<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 2, 1998
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------------
MBNA CORPORATION
(Exact name of registrant as specified in its charter)
MARYLAND 52-1713008
(State or other jurisdiction (I.R.S. employer identification no.)
of incorporation or organization)
WILMINGTON, DELAWARE 19884
(800) 362-6255
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
--------------------------
M. SCOT KAUFMAN
EXECUTIVE VICE PRESIDENT, CHIEF FINANCIAL OFFICER AND CHIEF ACCOUNTING OFFICER
MBNA CORPORATION
WILMINGTON, DELAWARE 19884-0144
(800) 362-6255
(Name, address, including zip code, and telephone
number, including area code, of agent for service)
--------------------------
COPIES TO:
JOHN W. SCHEFLEN JOHN B. TEHAN
EXECUTIVE VICE PRESIDENT, SIMPSON THACHER & BARTLETT
GENERAL COUNSEL & SECRETARY 425 LEXINGTON AVENUE
MBNA CORPORATION NEW YORK, NEW YORK 10017
WILMINGTON, DELAWARE 19884-0127
--------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC:
From time to time after the effective date of this Registration Statement, as
determined in light of market conditions.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, other than securities offered only in connection with dividend or
interest reinvestment plans, please check the following box. /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. /X/
--------------------------
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<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
PROPOSED
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE OFFERING PRICE OFFERING REGISTRATION
BE REGISTERED REGISTERED(1) PER UNIT(2) PRICE(2) FEE
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Debt Securities . . . . . . . . .
Capital Stock, $.01 par
value per share . . . . . . . .
Depositary Shares representing
Preferred Stock(4) . . . . . .
Warrants . . . . . . . . . . . .
Stock Purchase Contracts . . . .
Stock Purchase Units . . . . . .
- ----------------------------------------------------------------------------------------------------------------
Total . . . . . . . . . . . . . . $2,013,000,000(3) 100% $2,013,000,000(3) $593,835
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
(1) In U.S. dollars or equivalent thereof in other currencies, including
composite currencies, on the basis of exchange rates on the date an
agreement to issue and sell the applicable Debt Securities is entered
into.
(2) Estimated solely for the purpose of computing the registration fee.
(3) Such amount represents the principal amount of any Debt Securities issued
at their principal amount, the issue price rather than the principal amount
of any Debt Securities issued at an original issue discount, the
liquidation preference of any Preferred Stock and the initial offering
price of any Common Stock, Warrants, Stock Purchase Contracts and Stock
Purchase Units.
(4) Such indeterminate number of Depositary Shares to be evidenced by
Depositary Receipts issued pursuant to a Deposit Agreement. In the event
the Registrant elects to offer to the public fractional interests in
shares of the Preferred Stock registered hereunder, Depositary Receipts
will be distributed to those persons purchasing such fractional interests
and the shares of Preferred Stock will be issued to the Depositary under
the Deposit Agreement. No separate consideration will be received for the
Depositary Shares.
PURSUANT TO RULE 429 UNDER THE SECURITIES ACT OF 1933, THE PROSPECTUS
CONTAINED IN THIS REGISTRATION STATEMENT AND SUPPLEMENTS TO SUCH PROSPECTUS WILL
ALSO BE USED IN CONNECTION WITH UP TO $217,500,000 AGGREGATE PRINCIPAL AMOUNT OF
DEBT SECURITIES OR THE NUMBER OF SHARES OF PREFERRED STOCK AND DEPOSITARY
SHARES REGISTERED UNDER REGISTRATION STATEMENT NO. 333-17187 AND UP TO
$19,500,000 AGGREGATE PRINCIPAL AMOUNT OF DEBT SECURITIES OR THE NUMBER OF
SHARES OF PREFERRED STOCK AND DEPOSITARY SHARES REGISTERED UNDER REGISTRATION
STATEMENT NO. 33-76278. THIS REGISTRATION STATEMENT CONSTITUTES POST-EFFECTIVE
AMENDMENT NO. 1 TO REGISTRANT'S REGISTRATION STATEMENT ON FORM S-3 (NO.
333-17187) AND POST-EFFECTIVE AMENDMENT NO. 2 TO REGISTRANT'S REGISTRATION
STATEMENT ON FORM S-3 (NO. 33-76278), AND SUCH POST-EFFECTIVE AMENDMENTS SHALL
HEREAFTER BECOME EFFECTIVE CONCURRENTLY WITH THE EFFECTIVENESS OF THIS
REGISTRATION STATEMENT AND IN ACCORDANCE WITH SECTION 8(c) OF THE SECURITIES
ACT OF 1933. UPON THE EFFECTIVENESS OF SUCH POST-EFFECTIVE AMENDMENTS, THIS
REGISTRATION STATEMENT, REGISTRATION NO. 33-76278 AND REGISTRATION NO.
333-17187 WILL RELATE TO AN AGGREGATE OF $2,250,000,000 OF DEBT SECURITIES,
PREFERRED STOCK AND DEPOSITARY SHARES, COMMON STOCK, WARRANTS, STOCK PURCHASE
CONTRACTS AND STOCK PURCHASE UNITS.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
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2
<PAGE> 3
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED MARCH 2, 1998
LOGO
$2,250,000,000
MBNA Corporation
DEBT SECURITIES
PREFERRED STOCK
COMMON STOCK
WARRANTS
STOCK PURCHASE CONTRACTS
STOCK PURCHASE UNITS
------------------------------
MBNA Corporation (the "Company") from time to time may offer and sell (i)
debt securities, consisting of debentures, notes and/or other unsecured
evidences of indebtedness (the "Debt Securities"), which may be either unsecured
senior Debt Securities (the "Senior Debt Securities") or unsecured subordinated
Debt Securities (the "Subordinated Debt Securities"), (ii) preferred stock, par
value $.01 per share (the "Preferred Stock"), which may be issued in the form of
depositary shares evidenced by depositary receipts (the "Depositary Shares"),
(iii) common stock, $.01 par value per share (the "Common Stock"), (iv) warrants
to purchase Debt Securities, Preferred Stock, Depositary Shares or Common Stock,
or any combination of the foregoing (the "Warrants"), (v) stock purchase
contracts (the "Stock Purchase Contracts") to purchase Common Stock and (vi)
stock purchase units (the "Stock Purchase Units"), each representing ownership
of a Stock Purchase Contract and either Debt Securities or debt obligations of
third parties, including U.S. Treasury Securities, securing the holder's
obligation to purchase Common Stock under the Stock Purchase Contract. The Debt
Securities, the Preferred Stock, the Common Stock, the Warrants, the Stock
Purchase Contracts and the Stock Purchase Units are collectively referred to
herein as the "Securities."
The Securities offered pursuant to this Prospectus may be issued in one or
more series or issuances and will be limited to $2,250,000,000 aggregate public
offering price (or its equivalent (based on the applicable exchange rate at the
time of sale) in one or more foreign currencies, currency units or composite
currencies as shall be designated by the Company). Certain specific terms of the
particular Securities in respect of which this Prospectus is being delivered are
set forth in the accompanying Prospectus Supplement, including, where
applicable, (i) in the case of Debt Securities, the specific title, aggregate
principal amount, the denominations (which may be in U.S. dollars, in any other
currency or in composite currencies), maturity, premium, if any, the interest
rate (which may be fixed, floating or adjustable), the time and method of
calculating payment of interest, if any, the place or places where principal of
(and premium, if any) and interest, if any, on such Debt Securities will be
payable, the currency in which principal of (and premium, if any) and interest,
if any, on such Debt Securities will be payable, any terms of redemption at the
option of the Company or the holder, any sinking fund provisions, any terms for
conversion or exchange into Common Stock, the form of the Debt Securities (which
may be in registered form or book-entry form), the initial public offering price
and any other terms of such Debt Securities, (ii) in the case of Preferred
Stock, the specific title, the aggregate amount, any dividend (including the
method of calculating payment of dividends), liquidation, redemption, voting and
other rights, any terms for any conversion or exchange into other Securities,
the initial public offering price and any other terms of such Preferred Stock,
(iii) in the case of Common Stock, the specific title, the aggregate amount,
voting and other rights, the initial public offering price and any other terms
of such Common Stock, (iv) in the case of Warrants, the number and terms
thereof, the designation and the number of securities issuable upon their
exercise, the exercise price, the terms of the offering and sale thereof and,
where applicable, the duration and detachability thereof and any other terms of
such Warrants, (v) in the case of Stock Purchase Contracts, the designation and
number of shares of Common Stock issuable thereunder, the purchase price of
Common Stock, the date or dates on which the Common Stock is required to be
purchased by the holders of the Stock Purchase Contracts, any periodic payments
required to be made by the Company to the holders of the Stock Purchase
Contracts or vice-versa and, any other terms of such Stock Purchase Contracts,
and (vi) in the case of Stock Purchase Units, the specific terms of the Stock
Purchase Contracts and any Debt Securities or debt obligations of third parties
securing the holder's obligation to purchase the Common Stock under the Stock
Purchase Contracts, and any other terms of such Stock Purchase Units.
The Senior Debt Securities, when issued, will rank on a parity with all
other unsecured and unsubordinated indebtedness of the Company, and the
Subordinated Debt Securities, when issued, will be subordinated as described
under "Description of Debt Securities -- Subordination of Subordinated Debt
Securities."
------------------------------
The Securities will be sold directly by the Company, through agents,
underwriters or dealers as designated from time to time, or through a
combination of such methods. If agents of the Company or any dealers or
underwriters are involved in the sale of the Securities in respect of which this
Prospectus is being delivered, the names of such agents, dealers or underwriters
and any applicable commissions or discounts are set forth in or may be
calculated from the Prospectus Supplement with respect to such Securities.
Except as indicated in the applicable Prospectus Supplement, the Securities
are not expected to be listed on a securities exchange, except for the Common
Stock, which is listed on the New York Stock Exchange, and any underwriters or
dealers will not be obligated to make a market in Securities. The Company cannot
predict the activity or liquidity of any trading in the Securities.
THE SECURITIES WILL NOT BE DEPOSITS OR OTHER OBLIGATIONS OF A BANK AND WILL
NOT BE INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE BANK INSURANCE
FUND OR ANY OTHER GOVERNMENTAL AGENCY.
THIS PROSPECTUS MAY NOT BE USED TO CONSUMMATE SALES OF SECURITIES UNLESS
ACCOMPANIED BY A PROSPECTUS SUPPLEMENT.
------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------------
THE DATE OF THIS PROSPECTUS IS MARCH , 1998.
<PAGE> 4
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND ANY
ACCOMPANYING PROSPECTUS SUPPLEMENT IN CONNECTION WITH THE OFFERING DESCRIBED
HEREIN AND THEREIN, AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY
OR BY ANY UNDERWRITER, DEALER OR AGENT. NEITHER THIS PROSPECTUS NOR ANY
PROSPECTUS SUPPLEMENT SHALL CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY ANY SECURITIES OFFERED HEREUNDER IN ANY JURISDICTION TO ANY PERSON
TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION OR SALE IN SUCH
JURISDICTION. NEITHER THE DELIVERY OF THIS PROSPECTUS OR ANY PROSPECTUS
SUPPLEMENT NOR ANY SALE MADE HEREUNDER IMPLIES THAT THERE HAS BEEN NO CHANGE IN
THE AFFAIRS OF THE COMPANY AT ANY TIME SUBSEQUENT TO THE DATE HEREOF OR THAT THE
INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy and
information statements and other information, including the documents
incorporated by reference herein, can be inspected and copied at the public
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549; and at the Commission's regional offices at 75 Park
Place, New York, New York 10007 and Suite 1400, Northwestern Atrium Center, 500
West Madison Street, Chicago, Illinois 60661, or obtained through the
Commission's Internet address at http://www.sec.gov. Copies of such material can
be obtained from the Public Reference Section of the Commission, 450 Fifth
Street, N.W., Washington, D.C. 20549 at prescribed rates. Such material can also
be inspected and copied at the office of the New York Stock Exchange, 20 Broad
Street, New York, New York 10005.
The Company has filed a registration statement on Form S-3 (herein,
together with all amendments and exhibits, referred to as the "Registration
Statement") under the Securities Act of 1933, as amended (the "Securities Act"),
with respect to the securities offered hereby. This Prospectus does not contain
all of the information set forth in the Registration Statement, certain parts of
which are omitted in accordance with the rules and regulations of the
Commission.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
There are hereby incorporated by reference in this Prospectus the following
documents and information heretofore filed with the Commission:
1. The Company's Annual Report on Form 10-K for the year ended
December 31, 1996 provided, however, that the information referred to in
Item 402(a)(8) of Regulation S-K promulgated by the Commission shall not be
deemed to be specifically incorporated by reference herein.
2. The Company's Quarterly Reports on Form 10-Q for the quarters ended
March 31, 1997, June 30, 1997 and September 30, 1997.
3. The Company's Current Reports on Form 8-K dated October 14, 1997,
October 22, 1997, October 31, 1997, November 6, 1997, November 30, 1997,
December 9, 1997, December 31, 1997, January 13, 1998, and January 31,
1998.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act, after the date of this Prospectus and prior to the
termination of the offering of the Securities hereby shall be deemed to be
incorporated herein by reference. Any statement contained in a document
incorporated or deemed to be incorporated by reference herein shall be deemed to
be modified or superseded for purposes of this Prospectus and the Registration
Statement of which it is a part to the extent that a statement contained herein
or in any other subsequently filed document which is also incorporated or deemed
to be incorporated by reference herein modifies or supersedes such statement.
Any statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus or such
Registration Statement.
The Company undertakes to provide without charge to each person, including
any beneficial owner, to whom a copy of this Prospectus has been delivered, upon
written or oral request of such person, a copy of any or all of the documents
which have been or may be incorporated herein by reference, other than exhibits
to such documents (unless such exhibits are specifically incorporated by
reference to such documents). Requests for such copies should be directed to
MBNA Corporation, Wilmington, Delaware 19884-0131, Attention: Investor Relations
(800) 362-6255.
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THE COMPANY
MBNA Corporation (the "Company"), is a registered bank holding company
incorporated under the laws of Maryland in 1990. It is the parent corporation of
MBNA America Bank, National Association (the "Bank"), a national bank organized
in January 1991, as the successor to a national bank organized in 1982.
The Company's principal executive offices are located in Wilmington,
Delaware 19884, and its telephone number is (800) 362-6255.
USE OF PROCEEDS
Except as otherwise described in the applicable Prospectus Supplement, the
net proceeds from the sale of the Securities offered hereby will be applied to
the Company's general funds to be utilized for general corporate purposes,
including the reduction of short-term debt, possible acquisitions, investments
in, or extension of credit to, the Company's subsidiaries and the possible
acquisition of real property for use in the Company's business.
RATIO OF EARNINGS TO FIXED CHARGES AND
RATIO OF EARNINGS TO COMBINED FIXED CHARGES
AND PREFERRED STOCK DIVIDEND REQUIREMENTS
The following are the consolidated ratio of earnings to fixed charges and
ratio of earnings to combined fixed charges and preferred stock dividend
requirements for the Company for each of the years in the five-year period ended
December 31, 1996 and the nine-month period ended September 30, 1997:
<TABLE>
<CAPTION>
NINE MONTHS
ENDED YEARS ENDED DECEMBER 31,
SEPTEMBER 30, --------------------------------------
1997 1996(b) 1995 1994 1993(c) 1992
------------- ------- ---- ---- ------- ----
<S> <C> <C> <C> <C> <C> <C>
EARNINGS TO FIXED CHARGES:
Including Interest on Deposits................. 2.0 2.0 2.0 2.4 2.0 2.1
Excluding Interest on Deposits................. 3.8 4.2 4.4 5.7 6.0 15.7
EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED
STOCK DIVIDENDS(A):
Including Interest on Deposits................. 1.9 1.9 2.0 2.4 2.0 2.1
Excluding Interest on Deposits................. 3.5 3.8 4.3 5.7 6.0 15.7
</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
MasterCard(R) and Visa(R)* program. Without the charge, the ratio of
earnings to fixed charges, including and excluding interest on deposits,
would have been 2.0 and 4.4, respectively, and the ratio of earnings to
combined fixed charges and preferred stock dividend requirements, including
and excluding interest on deposits, would have been 2.0 and 4.0,
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 earnings to fixed
charges and the ratio of earnings to combined fixed charges and preferred
stock dividend requirements, including and excluding interest on deposits,
would have been 2.9 and 9.9, respectively.
The ratio of earnings to fixed charges is computed by dividing (i) income
before income taxes and fixed charges less interest capitalized during such
period, net of amortization of previously capitalized interest, by
- ---------------
* MasterCard(R) and Visa(R) are federally registered servicemarks of MasterCard
International Inc. and Visa U.S.A., Inc., respectively.
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<PAGE> 6
(ii) fixed charges. The ratio of earnings to combined fixed charges and
preferred stock dividend requirements is computed by dividing (i) income before
income taxes and fixed charges less interest capitalized during such period, net
of amortization of previously capitalized interest, by (ii) fixed charges and
preferred stock dividend requirements. Fixed charges consist of interest expense
on borrowings, including capitalized interest (including or excluding deposits,
as the case may be), and the portion of rental expense which is deemed
representative of interest. The preferred stock dividend requirements represent
the pretax earnings which would be required to cover such dividend requirements
on the Company's preferred stock outstanding. The Company did not have any
preferred stock outstanding during the periods prior to 1995 presented above and
accordingly there were no preferred stock dividend requirements during such
periods.
REGULATORY MATTERS
The following discussion sets forth certain of the elements of the
comprehensive regulatory framework applicable to bank holding companies and
banks and provides certain specific information relevant to the Company and its
subsidiaries. Federal regulation of financial institutions such as the Company
and the Bank is intended primarily for the protection of depositors and the Bank
Insurance Fund rather than shareholders or other creditors.
GENERAL
As a bank holding company, the Company is subject to the supervision of the
Board of Governors of the Federal Reserve System (the "Federal Reserve Board").
The Bank is subject to supervision and examination by applicable federal
agencies, principally the Office of the Comptroller of the Currency (the
"Comptroller"), which is the Bank's primary regulator. The Bank's deposits are
insured by, and therefore the Bank is also subject to the regulations of, the
Federal Deposit Insurance Corporation ("FDIC"). In addition to the impact of
regulation, commercial banks are affected significantly by the actions of the
Federal Reserve Board as it attempts to control the money supply and credit
availability in order to influence the economy.
As a bank holding company, the Company is also subject to regulation under
the Bank Holding Company Act of 1956 (the "BHCA") and to the BHCA's examination
and reporting requirements. Under the BHCA, bank holding companies must, in some
cases, obtain the approval of the Federal Reserve Board prior to acquiring
direct or indirect ownership or control of more than five percent of the voting
shares or substantially all of the assets of any company, including a bank. In
addition, bank holding companies are prohibited under the BHCA from engaging in
nonbanking activities other than those that the Federal Reserve Board has
determined are closely related to banking.
The earnings of the Bank, and therefore the earnings of the Company, are
affected by general economic conditions, management policies and the legislative
and governmental actions of various regulatory authorities, including the
Federal Reserve Board, the FDIC and the Comptroller. In addition, there are
numerous governmental requirements and regulations which affect the activities
of the Company.
DIVIDEND RESTRICTIONS
The Company is a legal entity separate and distinct from its banking and
other subsidiaries. The principal source of cash flow of the Company, including
cash flow to pay dividends on its stock or principal (premium, if any) and
interest on debt securities, is dividends from the Bank. The approval of the
Comptroller is required for any dividend paid or declared by a national bank if
the total of all dividends paid or declared by the bank in any calendar year
would exceed the total of its net income for that year combined with its
retained net income for the preceding two years less any required transfers to
surplus or a fund for the retirement of any preferred stock. In addition, a
national bank may not pay a dividend in an amount greater than its undivided
profits. Under current regulatory practice, national banks may pay dividends
only out of current operating earnings. The payment of dividends by the Bank may
also be affected by other factors, such as requirements for the maintenance of
adequate capital. Under these provisions, the Bank could have declared, as of
September 30, 1997, without obtaining prior regulatory approval, aggregate
dividends of approximately $478.0 million. The
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<PAGE> 7
Bank's payment of dividends to the Company may also be limited by a tangible net
worth requirement under the Bank's revolving credit facility. This facility was
not drawn upon as of September 30, 1997.
In addition, under the Federal Deposit Insurance Corporation Improvement
Act of 1991 ("FDICIA"), a FDIC-insured depository institution may not make
capital distributions (including the payment of dividends) or pay any management
fees to its holding company or pay any dividend if it is undercapitalized or if
such payment would cause it to become undercapitalized. See "-- FDICIA and FDIC
Insurance."
HOLDING COMPANY STRUCTURE
The Bank is subject to restrictions under federal law which limit the
transfer of funds by the Bank to the Company and its nonbanking subsidiaries,
whether in the form of loans, extensions of credit, investments or asset
purchases. Such transfers by the Bank to the Company or any nonbanking
subsidiary are limited in amount to 10% of the Bank's capital and surplus and,
with respect to the Company and all such nonbanking subsidiaries, to an
aggregate of 20% of the Bank's capital and surplus. Furthermore, loans and
extensions of credit by the Bank to the Company or its nonbanking subsidiaries
are required to be secured in specified amounts.
Extensions of credit and other transactions between the Bank and the
Corporation must be on terms and under circumstances, including credit
standards, that are substantially the same or at least as favorable to the Bank
as those prevailing at the time for comparable transactions with non-affiliated
companies.
Under Federal Reserve Board policy, the Company is expected to act as a
source of financial strength to each of its subsidiary banks and to commit
resources to support each such subsidiary bank, in circumstances where the
Company might not do so absent such policy. Any capital loans by the Company to
a subsidiary bank would also be subordinate in right of payment to deposits and
to certain other indebtedness of such bank. In addition, the Crime Control Act
of 1990 provides that in the event of a bank holding company's bankruptcy, any
commitment by the bank holding company to a federal bank regulatory agency to
maintain the capital of a subsidiary bank will be assumed by the bankruptcy
trustee and entitled to a priority of payment.
Federal law permits the Comptroller to order the pro rata assessment of
shareholders of a national bank whose capital stock has become impaired, by
losses or otherwise, to relieve a deficiency in such national bank's capital
stock. The statute also provides for the enforcement of any such pro rata
assessment of shareholders of such national bank to cover such impairment of
capital stock by sale, to the extent necessary, of the capital stock of any
assessed shareholder failing to pay the assessment. The Company, as the sole
stockholder of the Bank, is subject to such provisions.
CAPITAL ADEQUACY
Under the Federal Reserve Board's risk-based capital guidelines for bank
holding companies and member banks, the minimum ratio of total capital to
risk-adjusted assets (including certain off-balance sheet items) is 8%. At least
half of the total capital is to be comprised of common equity, retained
earnings, minority interests in consolidated subsidiaries, noncumulative
perpetual preferred stock and a limited amount of cumulative perpetual preferred
stock, less goodwill and less certain other intangible assets ("Tier 1
capital"). The remainder ("Tier 2 capital") may consist of hybrid capital
instruments, perpetual debt, mandatory convertible debt securities, a limited
amount of subordinated debt, other preferred stock and a limited amount of loan
and lease loss reserves. The total of Tier 1 capital and Tier 2 capital is
referred to as "Total capital." In addition, the Federal Reserve Board has
approved minimum leverage ratio guidelines for bank holding companies and state
member banks. These guidelines provide for a minimum ratio of Tier 1 capital to
quarterly average assets ("Leverage Ratio") of 3% for bank holding companies and
state member banks that meet certain specified criteria, including that they
have the highest regulatory rating. All other bank holding companies and state
member banks will be required to maintain a Leverage Ratio of 3% plus an
additional cushion of 100 to 200 basis points. The guidelines also provide that
banking organizations experiencing internal growth or making acquisitions will
be expected to maintain strong capital positions substantially above the minimum
supervisory levels, without significant reliance on intangible assets.
Furthermore, the guidelines indicate that the Federal
5
<PAGE> 8
Reserve Board will continue to consider a "tangible Tier 1 leverage ratio" in
evaluating proposals for expansion or new activities. The tangible Tier 1
leverage ratio is the ratio of a banking organization's Tier 1 capital, less all
intangibles, to total assets. The Bank is also subject to similar capital
requirements adopted by the Comptroller. Under the guidelines, as of September
30, 1997, the Company's Tier 1 and total capital to risk-adjusted assets ratios
were 9.17% and 11.48%, respectively, and the Company's Leverage Ratio was
10.94%. As of September 30, 1997, the Bank's Tier 1 and total capital to
risk-adjusted assets ratios were 8.74% and 10.22%, respectively, and the Bank's
Leverage Ratio was 10.54%.
On November 5, 1997, the OCC, the Federal Reserve, the FDIC and the Office
of Thrift Supervision proposed for comment regulations establishing new
risk-based capital requirements for recourse arrangements and direct credit
substitutes. "Recourse" for this purpose means any retained risk of loss
associated with any transferred asset that exceeds a pro rata share of the
bank's or holding company's remaining claim on the asset, if any. Under existing
regulations, banks and bank holding companies have to maintain capital against
the full amount of any assets for which risk of loss is retained, unless the
resulting capital amount would exceed the maximum contractual liability or
exposure retained, in which case the capital required would equal,
dollar-for-dollar, such maximum contractual liability or exposure. The proposal
would extend this treatment to direct credit substitutes. "Direct credit
substitute" means any assumed risk of loss associated with any asset or other
claim that exceeds the bank's or holding company's pro rata share of the asset
or claim, if any. The proposal also included a multi-level approach to assessing
capital charges based upon the relative credit risk of the bank's or holding
company's position in a securitization (i.e., recourse arrangements, direct
credit substitute or asset-backed security) and the rating assigned to such
position by a nationally recognized statistical rating agency. The Bank does not
believe the adoption of this proposal would have a material adverse effect on
its operations or financial position.
FDICIA AND FDIC INSURANCE
FDICIA provides for expanded regulation of banks and bank holding
companies. The expanded regulation includes expanded federal banking agency
examinations and increased powers of federal banking agencies to take corrective
action to resolve the problems of insured depository institutions with capital
deficiencies. Those powers vary depending on which of several levels of
capitalization a particular institution meets.
FDICIA permits only "well capitalized" institutions to accept brokered
deposits without restrictions. As of September 30, 1997 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 capital to risk-adjusted
assets of at least 6.0%, a ratio of Total capital to risk-adjusted assets of at
least 10.0% and a leverage ratio of at least 5.0% and is not subject to any
order, direction or written agreement to maintain specific capital levels. Under
the regulatory definition of brokered deposits, as of September 30, 1997, the
Bank had brokered deposits of $2.8 billion.
The Bank is subject to FDIC deposit insurance assessments for the Bank
Insurance Fund ("BIF"). Each financial institution is assigned to one of three
capital groups -- well capitalized, adequately capitalized or
undercapitalized -- and further assigned to one of three subgroups within a
capital group, on the basis of supervisory evaluations by the institution's
primary federal and, if applicable, state supervisors and other information
relevant to the institution's financial condition and the risk to the applicable
insurance fund.
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.
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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 Bank and its cardholders is extensively
regulated by federal and state consumer protection laws. The Truth in Lending
Act requires credit card issuers to make certain disclosures along with their
applications and solicitations, upon opening an account and with each periodic
statement. The Truth in Lending Act also imposes certain substantive
requirements and restrictions on credit card issuers and provides cardholders
with certain rights to dispute unauthorized charges and to have their billing
errors corrected promptly. Cardholders are also given the right to have their
payments promptly credited to their accounts.
The Equal Credit Opportunity Act prohibits lenders from making credit
decisions based on sex, race and marital status among others. In order to
protect borrowers from such discrimination, the Equal Credit Opportunity Act
requires credit card issuers to disclose the principal reasons they took adverse
action against an applicant or a cardholder.
The Fair Credit Reporting Act generally regulates credit reporting
agencies, but also imposes some duties on credit card issuers as users of
consumer credit reports. For instance, the Fair Credit Reporting 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 Fair Credit
Reporting Act also requires that credit card issuers notify consumers when they
take adverse action based upon information obtained from credit reporting
agencies.
The federal regulators are authorized to impose penalties for violations of
these statutes and, in certain cases, to order the Bank to pay restitution to
injured cardholders. Cardholders may bring actions for damages for such
violations. In addition, a cardholder may be entitled to assert a violation of
these consumer protection laws by way of set-off against his obligation to pay
the outstanding credit card balance.
In May, 1996, Andrew B. Spark filed a lawsuit against the Company, the Bank
and certain of its officers and its subsidiary, MBNA Marketing Systems, Inc. The
case is pending in the United States District Court for the District of
Delaware. This suit is a purported class action. The plaintiff alleges that 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, violation of the Delaware Deceptive Trade Practices Act and the
federal Racketeer Influenced and Corrupt Organizations Act. In February, 1998, a
class was certified. The Company believes its advertising practices are proper
under applicable federal and state law and intends to defend the action
vigorously.
DESCRIPTION OF DEBT SECURITIES
The Senior Debt Securities are to be issued under an Indenture (the "Senior
Indenture") between the Company and Bankers Trust Company, as Trustee (the
"Senior Trustee"). The Subordinated Debt Securities are to be issued under a
second Indenture (the "Subordinated Indenture") between the Company and Harris
Trust and Savings Bank, as Trustee (the "Subordinated Trustee"). Copies of the
Senior Indenture and the Subordinated Indenture have been filed with the
Commission as exhibits to the Registration Statement. The Senior Indenture and
the Subordinated Indenture are sometimes referred to collectively as the
"Indentures" and the Senior Trustee and the Subordinated Trustee are sometimes
referred to collectively as the "Trustees."
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The following summaries of the provisions of the Senior Debt Securities, the
Subordinated Debt Securities and the Indentures do not purport to be complete
and are subject to, and are qualified in their entirety by reference to, all the
provisions of the Indenture applicable to a particular series of Debt Securities
(the "Applicable Indenture"), including the definitions therein of certain
terms. Wherever particular Sections, Articles or defined terms of the Applicable
Indenture are referred to, it is intended that such Sections, Articles or
defined terms shall be incorporated herein by reference. Article and Section
references used herein are references to the Applicable Indenture. Capitalized
terms not otherwise defined herein shall have the meaning given to them in the
Applicable Indenture.
The following sets forth certain general terms and provisions of the Debt
Securities offered hereby. The particular terms of the Debt Securities offered
by any Prospectus Supplement (the "Offered Debt Securities") will be described
in the Prospectus Supplement relating to such Offered Debt Securities (the
"Applicable Prospectus Supplement").
The Company is a bank holding company, and the right of the Company to
participate as a shareholder in any distribution of assets of any subsidiary
upon its liquidation or reorganization or winding-up (and thus the ability of
Holders of the Debt Securities to benefit, as creditors of the Company, from
such distribution) is subject to the prior claims of creditors of any such
subsidiary. The Bank is subject to claims by creditors for long-term and
short-term debt obligations, including deposit liabilities, obligations for
federal funds purchased and securities sold under repurchase agreements. There
are also various legal limitations on the extent to which the Bank may pay
dividends or otherwise supply funds to the Company or its affiliates. See
"Regulatory Matters."
GENERAL
The Indentures do not limit the amount of Debt Securities that may be
issued thereunder and provide that Debt Securities may be issued thereunder from
time to time in one or more series. The Debt Securities will be unsecured
obligations of the Company.
The general provisions of the Indentures and the Debt Securities do not
contain any provisions that would limit the ability of the Company or its
Subsidiaries to incur indebtedness, that would require the Company or an
acquiror to repurchase Debt Securities in the event of a "change in control" or
that would afford holders of Debt Securities protection in the event of a highly
leveraged or similar transaction involving the Company or its Subsidiaries.
Reference is made to the Applicable Prospectus Supplement for information with
respect to any deletions from, modifications of or additions to the Events of
Default or covenants of the Company described below that are applicable to the
Debt Securities, including any addition of covenants or other provisions
providing event risk or similar protection.
Unless otherwise indicated in the Applicable Prospectus Supplement,
principal of, premium, if any, and interest on the Debt Securities will be
payable, and the transfer of Debt Securities will be registerable, at the office
or agency of the Company in the Borough of Manhattan, The City of New York
maintained by the Company and at any other office or agency maintained by the
Company for such purpose, except that, at the option of the Company, interest
may be paid by mailing a check to the address of the Person entitled thereto as
it appears on the register for the Debt Securities. (Sections 301, 305 and 1002)
The Debt Securities will be issued only in fully registered form without coupons
and, unless otherwise indicated in the Applicable Prospectus Supplement, in
denominations of $1,000 or integral multiples thereof. (Section 302) No service
charge will be made for any registration of transfer or exchange of the Debt
Securities, but the Company may require payment of a sum sufficient to cover any
tax or other governmental charge imposed in connection therewith. (Section 305)
The Applicable Prospectus Supplement will describe the following terms of
the Offered Debt Securities: (1) the title of the Offered Debt Securities; (2)
whether the Offered Debt Securities are Senior Debt Securities or Subordinated
Debt Securities; (3) any limit on the aggregate principal amount of the Offered
Debt Securities; (4) the date or dates on which the principal of the Offered
Debt Securities will mature; (5) the rate or rates (which may be fixed or
variable) at which the Offered Debt Securities will bear interest, if any, and
the date or dates from which any such interest, if any, will accrue; (6) the
dates on which such
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interest, if any, on the Offered Debt Securities will be payable and the Regular
Record Dates for such Interest Payment Dates; (7) the place or places where the
principal of and any premium and interest on the Offered Debt Securities shall
be payable; (8) any mandatory or optional sinking funds or analogous provisions;
(9) the date, if any, after which and the price or prices at which the Offered
Debt Securities may, pursuant to any optional or mandatory redemption
provisions, be redeemed and the other detailed terms and provisions of any such
optional or mandatory redemption provision; (10) the obligation of the Company,
if any, to redeem or repurchase the Offered Debt Securities at the option of the
Holder; (11) if other than denominations of $1,000 and any integral multiple
thereof, the denominations in which the Offered Debt Securities shall be
issuable; (12) if other than the principal amount thereof; the portion of the
principal amount of the Offered Debt Securities that will be payable upon the
declaration of acceleration of the Maturity thereof; (13) the currency of
payment of principal of and any premium and interest on the Offered Debt
Securities; (14) any index used to determine the amount of payment of principal
of and any premium and interest on the Offered Debt Securities; (15) if the
Offered Debt Securities will be issuable only in the form of a Global Security,
the Depositary or its nominee with respect to the Offered Debt Securities and
the circumstances under which the Global Security may be registered for transfer
or exchange in the name of a Person other than the Depositary or its nominee;
(16) the applicability, if any, of the provisions described under "Defeasance
and Covenant Defeasance"; (17) any additional Event of Default, and in the case
of any Offered Subordinated Debt Securities, any additional Event of Default
that would result in the acceleration of the maturity thereof; and (18) any
other terms of the Offered Debt Securities. (Section 301)
Both Senior Debt Securities and Subordinated Debt Securities may be issued
as Original Issue Discount Debt Securities to be offered and sold at a
substantial discount below their stated principal amount. Federal income tax
consequences and other special considerations applicable to any such Original
Issue Discount Debt Securities will be described in the Applicable Prospectus
Supplement. "Original Issue Discount Debt Security" means any Debt Security
which provides for an amount less than the principal amount thereof to be due
and payable upon the declaration of acceleration of the Maturity thereof upon
the occurrence of an Event of Default and the continuation thereof. (Section
101)
SUBORDINATION OF SUBORDINATED DEBT SECURITIES
Unless otherwise indicated in the Applicable Prospectus Supplement, the
following provisions shall apply to the Subordinated Debt Securities. The
following Section references are to Sections of the Subordinated Indenture.
The payment of the principal of, premium, if any, and interest on the
Subordinated Debt Securities will, to the extent set forth in the Subordinated
Indenture, be subordinated in right of payment to the prior payment in full of
all Senior Indebtedness (as defined below). In certain events of insolvency, the
payment of the principal of, premium, if any, and interest on the Subordinated
Debt Securities will, to the extent set forth in the Subordinated Indenture,
also be effectively subordinated in right of payment to the prior payment in
full of all Other Financial Obligations (as defined below). Upon any payment or
distribution of assets to creditors upon any liquidation, dissolution, winding
up, reorganization, assignment for the benefit of creditors, marshalling of
assets or any bankruptcy, insolvency or similar proceedings of the Company, the
holders of all Senior Indebtedness will first be entitled to receive payment in
full of all amounts due or to become due thereon before the Holders of the
Subordinated Debt Securities will be entitled to receive any payment in respect
of the principal of, premium, if any, or interest on the Subordinated Debt
Securities. (Section 1302) If, upon any such payment or distribution of assets
to creditors, there remain, after giving effect to such subordination provisions
in favor of the holders of Senior Indebtedness, any amounts of cash, property or
securities available for payment or distribution in respect of Subordinated Debt
Securities (as defined in the Subordinated Indenture, "Excess Proceeds") and if,
at such time, any person entitled to payment pursuant to the terms of Other
Financial Obligations (as defined in the Subordinated Indenture, "Entitled
Person") has not received payment in full of all amounts due or to become due on
or in respect of such Other Financial Obligations, then such Excess Proceeds
shall first be applied to pay or provide for the payment in full of such Other
Financial Obligations before any payment or distribution may be made in respect
of the Subordinated Debt Securities. In the event of the acceleration of the
maturity of any Subordinated Debt Securities, the
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holders of all Senior Indebtedness will first be entitled to receive payment in
full of all amounts due or to become due thereon before the Holders of the
Subordinated Debt Securities will be entitled to receive any payment of the
principal of, premium, if any, or interest on the Subordinated Debt Securities.
(Section 1303) Accordingly, in case of such an acceleration, all Senior
Indebtedness would have to be repaid before any payment could be made in respect
of the Subordinated Debt Securities. No payments on account of principal,
premium, if any, or interest in respect of the Subordinated Debt Securities may
be made if there shall have occurred and be continuing a default in any payment
with respect to any Senior Indebtedness, or an event of default with respect to
any Senior Indebtedness permitting the holders thereof to accelerate the
maturity thereof, or if any judicial proceeding shall be pending with respect to
any such default. (Section 1304)
By reason of such subordination, in the event of the insolvency of the
Company, creditors of the Company who are not holders of Senior Indebtedness or
the Subordinated Debt Securities may recover less, ratably, than holders of
Senior Indebtedness and may recover more, ratably, than Holders of the
Subordinated Debt Securities.
"Senior Indebtedness" is defined in the Subordinated Indenture to mean the
principal of, premium, if any, and interest on (i) all indebtedness of the
Company for money borrowed (including indebtedness of others guaranteed by the
Company) other than the Subordinated Debt Securities, whether outstanding on the
date of the Subordinated Indenture or thereafter created, assumed or incurred
and (ii) any amendments, renewals, extensions, modifications and refundings of
any such indebtedness, unless in either case in the instrument creating or
evidencing any such indebtedness or pursuant to which it is outstanding it is
provided that such indebtedness is not superior in right of payment to the
Subordinated Debt Securities. (Section 101) For the purposes of this definition,
"indebtedness for money borrowed" is defined as (i) any obligation of, or any
obligation guaranteed by, the Company for the repayment of borrowed money,
whether or not evidenced by bonds, debentures, notes or other written
instruments, (ii) any deferred payment obligation of, or any such obligation
guaranteed by, the Company for the payment of the purchase price of property or
assets evidenced by a note or similar instrument, and (iii) any obligation of,
or any such obligation guaranteed by, the Company for the payment of rent or
other amounts under a lease of property or assets which obligation is required
to be classified and accounted for as a capitalized lease on the balance sheet
of the Company under generally accepted accounting principles.
"Other Financial Obligations" is defined in the Subordinated Indenture to
mean all obligations of the Company to make payment pursuant to the terms of
financial instruments, such as (i) securities contracts and foreign currency
exchange contracts, (ii) derivative instruments, such as swap agreements
(including interest rate and currency and foreign exchange rate swap
agreements), cap agreements, floor agreements, collar agreements, interest rate
agreements, foreign exchange agreements, options, commodity futures contracts,
commodity options contracts and (iii) in the case of both (i) and (ii) above,
similar financial instruments other than (x) obligations on account of Senior
Indebtedness and (y) obligations on account of indebtedness for money borrowed
ranking pari passu with or subordinate to the Subordinated Debt Securities.
(Section 101)
The Subordinated Indenture does not limit the amount of other indebtedness,
including Senior Indebtedness and obligations of the Company in respect of Other
Financial Obligations, that may be issued by the Company or any of its
Subsidiaries. As of September 30, 1997, the aggregate amount of Senior
Indebtedness outstanding for the Company was $1.5 billion.
RESTRICTION ON SALE OR ISSUANCE OF VOTING STOCK OF THE BANK
The Senior Indenture contains a covenant by the Company that it will not,
and will not permit any Subsidiary to, sell, assign, transfer, grant a security
interest or otherwise dispose of any shares of Voting Stock, or any securities
convertible into, or options, warrants or rights to subscribe for or purchase
shares, of Voting Stock of the Bank or any Subsidiary owning, directly or
indirectly, any shares of the Bank and that it will not permit the Bank or any
Subsidiary owning, directly or indirectly, any shares of Voting Stock of the
Bank to issue any shares of the Bank's Voting Stock or any securities
convertible into, or options, warrants or rights to subscribe for or purchase
shares of the Bank's Voting Stock, except for sales, assignments, transfers,
issuances,
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grants of security interests or other dispositions which: (i) are for fair
market value (as determined by the Board of Directors of the Company) and if,
after giving effect thereto, the Company will own not less than 80% of the
shares of Voting Stock of the Bank or any such Subsidiary owning any shares of
Voting Stock of the Bank free and clear of any security interest; (ii) are made
(x) in compliance with an order of a court or regulatory authority of competent
jurisdiction, or (y) in compliance with a condition imposed by any such court or
authority permitting the acquisition by the Company, directly or indirectly, of
any other bank or entity the activities of which are legally permissible for a
Person such as the Company or a Subsidiary to engage in, or (z) in compliance
with an undertaking made to such an authority in connection with an acquisition
by the Company, directly or indirectly, of any bank or entity the activities of
which are legally permissible for a Person such as the Company or a Subsidiary
to engage in (provided that, in the case of clauses (y) and (z), the assets of
the bank or entity being acquired and its consolidated subsidiaries equal or
exceed 75% of the assets of the Bank or such Subsidiary owning, directly or
indirectly, any shares of Voting Stock of the Bank and its respective
consolidated subsidiaries on the date of acquisition); or (iii) are made to the
Company or any wholly owned Subsidiary. Notwithstanding the foregoing, the Bank
may be merged into or consolidated with another banking institution organized
under the laws of the United States, any State thereof or the District of
Columbia, if, after giving effect to such merger or consolidation, the Company
or any wholly owned Subsidiary owns at least 80% of the Voting Stock of such
other banking institution then issued and outstanding free and clear of any
security interest and if, immediately after giving effect thereto, no Event of
Default, and no event which, after notice or lapse of time or both, would become
an Event of Default, shall have happened and be continuing. (Section 1008)
The foregoing restriction is not included in the Subordinated Indenture.
EVENTS OF DEFAULT
The Senior Indenture (with respect to any series of Senior Debt Securities)
and, unless otherwise provided in the Applicable Prospectus Supplement, the
Subordinated Indenture (with respect to any series of Subordinated Debt
Securities) define an Event of Default as any one of the following events: (a)
default in the payment of any interest upon any Debt Security when it becomes
due and payable, and continuance of such default for a period of 30 days (in the
case of the Subordinated Indenture, whether or not payment is prohibited by the
subordination provisions); (b) default in the payment of the principal of (or
premium, if any, on) any Debt Security at its Maturity (in the case of the
Subordinated Indenture, whether or not payment is prohibited by the
subordination provisions); (c) failure to deposit any sinking fund payment when
due (in the case of the Subordinated Indenture, whether or not payment is
prohibited by the subordination provisions); (d) failure to perform any other
covenants or warranties of the Company in the Applicable Indenture (other than a
covenant or warranty included in the Applicable Indenture solely for the benefit
of a series of Debt Securities thereunder other than that series) continued for
a period of 60 days after the holders of at least 25% in principal amount of the
Outstanding Debt Securities have given written notice as provided in the
Applicable Indenture; (e) failure to pay when due the principal of, or
acceleration of, any indebtedness for borrowed money in an aggregate principal
amount exceeding $10,000,000 of the Company or of the Bank, if such acceleration
is not annulled within 10 days after written notice as provided in the
Applicable Indenture; (f) certain events of bankruptcy, insolvency or
reorganization of the Company or of the Bank; and (g) any other Event of Default
provided with respect to Debt Securities of that series. (Section 501) If an
Event of Default occurs with respect to Debt Securities of any series, the
Trustee under the Applicable Indenture shall give the Holders of Debt Securities
of such series notice of such default, provided however, that in the case of a
default described in (d) above, no such notice to Holders shall be given until
at least 30 days after the occurrence thereof. (Section 602)
If an Event of Default with respect to the Senior Debt Securities of any
series at the time Outstanding occurs and is continuing, either the Senior
Trustee or the Holders of at least 25% in aggregate principal amount of the
Outstanding Debt Securities of that series may declare the principal amount (or,
if the Debt Securities of that series are Original Issue Discount Debt
Securities, such portion of the principal amount as may be specified in the
terms thereof) of all the Senior Debt Securities of that series to be due and
payable immediately. Payment of the principal of the Subordinated Debt
Securities may be accelerated only in the
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case of certain events of bankruptcy, insolvency or reorganization of the
Company. The Subordinated Trustee and the Holders will not be entitled to
accelerate the maturity of the Subordinated Debt Securities upon the occurrence
of any of the Events of Default described above except for those described in
subparagraph (f) (i.e., the bankruptcy, insolvency or reorganization of the
Company). Accordingly, there is no right of acceleration in the case of a
default in the performance of any covenant with respect to the Subordinated Debt
Securities, including the payment of interest or principal. At any time after a
declaration of acceleration with respect to Debt Securities of any series has
been made, but before a judgment or decree based on acceleration has been
obtained, the Holders of a majority in aggregate principal amount of Outstanding
Debt Securities of that series may, under certain circumstances, rescind and
annul such acceleration. (Section 502)
The Indentures provide that, subject to the duty of the Trustee during
default to act with the required standard of care, the Trustee will be under no
obligation to exercise any of its rights or powers under the Indenture at the
request or direction of any of the Holders, unless such Holders shall have
offered to the Trustee reasonable indemnity. (Section 603) Subject to such
provisions for the indemnification of the Trustee and to certain other
conditions, the Holders of a majority in aggregate principal amount of the
Outstanding Debt Securities of any series will have the right to direct the
time, method and place of conducting any proceeding for any remedy available to
the Trustee, or exercising any trust or power conferred on the Trustee, with
respect to the Debt Securities of that series. (Section 512)
No Holder of any series of Debt Securities will have any right to institute
any proceeding with respect to the Applicable Indenture or for the appointment
of a receiver or a trustee or for any remedy thereunder, unless such Holder
shall have previously given to the Trustee under the Applicable Indenture
written notice of a continuing Event of Default and unless the Holders of at
least 25% in aggregate principal amount of the Outstanding Debt Securities of
that series shall have made written request, and offered reasonable indemnity,
to the Trustee to institute such proceeding as trustee, and the Trustee shall
not have received from the Holders of a majority in aggregate principal amount
of the Outstanding Debt Securities of that series a direction inconsistent with
such request and shall have failed to institute such proceeding within 60 days.
(Section 507) However, such limitations do not apply to a suit instituted by a
Holder of a Debt Security for enforcement of payment of the principal of and
premium, if any, or interest on such Debt Security on or after the respective
due dates expressed in such Debt Security. (Section 508)
The Company is required under each Indenture to furnish to the Trustee
annually a statement as to the performance by the Company of certain of its
obligations under such Indenture and as to any default in such performance.
(Section 1004)
DEFEASANCE AND COVENANT DEFEASANCE
The Indentures provide, if such provision is made applicable to the Debt
Securities of any series pursuant to Section 301 of the Applicable Indenture
(which will be indicated in the Applicable Prospectus Supplement), that the
Company may elect either (a) to defease and be discharged from any and all
obligations in respect of such Debt Securities then outstanding (including, in
the case of Subordinated Debt Securities, the provisions described under
"Subordination of Subordinated Debt Securities" and except for certain
obligations to register the transfer of or exchange of such Debt Securities,
replace stolen, lost or mutilated Debt Securities, maintain paying agencies and
hold monies for payment in trust) ("defeasance") or (b) to be released from its
obligations with respect to such Debt Securities under any covenant applicable
to such Debt Securities which is determined pursuant to Section 301 of the
Applicable Indenture to be subject to covenant defeasance and, with respect to
Senior Debt Securities, to be released from its obligations concerning the
restriction on sale or issuance of Voting Stock described under "Restriction on
Sale or Issuance of Voting Stock of the Bank" ("covenant defeasance"), and the
occurrence of an event described in clause (d) (insofar as with respect to
covenants subject to covenant defeasance) or clause (e) under "Events of
Default" above shall no longer be an Event of Default, in each case (a) or (b),
if the Company deposits, in trust, with the Trustee under the Applicable
Indenture money or U.S. Government Obligations, which through the payment of
interest thereon and principal thereof in accordance with their terms will
provide money, in an amount sufficient, without reinvestment, to pay all the
principal of (and premium, if any) and interest on such Debt Securities on the
dates such payments are due (which may include one or more redemption dates
designated
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by the Company) and any mandatory sinking fund or analogous payments thereon in
accordance with the terms of such Debt Securities. Such a trust may only be
established if, among other things, (i) no Event of Default or event which with
the giving of notice or lapse of time, or both, would become an Event of Default
under the Indenture shall have occurred and be continuing on the date of such
deposit, (ii) such deposit will not cause the Trustee under the Applicable
Indenture to have any conflicting interest with respect to other securities of
the Company, (iii) the Company shall have delivered an Opinion of Counsel to the
effect that the Holders will not recognize income, gain or loss for Federal
income tax purposes as a result of such deposit or defeasance and will be
subject to Federal income tax in the same manner as if such defeasance had not
occurred and (iv) in the case of Subordinated Debt Securities, no default in the
payment of principal of any Senior Indebtedness shall have occurred or be
continuing and no other event of default with respect to any Senior Indebtedness
shall have occurred and be continuing, permitting, after notice or lapse of time
or both, the acceleration thereof.
The Company may exercise its defeasance option with respect to such Debt
Securities notwithstanding its prior exercise of its covenant defeasance option.
If the Company exercises its defeasance option, payment of such Debt Securities
may not be accelerated because of an Event of Default. If the Company exercises
its covenant defeasance option, payment of such Debt Securities may not be
accelerated by reference to the covenants noted under clause (b) above. In the
event the Company omits to comply with its remaining obligations with respect to
such Debt Securities under the Applicable Indenture after exercising its
covenant defeasance option and such Debt Securities are declared due and payable
because of the occurrence of any Event of Default, the amount of money and U.S.
Government Obligations on deposit with the applicable Trustee may be
insufficient to pay amounts due on the Debt Securities of such series at the
time of the acceleration resulting from such Event of Default. However, the
Company will remain liable in respect of such payments. (Article Thirteen and
Article Fourteen of the Senior Indenture and the Subordinated Indenture,
respectively.)
MODIFICATION AND WAIVER
Modifications and amendments of each of the Senior Indenture or the
Subordinated Indenture may be made by the Company and the Trustee under the
Applicable Indenture with the consent of the Holders of not less than 66 2/3% in
aggregate principal amount of the Outstanding Debt Securities of each series
issued under such Indenture and affected by the modification or amendments;
provided, however, that no such modification or amendment may, without the
consent of the Holders of all Debt Securities affected thereby, (i) change the
Stated Maturity of the principal of, or any installment of principal of or
interest on, any Debt Security; (ii) reduce the principal amount of, or the
premium, if any, or (except as otherwise provided in the Applicable Prospectus
Supplement) interest on, any Debt Security (including in the case of an Original
Issue Discount Debt Security the amount payable upon acceleration of the
maturity thereof); (iii) change the place or currency of payment of principal
of, premium, if any, or interest on any Debt Security; (iv) impair the right to
institute suit for the enforcement of any payment on any Debt Security on or at
the Stated Maturity thereof (or in the case of redemption, on or after the
Redemption Date); (v) in the case of the Subordinated Indenture, modify the
subordination provisions in a manner adverse to the Holders of the Subordinated
Debt Securities; or (vi) reduce the percentage in principal amount of
Outstanding Debt Securities of any series, the consent of whose Holders is
required for modification or amendment of the Indenture or for waiver of certain
defaults or, in the case of the Senior Indenture, for waiver of compliance with
certain provisions of such Indenture. (Section 902)
The Holders of at least 66 2/3% in aggregate principal amount of the
Outstanding Senior Debt Securities of any series may, on behalf of all Holders
of that series, waive compliance by the Company with certain restrictive
provisions of the Applicable Indenture. (Section 1009) The Holders of a majority
in aggregate principal amount of the Senior Debt Securities or the Subordinated
Debt Securities may, on behalf of all Holders of the Senior Debt Securities or
the Subordinated Debt Securities, respectively, waive any past default under the
Applicable Indenture, except a default in the payment of principal, premium or
interest or in the performance of certain covenants. (Section 513)
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CONSOLIDATION, MERGER AND SALE OF ASSETS
Under each Indenture, the Company may consolidate with or merge into any
other corporation or convey, transfer or lease its properties and assets
substantially as an entirety to any Person without the consent of the Holders of
any of the Outstanding Debt Securities provided that (i) any successor or
purchaser is a corporation organized under the laws of the United States of
America, any State or the District of Columbia, and any such successor or
purchaser expressly assumes the Company's obligations on the Debt Securities
under a supplemental Indenture, (ii) immediately after giving effect to the
transaction no Event of Default, and no event which, after notice or lapse of
time or both, would become an Event of Default, shall have occurred and be
continuing, (iii) if properties or assets of the Company become subject to a
mortgage, pledge, lien, security interest or other encumbrance not permitted by
such Indenture, the Company or such successor Person, as the case may be, takes
such steps as shall be necessary effectively to secure the Securities equally
and ratably with (or prior to) all indebtedness secured thereby, and (iv) the
Company has delivered to the Trustee under the Applicable Indenture an Officers'
Certificate and an Opinion of Counsel stating compliance with these provisions.
(Section 801)
GLOBAL DEBT SECURITIES
The Debt Securities of a series may be issued in the form of one or more
Global Securities that will be deposited with a Depositary or its nominee
identified in the Applicable Prospectus Supplement. In such a case, one or more
Global Securities will be issued in a denomination or aggregate denominations
equal to the portion of the aggregate principal amount of Outstanding Debt
Securities of the series to be represented by such Global Security or
Securities. Unless and until it is exchanged in whole or in part for Debt
Securities in definitive registered form, a Global Security may not be
registered for transfer or exchange except as a whole by the Depositary for such
Global Security to a nominee for such Depositary and except in the circumstances
described in the Applicable Prospectus Supplement. (Sections 204 and 305)
The specific terms of the depositary arrangement with respect to any
portion of a series of Debt Securities to be represented by a Global Security
will be described in the Applicable Prospectus Supplement.
CONCERNING THE TRUSTEES
Bankers Trust Company and Harris Trust and Savings Bank are Trustees under
the Senior Indenture and the Subordinated Indenture, respectively. In the normal
course of business, the Company and its subsidiaries conduct banking
transactions with the Trustees, and the Trustees conduct banking transactions
with the Company and its subsidiaries. Bankers Trust Company serves as trustee
for several of the trusts established in connection with certain of the Bank's
asset securitizations.
DESCRIPTION OF PREFERRED STOCK
The following summary contains a description of the general terms of the
Preferred Stock to which any Prospectus Supplement may relate. Certain terms of
any series of the Preferred Stock offered by any Prospectus Supplement will be
described in the Prospectus Supplement relating to such series of the Preferred
Stock. If so indicated in the Prospectus Supplement, the terms of any such
series, including any Depositary Shares (as defined below) issued in respect
thereof, may differ from the terms set forth below. The description of certain
provisions of the Preferred Stock set forth below and in any Prospectus
Supplement does not purport to be complete and is subject to, and qualified in
its entirety by reference to, the Company's Articles of Incorporation and the
articles supplementary to the Company's Articles of Incorporation which will be
filed with the Commission in connection with the offering of such series of
Preferred Stock.
GENERAL
Under the Company's Articles of Incorporation, the Board of Directors of
the Company is authorized, without further shareholder action, to provide for
the issuance of shares of Preferred Stock, par value $.01 per share, in one or
more series, with such terms, including preferences, conversion and other
rights, voting power,
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restrictions, limitations as to dividends, qualifications and terms and
conditions of redemption, as shall be established in or pursuant to the
resolution or resolutions providing for the issue thereof to be adopted by the
Board of Directors. Currently, under the Company's Articles of Incorporation,
20,000,000 shares are classified as Preferred Stock. The Company's Board of
Directors has authority, without further shareholder approval, to reclassify
authorized but unissued shares of any stock as Preferred Stock or other stock
having preferred dividend and voting rights and other characteristics determined
by the Board of Directors. Prior to the issuance of each series of Preferred
Stock, the Board of Directors (as used herein the term "Board of Directors"
includes any duly authorized committee thereof) will adopt resolutions creating
and designating such series as a series of Preferred Stock. As of December 31,
1997, the Company has outstanding 4,547,882 shares of 7 1/2% Cumulative
Preferred Stock, Series A, and 4,026,000 shares of Adjustable Rate Cumulative
Preferred Stock, Series B.
The Preferred Stock shall have the dividend, liquidation, and voting rights
set forth below, unless otherwise provided in the Prospectus Supplement relating
to a particular series of the Preferred Stock. Reference is made to the
Prospectus Supplement relating to the particular series of the Preferred Stock
offered thereby for specific terms, including: (i) the designation of such
Preferred Stock and the number of shares offered; (ii) the amount of liquidation
preference per share; (iii) the price at which such Preferred Stock will be
issued; (iv) the dividend rate (or method of calculation), the dates on which
dividends shall be payable, whether such dividends shall be cumulative or
noncumulative and, if cumulative, the dates from which dividends shall commence
to cumulate; (v) any redemption or sinking fund provisions of such Preferred
Stock; (vi) whether the Company has elected to offer Depositary Shares (as
defined below); and (vii) any additional voting, dividend, liquidation,
redemption, sinking fund and other rights, preferences, privileges, limitations
and restrictions of such Preferred Stock.
The Preferred Stock will, when issued, be fully paid and nonassessable and
have no preemptive rights. Unless otherwise specified in the Prospectus
Supplement relating to a particular series of the Preferred Stock, each series
of the Preferred Stock will rank on a parity as to dividends and liquidation
rights in all respects with each other series of the Preferred Stock.
RANK
Any series of the Preferred Stock will, with respect to dividend rights and
rights on liquidation, winding up and dissolution rank (i) senior to all classes
of Common Stock and to all equity securities issued by the Company the terms of
which specifically provide that such equity securities will rank junior to the
Preferred Stock (collectively referred to as the "Junior Securities"); (ii) on a
parity with all equity securities issued by the Company the terms of which
specifically provide that such equity securities will rank on a parity with the
Preferred Stock (collectively referred to as the "Parity Securities"); and (iii)
junior to all equity securities issued by the Company the terms of which
specifically provide that such equity securities will rank senior to the
Preferred Stock.
DIVIDEND RIGHTS
Holders of the Preferred Stock of each series will be entitled to receive,
when, as and if declared by the Board of Directors of the Company, out of funds
of the Company legally available therefor, cash dividends at such rates and on
such dates as are set forth in the Prospectus Supplement relating to such series
of the Preferred Stock. Such rate may be fixed or variable or both. Each such
dividend will be payable to the holders of record as they appear on the stock
record books of the Company (or, if applicable, the records of the Depositary
referred to below under "Depositary Shares") on such record dates as will be
fixed by the Board of Directors of the Company or a duly authorized committee
thereof. Dividends on any series of the Preferred Stock may be cumulative or
noncumulative, as provided in the Prospectus Supplement relating thereto. The
Company's ability to pay dividends on its Preferred Stock is subject to policies
established by the Federal Reserve Board. See "Regulatory Matters -- Dividend
Restrictions."
No full dividends may be declared or paid or funds set apart for the
payment of dividends on any Parity Securities unless dividends shall have been
paid or set apart for such payment on the Preferred Stock. If full
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dividends are not so paid, the Preferred Stock shall share dividends pro rata
with the Parity Securities. No dividends may be declared or paid or funds set
apart for the payment of dividends on any Junior Securities unless full
cumulative dividends for all dividend periods terminating on or prior to the
date of such declaration or payment shall have been paid or declared and a sum
sufficient for the payment thereof set apart for payment on the Preferred Stock.
Each series of Preferred Stock will be entitled to dividends as described
in the Prospectus Supplement relating to such series, which may be based upon
one or more methods of determination. Different series of the Preferred Stock
may be entitled to dividends at different rates or based upon different methods
of determination.
VOTING RIGHTS
Except as indicated in the Prospectus Supplement relating to a particular
series of Preferred Stock, or except as expressly required by applicable law,
the holders of the Preferred Stock will not be entitled to any voting rights.
Under regulations adopted by the Board of Governors of the Federal Reserve
System (the "Federal Reserve Board") if the holders of shares of any series of
Preferred Stock of the Company become entitled to vote for the election of
directors because dividends on such series are in arrears such series may then
be deemed a "class of voting securities" and a holder of 25% or more of such
series (or a holder of 5% or more if it otherwise exercises a "controlling
influence" over the Company) may then be subject to regulation as a bank holding
company in accordance with the Bank Holding Company Act. In addition, at such
time as such series is deemed a class of voting securities, (i) any other bank
holding company may be required to obtain the approval of the Federal Reserve
Board under the Bank Holding Company Act to acquire or retain 5% or more of such
series and (ii) any person other than a bank holding company may be required to
obtain the approval of the Federal Reserve Board under the Change in Bank
Control Act or the Bank Holding Company Act to acquire or retain 10% or more of
such series.
RIGHTS UPON LIQUIDATION
In the event of any voluntary or involuntary liquidation, dissolution or
winding up of the Company, the holders of each series of Preferred Stock will be
entitled to receive out of assets of the Company available for distribution to
shareholders, before any distribution of assets is made to holders of Junior
Securities, including common stock, liquidating distributions in the amount set
forth in the Prospectus Supplement relating to such series of the Preferred
Stock plus an amount equal to accrued and unpaid dividends for the then-current
dividend period and, if such series of the Preferred Stock is cumulative, for
all dividend periods prior thereto, all as set forth in the Prospectus
Supplement with respect to such shares. If upon any voluntary or involuntary
liquidation, dissolution or winding up of the Company, the amounts payable with
respect to the Preferred Stock of any series and any other Parity Securities are
not paid in full, the holders of the Preferred Stock of such series and the
Parity Securities will share ratably in any such distribution of assets of the
Company in proportion to the full liquidation preferences to which each is
entitled. After payment of the full amount of the liquidation preference to
which they are entitled, the holders of such series of Preferred Stock will not
be entitled to any further participation in any distribution of assets of the
Company.
Because the Company is a bank holding company, its rights, the rights of
its creditors and of its stockholders, including the holders of the shares of
the Preferred Stock offered hereby, to participate in the assets of any
subsidiary, including the Bank, upon the latter's liquidation or
recapitalization may be subject to the prior claims of the subsidiary's
creditors except to the extent that the Company may itself be a creditor with
recognized claims against the subsidiary.
REDEMPTION
A series of the Preferred Stock may be redeemable, in whole or in part, at
the option of the Company or the holder thereof, and may be subject to mandatory
redemption pursuant to a sinking fund, in each case upon terms, at the times and
at the redemption prices set forth in the Prospectus Supplement relating to such
series.
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In the event of partial redemptions of Preferred Stock, whether by
mandatory or optional redemption, the shares to be redeemed will be determined
by lot or pro rata, as may be determined by the Board of Directors of the
Company, a committee thereof or by any other method determined to be equitable
by the Board of Directors.
On or after a redemption date, unless the Company defaults in the payment
of the redemption price, dividends will cease to accrue on shares of Preferred
Stock called for redemption and all rights of holders of such shares will
terminate except for the right to receive the redemption price.
Under current regulations, bank holding companies may exercise an option to
redeem shares of preferred stock included as Tier 1 capital, or exchange such
preferred stock for debt securities, without the prior approval of the Federal
Reserve Board, if the bank holding company will remain well capitalized,
received a composite rating of 1 or 2 of its most recent BOPEC inspection and is
not the subject of any unresolved supervisory issues.
CONVERSION
The Prospectus Supplement for any series of the Preferred Stock will state
the terms, if any, on which shares of that series are convertible into other
securities of the Company.
DEPOSITARY SHARES
General. The Company may, at its option, elect to offer receipts for
fractional interests ("Depositary Shares") in Preferred Stock, rather than full
shares of Preferred Stock. In such event, receipts ("Depositary Receipts") for
Depositary Shares, each of which will represent a fraction (to be set forth in
the Prospectus Supplement relating to a particular series of Preferred Stock) of
a share of a particular series of Preferred Stock, will be issued as described
below.
The shares of any series of Preferred Stock represented by Depositary
Shares will be deposited under a Deposit Agreement (the "Deposit Agreement")
between the Company and the depositary named in the Prospectus Supplement (the
"Depositary"). Subject to the terms of the Deposit Agreement, each owner of a
Depositary Share will be entitled, in proportion to the applicable fraction of a
share of Preferred Stock represented by such Depositary Share, to all the rights
and preferences of the Preferred Stock represented thereby (including dividend,
voting, redemption, subscription and liquidation rights). The following summary
of certain provisions of the Deposit Agreement does not purport to be complete
and is subject to, and is qualified in its entirety by reference to, all the
provisions of the Deposit Agreement, including the definitions therein of
certain terms. Whenever particular sections of the Deposit Agreement are
referred to, it is intended that such sections shall be incorporated herein by
reference. Copies of the forms of Deposit Agreement and Depositary Receipt are
filed as an exhibit to the Registration Statement of which this Prospectus is a
part, and the following summary is qualified in its entirety by reference to
such exhibits.
Dividends and Other Distributions. The Depositary will distribute all cash
dividends or other cash distributions received in respect to the Preferred Stock
to the record holders of Depositary Shares relating to such Preferred Stock in
proportion to the numbers of such Depositary Shares owned by such holders.
(Section 4.01)
In the event of a distribution other than in cash, the Depositary will
distribute property received by it to the record holders of Depositary Shares in
an equitable manner, unless the Depositary determines that it is not feasible to
make such distribution, in which case the Depositary may sell such property and
distribute the net proceeds for such sale to such holders. (Section 4.02)
Redemption of Depositary Shares. If a series of Preferred Stock
represented by Depositary Shares is subject to redemption, the Depositary Shares
will be redeemed from the proceeds received by the Depositary resulting from the
redemption, in whole or in part, of such series of Preferred Stock held by the
Depositary. The redemption price per Depositary Shares will be equal to the
applicable fraction of the redemption price per share payable with respect to
such series of the Preferred Stock. Whenever the Company redeems shares of
Preferred Stock held by the Depositary, the Depositary will redeem as of the
same redemption date the
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number of Depositary Shares representing shares of Preferred Stock so redeemed.
If fewer than all the Depositary Shares are to be redeemed, the Depositary
Shares to be redeemed will be selected by lot, pro rata or by any other
equitable method as may be determined by the Depositary. (Section 2.08)
Voting the Preferred Stock. Upon receipt of notice of any meeting at which
the holders of the Preferred Stock are entitled to vote, the Depositary will
mail the information contained in such notice of meeting to the record holders
of the Depositary Shares relating to such Preferred Stock. Each record holder of
such Depositary Shares on the record date (which will be the same date as the
record date for the Preferred Stock) will be entitled to instruct the Depositary
as to the exercise of the voting rights pertaining to the amount of the
Preferred Stock represented by such holder's Depositary Shares. The Depositary
will endeavor, insofar as practicable, to vote the amount of the Preferred Stock
represented by such Depositary Shares in accordance with such instructions, and
the Company will agree to take all reasonable action which may be deemed
necessary by the Depositary in order to enable the Depositary to do so. The
Depositary will abstain from voting shares of the Preferred Stock to the extent
it does not receive specific instructions from the holder of Depositary Shares
representing such Preferred Stock. (Section 4.05)
Amendment and Termination of the Deposit Agreement. The form of Depositary
Receipt evidencing the Depositary Shares and any provision of the Deposit
Agreement may at any time be amended by agreement between the Company and the
Depositary. However, any amendment which materially and adversely alters the
rights of the holders of Depositary Shares will not be effective unless such
amendment has been approved by the holders of at least a majority of the
Depositary Shares then outstanding. (Section 6.01) The Deposit Agreement will
only terminate if (i) all outstanding Depositary Shares have been redeemed or
(ii) there has been a final distribution in respect of the Preferred Stock in
connection with any liquidation, dissolution or winding up of the Company and
such distribution has been distributed to the holders of Depositary Receipts.
(Section 6.02)
Charges of Depositary. The Company will pay all transfer and other taxes
and governmental charges arising solely from the existence of the depositary
arrangements. The Company will pay charges of the Depositary in connection with
the initial deposit of the Preferred Stock and issuance of Depositary Receipts,
all withdrawals of shares of Preferred Stock by owners of Depositary Shares and
any redemption of the Preferred Stock. Holders of Depositary Receipts will pay
other transfer and other taxes and governmental charges and such other charges
as are expressly provided in the Deposit Agreement to be for their accounts.
(Section 5.07)
Resignation and Removal of Depositary. The Depositary may resign at any
time by delivering to the Company notice of its election to do so, and the
Company may at any time remove the Depositary, any such resignation or removal
to take effect upon the appointment of a successor Depositary and its acceptance
of such appointment. Such successor Depositary must be appointed within 60 days
after delivery of the notice of resignation or removal and must be a bank or
trust company having its principal office in the United States and having a
combined capital and surplus of at least $50,000,000. (Section 5.04)
Miscellaneous. The Depositary will forward all reports and communications
from the Company which are delivered to the Depositary and which the Company is
required or otherwise determines to furnish to the holders of the Preferred
Stock. (Section 4.07)
Neither the Depositary nor the Company will be liable under the Deposit
Agreement to holders of Depositary Receipts other than for its negligence,
willful misconduct or bad faith. Neither the Company nor the Depositary will be
obligated to prosecute or defend any legal proceeding in respect of any
Depositary Shares or Preferred Stock unless satisfactory indemnity is furnished.
The Company and the Depositary may rely upon written advice of counsel or
accountants, or upon information provided by persons presenting Preferred Stock
for deposit, holders of Depositary Receipts or other persons believed to be
competent and on documents believed to be genuine. (Section 5.03)
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DESCRIPTION OF COMMON STOCK
The following summary does not purport to be complete and is subject in all
respects to the applicable provisions of the Maryland General Corporation Law
and the Company's charter and by-laws. See "Available Information."
The Company is authorized to issue up to 700,000,000 shares of Common
Stock. At December 31, 1997, the Company had issued and outstanding 501,187,500
shares of Common Stock.
Holders of Common Stock of the Company are entitled to receive, pro rata,
dividends declared by the Board of Directors out of funds legally available
therefor. The ability of the Company to pay dividends to its stockholders may be
limited by federal law. See "Regulatory Matters." In the event of any
liquidation, dissolution or winding up of the Company, holders of Common Stock
are entitled to share ratably in the assets available for distribution to
stockholders.
Each share of Common Stock is entitled to one vote on each matter submitted
to a vote of stockholders. There is no right of cumulative voting in connection
with the election of directors. The Common Stock has no conversion rights and is
not redeemable. All outstanding shares of Common Stock are, and the shares sold
in the offerings will be when issued, fully paid and nonassessable. A
stockholder of the Company has no preemptive rights to subscribe for additional
shares of stock or other securities of the Company except as may be granted by
the Company's board of directors.
DESCRIPTION OF WARRANTS
The Company may issue Warrants to purchase Debt Securities, Preferred
Stock, Depositary Shares and Common Stock. Warrants may be issued independently
of or together with any other Securities and may be attached to or separate from
such Securities. Each series of Warrants will be issued under a separate Warrant
Agreement (each a "Warrant Agreement") to be entered into between the Company
and a Warrant Agent ("Warrant Agent"). The Warrant Agent will act solely as an
agent of the Company in connection with the Warrants of such series and will not
assume any obligation or relationship of agency or trust for or with holders or
beneficial owners of Warrants. The following sets forth certain general terms
and provisions of the Warrants offered hereby. Further terms of the Warrants and
the applicable Warrant Agreement will be set forth in the applicable Prospectus
Supplement.
The applicable Prospectus Supplement will describe the following terms,
where applicable, of the Warrants in respect of which this Prospectus is being
delivered: (i) the title of such Warrants; (ii) the aggregate number of such
Warrants; (iii) the price or prices at which such Warrants will be issued; (iv)
the designation, aggregate principal amount and terms of the securities
purchasable upon exercise of such Warrants; (v) the designation and terms of the
Securities with which such Warrants are issued and the number of such Warrants
issued with each such security; (vi) if applicable, the date on and after which
such Warrants and the related securities will be separately transferable; (vii)
the price at which the securities purchasable upon exercise of such Warrants may
be purchased; (viii) the date on which the right to exercise such Warrants shall
commence and the date on which such right shall expire; (ix) the minimum or
maximum amount of such Warrants which may be exercised at any one time; (x)
information with respect to book-entry procedures, if any; (xi) a discussion of
certain Federal income tax considerations; and (xii) any other terms of such
Warrants, including terms, procedures and limitations relating to the exchange
and exercise of such Warrants.
DESCRIPTION OF STOCK PURCHASE CONTRACTS AND STOCK PURCHASE UNITS
The Company may issue Stock Purchase Contracts, representing contracts
obligating holders to purchase from the Company, and the Company to sell to the
holders, a specified number of shares of Common Stock at a future date or dates.
The price per share of Common Stock may be fixed at the time the Stock Purchase
Contracts are issued or may be determined by reference to a specific formula set
forth in the Stock Purchase Contracts. The Stock Purchase Contracts may be
issued separately or as a part of Stock Purchase Units
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consisting of a Stock Purchase Contract and Debt Securities or debt obligations
of third parties, including U.S. Treasury securities, securing the holders'
obligations to purchase the Common Stock under the Stock Purchase Contracts. The
Stock Purchase Contracts may require the Company to make periodic payments to
the holders of the Stock Purchase Units or vice-versa, and such payments may be
unsecured or prefunded on some basis. The Stock Purchase Contracts may require
holders to secure their obligations thereunder in a specified manner.
The applicable Prospectus Supplement will describe the terms of any Stock
Purchase Contracts or Stock Purchase Units.
PLAN OF DISTRIBUTION
The Company may sell Securities to or through underwriters or dealers, and
also may sell Securities directly to other purchasers or through agents. Each
Prospectus Supplement will describe the method of distribution of the Securities
being offered thereby.
The distribution of the Securities may be effected from time to time in one
or more transactions at a fixed price or prices, which may be changed, or at
market prices prevailing at the time of sale, at prices related to such
prevailing market prices or at negotiated prices.
In connection with the sale of Securities, underwriters may receive
compensation from the Company or from purchasers of Securities for whom they may
act as agents in the form of discounts, concessions or commissions. Underwriters
may sell Securities to or through dealers, and such dealers may receive
compensation in the form of discounts, concessions or commissions from the
underwriters and/or commissions from the purchasers for whom they may act as
agents. Underwriters, dealers and agents that participate in the distribution of
Securities may be deemed to be underwriters, and any discounts or commissions
received by them from the Company and any profit on the resale of Securities by
them may be deemed to be underwriting discounts and commissions, under the
Securities Act. Any such underwriter or agent will be identified, and any such
compensation received from the Company will be described, in the Prospectus
Supplement.
If so indicated in the Applicable Prospectus Supplement and subject to
existing market conditions, the Company will authorize underwriters or other
persons acting as the Company's agents to solicit offers by certain institutions
to purchase Offered Debt Securities from the Company pursuant to contracts
providing for payment and delivery on a future date. Institutions with which
such contracts may be made include but are not limited to commercial and savings
banks, insurance companies, pension funds, investment companies, educational and
charitable institutions and others, but in all cases such institutions must be
approved by the Company. The obligations of any purchaser under any such
contract will be subject to the condition that the purchase of the Offered Debt
Securities shall not at the time of delivery be prohibited under the laws of the
jurisdiction to which such purchaser is subject. The underwriters and such other
agents will not have any responsibility in respect of the validity or
performance of such contracts.
Underwriters and agents who participate in the distribution of Securities
may be entitled under agreements which may be entered into by the Company to
indemnification by the Company against certain liabilities, including
liabilities under the Securities Act.
Except as indicated in the Applicable Prospectus Supplement, the Securities
are not expected to be listed on a securities exchange, except for the Common
Stock, which is listed on the New York Stock Exchange, and any underwriters or
dealers will not be obligated to make a market in Securities. The Company cannot
predict the activity or liquidity of any trading in the Securities.
VALIDITY OF SECURITIES
The validity of the Securities will be passed upon for the Company by John
W. Scheflen, Executive Vice President, General Counsel and Secretary of the
Company, and for any underwriters, dealers or agents by Simpson Thacher &
Bartlett, New York, New York. Simpson Thacher & Bartlett will rely on the
opinion of Mr. Scheflen as to matters of Maryland law and Mr. Scheflen will rely
on the opinion of Simpson Thacher &
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Bartlett as to matters of New York law. Mr. Scheflen owns beneficially in excess
of 100,000 shares of Common Stock, including options exercisable within sixty
days under the Company's 1991 Long Term Incentive Plan. Simpson Thacher &
Bartlett regularly performs legal services for the Company and its subsidiaries.
EXPERTS
The consolidated financial statements of MBNA Corporation incorporated by
reference in MBNA Corporation's Annual Report (Form 10-K) for the year ended
December 31, 1996, have been audited by Ernst & Young LLP, independent auditors,
as set forth in their report thereon incorporated by reference therein and
incorporated herein by reference. Such consolidated financial statements are
incorporated herein by reference in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.
21
<PAGE> 24
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The Company estimates that expenses, other than underwriting
compensation, in connection with the offering described in this Registration
Statement will be as follows:
<TABLE>
<S> <C>
Registration fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 593,835
Trustee's fees and expenses . . . . . . . . . . . . . . . . . . . . . . . 65,000
Printing and engraving expenses . . . . . . . . . . . . . . . . . . . . . 160,000
Legal fees and expenses . . . . . . . . . . . . . . . . . . . . . . . . . 160,000
Accountants' fees and expenses . . . . . . . . . . . . . . . . . . . . . 130,000
Rating agency fees . . . . . . . . . . . . . . . . . . . . . . . . . . . 800,000
Blue Sky fees and expenses . . . . . . . . . . . . . . . . . . . . . . . 30,000
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61,165
----------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,000,000
==========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Registrant's Articles of Incorporation and By-Laws provide that
the Registrant shall indemnify and advance expenses to its currently acting and
its former directors to the maximum extent permitted by the Maryland General
Corporation Law, and that the Registrant shall indemnify and advance expenses
to its officers to the same extent as its directors and to such further extent
as is consistent with law. The Maryland General Corporation Law provides that a
corporation may indemnify any director made a party to a proceeding by reason
of service in that capacity unless it is established that: (1) the act or
omission of the director was material to the matter giving rise to the
proceeding and (a) was committed in bad faith or (b) was the result of active
and deliberate dishonesty, or (2) the director actually received an improper
personal benefit in money, property or services, or (3) in the case of any
criminal proceeding, the director had reasonable cause to believe that the act
or omission was unlawful. To the extent that a director has been successful in
defense of any proceeding, the Maryland General Corporation Law provides that
he shall be indemnified against reasonable expenses incurred in connection
therewith. A Maryland corporation may indemnify its officers to the same extent
as its directors and to such further extent as is consistent with law.
The Underwriting Agreements filed as Exhibits 1(a) and 1(b) to this
Registration Statement and the Distribution Agreement filed as Exhibit 1(c) to
this Registration Statement provide for indemnification of directors and
officers of the Company by the underwriters and agents against certain
liabilities under the Securities Act of 1933, as amended, in certain instances.
ITEM 16. EXHIBITS.
(1)(a) -- Debt Underwriting Agreement (incorporated by reference to exhibit 1(a)
from the Registrant's Registration Statement on form S-3 (Commission
file No. 33-95600) filed with the Securities and Exchange Commission
("Registration Statement 33-95600")).
(1)(b) -- Form of Preferred Stock Underwriting Agreement (incorporated by
reference to exhibit 1(b) from the Registrant's Registration Statement
on Form S-3 (Commission File No. 33-76278) filed with the Securities
and Exchange Commission).
(1)(c) -- Distribution Agreement dated April 11, 1994 among the Company, Lehman
Brothers Inc., Bear, Stearns & Co., Inc., CS First Boston Corporation,
Goldman, Sachs & Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated and J.P. Morgan Securities Inc. (incorporated by
reference to exhibit 1(c) from Registration Statement 33-95600).
(1)(d) -- Amendment to Distribution Agreement dated May 1, 1995 among the
Company, Lehman Brothers Inc., Bear, Stearns & Co., Inc., CS First
Boston Corporation, Goldman, Sachs & Co., Merrill Lynch, Pierce,
II-1
<PAGE> 25
Fenner & Smith Incorporated and J.P. Morgan Securities Inc.
(incorporated by reference to exhibit 1(d) from Registration
Statement 33-95600).
(1)(e) -- Amendment to Distribution Agreement dated September 13, 1995 among
the Company, Lehman Brothers Inc., Bear, Stearns & Co., Inc., CS
First Boston Corporation, Goldman, Sachs & Co., Merrill Lynch,
Pierce, Fenner & Smith Incorporated and J.P. Morgan Securities Inc.
(incorporated by reference to exhibit 1(e) from the Registrant's
Registration Statement on Form S-3 (Commission File No. 333-17187)
filed with the Securities and Exchange Commission).
(1)(f) -- Amendment to Distribution Agreement dated January 17, 1997 among the
Company, Lehman Brothers Inc., Bear, Stearns & Co. Inc., Credit
Suisse First Boston Corporation, Goldman, Sachs & Co., Merrill Lynch,
Pierce, Fenner & Smith Incorporated and J.P. Morgan Securities Inc.
(1)(g) -- Amendment to Distribution Agreement dated October 8, 1997 among the
Company, Lehman Brothers Inc., Bear, Stearns & Co. Inc., Credit
Suisse First Boston Corporation, Goldman, Sachs & Co., Merrill Lynch,
Pierce, Fenner & Smith Incorporated and J.P. Morgan Securities Inc.
*(1)(h) -- Forms of Underwriting Agreement for Debt Securities, Preferred Stock,
Depositary Shares, Common Stock, Warrants, Stock Purchase Contracts
and Stock Purchase Units.
(4)(a) -- Senior Indenture, dated as of September 29, 1992, between the Company
and Bankers Trust Company as Trustee (incorporated by reference to
exhibit 4(a) from Registration Statement 33-95600).
(4)(b) -- Subordinated Indenture, dated as of November 24, 1992, between the
Company and Harris Trust and Savings Bank as Trustee (incorporated by
reference to exhibit 4(b) from Registration Statement 33-95600).
(4)(c) -- Form of fixed rate Senior Medium-Term Note Due Nine Months or More
From Date of Issue (incorporated by reference to exhibit 4(b) from
the Registrant's Current Report on Form 8-K dated November 24, 1992,
filed with the Securities and Exchange Commission (Commission File
No. 1-10683)).
(4)(d) -- Form of floating rate Senior Medium-Term Note Due Nine Months or More
From Date of Issue (incorporated by reference to exhibit 4(c) from
the Registrant's Current Report on Form 8-K dated November 24, 1992,
filed with the Securities and Exchange Commission (Commission File
No. 1-10683)).
(4)(e) -- Form of fixed rate Subordinated Medium-Term Note Due Nine Months or
More from Date of Issue (incorporated by reference to exhibit 4(d)
from the Registrant's Current Report on Form 8-K dated November 24,
1992, filed with the Securities and Exchange Commission (Commission
File No. 1-10683)).
(4)(f) -- Form of floating rate Subordinated Medium-Term Note Due Nine Months
or More From Date of Issue (incorporated by reference to exhibit 4(e)
from the Registrant's Current Report on Form 8-K dated November 24,
1992, filed with the Securities and Exchange Commission (Commission
File No. 1-10683)).
(4)(g) -- Form of Articles Supplementary relating to each series of Preferred
Stock (to be filed by amendment or incorporated by reference in
connection with the offering of each series of Preferred Stock).
(4)(h) -- Form of Deposit Agreement (incorporated by reference to exhibit 4(h)
from the Registrant's Registration Statement on Form S-3 (Commission
File No. 33-76278) filed with the Securities and Exchange
Commission)).
*(4)(i) -- Form of Warrant Agreement.
(4)(j) -- Articles of Incorporation, as amended and supplemented (incorporated
by reference to exhibit 3.1 from the Registrant's Annual Report on
Form 10-K for the fiscal year ended December 31, 1996 (Commission
File No. 1-10683)).
(4)(k) -- By-laws, as amended (incorporated by reference to exhibit 3.2 from
the Registrant's Annual Report on Form 10-K for the fiscal year
ended December 31, 1996 (Commission File No. 1-10683)).
(5) -- Opinion and Consent of John W. Scheflen, Executive Vice President,
General Counsel and Secretary of the Company.
(12) -- Statement re: Computation of Ratio of Earnings to Fixed Charges and
Ratio of Earnings to Combined Fixed Charges and Preferred Stock
Dividend Requirements.
II-2
<PAGE> 26
(23)(a)-- Consent of Ernst & Young LLP.
(23)(b)-- Consent of John W. Scheflen (included in exhibit 5).
(24) -- Powers of Attorney (included in signature page).
(25)(a)-- Statement of Eligibility on Form T-1 under the Trust Indenture Act of
1939, as amended, of Bankers Trust Company (incorporated by reference
to exhibit 25(a) from the Registrant's Registration Statement on Form
S-3 (Commission File No. 33-76278) filed with the Securities and
Exchange Commission).
(25)(b)-- Statement of Eligibility on Form T-1 under the Trust Indenture Act of
1939, as amended, of Harris Trust and Savings Bank (incorporated by
reference to exhibit 25(b) from the Registrant's Registration
Statement on Form S-3 (Commission File No. 33-76278) filed with the
Securities and Exchange Commission).
- --------------
* To be filed subsequent to the effectiveness of this Registration Statement by
an amendment to the Registration Statement or incorporated by reference
pursuant to a Current Report on Form 8-K in connection with the offering of
Securities.
II-3
<PAGE> 27
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made
of the securities registered hereby, a post-effective amendment to this
registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement;
provided, however, that paragraphs (1) (i) and (1) (ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the registrant pursuant to
Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in this registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(4) That, for purposes of determining any liability under the
Securities Act of 1933, each filing of the registrant's annual report pursuant
to Section 13 (a) or Section 15 (d) of the Securities Exchange Act of 1934 that
is incorporated by reference in this registration statement shall be deemed to
be a new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the provisions described under Item 15,
or otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer
or controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
II-4
<PAGE> 28
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, the Registrant has duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Wilmington, State of Delaware, on March 2, 1998.
MBNA CORPORATION
By: /s/ Vernon H.C. Wright
---------------------------------------------
Name: Vernon H.C. Wright
Title: Executive Vice President and
Chief Corporate Finance Officer
The undersigned Directors and Officers of MBNA Corporation hereby appoint
Vernon H.C. Wright and John W. Scheflen, and each of them, as
attorneys-in-fact for the undersigned, with full power of substitution and
resubstitution, for, and in the name, place and stead of the undersigned, to
sign and file with the Securities and Exchange Commission under the Securities
Act of 1933, as amended, any and all amendments (including post-effective
amendments) and exhibits to this Registration Statement and any and all
applications and other documents to be filed with the Securities and Exchange
Commission pertaining to the registration of the securities covered hereby,
with full power and authority to do and perform each and every act and thing
requisite and necessary or desirable, hereby ratifying and confirming all that
said attorneys-in-fact, or either of them, or their substitute or substitutes,
may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed on March 2, 1998 by the following
persons in the capacities indicated.
<TABLE>
<CAPTION>
Signature Title
--------- -----
<S> <C>
/s/ Alfred Lerner
- -------------------------------- Chairman and Chief Executive Officer (principal
Alfred Lerner executive officer) and Director
/s/ Charles M. Cawley
- -------------------------------- President and Director
Charles M. Cawley
/s/ M. Scot Kaufman
- -------------------------------- Executive Vice President, Chief Financial Officer
M. Scot Kaufman and Chief Accounting Officer and Treasurer
(principal financial and accounting officer)
/s/ James H. Berick, Esq.
- --------------------------------
James H. Berick, Esq. Director
/s/ Benjamin R. Civiletti, Esq.
- --------------------------------
Benjamin R. Civiletti, Esq. Director
/s/ Randolph D. Lerner, Esq.
- --------------------------------
Randolph D. Lerner, Esq. Director
/s/ Stuart L. Markowitz, M.D.
- --------------------------------
Stuart L. Markowitz, M.D. Director
/s/ Michael Rosenthal, Ph.D.
- --------------------------------
Michael Rosenthal, Ph.D. Director
</TABLE>
II-5
<PAGE> 1
EXHIBIT 1(f)
January 17, 1997
Lehman Brothers Inc.
Three World Financial Center
New York, New York 10285
Bear, Stearns & Co. Inc.
245 Park Avenue
New York, New York 10167
Credit Suisse First Boston Corporation
11 Madison Avenue
New York, New York 10018
Goldman, Sachs & Co.
85 Broad Street
New York, New York 10004
Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner &
Smith Incorporated
World Financial Center
North Tower
New York, New York 10281-1310
J.P. Morgan Securities Inc.
60 Wall Street
New York, New York 10260
Gentlemen:
Reference is hereby made to the Distribution Agreement, dated April
11, 1994, as amended as of May 1, 1995 and September 13, 1995 (the
"Distribution Agreement"), between MBNA Corporation, a Maryland corporation
("MBNA"), and you. The parties to the Distribution Agreement hereby
acknowledge that a Registration Statement of MBNA on Form S-3 (No. 333-17187)
relating to $600,000,000 aggregate principal amount of debt securities,
preferred stock and depositary shares representing preferred stock (the "First
Registration Statement"), which First Registration Statement also constitutes
Post-Effective Amendment No. 1 to MBNA's Registration Statement on Form S-3
(No. 33-95600)
<PAGE> 2
2
(the "Second Registration Statement"; the "First Registration Statement" and
the "Second Registration Statement" are herein collectively referred as the
"Registration Statement"), was declared effective by the Securities and
Exchange Commission on December 20, 1996. The parties to the Distribution
Agreement hereby further acknowledge that the Treasury Committee of the Board
of Directors of MBNA, in connection with the Registration Statement, adopted on
November 1, 1996 a resolution (the "Resolution") that authorized the issuance
of Senior Medium-Term Notes, Series C and Subordinated Medium-Term Notes,
Series C under the Registration Statement which may be issued from time to time
pursuant to the Distribution Agreement. A copy of the Resolution is enclosed.
In order to implement the Resolution, the parties hereby agree that
the Distribution Agreement be amended so that all references contained therein
to Senior Medium-Term Notes be deemed to also be references to Senior
Medium-Term Notes, Series C and all references contained therein to
Subordinated Medium-Term Notes be deemed to also be references to Subordinated
Medium-Term Notes, Series C. In addition, all references in the Distribution
Agreement to $300,000,000 shall be changed to "$600,000,000".
<PAGE> 3
3
Please confirm your agreement to this amendment by signing and
returning the enclosed copy of this letter.
/s/ MBNA CORPORATION
Agreed to and accepted this
17th day of January, 1997.
/s/ LEHMAN BROTHERS INC.
/s/ BEAR, STEARNS & CO. INC.
/s/ CREDIT SUISSE FIRST BOSTON CORPORATION
/s/ GOLDMAN, SACHS, & CO.
/s/ MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
/s/ J.P. MORGAN SECURITIES INC.
<PAGE> 1
EXHIBIT 1(g)
October 8, 1997
Lehman Brothers Inc.
Three World Financial Center
New York, New York 10285
Bear, Stearns & Co. Inc.
245 Park Avenue
New York, New York 10167
Credit Suisse First Boston Corporation
11 Madison Avenue
New York, New York 10018
Goldman, Sachs & Co.
85 Broad Street
New York, New York 10004
Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner &
Smith Incorporated
World Financial Center
North Tower
New York, New York 10281-1310
J.P. Morgan Securities Inc.
60 Wall Street
New York, New York 10260
Gentlemen:
Reference is hereby made to the Distribution Agreement, dated April
11, 1994, as amended as of May 1, 1995, September 13, 1995 and January 17, 1997
(the "Distribution Agreement"), between MBNA Corporation, a Maryland
corporation ("MBNA"), and you. The parties to the Distribution Agreement
hereby acknowledge that a Registration Statement of MBNA on Form S-3 (No.
333-17187) relating to $600,000,000 aggregate principal amount of debt
securities, preferred stock and depositary shares representing preferred stock
(the "First Registration Statement"), which First Registration Statement also
constitutes Post-Effective Amendment No. 1 to MBNA's Registration Statement on
Form S-3 (No. 33-95600)
<PAGE> 2
2
(the "Second Registration Statement"; the "First Registration Statement" and
the "Second Registration Statement" are herein collectively referred as the
"Registration Statement"), was declared effective by the Securities and
Exchange Commission on December 20, 1996. The parties to the Distribution
Agreement hereby further acknowledge that the Treasury Committee of the Board
of Directors of MBNA, in connection with the Registration Statement, adopted on
November 1, 1996 a resolution (the "Resolution") that authorized the issuance
of Senior Medium-Term Notes, Series C and Subordinated Medium-Term Notes,
Series C under the Registration Statement which may be issued from time to time
pursuant to the Distribution Agreement. A copy of the Resolution is enclosed.
In order to implement the Resolution, the parties hereby agree that
the Distribution Agreement be amended so that all references contained therein
to Senior Medium-Term Notes be deemed to also be references to Senior
Medium-Term Notes, Series C and all references contained therein to
Subordinated Medium-Term Notes be deemed to also be references to Subordinated
Medium-Term Notes, Series C. In addition, all references in the Distribution
Agreement to $600,000,000 shall be changed to "$900,000,000".
<PAGE> 3
3
Please confirm your agreement to this amendment by signing and
returning the enclosed copy of this letter.
/s/ MBNA CORPORATION
Agreed to and accepted this 8th day of October, 1997.
/s/ LEHMAN BROTHERS INC.
/s/ BEAR, STEARNS & CO. INC.
/s/ CREDIT SUISSE FIRST BOSTON CORPORATION
/s/ GOLDMAN, SACHS, & CO.
/s/ MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
/s/ J.P. MORGAN SECURITIES INC.
<PAGE> 1
EXHIBIT 5
March 2, 1998
MBNA Corporation
1100 North King Street
Wilmington, Delaware 19884
Ladies and Gentlemen:
In connection with the registration under the Securities Act of 1993 (the "Act")
of $2,250,000,000 aggregate initial offering price of debt securities (the "Debt
Securities"), preferred stock, par value $.01 per share ("Preferred Stock"),
which may be issued in the form of depository shares ("Depository Shares")
evidenced by depository receipts ("Depository Receipts"), common stock, par
value $.01 per share ("Common Stock"), warrants to purchase Debt Securities,
Preferred Stock, Depository Shares or Common Stock, or any combination of the
foregoing ("Warrants"), stock purchase contracts ("Stock Purchase Contracts")
to purchase Common Stock and stock purchase units ("Stock Purchase Units"), each
representing ownership of a Stock Purchase Contract and either Debt Securities
or debt obligations of third parties, including U.S. Treasury Securities,
securing the holder's obligation to purchase Common Stock under the Stock
Purchase Contract, of MBNA Corporation, a Maryland corporation (the "Company"),
I, as General Counsel of the Company, have examined such corporate records,
certificates and other documents, and such questions of law, as I have
considered necessary or appropriate for purposes of this opinion. Each
capitalized term used herein, unless otherwise defined herein, has the meaning
ascribed to it in the Registration Statement filed with the Securities and
Exchange Commission as of the date hereof (the "Registration Statement").
I am admitted to the Bar of the State of Maryland and express no opinion as to
the law of any jurisdiction other than the laws of the United States of America
and the State of Maryland. For the purpose of giving the opinion set forth
below, I have assumed the following with respect to each sale of Debt
Securities, Preferred Stock, Depository Shares, Common Stock, Warrants, Stock
Purchase Contracts and Stock Purchase Units: (i) that each sale will be
pursuant to the terms and conditions as contemplated in the Registration
Statement, which has become and remains effective under the Act; (ii) that all
necessary Company actions, approvals, and authorizations will have been taken
or obtained, and that such actions will be in conformity with applicable law;
(iii) that all necessary filings and approvals with any regulatory authority
will have been made or obtained, including, without limitation, the fixing of
terms with respect to any security, and that such actions will be in conformity
with applicable law; (iv) any actions, approvals or authorizations required by
any applicable indenture will have been taken or obtained; (v) that the required
consideration will have been received by the Company and (vi) that all
parties, other than the Company, will have taken or obtained any and all
necessary actions, authorizations and approvals, that such parties will be in
conformity with applicable law and that any document executed and delivered by
such parties will be enforceable against such parties.
Upon the basis of such examination, it is my opinion that:
(i) The Preferred Stock and the Common Stock when authorized and sold as
contemplated in the Registration Statement will be validly issued by the
Company and will be duly authorized, fully paid and non-assessable; and
(ii) The Debt Securities, Warrants, Stock Purchase Contracts and Stock Purchase
Units when authorized and sold as contemplated in the Registration
Statement will be validly issued by the Company and will constitute valid
and legally binding obligations of the Company, enforceable in accordance
with their terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors' rights and to general equity
principles.
<PAGE> 2
I consent to the filing of this opinion as an exhibit to the Registration
Statement and to the references to me under the heading "Validity of
Securities" in the Prospectus. In giving such consent, I do not thereby admit
that I am in the category of persons whose consent is required under Section 7
of the Act.
Very truly yours,
/s/ John W. Scheflen
--------------------
<PAGE> 1
EXHIBIT 12
Computation of Ratios
a. Ratio of Earnings to Fixed Charges
(dollars in thousands)
<TABLE>
<CAPTION>
Nine Months
Ended Year Ended December 31,
September 30, ---------------------------------------------------------
1997 1996(a) 1995 1994 1993(b) 1992
------------- ---------- ---------- -------- -------- --------
(unaudited)
<S> <C> <C> <C> <C> <C> <C>
INCLUDING INTEREST ON DEPOSITS:
EARNINGS:
Income before income taxes.............. $ 713,573 $ 731,294 $ 584,601 $441,101 $190,624 $272,019
Fixed charges........................... 750,133 755,884 609,742 316,647 183,148 250,027
Interest capitalized during period,
net of amortization of previously
capitalized interest................... (2,997) (2,370) (3,409) (683) (1,146) (440)
------------- ---------- ---------- -------- -------- --------
Earnings, for computation purposes...... $ 1,460,709 $1,484,808 $1,190,934 $757,065 $372,626 $521,606
============= ========== ========== ======== ======== ========
FIXED CHARGES:
Interest on deposits, short-term
borrowings, and long-term debt and
bank notes, expensed or capitalized.... $ 741,936 $ 746,008 $ 600,047 $308,242 $179,647 $237,287
Portion of rents representative of the
interest factor........................ 8,197 9,876 9,695 8,405 3,501 12,740
------------- ---------- ---------- -------- -------- --------
Fixed charges, including interest on
deposits, for computation purposes..... $ 750,133 $ 755,884 $ 609,742 $316,647 $183,148 $250,027
============= ========== ========== ======== ======== ========
Ratio of earnings to fixed charges,
including interest on deposits......... 1.95 1.96 1.95 2.39 2.03 2.09
EXCLUDING INTEREST ON DEPOSITS:
EARNINGS:
Income before income taxes.............. $ 713,573 $ 731,294 $ 584,601 $441,101 $190,624 $272,019
Fixed charges........................... 249,956 227,999 171,585 94,495 38,100 18,526
Interest capitalized during period,
net of amortization of previously
capitalized interest................... (3,013) (2,391) (3,430) - (760) -
------------- ---------- ---------- -------- -------- --------
Earnings, for computation purposes...... $ 960,516 $ 956,902 $ 752,756 $535,596 $227,964 $290,545
============= ========== ========== ======== ======== ========
FIXED CHARGES:
Interest on short-term borrowings and
long-term debt and bank notes,
expensed or capitalized................ $ 241,759 $ 218,123 $ 161,890 $ 86,090 $ 34,599 $ 5,786
Portion of rents representative of the
interest factor........................ 8,197 9,876 9,695 8,405 3,501 12,740
------------- ---------- ---------- -------- -------- --------
Fixed charges, excluding interest on
deposits, for computation purposes..... $ 249,956 $ 227,999 $ 171,585 $ 94,495 $ 38,100 $ 18,526
============= ========== ========== ======== ======== ========
Ratio of earnings to fixed charges,
excluding interest on deposits......... 3.84 4.20 4.39 5.67 5.98 15.68
</TABLE>
(a) 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
MasterCard and Visa program. Without the charge, the ratio of earnings to
fixed charges, including and excluding interest on deposits, would have
been 2.04 and 4.44, respectively.
(b) Income before income taxes for 1993 includes a charge of $150.0 million
for the termination of a marketing agreement with an independent third-
party marketing organization. Without the charge, the ratio of earnings to
fixed charges, including and excluding interest on deposits, would have
been 2.85 and 9.92, respectively.
<PAGE> 2
b. Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividend
Requirements (dollars in thousands)
<TABLE>
<CAPTION>
Nine Months
Ended Year Ended December 31,
September 30, --------------------------------------------------------
1997 1996(b) 1995 1994 1993(c) 1992
------------- ---------- ---------- -------- -------- --------
(unaudited)
<S> <C> <C> <C> <C> <C> <C>
INCLUDING INTEREST ON DEPOSITS:
EARNINGS:
Income before income taxes.............. $ 713,573 $ 731,294 $ 584,601 $441,101 $190,624 $272,019
Fixed charges........................... 750,133 755,884 609,742 316,647 183,148 250,027
Interest capitalized during period,
net of amortization of previously
capitalized interest................... (2,997) (2,370) (3,409) (683) (1,146) (440)
------------- ---------- ---------- -------- -------- --------
Earnings, for computation purposes...... $ 1,460,709 $1,484,808 $1,190,934 $757,065 $372,626 $521,606
============= ========== ========== ======== ======== ========
FIXED CHARGES AND PREFERRED STOCK
DIVIDEND REQUIREMENTS:
Interest on deposits, short-term
borrowings, and long-term debt and
bank notes, expensed or capitalized.... $ 741,936 $ 746,008 $ 600,047 $308,242 $179,647 $237,287
Portion of rents representative of the
interest factor........................ 8,197 9,876 9,695 8,405 3,501 12,740
------------- ---------- ---------- -------- -------- --------
Fixed charges........................... 750,133 755,884 609,742 316,647 183,148 250,027
Preferred stock dividend
requirements (a)....................... 25,962 23,269 2,432 - - -
------------- ---------- ---------- -------- -------- --------
Fixed charges and preferred stock
dividend requirements, including
interest on deposits, for computation
purposes............................... $ 776,095 779,153 $ 612,174 $316,647 $183,148 $250,027
============= ========== ========== ======== ======== ========
Ratio of earnings to fixed charges and
preferred stock dividend requirements,
including interest on deposits......... 1.88 1.91 1.95 2.39 2.03 2.09
EXCLUDING INTEREST ON DEPOSIT:
EARNINGS:
Income before income taxes.............. $ 713,573 $ 731,294 $ 584,601 $441,101 $190,624 $272,019
Fixed charges........................... 249,956 227,999 171,585 94,495 38,100 18,526
Interest capitalized during period,
net of amortization of previously
capitalized interest................... (3,013) (2,391) (3,430) - (760) -
------------- ---------- ---------- -------- -------- --------
Earnings, for computation purposes...... $ 960,516 $ 956,902 $ 752,756 $535,596 $227,964 $290,545
============= ========== ========== ======== ======== ========
FIXED CHARGES AND PREFERRED STOCK
DIVIDEND REQUIREMENTS:
Interest on short-term borrowings and
long-term debt and bank notes,
expensed or capitalized................ $ 241,759 $ 218,123 $ 161,890 $ 86,090 $ 34,599 $ 5,786
Portion of rents representative of the
interest factor........................ 8,197 9,876 9,695 8,405 3,501 12,740
------------- ---------- ---------- -------- -------- --------
Fixed charges........................... 249,956 227,999 171,585 94,495 38,100 18,526
Preferred stock dividend
requirements (a)....................... 25,962 23,269 2,432 - - -
------------- ---------- ---------- -------- -------- --------
Fixed charges and preferred stock
dividend requirements, excluding
interest on deposits, for computation
purposes............................... $ 275,918 $ 251,268 $ 174,017 $ 94,495 $ 38,100 $ 18,526
============= ========== ========== ======== ======== ========
Ratio of earnings to fixed charges and
preferred stock dividend requirements,
excluding interest on deposits......... 3.48 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
MasterCard and Visa program. Without the charge, the ratio of earnings to
combined fixed charges and preferred stock dividend requirements,
including and excluding interest on deposits, would have been 1.98 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 earnings to
combined fixed charges and preferred stock dividend requirements, including
and excluding interest on deposits, would have been 2.85 and 9.92,
respectively.
<PAGE> 1
EXHIBIT 23(a)
Consent of Ernst & Young LLP
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement on Form S-3 and related Prospectus of MBNA Corporation
for the registration of $2,250,000,000 of Debt Securities, Preferred Stock,
Common Stock, Warrants, Stock Purchase Contracts and Stock Purchase Units and to
the incorporation by reference therein of our report dated January 14, 1997,
with respect to the consolidated financial statements of MBNA Corporation
incorporated by reference in its Annual Report (Form 10-K) for the year ended
December 31, 1996, filed with the Securities and Exchange Commission.
Baltimore, Maryland
February 25, 1998
/s/ Ernst & Young LLP
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