, Drs. Markowitz, Rosenberg
& Associates, physicians
Michael Rosenthal, Ph.D. 59 Professor of English, Columbia University
</TABLE>
Mr. Alfred Lerner 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 Board 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.
Mr. Cawley 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.
Mr. Berick has been a director of the Corporation since January 1991 and a
director of the Bank since April 1991. He has been Chairman of Berick, Pearlman
& Mills Co., L.P.A. since July 1986. He is a director of A. Schulman, Inc., The
Tranzonic Companies and The Town and Country Trust, and is President and a
Trustee of Realty ReFund Trust. He was a director of Equitable Bancorporation
from 1984 until January 1990, when it merged into MNC Financial, of Equitable
Bank, N.A. from 1984 until July 1990, when it merged into Maryland National
Bank, and of Maryland National Bank from July 1990 to January 1991.
Mr. Civiletti has been a director of the Corporation and the Bank since
April 1993. He served as Managing Partner of Venable, Baetjer and Howard, LLP,
from 1987 until 1993 and Chairman since 1993. He was Attorney General of the
United States from 1979 to 1981. He is Chairman of the Board of GBMC Healthcare,
Inc., a director of Bethlehem Steel Corporation and Wackenhut Corrections
Corporation and a member of the Board of Trustees of The Johns Hopkins
University.
4
<PAGE> 7
Mr. Randolph D. Lerner has been a director of the Corporation and the Bank
since April 1993. He has been President of R.D. Lerner Securities, Inc. since
September 1991. He is a member of the Boards of Trustees of the New York Academy
of Art, the Hospital for Special Surgery in New York City, the Corcoran Gallery,
and the New York Legal Assistance Group. He is a member of the District of
Columbia and New York Bar Associations and is Alfred Lerner's son.
Dr. Markowitz has been a director of the Corporation and the Bank since
April 1991. He is an internist and Managing Partner of Drs. Markowitz, Rosenberg
& Associates, a private medical practice, and is Assistant Clinical Professor at
Case Western Reserve University, College of Medicine, where he has taught since
1976. He is a member of the Medical Board and a volunteer physician for The
Jewish Children's Bureau in Cleveland.
Dr. Rosenthal has been a director of the Corporation and the Bank since
April 1991. He has taught at Columbia University since 1964, served as Associate
Dean responsible for academic administration from 1972 to 1989 and has been
Professor of English since 1989. He is a member of the Authors Guild.
Mr. Civiletti (Chairman) and Drs. Markowitz and Rosenthal serve as the
Audit Committee. Mr. Berick (Chairman), Mr. Civiletti, and Drs. Markowitz and
Rosenthal serve as the Compensation Committee, and Drs. Markowitz and Rosenthal
serve as the Stock Option Committee. The Audit Committee supervises the
Corporation's internal corporate auditors, approves the selection of independent
auditors, reviews the scope of services and reports of the independent auditors,
reviews financial reports with management and the independent auditors, and
reviews regulatory examination reports. The Compensation Committee approves the
compensation of the Corporation's senior executives and administers the Senior
Executive Performance Plan. The Stock Option Committee administers the
Corporation's 1991 Long Term Incentive Plan.
During 1996, the Board of Directors held eight meetings, the Audit
Committee held five meetings, the Compensation Committee held four meetings and
the Stock Option Committee held two meetings. Except for Mr. Civiletti, each of
the directors attended at least 75% of the applicable board and committee
meetings held during 1996. Mr. Civiletti attended five of the eight board
meetings and seven of the nine applicable committee meetings.
The directors of the Corporation who are not officers each received $35,000
for their services in 1996, and $1,000 for each meeting of the Board of
Directors or committee attended. Directors who are not officers of the
Corporation may elect to defer 100% of their annual retainer and meeting fees
pursuant to the Corporation's deferred compensation plan. Directors' retainer
and meeting fees were increased effective for 1997 to $40,000 annually and
$1,500 per meeting attended.
During 1996, each director who is not an officer received an option for
16,875 shares of the Corporation's Common Stock pursuant to the Corporation's
1991 Long Term Incentive Plan. Under the Plan, each director who is not an
officer received an option for 16,875 shares of Common Stock, adjusted for
subsequent stock splits, upon election to the Board and on January 2 of each
year. If the Corporation's 1997 Long Term Incentive Plan is approved by
stockholders, each director who is not an officer will receive an option for
5,000 shares of Common Stock upon election to the Board and on January 2 of each
year beginning in 1998. See "Proposal to Approve a New 1997 Long Term Incentive
Plan." The exercise price of the options is the fair market value of the Common
Stock on the grant date. The options have a term of ten years but expire sooner
if the holder ceases to be a director.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH NOMINEE FOR DIRECTOR.
5
<PAGE> 8
EXECUTIVE COMPENSATION
The following table sets forth information concerning compensation paid or
accrued to the Corporation's Chairman and Chief Executive Officer and the four
other most highly compensated executives of the Corporation for services to the
Corporation in 1994, 1995 and 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM COMPENSATION
----------------------------------- ---------------------------
AWARDS
---------------------------
OTHER NUMBER OF
ANNUAL SECURITIES ALL OTHER
COMPEN- RESTRICTED UNDERLYING COMPEN-
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(1) SATION(2) STOCK(3) OPTIONS(4) SATION(5)
- - ------------------------------------------- ---- ---------- ---------- --------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Alfred Lerner 1996 $1,515,000 $3,000,000 $ 0 $1,585,000 300,000 $ 0
Chairman and Chief Executive Officer 1995 1,505,000 1,275,000* 0 1,633,500 225,000 0
of the Corporation 1994 1,041,666 1,000,000* 0 1,025,000 2,250,000 0
Charles M. Cawley 1996 1,515,000 3,000,000 71,465 1,585,000 300,000 135,550
President of the Corporation; Chairman 1995 1,505,000 1,275,000 109,592 1,633,500 225,000 224,508
and Chief Executive Officer of the Bank 1994 1,041,666 1,000,000 42,848 1,025,000 2,115,000 200,803
John R. Cochran III 1996 888,000 1,865,000 286,448 792,500 150,000 401,328
Executive Vice President of the 1995 812,917 814,921 37,183 928,125 168,750 93,539
Corporation; Vice Chairman and 1994 665,383 650,000 35,713 512,500 517,500 86,742
Chief Marketing Officer of the Bank
Bruce L. Hammonds 1996 888,000 1,865,000 60,968 792,500 150,000 74,183
Executive Vice President of the 1995 812,917 814,849 29,514 928,125 168,750 97,942
Corporation; Vice Chairman and 1994 665,383 650,000 116,822 512,500 517,500 91,267
Chief Operating Officer of the Bank
M. Scot Kaufman 1996 756,500 1,500,000 85,619 891,868 112,500 78,341
Executive Vice President and Chief 1995 664,538 663,000 42,011 631,125 112,500 96,614
Financial Officer of the Corporation; 1994 540,370 575,000 35,541 256,250 292,500 89,249
Vice Chairman and Chief Financial Officer
of the Bank
</TABLE>
- - ------------------------------
* All of Mr. Lerner's bonus for 1994 and 1995 was paid in restricted shares of
the Corporation's Common Stock at his request. For Mr. Lerner, the "Bonus"
column for 1994 and 1995 includes the value of restricted stock (based on the
market price on the date of issuance) issued to him.
(1) Includes amounts deferred under the Corporation's deferred compensation
plan.
(2) For 1996, includes taxes on expenses reimbursed to Mr. Cochran for his
relocation, AT THE REQUEST OF THE CORPORATION, from Maryland to Delaware.
For 1995, includes $41,084 for airplane use for Mr. Cawley. For 1994,
includes $25,060 for automobile use and $23,246 for country club dues for
Mr. Hammonds.
(3) The number of restricted shares held at December 31, 1996, including the
restricted shares issued to Mr. Lerner in payment of his 1994 and 1995
bonuses at his request, and the value of these shares calculated by
multiplying the number of shares held by the closing price of the Common
Stock on December 31, 1996, were: Mr. Lerner, 517,918 shares, $14,372,224;
Mr. Cawley, 409,960 shares, $11,376,390; Mr. Cochran, 209,133 shares,
$5,803,441; Mr. Hammonds, 209,133 shares, $5,803,441; and Mr. Kaufman,
146,199 shares, $4,057,022. Dividends are paid on restricted stock from the
grant date.
(4) All of Mr. Lerner's 1994 options are long term performance options. The 1994
options for Messrs. Cawley, Cochran, Hammonds and Kaufman include long term
performance options for 1,912,500, 360,000, 360,000 and 202,500 shares,
respectively. These options have an exercise price of $10.89 per share, the
market price of the Common Stock at grant. A total of 25% of these options
became exercisable in January, 1997 after the Corporation achieved net
income of
6
<PAGE> 9
$400 million and the market price of a share of the Corporation's Common
Stock exceeded $15.55. An additional 35% of these options become
exercisable when the Corporation achieves net income of $500 million if the
market price of a share of the Corporation's Common Stock exceeds $20, and
the balance when the Corporation achieves net income of $600 million if the
market price of a share of the Corporation's Common Stock exceeds $24.45.
The long term performance options are exercisable sooner in the event of
the recipient's death, disability, retirement or a change in control of the
Corporation. In addition, to ensure that the Corporation is not required to
charge earnings for any increase in option value from grant date to
exercise date, the options are exercisable for one day only prior to
expiration ten years from grant.
(5) Includes matching contributions made by the Corporation in 1996 to its
401(k) Plus Savings Plan (Mr. Cawley, $3,000; Mr. Cochran, $3,000; Mr.
Hammonds, $3,000; and Mr. Kaufman, $3,000); premiums paid by the
Corporation in 1996 on term life insurance (Mr. Cawley, $17,106; Mr.
Cochran, $7,727; Mr. Hammonds, $8,657; and Mr. Kaufman, $5,547); premiums
paid by the Corporation in 1996 on split dollar life insurance policies,
ALL OF WHICH WILL BE REPAID TO THE CORPORATION NOT LATER THAN THE DEATH OF
THE EXECUTIVE (Mr. Cawley, $58,602; Mr. Cochran, $27,454; Mr. Hammonds,
$29,913; and Mr. Kaufman, $34,797); above-market earnings on deferred
compensation in 1996 (Mr. Cawley, $2,148; Mr. Cochran, $3,457; Mr.
Hammonds, $3,038; and Mr. Kaufman, $10,689); contributions made by the
Corporation in 1996 to its deferred compensation plan (Mr. Cawley, $54,694;
Mr. Cochran, $29,575; Mr. Hammonds, $29,575; and Mr. Kaufman, $24,308); and
reimbursement by the Corporation in 1996 of expenses of $330,115 (including
$210,000 for Mr. Cochran's loss on the sale of his home) to Mr. Cochran for
his relocation, AT THE REQUEST OF THE CORPORATION, from Maryland to
Delaware. Mr. Lerner did not receive any of these benefits at his request.
1996 OPTION GRANTS
The following table sets forth information concerning stock option grants
to the named executive officers made in 1996.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-------------------------------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO EXERCISE
OPTIONS EMPLOYEES PRICE PER EXPIRATION GRANT DATE
NAME GRANTED (1) IN 1996 SHARE DATE PRESENT VALUE (2)
- - -------------------------------- ----------- ---------- --------- ---------- ------------------
<S> <C> <C> <C> <C> <C>
Alfred Lerner................... 300,000 8.91% $ 18.33 7/29/06 $1,545,000
Charles M. Cawley............... 300,000 8.91% 18.33 7/29/06 1,545,000
John R. Cochran III............. 150,000 4.45% 18.33 7/29/06 804,000
Bruce L. Hammonds............... 150,000 4.45% 18.33 7/29/06 804,000
M. Scot Kaufman................. 112,500 3.34% 18.33 7/29/06 603,000
</TABLE>
- - ------------------------------
(1) The options granted to Messrs. Lerner and Cawley were exercisable upon
grant. The options granted to the other named executives are exercisable in
equal annual installments over a five-year period beginning on December 1,
1997 and sooner in the event of a change in control or retirement, death or
disability.
(2) Amounts reflect the estimated present value of the grant as of the grant
date using the Black-Scholes option pricing model. The following
assumptions were used: (1) average expected life of 5 years for the
immediately exercisable options granted to Messrs. Lerner and Cawley and
5.5 years for the options granted to the other named executives; (2)
expected volatility or fluctuation of the Corporation's stock price of
28.6% each year calculated based on historical fluctuations; (3) expected
dividend yield for the Corporation's stock of 2.71% calculated based on
historical yield; and (4) discount for present value based on an annual
rate of return of 6.60% for the immediately exercisable options and 6.63%
for the other options, which were the approximate rates, at the time of
grant of the options, for zero coupon U.S. government securities with
7
<PAGE> 10
maturities equal to the expected lives of the options. This estimate of
value has been included solely for purposes of disclosure in accordance
with the rules of the Securities and Exchange Commission. The actual value
of the options will depend on the fair market value of the Corporation's
Common Stock on the dates the options are exercised. No realization of
value is possible without an increase in the price of the Corporation's
Common Stock, which would benefit all stockholders.
AGGREGATED OPTION EXERCISES IN 1996 AND OPTION VALUES AT DECEMBER 31, 1996
The following table sets forth information concerning stock options
exercised by the named executive officers during 1996 and the values at year end
1996 of unexercised options held by these executive officers.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
SHARES OPTIONS AT 12/31/96 AT 12/31/96(2)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE REALIZED(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- - --------------------- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Alfred Lerner........ 0 $ 0 525,000 2,250,000 $ 5,356,250 $37,937,500
Charles M. Cawley.... 334,501 4,502,909 737,249 2,418,751 9,231,310 41,392,583
John R. Cochran
III................ 101,933 1,779,801 634,873 975,752 12,243,512 14,955,853
Bruce L. Hammonds.... 262,602 3,634,021 259,499 975,752 4,359,510 14,955,853
M. Scot Kaufman...... 135,000 2,081,040 452,833 621,002 8,981,703 9,398,291
</TABLE>
- - ------------------------------
(1) Represents the difference between the fair market value of the shares of
Common Stock for which options were exercised in 1996 less the exercise
price of the options.
(2) Represents the difference between the fair market value of the option shares
(based on $27.75 per share, the closing price of the Common Stock on the
New York Stock Exchange on December 31, 1996) and the exercise price of the
options.
RETIREMENT PLANS
The maximum annual retirement benefit permitted by law for 1997 is
$125,000. The limit is adjusted annually for inflation. The following table sets
forth approximate annual retirement benefits for retirement at age 65 which
would be payable under the Corporation's defined benefit pension plan if not
limited by law. The table is included in accordance with the rules of the
Securities and Exchange Commission.
<TABLE>
<CAPTION>
YEARS OF SERVICE
AVERAGE ANNUAL ---------------------------------------------------------
COMPENSATION 15 20 25 30 35
- - -------------- ------- ------- ------- ------- ---------
<S> <C> <C> <C> <C> <C>
$700,000 186,802* 249,070* 311,337* 373,604* 419,104*
800,000 213,802* 285,070* 356,337* 427,604* 479,604*
900,000 240,802* 321,070* 401,337* 481,604* 540,104*
1,000,000 267,802* 357,070* 446,337* 535,604* 600,604*
1,500,000 402,802* 537,070* 671,337* 805,604* 903,104*
1,600,000 429,802* 573,070* 716,337* 859,604* 963,604*
1,700,000 456,802* 609,070* 761,337* 913,604* 1,024,104*
1,800,000 483,802* 645,070* 806,337* 967,604* 1,084,604*
</TABLE>
- - ------------------------------
* The current maximum annual retirement benefit permitted by law is $125,000.
Credited years of service and current compensation covered by the pension
plan for the persons named in the Summary Compensation Table are as follows: Mr.
Lerner, 13 years and $1,500,000; Mr. Cawley, 23 years and $1,500,000; Mr.
Cochran, 22 years and $1,000,000; Mr. Hammonds, 17 years and $1,000,000; and Mr.
Kaufman, 24 years and $850,000. Past service to MNC Financial is included in
credited years of service.
8
<PAGE> 11
Annual benefits at normal retirement are 1.3% of average annual
compensation times years of credited service up to 40 plus .5% of average annual
compensation in excess of covered compensation times years of credited service
up to 30. Average annual compensation is determined by averaging the 60
consecutive months of compensation out of the last 120 months which yield the
highest average. Compensation includes salary, but not bonuses, and may not
exceed $160,000 in 1997 for this purpose. Covered compensation is the 30-year
average of amounts with respect to which Social Security taxes must be paid.
Benefits payable under the pension plan as set forth in the table are not
subject to deductions for Social Security and other offset amounts.
The executive officers named in the Summary Compensation Table (except for
Mr. Lerner at his request) participate in a supplemental retirement plan which
provides a retirement benefit equal to 80% of the participant's highest average
salary for any 12 month period during the 72 months preceding retirement.
Benefits are reduced by pension and Social Security benefits. The Plan also
provides for salary continuation in the event of the death or disability of the
participant. Salary is capped at $1,500,000 for purposes of determining
retirement benefits, but is not capped for disability or survivors' benefits.
Except for Mr. Cawley, participants named in the Summary Compensation Table must
remain employed until age 60 to receive a retirement benefit. Annual retirement
benefits at age 65 under this plan based on 1997 salaries, net of pension and
Social Security benefits, would be approximately: Mr. Cawley, $1,072,164; Mr.
Cochran, $666,281; Mr. Hammonds, $676,790; and Mr. Kaufman, $546,401.
COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The following report is submitted by the Corporation's Compensation
Committee and Stock Option Committee. Each member of the Compensation Committee
and the Stock Option Committee is a non-employee director. The Compensation
Committee is comprised of Messrs. Berick and Civiletti and Drs. Markowitz and
Rosenthal. The Stock Option Committee is comprised of Drs. Markowitz and
Rosenthal.
The Corporation's compensation program provides annual cash compensation to
executive officers that recognizes short term company performance, and long term
compensation that encourages executive officers to focus on the future as well
as the present. The program is designed to reward current performance in proper
context with the long term health of the Corporation. Annual cash compensation
consists primarily of salary and bonus. Long term programs include stock
options, restricted shares and retirement programs.
ANNUAL COMPENSATION
The Compensation Committee determines annual salaries and bonuses for
senior executive officers. Salaries are based primarily on experience,
responsibilities and corporate and individual performance. Bonuses for the most
senior executive officers are based on corporate performance.
The Compensation Committee measures corporate performance primarily by
achievement of the objectives set forth in the Corporation's financial plan,
including goals for net income, managed loans, new accounts, managed credit
losses, customer retention and operating efficiencies. The Corporation exceeded
the net income goal and substantially achieved 1996 performance objectives. The
Compensation Committee also considers, but gives less weight to, the competitive
and economic environment in which these results are achieved and other factors,
such as superior Customer quality, results of regulatory examinations and the
total return on the Corporation's Common Stock compared to the Standard & Poor's
500 Stock and Financial Indices.
A portion of the 1996 bonuses paid to the Corporation's senior executive
officers named in the Summary Compensation Table were paid pursuant to the
Corporation's Senior Executive Perform-
9
<PAGE> 12
ance Plan, which provided for payment of 1996 bonuses in an amount equal to 150%
of 1994 base salary if the Corporation achieved the 1996 net income objective
established by the Compensation Committee. The Corporation's 1996 net income, as
certified by the Compensation Committee, exceeded the net income objective for
that year. The Compensation Committee also approved additional bonuses in an
amount equal to 1996 salary to senior executives based on achievement of net
income for 1996 higher than the objective established by the Compensation
Committee. If the new Senior Executive Performance Plan is approved by the
stockholders, bonuses for 1997 under the Plan will be set at 200% of 1997 base
salary if the net income objective established by the Compensation Committee for
1997 is attained, subject to the Compensation Committee's authority to reduce or
eliminate bonuses. See "Proposal to Approve a New Senior Executive Performance
Plan."
The Committee also reviewed and considered salaries, bonuses and certain
long term compensation paid in 1995 to chief executive officers of other
publicly held companies that issue credit cards (the most recent data
available). Several of these companies, along with others, are included in the
Standard and Poor's Financial Index comparison in the Stock Performance Graph.
When the cash compensation paid to chief executive officers of these companies
is adjusted (based on limited available data) for significant differences in
business lines, size, earnings, corporate performance, compensation practices,
and other factors, the Committee believes that the compensation paid to the
Corporation's chief executive officer is appropriate. The Committee also
considered other benefits received by the senior executive officers and the fact
that Mr. Lerner generally did not participate in these benefits.
Based on its review, the Committee approved bonuses for 1996, in addition
to those authorized under the Senior Executive Performance Plan, and 1997
salaries in amounts it judged to be appropriate. Salaries for 1996 for senior
executive officers were approved by the Compensation Committee based on review
of the Corporation's performance for 1995 applying the same criteria. Salaries
and bonuses for 1996 and salaries for 1997 for all other officers were
determined by the senior executive officers based on the same factors used by
the Compensation Committee.
LONG TERM COMPENSATION
The Stock Option Committee grants stock options and restricted stock to
executive and other officers and key employees under the Corporation's 1991 Long
Term Incentive Plan.
During 1996, the Stock Option Committee granted restricted shares to senior
executive officers as additional compensation based on the Corporation's results
compared to the goals set forth in its financial plan and as incentive to remain
with the Corporation and for future performance. All restricted shares are
forfeited if the holder's employment terminates other than as a result of
retirement, death or disability, a change in control of the Corporation or as
otherwise determined by the Stock Option Committee.
The Stock Option Committee granted stock options during 1996 under the
Corporation's 1991 Long Term Incentive Plan for a total of 3,367,050 shares to
approximately 90 persons, including the Corporation's most senior executive
officers. The stock options for 300,000 shares granted to each of Messrs. Lerner
and Cawley were exercisable immediately. All other stock options granted in 1996
are exercisable in installments over a five-year period, or are long term
performance options exercisable in installments after the Corporation achieves
certain net income and share price targets. All options are exercisable sooner
in the event of death, disability or retirement or a change in control of the
Corporation. In addition, to ensure that the Corporation is not required to
charge earnings for any increase in option value from grant date to exercise
date, the long term performance options are exercisable for one day only prior
to expiration ten years from grant.
The options were granted based on the recipient's performance and
responsibilities with the Corporation. The Committee considered prior option
grants to each recipient and the aggregate options to be outstanding following
the grants as a percentage of total shares and options outstanding.
10
<PAGE> 13
The Committee grants all options with an exercise price equal to the fair market
value of the Common Stock on the grant date.
Senior executive officers (other than Mr. Lerner at his request)
participate in the Corporation's Supplemental Executive Retirement Plan and
split dollar life insurance program. These programs provide greater retirement
benefits for those participants who remain with the Corporation until at least
age 60 and provide for loss of benefits if a participant engages in competition
with the Corporation following termination of employment. Senior executive
officers, including Mr. Lerner, also participate in the Corporation's pension
plan. Senior executive officers, except Mr. Lerner at his request, also
participate in the Corporation's 401(k), deferred compensation and other
broad-based benefit plans.
DEDUCTIBILITY OF EXECUTIVE COMPENSATION
The Compensation Committee considers the effect of limitations on
deductibility for federal income tax purposes of compensation in excess of
$1,000,000 paid in a given year to an executive officer named in the Summary
Compensation Table for that year.
Amounts paid for 1996 as salary to Messrs. Lerner and Cawley in excess of
$1,000,000 and the additional bonuses paid to each of the executive officers
named in the Summary Compensation Table will not be deductible. The Compensation
Committee expects that the bonuses paid for 1996 pursuant to the existing Senior
Executive Performance Plan should be fully deductible. If the new Senior
Executive Performance Plan is approved, bonuses paid for 1997 should be fully
deductible. In addition, the Compensation Committee expects that tax deductions
related to exercise of stock options granted by the Stock Option Committee
pursuant to the 1991 Long Term Incentive Plan will not be subject to limits on
deductions. The Corporation does not incur compensation expense for federal
income tax purposes for restricted stock grants until the restricted shares vest
at death, disability, retirement or a change in control of the Corporation.
James H. Berick, Esq.
Benjamin R. Civiletti, Esq.
Stuart L. Markowitz, M.D.
Michael Rosenthal, Ph.D.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee and Stock Option Committee during
1996 are listed above. No member of the Compensation Committee has served as an
executive officer or employee of the Corporation or served during 1996 as an
executive officer of another entity of which any executive officer of the
Corporation was a director or member of the compensation committee.
Berick, Pearlman & Mills Co., L.P.A., of which Mr. Berick is chairman, and
Venable, Baetjer and Howard, LLP, of which Mr. Civiletti is chairman, are among
the law firms the Corporation has retained to provide legal services to the
Corporation.
CERTAIN RELATIONSHIPS
The Corporation's directors and executive officers hold credit cards or
other lines of credit issued by the Bank on the same terms prevailing at the
time for those issued to other persons.
11
<PAGE> 14
STOCK PERFORMANCE GRAPH
The following chart compares the total return on the Corporation's Common
Stock from December 31, 1991 through December 31, 1996 to the total return for
the same period of the Standard & Poor's 500 Stock Index and the Standard &
Poor's Financial Index. The graph assumes that the value of the investment in
the Corporation's Common Stock and each index was $100 at December 31, 1991 and
that all dividends were reinvested. While total return comparisons may be useful
to investors in gauging the performance of the Corporation's Common Stock, in
the opinion of the Corporation's management and Board of Directors, the total
return on the Corporation's Common Stock may not necessarily relate directly to
the performance of the Corporation's management and should be used only as one
of several important measures including, for example, customer satisfaction,
quality measures, future business development and net income.
[GRAPH]
At year end 1996, the total return on the Corporation's Common Stock from
December 31, 1991 was 511%, compared to the total return on the S&P Financial
Index of 175% and the S&P 500 Index of 103%. The average annual total return on
the Corporation's Common Stock for this period was 45%. The measurement points
used in the graph and set forth below are based on an initial investment of
$100.
<TABLE>
<CAPTION>
DECEMBER 31, MBNA S&P FINANCIALS S&P 500
- - ------------ ---- -------------- -------
<S> <C> <C> <C>
1992 145 123 108
1993 202 137 118
1994 219 132 120
1995 354 204 165
1996 611 275 203
</TABLE>
12
<PAGE> 15
PROPOSAL TO APPROVE A NEW
1997 LONG TERM INCENTIVE PLAN
The Board of Directors of the Corporation has approved the Corporation's
1997 Long Term Incentive Plan (the "Plan") and is submitting the Plan for
stockholder approval. The Plan authorizes grants of stock options and restricted
and unrestricted share awards to officers, directors, key employees, consultants
and advisors of the Corporation.
All of the shares authorized for options and share awards under the
Corporation's 1991 Long Term Incentive Plan (the "1991 Plan") have been granted.
At March 1, 1997, options for 24,934,098 shares were outstanding. If the Plan is
approved by stockholders, options or restricted stock granted after that date
will be granted under the Plan.
The maximum number of shares for which share awards and stock options may
be issued pursuant to the Plan is 11,000,000. If the Plan is approved, shares
subject to options outstanding and available for grant under the Plan will
aggregate approximately 9.7% of the sum of the shares outstanding and shares
subject to options and available for grant. The maximum number of shares with
respect to which options may be granted to any one participant in any year is
1,000,000 shares. The above limitations are subject to adjustment for stock
splits and similar events as provided in the Plan.
The Stock Option Committee (the "Committee") has approved stock option
grants pursuant to the Plan for a total of 2,024,000 shares, subject to
stockholder approval of the Plan. A total of 2,000,000 of the options are long
term performance options which become exercisable in three equal annual
installments beginning on January 1 of the year immediately following the year
in which the Corporation achieves net income of at least $1 billion. The options
are exercisable sooner in the event of the recipient's death, disability or
retirement or a change in control of the Corporation. In addition, to ensure
that the Corporation is not required to charge earnings for any increase in
option value from grant date to exercise date, the options are exercisable for
one day only prior to expiration ten years from grant. These options were
granted with an exercise price equal to the closing price of the Corporation's
Common Stock on the date shareholders approve the Plan. The remaining 24,000 of
these options have an exercise price of $26.42, which was the closing price of
the Corporation's Common Stock on the grant date, and become exercisable in five
equal annual installments. These options were granted as follows:
<TABLE>
<CAPTION>
NUMBER OF OPTIONS
-----------------
<S> <C>
Alfred Lerner................................ 100,000
Charles M. Cawley............................ 100,000
John R. Cochran III.......................... 100,000
Bruce L. Hammonds............................ 100,000
M. Scot Kaufman.............................. 100,000
Executive group (8 persons, including those
named above)............................... 800,000
Non-executive officer employee group......... 1,224,000
</TABLE>
The Plan is administered by the Committee, which has authority to select
participants from among those eligible and to determine the form and substance
of awards and any conditions and restrictions on them. All members of the Stock
Option Committee are outside directors.
Officers, directors, key employees, consultants and advisors of the
Corporation are eligible to receive grants of stock options and share awards
under the Plan. Although over 1,000 officers, key employees, consultants and
advisors were eligible to participate during 1996, substantially all of the
awards under the 1991 Plan have been made to senior officers and the Committee
expects to continue that practice under the Plan. Approximately 90 persons
received grants of options or share awards in 1996.
13
<PAGE> 16
The Plan authorizes grants of incentive and nonqualified stock options. All
stock options have an exercise price that is not less than the fair market value
of the Common Stock on the date the option is granted. The closing price of the
Common Stock on the New York Stock Exchange on March 7, 1997 was $35.50 per
share. The Committee determines the terms and conditions of stock option grants,
including the period for exercise, the expiration date and any conditions to
exercise. The Committee's current policy is to provide that all options vest in
the event of death, disability or retirement of the participant or a change in
control. The Committee may amend or modify the terms of any outstanding option
grant.
The Plan provides for a grant of options for 5,000 shares to each
non-employee director at the time the person becomes a director and an
additional grant of options for 5,000 shares to each person who is a
non-employee director on each January 2. The exercise price of these options is
the closing price of the Common Stock on the New York Stock Exchange on the
grant date. These options are exercisable immediately and expire on the earlier
of ten years from the grant date or 90 days after the grantee ceases to be a
non-employee director. The 1991 Plan provided for a grant of options for 16,875
shares (adjusted for subsequent stock splits) to each non-employee director at
the time he became a director and an additional grant of options for 16,875
shares (adjusted for subsequent stock splits) to each person who was a
non-employee director on each January 2. The number of shares for grants to
non-employee directors under the Plan is not subject to adjustment for stock
splits or similar events.
The Plan authorizes share awards either with or without restrictions. The
Committee determines the number of shares to be awarded and the restrictions, if
any, on the shares. The Committee's policy has been to issue restricted shares
at the time of award, with the participant having all rights of a stockholder,
including the rights to vote the shares and receive dividends. The Committee has
generally provided that restrictions lapse upon death, disability or retirement
of the participant or a change in control. Restricted shares are forfeited to
the Corporation if the participant's employment terminates prior to lapse of the
restrictions. The Committee may shorten the period of any restriction or waive
any restriction.
Under current federal income tax laws, a participant does not recognize
income upon receipt of a stock option. At the time of exercise of a nonqualified
option, a participant recognizes ordinary income in an amount equal to the
difference between the fair market value of the Common Stock on the exercise
date and the exercise price.
A participant does not recognize income upon exercise of an incentive stock
option. If the shares acquired upon exercise of an incentive stock option are
held at least two years from the grant date of the option and one year from the
exercise date, upon sale of the shares the participant will recognize long term
capital gain in an amount equal to the difference between the sale price and the
exercise price of the option. If the shares are sold sooner, the participant
generally recognizes ordinary income or loss on the date of sale in an amount
equal to the lesser of the difference between the sale price and the exercise
price and the difference between the fair market value of the shares on the
exercise date and the exercise price.
The Corporation generally is entitled to an income tax deduction, at the
time the participant recognizes ordinary income, in an amount equal to the
amount of ordinary income recognized by the participant. Section 162(m) of the
Internal Revenue Code, as amended in 1993, denies to a publicly held corporation
a deduction in determining its taxable income for covered compensation in excess
of $1,000,000 paid in any taxable year to its chief executive officer or certain
other officers whose compensation must be reported in its proxy statement. Tax
deductions related to exercise of stock options are not subject to this
limitation if, among other things, the stock options are granted pursuant to a
plan approved by stockholders. The Corporation believes that the Plan meets all
requirements of Section 162(m). Section 280G of the Internal Revenue Code denies
a deduction to a corporation for excess parachute payments made to an officer or
employee if contingent upon a change in control. A portion of the deduction
which the Corporation might otherwise receive upon exercise of
14
<PAGE> 17
nonqualified stock options or vesting of restricted shares if accelerated by a
change in control may not be available in these circumstances.
The Corporation may withhold, or require a participant to remit to the
Corporation, an amount sufficient to satisfy any federal, state and local
withholding tax requirements. The Committee has provided that a participant may
satisfy a tax withholding requirement by delivery of shares of Corporation
Common Stock owned by the participant, including shares the participant is
entitled to receive upon exercise of the option.
The Board of Directors may amend the 1997 Plan and any outstanding grants
made under the Plan without the approval of stockholders. The New York Stock
Exchange requires that an increase in the number of shares authorized for grant
be approved by stockholders. No further grants may be made under the 1997 Plan
after December 31, 2006.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE NEW 1997 LONG
TERM INCENTIVE PLAN.
PROPOSAL TO APPROVE A NEW
SENIOR EXECUTIVE PERFORMANCE PLAN
The Corporation's new Senior Executive Performance Plan (the "Plan") has
been approved by the Compensation Committee and is being submitted to the
stockholders for approval.
The Internal Revenue Code of 1986 denies to a publicly held corporation a
deduction in determining its taxable income for covered compensation in excess
of $1,000,000 paid in any taxable year to its chief executive officer or certain
other officers whose compensation must be reported in its proxy statement.
Covered compensation for this purpose does not include amounts payable solely on
account of the attainment of one or more performance goals established by a
committee of outside directors if the material terms under which the
compensation is to be paid are approved by the corporation's stockholders.
The new Plan authorizes the payment of annual bonuses to the Corporation's
senior executive officers whose compensation would otherwise be subject to a
limitation on deductibility, based on attainment of net income objectives
established or to be established by the Compensation Committee. The Compensation
Committee intends that bonuses paid by the Corporation pursuant to the Plan
would be fully deductible for federal income tax purposes if the Plan is
approved by the Corporation's stockholders.
The Compensation Committee has established a specific net income objective
for 1997 bonuses and will do so for each subsequent year's bonuses while the
Plan is in effect no later than 90 days after the commencement of that year. The
Compensation Committee will certify attainment of the objective before payment
of any bonuses for that year pursuant to the Plan. Net income for purposes of
the Plan means consolidated net income of the Corporation before extraordinary
items and the cumulative net effect of accounting changes occurring or
implemented following adoption by the Compensation Committee of the net income
objective. The Plan requires the Compensation Committee to make appropriate
adjustments in the net income objectives for changes in federal or applicable
state income taxes.
If the net income objective is attained for a year, each senior executive
covered by the Plan will be eligible to receive a bonus for that year in an
amount equal to 200% of the senior executive's 1997 base salary, subject to the
Compensation Committee's authority to reduce or eliminate bonuses. If the net
income objective is not met for any year, no bonus may be paid under the Plan.
The Compensation Committee may decrease the amount of any bonus or approve no
bonus payable under the Plan in any year notwithstanding attainment of the net
income objective for that year. Bonuses may be paid in cash, restricted or
unrestricted shares of Corporation Common Stock, or both, as determined by the
Compensation Committee. Payments in Common Stock would be made pursuant to the
1997 Long
15
<PAGE> 18
Term Incentive Plan, if such plan is approved by the Corporation's stockholders.
See "Proposal to Approve a new 1997 Long Term Incentive Plan."
If the net income objective is attained for 1997, if the persons named in
the Summary Compensation Table are the persons covered by the Plan and if the
Compensation Committee does not eliminate or reduce bonuses for 1997, the
maximum bonuses payable under the Plan for 1997 would be as follows:
<TABLE>
<CAPTION>
MAXIMUM 1997
BONUS
-----------------
<S> <C>
Alfred Lerner................................ $ 3,000,000
Charles M. Cawley............................ 3,000,000
John R. Cochran III.......................... 2,000,000
Bruce L. Hammonds............................ 2,000,000
M. Scot Kaufman.............................. 1,700,000
All participants............................. 11,700,000
</TABLE>
If the Plan is approved by the stockholders, annual bonuses will be paid to
senior executives covered by the Plan under the Plan rather than under the
Corporation's Senior Executive Performance Plan approved by the stockholders in
1994 (the "1994 Plan"). The 1994 Plan is substantially the same as the Plan
except that the 1994 Plan provides for a 1997 bonus equal to 175% of the senior
executive's 1994 base salary, increased by an additional 25% of 1994 base salary
for each subsequent year.
The Compensation Committee may award additional bonuses to senior
executives outside of the Plan. The Corporation expects to pay annual bonuses to
its other executives in accordance with its existing practice, and to continue
to provide long term and other compensation to its executives, including those
covered by the Plan.
The Plan will apply to 1997 bonuses and will continue in effect until
terminated by the Compensation Committee. The Compensation Committee may amend
the Plan at any time, without stockholder approval, unless the amendment without
stockholder approval would limit the deductibility for federal income tax
purposes of bonuses paid pursuant to the Plan. The Compensation Committee may
terminate the Plan at any time.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF A NEW SENIOR
EXECUTIVE PERFORMANCE PLAN.
INDEPENDENT AUDITORS
The Corporation has retained Ernst & Young LLP as its independent auditors
for 1997. Ernst & Young LLP has served as the independent auditors for the
Corporation since 1991.
Representatives of Ernst & Young LLP will attend the meeting and, while
they do not intend to make a statement, will respond to appropriate questions
directed to them.
STOCKHOLDER PROPOSALS FOR 1998 ANNUAL MEETING
Stockholder proposals to be included in the Corporation's proxy material
for the 1998 Annual Meeting of Stockholders must be received at the
Corporation's principal executive offices not later than November 21, 1997.
A Corporation Bylaw provides that no business, including a nomination for
election as a director, may be brought before an annual or special meeting of
stockholders by any stockholder unless the stockholder has given written notice
of the business to the Corporation's Secretary not later than
16
<PAGE> 19
60 days prior to the date of the meeting. If less than 70 days public notice of
the date of the meeting has been given, the stockholder notice must be received
within 10 days following notice or publication of the date of the meeting. The
notice must include certain information concerning the stockholder, the business
the stockholder proposes to bring before the meeting and, in the case of a
nomination for director, the nominee. A copy of the Bylaw may be obtained from
the Secretary of the Corporation at the address set forth in the accompanying
notice.
OTHER BUSINESS
As of the date of this Proxy Statement, the Corporation does not intend to
bring any other matter before the meeting requiring action of the stockholders,
nor does it have any information that any other matter will be brought before
the meeting. However, if any other matter requiring the vote of the stockholders
properly comes before the meeting, it is the intention of the persons named in
the enclosed form of proxy to vote the proxy in accordance with their best
judgment in the interest of the Corporation.
ANNUAL REPORT ON FORM 10-K
THE CORPORATION WILL PROVIDE WITHOUT CHARGE TO EACH PERSON SOLICITED FOR A
PROXY, ON THE WRITTEN REQUEST OF ANY SUCH PERSON, A COPY OF THE CORPORATION'S
ANNUAL REPORT ON FORM 10-K FOR ITS MOST RECENTLY COMPLETED FISCAL YEAR. REQUESTS
SHOULD BE DIRECTED TO JOHN W. SCHEFLEN, SECRETARY, AT THE ADDRESS SET FORTH ON
THE FIRST PAGE OF THIS PROXY STATEMENT.
March 21, 1997
17
<PAGE> 20
MBNA CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints James H. Berick, Charles M. Cawley and
Benjamin R. Civiletti, and each or any of them, as proxies, with full powers of
substitution, to represent and to vote all shares of the Common Stock of MBNA
Corporation which the undersigned is entitled to vote at the Annual Meeting of
Stockholders of the Corporation to be held on April 21, 1997 and at any
adjournment thereof. The undersigned acknowledges receipt of notice of the
meeting and the proxy statement.
1. ELECTION OF DIRECTORS
[ ] FOR all nominees listed below [ ] WITHHOLD AUTHORITY
to vote for all nominees listed below
NOMINEES: Alfred Lerner, Charles M. Cawley, James H. Berick, Benjamin R.
Civiletti, Randolph D. Lerner,
Stuart L. Markowitz, Michael Rosenthal
INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, STRIKE
OUT THAT NOMINEE'S NAME.
2. APPROVAL OF 1997 LONG TERM INCENTIVE PLAN
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. APPROVAL OF SENIOR EXECUTIVE PERFORMANCE PLAN
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(continued on reverse side)
- - -------------------------------------------------------------------------------
(continued from front)
4. TRANSACTION OF WHATEVER OTHER BUSINESS MAY PROPERLY BE BROUGHT BEFORE THE
MEETING.
This proxy when properly executed will be voted in the manner directed
herein by the undersigned stockholder.
IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR PROPOSALS 1, 2 AND 3.
Please sign exactly as name appears below. When shares are held jointly, any
co-owner may sign unless the Secretary of the Corporation has been given notice
to the contrary and has been furnished with a copy of the order or instrument
which so provides. When signing as attorney, executor, administrator, trustee or
guardian, please give full title as such. If a corporation, please sign in full
corporate name by President or other authorized officer. If a partnership,
please sign in partnership name by authorized person.
Dated: , 1997
----------------------
Signature:
------------------------
----------------------------------
Please mark, sign, date and return
this proxy card promptly in the
enclosed envelope.
<PAGE> 21
MBNA CORPORATION
1997 LONG TERM INCENTIVE PLAN
1. ESTABLISHMENT
MBNA Corporation (the "Corporation") hereby establishes the
1997 LONG TERM INCENTIVE PLAN (the "Plan"). The Plan permits the grant of
stock options and restricted or unrestricted share awards for shares of the
Corporation's Common Stock ("Common Stock").
2. ADMINISTRATION
The Plan shall be administered by the Board of Directors of the
Corporation or a committee ("Committee") of the Board of Directors. All
references herein to "Committee" shall mean the Board of Directors if no
committee of the Board of Directors is appointed or otherwise authorized to act
on a particular matter. The Committee shall have all power and authority
necessary to administer the Plan, including but not limited to the power to
select persons to participate in the Plan, determine the terms of grants made
under the Plan, interpret the Plan and adopt such policies for carrying out the
Plan as it may deem appropriate. The decisions of the Committee on all matters
relating to the Plan shall be conclusive.
3. SHARES AVAILABLE FOR THE PLAN; LIMITATIONS
(a) Shares of Common Stock may be issued by the
Corporation pursuant to incentive or nonqualified stock options or restricted
or unrestricted share awards granted under the Plan.
(b) The number of shares of Common Stock with respect to
which stock option and share awards may be made pursuant to the Plan is
11,000,000. If any grant under the Plan expires or terminates unexercised,
becomes unexercisable or is forfeited as to any shares, such unpurchased or
forfeited shares shall thereafter be available for further grants under the
Plan.
(c) The maximum number of shares of Common Stock with
respect to which options may be granted pursuant to the Plan in any calendar
year to any one participant is 1,000,000.
(d) In the event of a reorganization, recapitalization,
stock split, stock dividend, combination of shares, merger, share exchange,
consolidation, substantial distribution of assets, or any other change in the
corporate structure or shares of the Corporation, the maximum numbers and total
of shares provided in Sections 3(b) and 3(c), but not Section 5(e), and the
kinds of shares under the Plan shall be appropriately adjusted.
<PAGE> 22
4. PARTICIPATION
Participation in the Plan is limited to officers, directors,
key employees, consultants and advisors of the Corporation and its subsidiaries
selected by the Committee. Only officers and key employees of the Corporation
and its subsidiaries are eligible to receive incentive stock options.
5. STOCK OPTIONS
(a) The Committee may from time to time grant to
participants non qualified stock options or incentive stock options.
(b) The price per share payable upon the exercise of
each option shall not be less than 100% of the fair market value of a share of
Common Stock on the date the option is granted.
(c) The Committee shall determine all terms and
conditions of options, including but not limited to the period for exercise,
the expiration date and any conditions to exercise. The Committee may amend or
modify the terms of any outstanding option grant.
(d) Options may be exercised in any manner approved by
the Committee. If authorized by the Committee, a participant may deliver
Common Stock, including shares acquired upon exercise of the option, to pay the
exercise price or withholding taxes in connection with exercise of an option.
(e) Each person who becomes a non-employee director of
the Corporation shall be granted an option to purchase 5,000 shares of Common
Stock on the date the person becomes a director and each person who is a
non-employee director on January 2 of each year beginning in 1998 shall be
granted an option to purchase 5,000 shares of Common Stock on that date or the
next day the New York Stock Exchange is open for trading. The exercise price
shall be the closing price of the Common Stock on the New York Stock Exchange
on the grant date. All non-employee director's options are exerciseable
immediately following the effective date of the grant, shall have a term of ten
years, and shall expire 90 days after the grantee is no longer a director.
6. RESTRICTED AND UNRESTRICTED SHARE AWARDS
The Committee may from time to time award shares of Common
Stock to participants in such amounts and on such terms as it determines. Each
award of shares shall specify the restrictions, if any, on the shares. The
Committee may waive or modify any restriction.
7. AMENDMENT AND TERMINATION OF THE PLAN
The Plan may be amended or terminated at any time by the Board
of Directors. The Board of Directors may condition any amendment of the Plan
on approval by the stockholders of the Corporation. No further grants may be
made under the Plan after December 31, 2006.
<PAGE> 23
MBNA CORPORATION
SENIOR EXECUTIVE PERFORMANCE PLAN
Purpose
The purpose of the Senior Executive Performance Plan (the
"Plan") is to set forth the terms on which annual bonuses will be paid to
participating senior executives of MBNA Corporation and MBNA America Bank, N.A.
and their subsidiaries (collectively the "Corporation"). The Plan is intended
to permit the Corporation to deduct fully annual bonuses paid to senior
executives in determining its federal income taxes in accordance with Section
162(m) of the Internal Revenue Code of 1986, as amended.
Administration
The Plan has been approved by and shall be administered by the
Compensation Committee of the Board of Directors of the Corporation or a
subcommittee of the Compensation Committee composed of two or more "outside
directors" as defined in Section 162(m) and the regulations thereunder (the
"Committee"). The Committee shall interpret the Plan and shall have the
authority and duties set forth in the Plan.
Covered Officers
The Plan applies each year to those officers of the
Corporation whose compensation would be subject to the limitations of Section
162(m) or the regulations thereunder for that year.
Bonuses
Each covered officer who is employed by the Corporation during
a calendar year while this Plan is in effect will be eligible to receive a
bonus, if the Corporation achieves the net income target for that year
established or to be established by the Committee, in an amount equal to 200%
of the covered officer's 1997 base salary. No bonus will be paid for any year
pursuant to the Plan unless the net income objective for that year has been
attained. The Committee may reduce or eliminate bonuses for any reason in its
sole discretion notwithstanding attainment of the net income objective for that
year.
<PAGE> 24
The Committee will determine the net income objective for each
year's bonuses not later than 90 days after the commencement of each year,
provided that the net income objective for such year is substantially
uncertain. Net income for purposes of the Plan means consolidated net income
of the Corporation before extraordinary items and the cumulative net effect of
accounting changes occurring or adopted following approval of the net income
objective by the Committee. The Committee shall make appropriate adjustments
in net income objectives to reflect any changes in federal or applicable state
income tax rates.
No bonus shall be paid pursuant to this Plan for any year
until the Committee has certified that the net income target for that year has
been attained. Bonuses shall be paid promptly following the Committee's
certification that the net income objective for that year has been attained.
Annual bonuses payable pursuant to the Plan may be paid in cash, restricted or
unrestricted shares of Common Stock, or both, as determined by the Committee.
Miscellaneous
No covered officer may assign the right to receive any benefit
under the Plan. The Committee may approve payment of any amount which a
disabled or deceased covered officer would have earned under the Plan to the
covered officer's spouse or estate.
The Plan shall be submitted to the Corporation's stockholders
for approval in accordance with Section 162(m).
The Committee may amend or change the Plan at any time and in
any manner. After the Plan has been approved by the Corporation's stockholders,
the Plan may not be amended or changed without stockholder approval if the
amendment or change would limit the deductibility of bonuses paid pursuant to
the Plan under Section 162(m).
The Plan will be effective beginning with bonuses for 1997.
The Plan will continue in effect without further stockholder approval until
terminated by the Committee. The Committee may terminate the Plan at any time.
