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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 1-10683
MBNA CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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MARYLAND 52-1713008
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
1100 NORTH KING STREET 19884-0131
WILMINGTON, DE (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
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REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (800) 362-6255
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) of the Act:
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NAME OF EACH EXCHANGE ON
TITLE OF EACH CLASS WHICH REGISTERED
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Common Stock, $.01 par value New York Stock Exchange
7 1/2% Cumulative Preferred Stock, Series A New York Stock Exchange
Adjustable Rate Cumulative Preferred Stock, Series B New York Stock Exchange
MBNA Capital A 8.278% Capital Securities, Series A,
guaranteed by MBNA Corporation to the extent described
therein New York Stock Exchange
MBNA Capital B Floating Rate Capital Securities, Series B,
guaranteed by MBNA Corporation to the extent described
therein New York Stock Exchange
MBNA Capital C 8.25% Trust Originated Preferred Securities,
Series C, guaranteed by MBNA Corporation to the extent
described therein New York Stock Exchange
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SECURITIES REGISTERED PURSUANT TO SECTION 12(g) of the Act: None
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or such shorter period that the Registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in the definitive proxy or information
statement incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
As of March 3, 2000, the aggregate market value of the voting and
non-voting common equity held by non-affiliates of the Registrant calculated by
reference to the closing price of the Registrant's common stock as reported on
the New York Stock Exchange was $15,042,111,224. As of March 3, 2000, there were
outstanding 801,781,250 shares of common stock, par value $.01 per share, which
stock is the only class of Registrant's common stock.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the 1999 Annual Report to Stockholders for the year ended
December 31, 1999 are incorporated by reference into Parts I, II and IV.
Portions of the definitive Proxy Statement for the Annual Meeting of
Stockholders to be held April 24, 2000 ("Definitive Proxy Statement") are
incorporated by reference into Part III.
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MBNA CORPORATION
1999 ANNUAL REPORT ON FORM 10-K
TABLE OF CONTENTS
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PAGE
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PART I
ITEM 1. Business.................................................... 1
ITEM 2. Properties.................................................. 10
ITEM 3. Legal Proceedings........................................... 11
ITEM 4. Submission of Matters to a Vote of Security Holders......... 11
Executive Officers of the Registrant........................ 11
PART II
ITEM 5. Market for the Registrant's Common Equity and Related
Stockholder Matters....................................... 14
ITEM 6. Selected Financial Data..................................... 14
ITEM 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 14
ITEM 7A. Quantitative and Qualitative Disclosures about Market
Risk...................................................... 14
ITEM 8. Financial Statements and Supplementary Data................. 14
ITEM 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.................................. 14
PART III
ITEM 10. Directors and Executive Officers of the Registrant.......... 14
ITEM 11. Executive Compensation...................................... 14
ITEM 12. Security Ownership of Certain Beneficial Owners and
Management................................................ 14
ITEM 13. Certain Relationships and Related Transactions.............. 14
PART IV
ITEM 14. Exhibits, Financial Statement Schedules, and Reports on Form
8-K....................................................... 15
Signatures............................................................. 19
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PART I
ITEM 1. BUSINESS
OVERVIEW
MBNA Corporation (the "Corporation"), a registered bank holding company,
was incorporated under the laws of Maryland on December 6, 1990. It is the
parent company of MBNA America Bank, N.A. (the "Bank"), a national bank
organized in January 1991 as the successor to a national bank formed in 1982 and
the Corporation's principal subsidiary. The Bank has two wholly owned foreign
bank subsidiaries, MBNA International Bank Limited ("MBNA Europe") formed in
1993 and located in the United Kingdom and MBNA Canada Bank ("MBNA Canada")
formed in 1997. Through the Bank, the Corporation is the largest independent
credit card lender in the world and is the leading issuer of affinity credit
cards, marketed primarily to members of associations and Customers of financial
institutions. In addition to its credit card lending, the Corporation also makes
other consumer loans and offers insurance and deposit products.
PRODUCTS
Credit Cards
The Corporation offers two general types of credit cards, premium and
standard, issued under either the MasterCard(R) or Visa(R) name.* The
Corporation markets standard and premium cards to new Customers and it markets
premium cards to qualifying standard card Customers. Premium cards include Gold
and Platinum Plus cards. Premium card usage and average account balances are
generally higher than those of standard card Customers.
Other Consumer Loans
The Corporation's other consumer loan products include unsecured lines of
credit accessed by check and unsecured installment loans. These products are
used by Customers primarily for large purchases or consolidation of other
consumer debt. The Bank markets these products to customers of retailers, to the
Bank's existing credit card Customers and to others.
The Corporation also offers home equity loans and airplane loans to
individuals through MBNA Consumer Services, Inc.
Deposits
The Corporation offers money market deposit accounts and certificates of
deposit through the Bank. Money market deposit accounts provide Customers with
liquidity and convenience of service, as well as insurance up to $100,000 per
depositor by the Federal Deposit Insurance Corporation ("FDIC"). Certificates of
deposit are traditional fixed term investments with maturities that typically
range from six to sixty months. They are also insured by the FDIC up to
$100,000. Deposit products are offered to members of the Corporation's endorsing
associations, to existing credit card Customers and to others.
Insurance
The Corporation offers credit insurance to credit card Customers of the
Bank, MBNA Europe and MBNA Canada. It also offers automobile insurance and life
insurance through the Bank to Customers. During 1999, the Corporation began
marketing automobile insurance offered by American International Group, Inc.,
its new insurance underwriter.
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* MasterCard(R) is a federally registered servicemark of MasterCard
International Inc.; Visa(R) is a federally registered servicemark of Visa
U.S.A., Inc.
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MARKETING
The Corporation directs its marketing efforts primarily to members of
endorsing groups, to customers of financial institutions, and to targeted lists
of people with a strong common interest. The Corporation is the recognized
leader in affinity marketing, with endorsements from thousands of membership
organizations and financial institutions.
Credit cards issued to affinity group members or financial institution
customers usually carry custom graphics and the name and logo of the endorsing
organization. The Corporation develops a customized marketing program for each
endorsing organization or financial institution. In addition to servicing the
credit cards, the Corporation offers economic incentives to the endorsing groups
and financial institutions.
The Corporation's affinity marketing approach includes created personal
interest and regional affinity programs for people with strong common interests
but without a specific group affiliation. Personal interest programs are offered
to people with common interests through purchased targeted lists. Regional
programs include state and city series cards that bear images of regional or
local scenes.
The Corporation also offers co-branded cards through relationships with
commercial firms, including professional sports teams. These programs typically
include incentives for Customers to purchase services or merchandise from the
co-branding firm. The Corporation also offers unsecured installment loans
through retailers.
The Corporation primarily uses direct mail, telemarketing, person-to-person
and internet marketing to market its credit cards and other products. Thousands
of different marketing campaigns are developed each year, generating millions of
direct mail pieces designed to add accounts and stimulate use. The Corporation
customizes its marketing approach for each program. The Corporation's in-house
advertising agency designs custom graphics for credit cards and prepares direct
mail programs and advertisements. The Corporation conducts internet marketing
through a combination of banner, e-mail and search engine advertisements. In
addition, the Corporation's marketing activities include efforts to retain
profitable accounts and programs designed to activate new accounts and stimulate
usage of existing accounts, primarily through balance transfer programs.
The Corporation conducts marketing activities in the United States through
MBNA Marketing Systems, Inc., a subsidiary of the Bank. The Corporation markets
credit cards and other consumer loans in the United Kingdom through MBNA Europe
and in Canada through MBNA Canada.
The Corporation selectively purchases credit card loan portfolios from
other credit card issuers. Generally, the Corporation purchases portfolios when
it can also obtain endorsements from the seller for an ongoing program or from
third parties.
MBNA Marketing Systems, Inc. has regional centers in Maine, Ohio, Texas,
Maryland, Florida and California and sales offices in New York City, Chicago and
Atlanta. MBNA Europe has its headquarters in Chester, England and sales and
marketing offices in London, England, Dublin, Ireland and Edinburgh, Scotland.
MBNA Canada has its headquarters in Gloucester, Ontario and a sales and
marketing office in Montreal, Quebec. These regional centers and sales offices
assist the Corporation to obtain endorsements, increase its familiarity with
local markets, better understand the needs and motivations of Customers and keep
in close touch with what competitors are doing.
MBNA Marketing Systems, Inc. has 16 telemarketing facilities in 8 states.
As of December 31, 1999, it employed approximately 3,400 people in
telemarketing, the majority of whom worked part-time. The telemarketing
organization generates new accounts by calling prospects obtained from
membership lists of endorsing organizations and other prospect lists.
CREDIT
The Corporation makes credit decisions by combining sophisticated
technology and predictive models with the insight of a credit analyst. Approved
credit applications are reviewed individually by a credit analyst, who assigns a
credit line based on a review of the potential Customer's financial history and
capacity to repay.
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Less than half of the credit applications received by the Corporation in 1999
were approved. Credit analysts review credit reports obtained through an
independent credit reporting agency, and use a delinquency probability model to
assist them in reaching a credit decision for each applicant. Credit analysts
also review and verify other information, such as employment and income, when
necessary to make a credit decision. Further levels of review are automatically
triggered, depending upon the level of risk indicated by the delinquency
probability model and a combination of other factors indicative of credit
quality. Credit lines for existing Customers are regularly reviewed for credit
line increases, and when appropriate, credit line decreases. The Corporation's
Loan Review Department independently reviews selected applications to ensure
quality and consistency. The Corporation's losses have been consistently below
reported MasterCard and Visa industry averages.
RISK CONTROL
The Corporation manages risk at the Customer level through sophisticated
analytical techniques combined with regular judgmental review. Transactions are
evaluated at the point of sale, where risk levels are balanced with
profitability and Customer satisfaction. Additionally, Customers showing signs
of financial stress are periodically reviewed, a process which includes an
examination of the Customer's credit file and in many cases a phone call for
clarification of the situation.
A balanced approach is also used when stimulating portfolio growth. Risk
levels are measured through statistical models that incorporate payment
behavior, employment information, and transaction activity. Credit bureau scores
and attributes are obtained and combined with internal information to allow the
Corporation to increase credit lines and promote account usage while minimizing
additional risk.
The Corporation utilizes technology, including a neural network and expert
systems, to detect and prevent fraud at its earliest stages. It also employs
authorization strategies to control fraud losses.
COLLECTION (CUSTOMER ASSISTANCE)
The Corporation's collection (Customer Assistance) philosophy, based on a
persistent yet professional approach, is to work with each past due Customer at
an early stage of delinquency. The Corporation employs several computerized
systems to assist in the collection of past due accounts. These systems analyze
each Customer's purchase and repayment habits, and select accounts for initial
contact with the objective of contacting the highest risk accounts first.
Customers who are experiencing significant financial problems and who may
consider filing for bankruptcy are referred to a specialized group of people who
have been educated on effective alternatives to bankruptcy, including debt
counseling, reduced interest rates and fixed payment arrangements.
Accounts are worked continually, by market sector, at each stage of
delinquency through the 180-day past due level. As an account enters the 180-day
delinquency level, it is classified as a potential charge-off. Accounts failing
to make a payment during the 180-day cycle are written off. Managers may defer
charge-off of an account for another month, pending continued payment activity
or other special circumstances. Senior manager approval is required on all
exceptions to charge-off.
A Customer account may be reaged to remove existing delinquency. Generally,
to qualify for reaging, the account must have been open for at least one year
and cannot have been reaged during the preceding 365 days. The Customer must
have made payments equal to a total of three minimum payments in the last 90
days, including one full minimum payment during the last 30 days. All account
reages are approved by a manager. Collection reages are reviewed by the Loan
Review Department.
If an account has been charged-off, it may be sold to a third party vendor
or retained by the Corporation for collection. The Corporation has entered into
contracts for the sale of these accounts which provide pricing which is
comparable to amounts which were realized from previous charge-off collection
efforts, after the deduction of the costs of collection.
In February 1999, the Federal Financial Institutions Examinations Council
published a revised policy statement on the classification of consumer loans.
The revised policy establishes uniform guidelines for the
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charge-off of loans to delinquent, bankrupt, and deceased borrowers, for
charge-off of fraudulent accounts, and for re-aging, extending, deferring or
rewriting delinquent accounts. The guidelines must be implemented by December
31, 2000. The Corporation expects to complete and implement the guidelines prior
to or on December 31, 2000. The Corporation will accelerate charge-off of some
delinquent loans when it implements the guidelines, and does not expect
implementation to have a material impact on the Corporation's consolidated
statement of income for the year ended December 31, 2000.
OPERATIONS
Account processing services performed by MBNA Hallmark Information
Services, Inc. ("Information Services"), a wholly-owned subsidiary of the Bank,
include data processing, payment processing, statement rendering, card
production and network services. Information Services' data network provides an
interface to MasterCard and Visa for performing authorizations and settlement
funds transfers. Most data processing and network functions are performed at
Information Services' facilities in Dallas, Texas, and Newark, Delaware.
Information Services generates and mails to Customers monthly statements
summarizing account activity and processes Customer payments.
TECHNOLOGY
The Corporation uses sophisticated systems and technology in all aspects of
its business operations to enhance Customer service and improve efficiency.
These systems include marketing databases, advanced telecommunications networks
to support Customer service and telemarketing, a credit decisioning system which
processes credit card applications with on-line credit bureaus to support
credit, neural networks to identify and prevent fraud, and selective statement
insertion for customizing communications with Customers. These systems enable
the Corporation to implement customized marketing and service strategies for
endorsed organizations. The Corporation relies primarily on internal development
of technology solutions to ensure the flexibility, quality and responsiveness of
computer and telecommunication systems needed in its business. For a discussion
of Year 2000 compliance, see "Year 2000 Readiness Disclosure" on pages 31
through 32 of the 1999 Annual Report to Stockholders, which is incorporated
herein by reference.
TERMS AND CONDITIONS
Each Customer and the Corporation enter into an agreement which governs the
terms and conditions of the Customer's account. The Corporation reserves the
right to add or change any terms, conditions, services or features of its
accounts at any time, including increasing or decreasing periodic finance
charges, other charges or minimum payment terms. The agreement with each
Customer provides that the Corporation may apply such changes, when applicable,
to current outstanding balances as well as to future transactions. The Customer
can avoid a rate increase by notice to the Corporation and by not using the
account.
A Customer may use an account for purchases and cash advances. Monthly
periodic finance charges are calculated by multiplying the applicable average
daily balances on the account by the applicable daily periodic rates and by the
number of days in the billing cycle.
Finance charges are calculated on purchases from the date of the purchase
or the first day of the billing cycle in which the purchase posts to the
account, whichever is later, and with respect to credit card accounts are not
assessed in most circumstances on new purchases if all balances shown in the
previous billing statement are paid in full by the payment due date, which is
generally 1 day before the next billing date. Finance charges on credit card
accounts are not assessed in most circumstances on previous purchases if all
balances shown on the two previous billing statements are paid by their
respective due dates. Finance charges on cash advances are calculated from the
date of the transaction.
Credit card Customers are required to make a minimum monthly payment equal
to the greater of $15 or 2% of the outstanding balance on the account. With
respect to certain consumer loan products, Customers are required to make a
minimum monthly payment sufficient to repay the account balance over a set term.
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The Corporation offers fixed and variable rates on accounts and also offers
temporary promotional rates. Variable rates are offered at a percentage rate
tied to the U.S. prime rate published in The Wall Street Journal and are
adjusted, if applicable, quarterly.
The Corporation assesses an annual fee on some Customer accounts. Annual
fees, when assessed, are generally waived for the first year on new accounts and
thereafter may be waived or rebated. The Corporation assesses cash advance
transaction, certain purchase, late, overlimit and returned check fees on
Customer accounts in accordance with agreements with Customers.
INTERNATIONAL
The Corporation's international activities are primarily performed through
the Bank's two foreign bank subsidiaries, MBNA Europe and MBNA Canada. The
Corporation has been marketing credit card and other consumer loan products
through MBNA Europe since 1993 and credit card products through MBNA Canada
since 1998. The Corporation uses substantially the same business strategy and
operating methods in its international activities as it does in the United
States. Although MBNA Europe relies on third party vendors for some processing
functions, it uses substantially the same systems as are used in the United
States. See "Note T: Foreign Activities" on page 64 of the 1999 Annual Report to
Stockholders, which is incorporated herein by reference, for certain financial
information on the Corporation's international activities.
REGULATORY MATTERS
General
As a bank holding company, the Corporation is subject to regulation under
the Bank Holding Company Act of 1956 (the "BHCA") and to the BHCA's examination
and reporting requirements. Under the BHCA, bank holding companies may not
directly or indirectly acquire the ownership or control of more than five
percent of the voting shares or substantially all of the assets of any company,
including a bank, without the prior approval of the Board of Governors of the
Federal Reserve System (the "Federal Reserve Board"). In addition, bank holding
companies generally are prohibited under the BHCA from engaging in non-banking
activities, subject to certain exceptions. The recently enacted
Gramm-Leach-Bliley Act, discussed below, broadened the range of permissible
activities that are deemed financial in nature.
The earnings of the Bank and the Corporation are affected by general
economic conditions, monetary policies and the actions of various regulatory
authorities, including the Federal Reserve Board, the Federal Deposit Insurance
Corporation (the "FDIC") and the Office of the Comptroller of the Currency (the
"OCC"). In addition, there are numerous governmental requirements and
regulations which affect the activities of the Corporation.
The Bank is subject to supervision and examination by the OCC, the Bank's
primary regulator. The Bank is insured by, and therefore also is subject to the
regulations of, the FDIC and is also subject to requirements and restrictions
under federal and state law, including requirements to maintain reserves against
deposits, restrictions on the types and amounts of loans that may be granted and
the interest that may be charged thereon, and limitations on the types of
investments that may be made and the types of services that may be offered.
MBNA Europe is subject to regulation and supervision by the Financial
Services Authority, the Federal Reserve Board and the OCC. MBNA Canada is
subject to regulation and supervision by the Office of the Superintendent of
Financial Institutions, the Canadian Deposit Insurance Corporation, the Federal
Reserve Board and the OCC.
Dividends
The principal source of funds to the Corporation to pay dividends, interest
and principal on debt securities and to meet other obligations is dividends from
the Bank. The Bank is subject to limitations on the dividends it may pay to the
Corporation. The Corporation may also be subject to limitations on the payment
of dividends to stockholders. See "Dividend Limitations" on pages 35 and 36 of
the 1999 Annual Report to Stockholders,
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which is incorporated herein by reference. In addition, both the Corporation and
the Bank are subject to various regulatory policies and requirements relating to
the payment of dividends, including requirements to maintain capital above
regulatory minimums. The appropriate federal regulatory authority is authorized
to determine under certain circumstances relating to the financial condition of
a bank or bank holding company that the payment of dividends would be an unsafe
or unsound practice and to prohibit payment thereof. The OCC and the Federal
Reserve Board have each indicated that banking organizations should generally
pay dividends only out of current operating earnings.
Borrowings by the Corporation
There are various legal restrictions on the extent to which the Corporation
may borrow or otherwise obtain credit from, sell assets to, or engage in certain
other transactions with, the Bank. In general, these restrictions require that
any such extensions of credit must be secured by designated amounts of specified
collateral and the aggregate of such transactions are limited, as to any one of
the Corporation or its non-bank subsidiaries, to 10 percent of the Bank's
capital stock and surplus, and as to the Corporation and all such non-bank
subsidiaries in the aggregate, to 20 percent of the Bank's capital stock and
surplus.
Extensions of credit and other transactions between the Bank and the
Corporation must be on terms and under circumstances, including credit
standards, that are substantially the same or at least as favorable to the Bank
as those prevailing at the time for comparable transactions between the Bank and
non-affiliated companies.
Capital Requirements
The Corporation is subject to risk-based capital guidelines adopted by the
Federal Reserve Board for bank holding companies. The Bank is subject to similar
capital requirements adopted by the OCC. The guidelines require a minimum ratio
of total capital to risk-weighted assets (including certain off-balance sheet
items, such as interest rate swaps) of 8%. At least half of the total capital
may be comprised of common stockholders' equity, non-cumulative perpetual
preferred stock and a limited amount of cumulative perpetual preferred stock,
less goodwill and certain other intangible assets ("Tier 1 risk-based capital").
The remainder ("Total risk-based capital") may consist of mandatory convertible
debt securities, a limited amount of subordinated debt, other preferred stock
and a limited amount of reserves for possible credit losses. In addition, the
Federal Reserve Board has adopted a minimum leverage ratio (Tier 1 risk-based
capital to average total assets less goodwill and certain other intangible
assets) of 3% for bank holding companies that have the agency's highest
supervisory rating or have implemented the Federal Reserve's market risk capital
measure, and 4% for all other bank holding companies. See "Table 9: Regulatory
Capital Ratios" on page 34 of the 1999 Annual Report to Stockholders, which is
incorporated herein by reference. Bank holding companies and banks may be
subject to higher risk-based and leverage capital ratios depending on other
specific factors, such as interest rate risk, concentrations of credit risk, and
the conduct of non-traditional activities.
Corporation Support of Bank
Under the National Bank Act, if the capital stock of a national bank is
impaired by losses or otherwise, the OCC is authorized to require payment of the
deficiency by assessment upon the bank's stockholders and, if any such
assessment is not paid, to sell the stock to make good the deficiency. Under
Federal Reserve Board policy, the Corporation is expected to act as a source of
financial strength to the Bank and to commit resources to support it. Any
capital loans by the Corporation to the Bank are subordinate in right of payment
to deposits and to certain other indebtedness of the Bank.
FDICIA and FDIC Insurance
The Federal Deposit Insurance Corporation Improvement Act of 1991
("FDICIA") provided increased funding for the Bank Insurance Fund ("BIF") of the
FDIC and provided for expanded regulation of banks and bank holding companies.
The regulation includes expanded federal banking agency examinations and
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increased powers of federal banking agencies to take corrective action to
resolve the problems of insured depository institutions with capital
deficiencies. These powers vary depending on which of several levels of
capitalization a particular institution meets.
FDIC regulations adopted under FDICIA prohibit a bank from accepting
brokered deposits unless (i) it is well capitalized or (ii) it is adequately
capitalized and receives a waiver from the FDIC. A bank that is adequately
capitalized and that accepts brokered deposits under a waiver from the FDIC may
not pay an interest rate on any deposit in excess of 75 basis points over
certain prevailing market rates; there are no such restrictions on a bank that
is well capitalized. As of December 31, 1999 the Bank met the FDIC's definition
of a well capitalized institution for purposes of accepting brokered deposits.
For the purposes of the brokered deposit rules, a bank is defined to be "well
capitalized" if it maintains a ratio of Tier 1 risk-based capital to
risk-adjusted assets of at least 6%, a ratio of total risk-based capital to
risk-weighted assets of at least 10% and a leverage ratio of at least 5% and is
not subject to any order, direction or written agreement to maintain specific
capital levels. Under the regulatory definition of brokered deposits, as of
December 31, 1999, the Bank had brokered deposits of $5.1 billion.
The Bank is subject to FDIC deposit insurance assessments for the BIF. Each
financial institution is assigned to one of three capital groups -- well
capitalized, adequately capitalized or undercapitalized -- and further assigned
to one of three subgroups within a capital group, on the basis of supervisory
evaluations by the institution's primary federal and, if applicable, state
supervisors and other information relevant to the institution's financial
condition and the risk posed to the applicable insurance fund. The assessment
rate applicable to the Bank in the future will depend in part upon the risk
assessment classification assigned to the Bank by the FDIC and in part on the
BIF assessment schedule adopted by the FDIC. FDIC regulations currently provide
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.
The Deposit Insurance Funds Act of 1996 ("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 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 may be adjusted quarterly to reflect a change in assessment base for the
BIF. The current FICO annual assessment rate is 2.12 cents per $100 of deposits.
Regulation of the Credit Card and Other Consumer Lending Businesses
The relationship between the Corporation and its Customers is extensively
regulated by federal and state consumer protection laws. The Truth in Lending
Act requires consumer lenders to make certain disclosures along with their
applications (for credit card accounts) and solicitations, upon opening an
account and with each periodic statement. The Act also imposes certain
substantive requirements and restrictions on lenders and provides Customers with
certain rights to dispute unauthorized charges and to have their billing errors
corrected promptly. Customers are also given the right to have their payments
promptly credited to their accounts.
The Equal Credit Opportunity Act prohibits lenders from discriminating in
extending credit on certain criteria such as an applicant's sex, race and
marital status. In order to protect borrowers from such discrimination, the Act
requires that lenders disclose the reasons they took adverse action against an
applicant or a Customer.
The Fair Credit Reporting Act generally regulates credit reporting
agencies, but also imposes some duties on lenders as users of consumer credit
reports. For instance, the Act prohibits the use of a consumer credit report by
a lender except in connection with a proposed business transaction with the
consumer. The Act also requires that lenders notify consumers when the lenders
take adverse action based upon information obtained from credit reporting
agencies.
The federal regulators are authorized to impose penalties for violations of
these statutes and, in certain cases, to order the Corporation to pay
restitution to injured Customers. Customers may bring actions for
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damages for certain violations. In addition, a Customer may be entitled to
assert a violation of these consumer protection laws by way of set-off against
the Customer's obligation to pay the outstanding loan balance.
The National Bank Act, which governs the activities of national banks,
authorizes national banks to use various alternative interest rates when they
make loans, including the highest interest rate authorized for state chartered
lenders located in the state where the national bank is located. This ability to
"export" rates, as provided for in the Act, is relied upon by the Bank to charge
Customers the interest rates and fees permitted by Delaware law regardless of an
inconsistent law of the state in which the Customer is located, thereby
facilitating the Bank's nationwide lending activities.
Interstate Banking
The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994
permits bank holding companies, with Federal Reserve Board approval, to acquire
banks located in states other than the holding company's home state, generally
without regard to whether the transaction is prohibited under state law. In
addition, effective June 1, 1997, national and state banks with different home
states were permitted to merge across state lines, with approval of the
appropriate federal banking agency, unless the home state of a participating
bank passed legislation prior to this date expressly prohibiting interstate bank
mergers.
Insurance
Section 92 of the National Bank Act authorizes the Bank to engage in the
business of insurance as an agency from a place of less than 5,000 people. In
order to conduct an agency business the Bank must obtain licensing approval in
each state in which it intends to operate and is subject to state regulation on
agency and agent licensing, disclosure requirements, policy delivery and other
matters. State requirements which are so burdensome or onerous as to
significantly interfere with the exercise by a national bank of the powers
granted to it under Section 92 are preempted, subject to certain exemptions. In
addition, as discussed below, the Gramm-Leach-Bliley Act allows qualifying
financial holding companies to engage in insurance agency and underwriting
activities and financial subsidiaries of national banks to engage in insurance
agency activities. State laws that would prevent the exercise of such powers are
preempted.
Financial Modernization Legislation: The Gramm-Leach-Bliley Act
On November 12, 1999, the President signed the Gramm-Leach-Bliley Act into
law. Effective as of March 11, 2000, the Gramm-Leach-Bliley Act:
- allows bank holding companies meeting management, capital and CRA
standards to engage in a substantially broader range of nonbanking
activities than was previously permissible, including insurance
underwriting and agency, and underwriting and making merchant
banking investments in commercial and financial companies;
- allows insurers and other financial services companies to acquire
banks;
- removes various restrictions that previously applied to bank holding
company ownership of securities firms and mutual fund advisory
companies; and
- establishes the overall regulatory structure applicable to bank
holding companies that also engage in insurance and securities
operations.
In order for a bank holding company to engage in the broader range of
activities that are permitted by the Gramm-Leach-Bliley Act, (1) all of its
depository institutions must be well capitalized and well managed and (2) it
must file a declaration with the Federal Reserve Board that it elects to be a
"financial holding company". In addition, to commence any new activity permitted
by the Gramm-Leach-Bliley Act and to acquire any company engaged in any new
activity permitted by the Gramm-Leach-Bliley Act, each insured depository
institution of the financial holding company must have received at least a
"satisfactory" rating in its most recent examination under the Community
Reinvestment Act.
8
<PAGE> 11
The Gramm-Leach-Bliley Act also allows a national bank to own a financial
subsidiary engaged in certain of the nonbanking activities authorized for
financial holding companies. The national bank must meet certain requirements,
including that it and all of its depository institution affiliates be well
capitalized and well managed. Also, to commence any new activity or acquire any
company engaged in any new activity, the national bank must have at least a
"satisfactory" Community Reinvestment Act examination rating. In addition, it
must obtain approval of the OCC.
The Gramm-Leach-Bliley Act also modified laws related to financial privacy
and community reinvestment. The new financial privacy provisions generally
prohibit financial institutions, including the Corporation, from disclosing
nonpublic personal financial information to third parties unless customers have
the opportunity to "opt out" of the disclosure.
COMPETITION
The Corporation's business is highly competitive. The Corporation competes
with numerous banks with national, regional and local operations in domestic and
international markets and with non-bank competitors who issue credit and charge
cards and make other consumer loans. Strategies used by the Corporation's
competitors include targeted marketing, low introductory rates, no annual fee
credit cards, balance transfers and discounts on products and services. The
Corporation also uses these strategies and, in addition, relies on its strategy
of marketing to people with a strong common interest and its superior Customer
service to compete with its competitors.
EMPLOYEES
As of December 31, 1999, the Corporation had approximately 22,000
employees.
IMPORTANT FACTORS REGARDING FORWARD-LOOKING STATEMENTS
From time to time the Corporation may make forward-looking oral or written
statements concerning the Corporation's future performance. Such statements are
subject to risks and uncertainties that may cause the Corporation's actual
performance to differ materially from that set forth in such forward-looking
statements. Words such as "believe", "expect", "anticipate", "intend" or similar
expressions are intended to identify forward-looking statements. Such statements
speak only as of the date on which they are made. The Corporation undertakes no
obligation to update publicly or revise any such statements. Factors which could
cause the Corporation's actual financial and other results to differ materially
from those projected by the Corporation in forward-looking statements include,
but are not limited to the following:
Competition
The Corporation's business is highly competitive. See "Competition" above.
Competition from other lenders could affect the Corporation's loans outstanding,
Customer retention, and the rates and fees charged on the Corporation's loans.
Economic Conditions
The Corporation's business is affected by general economic conditions
beyond the Corporation's control, including employment levels, consumer
confidence, and interest rates. A recession or slowdown in the economy of the
United States or in other markets in which the Corporation does business may
cause an increase in delinquencies and credit losses and reduce new account
growth and charge volume.
Delinquencies and Credit Losses
An increase in delinquencies and credit losses could affect the
Corporation's financial performance. Delinquencies and credit losses are
influenced by a number of factors, including the quality of the Corporation's
credit card and other consumer loans, general economic conditions, the success
of the Corporation's collection efforts, and the average seasoning of the
Corporation's accounts.
9
<PAGE> 12
Interest Rate Increases
An increase in interest rates could increase the Corporation's cost of
funds and reduce the net interest margin. The Corporation's ability to manage
the risk of interest rate increases in the United States and other markets is
dependent on its overall product and funding mix and its ability to successfully
reprice outstanding loans. See "Interest Rate Sensitivity" on page 38 of the
1999 Annual Report to Stockholders, which is incorporated herein by reference,
for a discussion of the Corporation's efforts to manage interest rate risk.
Availability of Funding and Securitization
Changes in the amount, type, and cost of funding available to the
Corporation could affect the Corporation's performance. A major funding
alternative for the Corporation is the securitization of credit card and other
consumer loans. Difficulties or delays in securitizing loans or changes in the
current legal, regulatory, accounting, and tax environment governing
securitizations could adversely affect the Corporation.
Customer Behavior
The acceptance and use of credit card and other consumer loan products for
consumer spending has increased significantly in recent years. The Corporation's
performance could be affected by changes in such acceptance and use, and overall
consumer spending, as well as different acceptance and use in international
markets.
New Products and Markets
The Corporation's performance could be affected by difficulties or delays
in the development of new products or services, including products or services
beyond credit card and other consumer loans, and in the expansion into new
international markets. These may include failure of Customers to accept products
or services when planned, losses associated with the testing of new products,
services or markets, or financial, legal or other difficulties that may arise in
the course of such implementation. In addition, the Corporation could face
competition with new products or services or in new markets, which may affect
the success of such efforts.
Growth
The growth of the Corporation's existing business and the development of
new products and services will be dependent upon the ability of the Corporation
to continue to develop the necessary operations, systems, and technology, hire
qualified people, obtain funding for significant capital investments, and
selectively pursue loan portfolio acquisitions.
Legal and Regulatory
The banking and consumer credit industry is subject to extensive
regulation. Changes in the laws and regulations and in policies applied by
banking or other regulators affecting banking, consumer credit, bankruptcy,
privacy or other matters could impact the Corporation's performance. For
example, in recent years Congress has considered legislation which would have
had the effect of limiting the interest rate that could be charged on credit
card accounts. In addition, the Corporation could incur unanticipated litigation
or compliance costs.
ITEM 2. PROPERTIES
The Corporation has approximately 3,000,000 square feet of administrative
offices and credit card facilities in five office complexes that it owns in
Delaware. The majority of these facilities were designed and built expressly for
the Corporation's credit card operations. These complexes include space for
future expansion.
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<PAGE> 13
MBNA Information Services conducts its processing from an approximately
587,000 square foot facility that the Corporation owns in Dallas, Texas as well
as from approximately 300,000 square feet of office space at the Corporation's
facilities in Newark, Delaware.
MBNA Marketing Systems, Inc. has regional offices in Camden and Belfast,
Maine, Cleveland, Ohio, Dallas, Texas (part of Information Services' facility),
Boca Raton, Florida and Hunt Valley, Maryland. These facilities are owned by the
Corporation.
MBNA Marketing Systems, Inc. has a leased regional office in San Francisco
and leased sales offices in New York City, Chicago and Atlanta. Marketing
Systems leases telesales facilities in Delaware, Maine, New Hampshire, Ohio and
Pennsylvania.
MBNA Europe has approximately 272,000 square feet of administrative offices
and credit card facilities that it owns in Chester, England. It is constructing
additional expansion space in Chester. It has leased sales offices in London,
England and Edinburgh, Scotland and it conducts operations in Ireland from a
leased facility in Dublin, Ireland.
MBNA Canada has approximately 79,000 square feet of leased office space for
its credit card operations in Gloucester and Montreal, Quebec.
ITEM 3. LEGAL PROCEEDINGS
In May 1996, Andrew B. Spark filed a lawsuit against the Corporation, the
Bank and certain of its officers and its subsidiary MBNA Marketing Systems, Inc.
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 violation
of the federal Racketeer Influenced and Corrupt Organizations Act. In February
1998, a class was certified by the District Court. In October 1998, Gerald D.
Broder filed a lawsuit against the Corporation and the Bank in the Supreme Court
of the State of New York, County of New York. 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, common law fraud
and violation of New York consumer protection statutes. The Corporation believes
that its advertising practices were and are proper under applicable federal and
state law and intends to defend these actions vigorously.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the fourth quarter of 1999, no matters were submitted to a vote of
security holders of the Corporation.
------------------------
EXECUTIVE OFFICERS OF THE REGISTRANT
Information concerning the Corporation's executive officers is set forth
below.
Alfred Lerner (66) has been Chief Executive Officer of MBNA Corporation and
Chairman of its Board of Directors since January 1991 and a director of the Bank
since December 1991. He has more than 25 years of management experience in
banking and finance. He has been Chairman of The Town and Country Trust since
1993 and was Chief Executive Officer from 1993 until 1997. He has been Chairman
and owner of the Cleveland Browns since October 1998. A graduate of Columbia
University and Vice Chairman of its Board of Trustees, Mr. Lerner is also
President of the Cleveland Clinic Foundation and a member of its Board of
Trustees. He is also a trustee of New York Presbyterian Hospital and Case
Western Reserve University, and a member of the Board of Directors of the Marine
Corps Law Enforcement Foundation.
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<PAGE> 14
Charles M. Cawley (59) has been President and a director of the Corporation
and Chairman and Chief Executive Officer of the Bank since January 1991. He has
more than 36 years of management experience in the financial services industry
and was the senior member of the group that established the Bank in 1982. He has
served as Chief Executive Officer of the Bank since 1990, and as President since
1985. He has been a director of the Bank since 1982. A graduate of Georgetown
University and a member of its Board of Directors, Mr. Cawley also serves on the
boards of the University of Delaware, the Eisenhower Exchange Fellowships, the
American Architectural Foundation, the Marine Corps Law Enforcement Foundation,
America's Promise and the Owl's Head Transportation Museum. He is Chairman of
the Board of the Grand Opera House in Wilmington, Delaware and serves as a
member of the Board of Trustees of St. Benedict's Preparatory School.
John R. Cochran III (48) oversees all business development and marketing
activities, including sales, marketing, advertising, regional marketing,
telemarketing, and group administration. He is also responsible for Customer
satisfaction, community relations, and external affairs. He has been a Senior
Executive Vice President of the Corporation and an Executive Vice Chairman of
the Bank since November 1998. He has served as the Chief Marketing Officer since
April 1991. He has 27 years of management experience in the financial services
industry and was a member of the group that established the Bank in 1982. He has
been a director of the Bank since 1986.
Bruce L. Hammonds (51) oversees credit, Customer assistance, consumer
finance, control, and information services. He is also responsible for MBNA
Europe, MBNA Canada, and MBNA Consumer Services. He has been a Senior Executive
Vice President of the Corporation and an Executive Vice Chairman of the Bank
since November 1998. He has served as the Chief Operating Officer since 1990. He
has 30 years of management experience in consumer lending and was a member of
the management team that established the Bank in 1982. He has been a director of
the Bank since 1986.
M. Scot Kaufman (50) oversees accounting, finance, and treasury activities.
He is also responsible for administrative services and personnel. He has been a
Senior Executive Vice President of the Corporation since January 2000, Treasurer
since January 1991, Chief Accounting Officer since July 1991, and Chief
Financial Officer since July 1992. He has served as Executive Vice Chairman of
the Bank since January 2000 and as its Chief Financial Officer since 1985. He
has 29 years of experience in the financial services industry and has been with
the Bank since 1985. He has been a director of the Bank since 1986.
Gregg Bacchieri (44) oversees consumer finance. He has been an Executive
Vice President of the Corporation since July 1997 and Senior Vice Chairman of
the Bank since November 1998. He has 21 years of management experience in retail
lending and was a member of the management team that established the Bank in
1982. He has been a director of the Bank since July 1997.
Ronald W. Davies (58) oversees MBNA Hallmark Information Services, which
provides the Corporation with telecommunications, production operations,
information systems, and systems operations and development. He has been an
Executive Vice President of the Corporation since October 1991. He has served as
Senior Vice Chairman of the Bank since December 1997 and Chief Technology
Officer of the Bank since April 1991. He has served as Chairman and Chief
Executive Officer of MBNA Hallmark Information Services, Inc. since August 1991.
He has 35 years of experience in information systems and technology management
and has been with the Corporation since 1991. He has been a director of the Bank
since April 1991.
Charles C. Krulak (58) oversees administrative services, audit, benefits,
compensation, compliance, personnel, quality assurance and risk management. He
joined the Corporation in August 1999 as an Executive Vice President of the
Corporation and as a Senior Vice Chairman and director of the Bank. Prior to
joining the Corporation, he had a 35 year career in the U.S. Marine Corp,
including serving four years as Commandant.
Richard K. Struthers (44) oversees international, insurance, deposit,
travel, business card and portfolio acquisition activities. He has been an
Executive Vice President of the Corporation since April 1997. He has served as
Senior Vice Chairman of the Bank since December 1997. He has 22 years of
experience in consumer lending and was a member of the group that established
the Bank in 1982. He has been a director of the Bank since January 1997.
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<PAGE> 15
Lance L. Weaver (45) oversees corporate affairs, law, industry relations,
real estate, communications, community initiatives and The MBNA Foundation. He
has been an Executive Vice President of the Corporation since April 1994. He has
served as Senior Vice Chairman of the Bank since July 1997 and served as Chief
Administrative Officer of the Bank from February 1993 until August 1999. He has
25 years of experience in consumer lending and administration and has been with
the Corporation since 1991. He has been a director of the Bank since February
1993.
Kenneth F. Boehl (45) oversees risk management and personnel activities. He
has been an Executive Vice President of the Corporation and Vice Chairman of the
Bank since July 1997. He has been the Senior Control Officer of the Bank since
April 1992. He has 24 years of experience in financial management and has been
with the Corporation since 1988. He has been a director of the Bank since July
1997.
Jules J. Bonavolonta (59) oversees special operations, operating services
and facility management. He has been an Executive Vice President of the
Corporation and Vice Chairman of the Bank since October 1997. Prior to joining
the Corporation, he served as President of Universal Network, Inc., a security
consulting firm, from August 1995 to March 1997. He was director of corporate
security for Consolidated Edison of New York from January 1991 to August 1992
and for Republic National Bank of New York from August 1992 to July 1995. He had
a 23 year career with the Federal Bureau of Investigation which included
extensive experience in domestic and international investigations, including as
Chief of the Organized Crime and Narcotics Division. He joined the Corporation
in March 1997 and has been a director of the Bank since October 1997.
Michael G. Rhodes (34) oversees marketing. He has been an Executive Vice
President of the Corporation and a Vice Chairman and Director of the Bank since
August 1998. He joined the Corporation in 1994. He is Mr. Cawley's son-in-law.
John W. Scheflen (53) oversees corporate affairs, government affairs and
law. He has been an Executive Vice President, General Counsel and Secretary of
the Corporation and Secretary and Cashier of the Bank since March 1992. He has
been a Vice Chairman and director of the Bank since September 1998. Prior to
joining the Corporation he was a partner with Venable, Baetjer and Howard from
1984 to March 1992. He has 25 years of experience in law and has been with the
Corporation since 1992.
Michelle D. Shepherd (33) oversees advertising, including the Corporation's
in-house advertising, database marketing, direct response marketing, research
and development, and loyalty marketing. She has been an Executive Vice President
of the Corporation and a Vice Chairwoman and director of the Bank since January
2000. She has been with the Company since 1985.
David W. Spartin (42) oversees investor relations, media relations, and
communications. He has been an Executive Vice President of the Corporation since
April 1997 and has served as Vice Chairman of the Bank since March 1997. He has
21 years of experience in the financial services industry and has been with the
Corporation since 1991. He has been a director of the Bank since March 1997.
Vernon H. C. Wright (57) oversees foreign and domestic treasury activities,
including securitization, investments and funding, and corporate finance
activities. He has been an Executive Vice President and Chief Corporate Finance
Officer of the Corporation and Chief Corporate Finance Officer of the Bank since
July 1992. He has been Vice Chairman of the Bank since September 1995. He has
more than 31 years of experience in retail and commercial lending and has been
with the Corporation since 1991. He has been a director of the Bank since
November 1992.
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<PAGE> 16
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
"Common Stock Price Range and Dividends" on page 74 and "Dividend
Limitations" on pages 35 and 36 of the 1999 Annual Report to Stockholders are
incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA
"Ten-Year Statistical Summary" on pages 22 and 23 of the 1999 Annual Report
to Stockholders is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" on pages 25 through 41 of the 1999 Annual Report to Stockholders is
incorporated herein by reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
"Interest Rate Sensitivity" on pages 38 and 39 and "Foreign Currency
Exchange Rate Sensitivity" on page 38 of the 1999 Annual Report to Stockholders
are incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Consolidated Financial Statements and Notes to the Consolidated
Financial Statements, the "Report of Independent Auditors", and the "Summary of
Consolidated Quarterly Financial Information" on pages 44 through 72 of the 1999
Annual Report to Stockholders are incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
"Election of Directors" on pages 4 and 5 and "Section 16(a) Beneficial
Ownership Reporting Compliance" on page 3 in the Definitive Proxy Statement are
incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
"Election of Directors" on pages 4 and 5, "Executive Compensation" on pages
6 through 9 and "Compensation Committee Interlocks and Insider Participation" on
page 11 in the Definitive Proxy Statement are incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
"Security Ownership of Management and Certain Beneficial Owners" on pages 2
and 3 in the Definitive Proxy Statement is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
"Compensation Committee Interlocks and Insider Participation" on page 11
and "Certain Relationships" on page 12 in the Definitive Proxy Statement are
incorporated herein by reference.
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<PAGE> 17
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
1. The following consolidated financial statements of MBNA Corporation and
subsidiaries are incorporated herein by reference from the pages designated in
the 1999 Annual Report to Stockholders:
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Consolidated Statements of Financial Condition, December 31,
1999 and 1998............................................. 44
Consolidated Statements of Income for the years ended
December 31, 1999, 1998 and 1997.......................... 45
Consolidated Statements of Changes in Stockholders' Equity
for the years ended December 31, 1999, 1998 and 1997...... 46
Consolidated Statements of Cash Flows for the years ended
December 31, 1999, 1998 and 1997.......................... 47
Notes to the Consolidated Financial Statements.............. 48-70
Report of Independent Auditors.............................. 71
</TABLE>
2. Financial Statement Schedules
No Financial Statement Schedules are required to be filed.
3. Exhibits:
The following exhibits are incorporated by reference or filed
herewith. References to the 1990 Form S-1 are to the Registrant's
Registration Statement on Form S-1 effective January 22, 1991, Registration
No. 33-38125. References to the 1997 Form S-4 are to Amendment No. 1 of the
Registrant's Registration Statement on Form S-4, Registration No.
333-21181, filed on February 25, 1997. References to the 1991 Form 10-K,
the 1992 Form 10-K, the 1993 Form 10-K, the 1994 Form 10-K, the 1995 Form
10-K, the 1996 Form 10-K, the 1997 Form 10-K and the 1998 Form 10-K are to
the Registrant's Annual Reports on Form 10-K for the years ended December
31, 1991, 1992, 1993, 1994, 1995, 1996, 1997 and 1998, respectively.
<TABLE>
<S> <C>
Exhibit 3.1 Articles of Incorporation, as amended and supplemented
(incorporated by reference to Exhibit 3.1 of Form 10-Q for
the quarter ended March 31, 1998).
Exhibit 3.2 By-laws, as amended.
Exhibit 4.1* Senior Indenture dated as of September 29, 1992, between the
Registrant and Bankers Trust Company, as Trustee.
Exhibit 4.2* Subordinated Indenture, dated as of November 24, 1992,
between the Registrant and Harris Trust and Savings Bank, as
Trustee.
Exhibit 4.3* Fiscal and Paying Agency Agreement, dated September 21,
1992, between MBNA America Bank, N.A. and Harris Trust and
Savings Bank, as Fiscal and Paying Agent, for the 7.25%
Subordinated Notes due 2002.
Exhibit 4.4* Issuing and Paying Agency Agreement dated as of December 10,
1991, and amended as of August 11, 1993, December 21, 1994
and May 6, 1996 between MBNA America Bank, N.A. and First
Trust of New York, National Association.
Exhibit 4.5 Junior Subordinated Indenture between the Registrant and The
Bank of New York, as Debenture Trustee (incorporated by
reference to Exhibit 4(c) of 1997 Form S-4).
</TABLE>
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<TABLE>
<S> <C>
Exhibit 4.6 Amended and Restated Trust Agreement, dated as of December
18, 1996, between the Registrant and The Bank of New York
(incorporated by reference to Exhibit 4.6 of 1996 Form
10-K).
Exhibit 4.7 Guarantee Agreement, dated as of December 18, 1996, between
the Registrant and The Bank of New York (incorporated by
reference to Exhibit 4.7 of 1996 Form 10-K).
Exhibit 4.8 Amended and Restated Trust Agreement, dated as of January
23, 1997, between the Registrant and The Bank of New York
(incorporated by reference to Exhibit 4.8 of 1996 Form
10-K).
Exhibit 4.9 Guarantee Agreement, dated as of January 23, 1997, between
the Registrant and The Bank of New York (incorporated by
reference to Exhibit 4.9 of 1996 Form 10-K).
Exhibit 4.10 Amended and Restated Trust Agreement, dated as of February
24, 1997, between the Registrant and The Bank of New York
(incorporated by reference to Exhibit 4(e)(4) of the 1997
Form S-4).
Exhibit 4.11 Guarantee Agreement, dated as of March 31, 1997 between the
Registrant and The Bank of New York (incorporated by
reference to Exhibit 4.11 of 1997 Form 10-K).
Exhibit 4.12 Agency Agreement, dated as of July 17, 1997, among MBNA
America Bank, N.A., as Issuer, The First National Bank of
Chicago, as Global Agent, The First National Bank of
Chicago, London Office, as London Paying Agent and London
Issuing Agent, The First National Bank of Chicago, New York
Office, as NY Paying Agent and Registrar, and Banque
Indosuez Luxembourg, as Luxembourg Paying Agent and Transfer
Agent, for the Global Bank Note Program.
Exhibit 10.1 Tax Sharing and Indemnity Agreement with MNC Financial
(incorporated by reference to Exhibit 10.2 of 1990 Form
S-1).
Exhibit 10.2 License Agreement with MasterCard (incorporated by reference
to Exhibit 10.3 of 1990 Form S-1).
Exhibit 10.3 License Agreement with VISA (incorporated by reference to
Exhibit 10.4 of 1990 Form S-1).
Exhibit 10.4 Share Purchase Agreement with Alfred Lerner (including
Registration Rights Agreement) (incorporated by reference to
Exhibit 10.10 of 1990 Form S-1).
Exhibit 10.5 Amended and Restated Competitive Advance and Revolving
Credit Facility Agreement, dated as of January 15, 1997,
among MBNA America Bank, N.A., certain lenders and Chase
Manhattan Bank, as Agent (incorporated by reference to
Exhibit 10.5 of 1996 Form 10-K).
Exhibit 10.6 Amendments dated October 1, 1997, March 9, 1998 and
September 29, 1999 to the Credit Agreement, dated as of
October 5, 1994, between Registrant and The Bank of New York
(the Amendment dated September 30, 1998 is incorporated by
reference to Exhibit 10.7 of 1998 Form 10-K, the Amendment
dated October 2, 1996 and the Amendment dated June 28, 1996
are incorporated by reference to Exhibit 10.7 of 1996 Form
10-K, the Amendment dated October 4, 1995 is incorporated by
reference to Exhibit 10.7 of 1995 Form 10-K and the original
Agreement is incorporated by reference to Exhibit 10.8 of
1994 Form 10-K).
Exhibit 10.7** Form of Executive Non-Compete Agreement (incorporated by
reference to Exhibit 10 of Form 10-Q for the quarter ended
September 30, 1999).
</TABLE>
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<PAGE> 19
<TABLE>
<S> <C>
Exhibit 10.8** 1991 Long Term Incentive Plan, as amended (incorporated by
reference to Exhibit 10.3 of Form 10-Q for the quarter ended
March 31, 1997 and Exhibit 10.8 of 1995 Form 10-K), and
forms of Stock Option Agreements (1993 agreement
incorporated by reference to Exhibit 10.12 of 1993 Form 10-K
and 1995 agreements incorporated by reference to Exhibit
10.8 of 1995 Form 10-K).
Exhibit 10.9** 1997 Long Term Incentive Plan, as amended (incorporated by
reference to Exhibit 10.1 of Form 10-Q for the quarter ended
March 31, 1999) and form of Stock Option Grant (incorporated
by reference to Exhibit 10.9 of 1997 Form 10-K).
Exhibit 10.10** Form of Restricted Stock Agreement (incorporated by
reference to Exhibit 10.9 of 1995 Form 10-K).
Exhibit 10.11** MBNA Corporation Supplemental Executive Retirement Plan, as
amended and restated (incorporated by reference to Exhibit
10.11 of 1998 Form 10-K).
Exhibit 10.12** Assumed Deferred Compensation Plans (1989 Deferred
Compensation Plan incorporated by reference to Exhibit 10.12
of 1991 Form 10-K and 1988 Deferred Compensation Plan
incorporated by reference to Exhibit 10.14 of 1993 Form
10-K).
Exhibit 10.13** MBNA Corporation Senior Executive Performance Plan
(incorporated by reference to Exhibit 10.2 of Form 10-Q for
the quarter ended March 31, 1997).
Exhibit 10.14** Form of Split Dollar Agreement (incorporated by reference to
Exhibit 10.18 of 1992 Form 10-K).
Exhibit 10.15** Deferred Compensation Plan and form of Agreement, as amended
and restated effective April 1, 1995 (incorporated by
reference to Exhibit 10.16 of 1994 Form 10-K).
Exhibit 10.16 Amended and Restated Multicurrency Revolving Credit Facility
Agreement dated as of October 11, 1996, among MBNA
International Bank Limited, certain lenders and The First
National Bank of Chicago, as Agent (incorporated by
reference to Exhibit 10.16 of 1997 Form 10-K).
Exhibit 12 Computation of Ratio of Earnings to Combined Fixed Charges
and Preferred Stock Dividend Requirements.
Exhibit 13 1999 Annual Report to Stockholders.
Exhibit 21 Subsidiaries of the Corporation.
Exhibit 23 Consent of Independent Auditors.
Exhibit 27 Financial Data Schedule.
</TABLE>
- ---------------
* The Registrant agrees to furnish a copy to the Securities and Exchange
Commission on request.
** Management contract or compensatory plan or arrangement required to be filed
as an exhibit pursuant to Item 14(c) of Form 10-K.
4. Reports on Form 8-K
1. Report dated October 7, 1999, reporting MBNA Corporation's earnings
release for the third quarter of 1999.
2. Report dated October 31, 1999, reporting the net credit losses and
loan delinquencies for MBNA America Bank, N.A., for its net loan portfolio
and managed loan portfolio for October 1999.
3. Report dated November 5, 1999, reporting the securitization of
$750.0 million of credit card receivables by MBNA America Bank, N.A.
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<PAGE> 20
4. Report dated November 30, 1999, reporting the net credit losses and
loan delinquencies for MBNA America Bank, N.A., for its net loan portfolio
and managed loan portfolio for November 1999.
5. Report dated December 1, 1999, reporting the securitization of
$500.0 million of credit card receivables by MBNA America Bank, N.A.
6. Report dated December 9, 1999, reporting the securitization of
250.0 million pounds sterling of credit card receivables by MBNA
International Bank Limited.
7. Report dated December 31, 1999, reporting the net credit losses and
loan delinquencies for MBNA America Bank, N.A., for its net loan portfolio
and managed loan portfolio for December 1999.
8. Report dated January 10, 2000, reporting MBNA Corporation's
earnings release for the fourth quarter of 1999.
9. Report dated January 31, 2000, reporting the net credit losses and
loan delinquencies for MBNA America Bank, N.A., for its net loan portfolio
and managed loan portfolio for January 2000.
10. Report dated February 29, 2000, reporting the net credit losses
and loan delinquencies for MBNA America Bank, N.A., for its net loan
portfolio and managed loan portfolio for February 2000.
11. Report dated March 8, 2000, reporting the securitization of $750.0
million of credit card receivables by MBNA America Bank, N.A.
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<PAGE> 21
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
MBNA CORPORATION
By: /s/ ALFRED LERNER
------------------------------------
Alfred Lerner
Chairman and Chief Executive Officer
March 17, 2000
Pursuant to the requirement of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ ALFRED LERNER Chairman, Chief Executive Officer and March 17, 2000
- ------------------------------------------ Director (principal executive officer)
Alfred Lerner
/s/ CHARLES M. CAWLEY President and Director March 17, 2000
- ------------------------------------------
Charles M. Cawley
/s/ M. SCOT KAUFMAN Senior Executive Vice President and March 17, 2000
- ------------------------------------------ Treasurer (principal financial and
M. Scot Kaufman accounting officer)
/s/ JAMES H. BERICK Director March 17, 2000
- ------------------------------------------
James H. Berick, Esq.
/s/ BENJAMIN R. CIVILETTI Director March 17, 2000
- ------------------------------------------
Benjamin R. Civiletti, Esq.
/s/ RANDOLPH D. LERNER Director March 17, 2000
- ------------------------------------------
Randolph D. Lerner, Esq.
/s/ STUART L. MARKOWITZ Director March 17, 2000
- ------------------------------------------
Stuart L. Markowitz, M.D.
/s/ MICHAEL ROSENTHAL Director March 17, 2000
- ------------------------------------------
Michael Rosenthal, Ph.D.
</TABLE>
19
<PAGE> 22
[LOGO] PRINTED ON RECYCLED PAPER
<PAGE> 23
EXHIBIT INDEX
The following exhibits are filed with the MBNA Corporation annual report on
Form 10-K for the fiscal year ended December 31, 1999:
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<S> <C>
3.2 By-laws, as amended.
4.12 Agency Agreement, dated as of July 17, 1997, among MBNA
America Bank, N.A., as Issuer, The First National Bank of
Chicago, as Global Agent, The First National Bank of
Chicago, London Office, as London Paying Agent and London
Issuing Agent, The First National Bank of Chicago, New York
Office, as NY Paying Agent and Registrar, and Banque
Indosuez Luxembourg, as Luxembourg Paying Agent and Transfer
Agent, for the Global Bank Note Program.
10.6 Amendments dated October 1, 1997, March 9, 1998 and
September 29, 1999 to the Credit Agreement, dated as of
October 5, 1994, between Registrant and The Bank of New York
(the Amendment dated September 30, 1998 is incorporated by
reference to Exhibit 10.7 of 1998 Form 10-K, the Amendment
dated October 2, 1996 and the Amendment dated June 28, 1996
are incorporated by reference to Exhibit 10.7 of 1996 Form
10-K, the Amendment dated October 4, 1995 is incorporated by
reference to Exhibit 10.7 of 1995 Form 10-K and the original
Agreement is incorporated by reference to Exhibit 10.8 of
1994 Form 10-K).
12 Computation of Ratio of Earnings to Combined Fixed Charges
and Preferred Stock Dividend Requirements.
13 1999 Annual Report to Stockholders.
21 Subsidiaries of the Corporation.
23 Consent of Independent Auditors.
27 Financial Data Schedule.
</TABLE>
<PAGE> 1
EXHIBIT 3.2
MBNA CORPORATION
COMPOSITE BYLAWS
ARTICLE I - STOCKHOLDERS
SECTION 1. ANNUAL MEETING
The annual meeting of the stockholders of the Corporation, for the
election of the directors and for the transaction of such other business within
the power of the Corporation as properly may come before the meeting, shall be
held at such place as the Board of Directors may designate, at such date and
hour during the month of April as shall be determined by the Board of Directors.
SECTION 2. SPECIAL MEETING
At any time in the intervals between annual meetings, a special meeting
of the stockholders may be called by the Chairman of the Board of Directors or
by the President or by the Board of Directors. Upon the request in writing by
stockholders entitled to cast at least 25% of all the votes entitled to be cast
at the meeting, the Secretary shall call a special meeting of the stockholders.
The request shall state the purpose of the meeting and the matters proposed to
be acted on. The Secretary shall inform such stockholders of the reasonably
estimated costs of preparing and mailing the notice of the meeting and, upon
payment to the Corporation of such costs, the Secretary shall give notice of the
time, place and purpose of the meeting in the manner provided in these Bylaws.
Unless requested by stockholders entitled to cast a majority of all the votes
entitled to be cast at the meeting, a special meeting need not be called to
consider any matter which is substantially the same as a matter voted on at any
special meeting of the stockholders held during the preceding 12 months.
SECTION 3. NOTICE OF MEETING
Not less than ten (10) days nor more than ninety (90) days before the
date of every stockholder's meeting, the Secretary shall give to each
stockholder entitled to vote thereat, written or printed notice stating the time
and place of such meeting, and in the case of a special meeting, the purpose or
purposes for which the meeting is called, by third-class or first-class mail,
postage prepaid, mailed to each stockholder of record at his address as shown
upon the books of the Corporation.
<PAGE> 2
SECTION 4. NOTICE OF STOCKHOLDERS BUSINESS
At any annual meeting of the stockholders, only such business shall be
conducted as shall have been properly brought before the meeting. To be properly
brought before an annual meeting, the business, including any nomination for
election of directors, must be (i) specified in the notice of meeting (or any
supplement thereto) given by or at the direction of the board of directors, (ii)
otherwise properly brought before the meeting by or at the direction of the
board of directors, or (iii) otherwise properly brought before the meeting by a
stockholder who complies with the notice procedures set forth in this Section 4.
For business to be properly brought before an annual meeting by a
stockholder, the stockholder must have given timely notice thereof in writing to
the Secretary of the Corporation and such business must be a proper matter for
stockholder action. To be timely, such notice must be delivered to the Secretary
at the principal executive offices of the Corporation not later than the close
of business on the 90th day prior to the first anniversary of the preceding
year's annual meeting. If the date of the annual meeting is more than 30 days
before or more than 60 days after such anniversary date, to be timely any such
notice must be so delivered not later than the close of business on the later of
the 90th day prior to such annual meeting or the 10th day following the day on
which public announcement of such meeting is first made. In no event shall the
public announcement of an adjournment of an annual meeting commence a new time
period for the giving of a stockholder's notice as described above. In the event
that the number of directors is increased and there is a public announcement of
the increase or a public announcement naming all of the nominees for director at
least 100 days prior to the first anniversary of the preceding year's annual
meeting, a stockholder's notice shall be considered timely if delivered within
the time period described above. If such public announcement is made later, a
stockholder's notice shall be considered timely, but only with respect to
nominees for any new positions created by such increase, if it shall be
delivered not later than the close of business on the 10th day following the day
on which such public announcement is first made by the Corporation.
Any such notice by a stockholder shall set forth as to each matter the
stockholder proposes to bring before the meeting (i) a brief description of the
business desired to be brought before the meeting and the reasons for conducting
such business at the meeting, (ii) the name and address of the stockholder
proposing such business, as they appear on the Corporation's books, and of the
beneficial owner, if any, on whose behalf the proposal is made, (iii) the class
and number of shares of the capital stock of the Corporation which are
beneficially owned by such stockholder and such beneficial owner, if any, and
(iv) any material interest of such stockholder and such beneficial owner, if
any, in such business. If a stockholder proposes the nomination for election of
directors, such notice by the stockholder shall also set forth as to each person
whom the stockholder proposes to nominate (i) the name, age, business address
and residence address of such person, (ii) the principal occupation or
employment of such person, (iii) the class and number of shares of the capital
stock of the Corporation which are beneficially owned by such person and
<PAGE> 3
(iv) any other information relating to such person that is required to be
disclosed in solicitations of proxies for the election of directors pursuant to
Regulation 14A under the Securities Exchange Act of 1934 ("Exchange Act") or any
successor regulation thereto, including without limitation such person's written
consent to being named in the proxy statement as a nominee and to serving as a
director if elected and whether any person intends to seek reimbursement from
the Corporation of the expenses of any solicitation of proxies should such
person be elected a director of the Corporation. No person shall be entitled to
receive reimbursement from the Corporation of the expenses of a solicitation of
proxies for the election as a director of a person named in such notice unless
such notice states that such reimbursement will be sought from the Corporation.
Only such business shall be conducted at a special meeting of
stockholders as shall have been brought before the meeting pursuant to the
Corporation's notice of meeting. Nominations of persons for election to the
board of directors may be made at a special meeting of stockholders at which
directors are to be elected pursuant to the Corporation's notice of meeting (i)
by or at the direction of the board of directors or (ii) by a stockholder who
complies with the notice procedures set forth in this Section 4. In the event
the Corporation calls a special meeting of stockholders for the purpose of
electing one or more directors to the board of directors, any such stockholder
may nominate a person or persons, as the case may be, for election to such
position(s) as specified in the Corporation's notice of meeting, if the
stockholder gives timely notice thereof to the Secretary of the Corporation in
writing and setting forth the information required in the paragraph immediately
above. To be timely, any such notice must be delivered to the Secretary at the
principal executive offices of the Corporation not later than the close of
business on the later of the 90th day prior to such special meeting or the 10th
day following the day on which public announcement is first made of the date of
the special meeting and of the nominees proposed by the board of directors to be
elected at such meeting. In no event shall the public announcement of an
adjournment of a special meeting commence a new time period for the giving of a
stockholder's notice as described above.
For purposes of this Section 4, "public announcement" shall mean
disclosure in a press release reported by the Dow Jones News Service, Associated
Press or comparable national news service or in a document publicly filed by the
Corporation with the Securities and Exchange Commission pursuant to Section 13,
14 or 15(d) of the Exchange Act.
Notwithstanding anything in these bylaws to the contrary, no business
shall be conducted at any annual or special meeting except in accordance with
the procedures set forth in this Section. The chairman of the annual or special
meeting shall, if the facts warrant, determine and declare to the meeting that
business was not properly brought before the meeting in accordance with the
provisions of this Section and, if he should so determine, he shall so declare
to the meeting that any such business not properly brought before the meeting
shall not be considered or transacted.
<PAGE> 4
Notwithstanding the foregoing provisions of this Section 4, a
stockholder shall also comply with all applicable requirements of the Exchange
Act and the rules and regulations thereunder with respect to the matters set
forth in this Section 4. Nothing in this Section 4 shall be deemed to affect any
rights of stockholders to request inclusion of proposals in the Corporation's
proxy statement pursuant to Rule 14a-8 under the Exchange Act or the holders of
any series of preferred stock to elect directors under specified circumstances.
SECTION 5. QUORUM
At any meeting of stockholders the presence in person or by proxy of
stockholders entitled to cast a majority of the votes thereat shall constitute a
quorum.
A meeting of stockholders convened on the date for which it was called
may be adjourned from time to time by vote of a majority of the shares present
in person or by proxy even if less than a quorum without further notice to a
date not more than 120 days after the original record date. At such reconvened
meeting at which a quorum shall be present, any business may be transacted which
might have been transacted at the meeting originally called. The stockholders
present at a duly organized meeting may continue to transact business until
adjournment, notwithstanding the withdrawal of enough stockholders to leave less
than a quorum.
SECTION 6. PROXIES
At all meetings of stockholders, a stockholder may vote the shares
owned of record by him either in person or by proxy executed in writing by the
stockholder or by his duly authorized attorney-in-fact. Such proxy shall be
filed with the Secretary of the Corporation before or at the time of the
meeting. No proxy shall be valid after eleven (11) months from the date of its
execution, unless otherwise provided in the proxy.
SECTION 7. VOTING
Each stockholder shall be entitled to one vote for each share of stock
held by him. At all elections of directors of the Corporation, each stockholder
shall have the right to vote, in person or by proxy, the shares owned of record
by him, for as many persons as there are directors to be elected and for whose
election he has a right to vote. A plurality of the votes cast at a meeting of
stockholders, duly called and at which a quorum is present, shall be sufficient
to elect any director. A majority of the votes cast at a meeting of
stockholders, duly called and at which a quorum is present, shall be sufficient
to take or authorize action upon any other matter which may properly come before
the meeting unless more than a majority of votes is required by law or the
Charter.
<PAGE> 5
ARTICLE II - DIRECTORS
SECTION 1. POWERS
The business and affairs of the Corporation shall be managed by or
under the direction of its Board of Directors, which may exercise all of the
powers of the Corporation, except such as are by statute expressly conferred
upon or reserved to the stockholders.
SECTION 2. NUMBER AND TENURE
The number of directors of the Corporation shall be that number as may
be fixed from time to time by resolution of the Board of Directors but in no
event shall be less than the lesser of three (3) or the number of stockholders
or more than twenty (20).
SECTION 3. VACANCIES
Any vacancy occurring in the Board of Directors, other than one
occurring because of an increase in the number of directors, may be filled by
the affirmative vote of a majority of the remaining directors. A vacancy
occurring in the Board of Directors by reason of an increase in the number of
directors may be filled by a majority of the entire Board of Directors. A
director elected to fill a vacancy shall be elected for the unexpired term of
his predecessor in office.
SECTION 4. REGULAR MEETINGS
The Board of Directors shall meet for the purpose of organization, the
election of officers, and the transaction of other business as soon as
practicable after each annual election of directors. Notice of such meeting need
not be given.
The Board of Directors shall also meet regularly at such times as may
be stated from time to time by the Board.
SECTION 5. SPECIAL MEETINGS
Special meetings of the Board of Directors may be called by the
Chairman of the Board of Directors, the President or by a majority of the Board.
<PAGE> 6
SECTION 6. NOTICE
Notice of every regular, except as otherwise provided in Article II,
Section 4 of these Bylaws, or special meeting of the Board shall be given to
each director at least one (l) day previous thereto by written notice delivered
personally or mailed to his last known business or residence address, or by
telegram sent to his last known business or residence address, or by personal
telephone call. Any director may waive notice of any meeting by written waiver
filed with the records of the meeting, either before or after the holding
thereof. The attendance of a director at a meeting shall constitute a waiver of
notice of such meeting, except where a director attends a meeting for the
express purpose of objecting to the transaction of any business because the
meeting is not lawfully called or convened. Neither the business to be
transacted at, nor the purpose of, any regular or special meeting of the Board
of Directors need be specified in the notice or waiver of notice of such
meeting.
SECTION 7. QUORUM
A majority of the Board of Directors shall constitute a quorum for the
transaction of business, but if less than such quorum is present at a meeting, a
majority of the directors present may adjourn the meeting from time to time
without further notice.
SECTION 8. MANNER OF ACTING
The action of a majority of the directors present at a meeting at which
a quorum is present shall be the action of the Board of Directors unless the
concurrence of a greater proportion is required for such action by law, the
Charter or these Bylaws.
SECTION 9. COMMITTEES
The Board of Directors may establish committees, composed of at least
two directors, from among its members. Any such committee shall serve at the
pleasure of the Board of Directors and shall have such powers in the management
of the business and affairs of the Corporation as may be delegated by the Board
of Directors consistent with law. The Board of Directors may fill any vacancy on
a committee. Committees shall meet at the call of the Chairman of the Board of
Directors or any two or more members. A majority of the members of a committee
shall constitute a quorum for the transaction of business and the actions of a
majority of the members present at a meeting at which a quorum is present shall
be the action of the committee. The members of any committee present at a
meeting, whether or not they constitute a quorum, may appoint a director to act
in the place of an absent member. Each committee shall report its actions to the
Board of Directors. Any action taken by a committee shall be subject to review
or alteration by the Board of Directors, provided that no rights of third
persons arising from any action taken or permitted upon the failure of approval
of such committee shall be affected by any such review or alteration or by
disapproval by the Board of Directors of any report by the committee.
<PAGE> 7
SECTION 10. COMPENSATION
Directors shall receive for their services as directors of the
Corporation such compensation as shall be determined by resolution of the Board
of Directors. A director may serve the Corporation or its subsidiaries in any
other capacity and receive compensation therefor.
SECTION 11. INFORMAL ACTION
Any action required or permitted to be taken at any meeting of the
Board of Directors may be taken without a meeting, if a written consent to such
action is signed by all members of the Board of Directors and such written
consent is filed with the minutes of proceedings of the Board of Directors.
ARTICLE III - OFFICERS
SECTION 1. NUMBER
The officers of the Corporation shall be a Chairman of the Board, a
President, one or more Vice Presidents, a Secretary, a Treasurer, and such other
officers as the Board of Directors may elect or may be appointed as provided in
Section 2 hereof. Any two offices may be held by the same persons, except those
of President and Vice President, but no officer shall execute, acknowledge or
verify any instrument in more than one capacity, if such instrument is required
to be executed, acknowledged or verified by any two or more officers. In its
discretion, the Board of Directors may leave unfilled any offices except those
of President, Treasurer and Secretary.
SECTION 2. ELECTION AND TENURE
The officers of the Corporation shall be elected by the Board of
Directors at the first meeting of the Board of Directors held after each annual
meeting of the stockholders, or as soon after such first meeting as may be
convenient. Each officer shall hold office for a term of one (l) year and until
his successor shall have been duly elected and shall have qualified.
SECTION 3. REMOVAL
Any officer or agent of the Corporation may be removed by the Board of
Directors whenever, in its judgment, the best interests of the Corporation will
be served thereby, but such removal shall be without prejudice to the contract
rights, if any, of the person so removed. The Board of Directors may authorize
any officer to remove subordinate officers.
<PAGE> 8
SECTION 4. VACANCIES
A vacancy in any office may be filled by the Board of Directors for the
unexpired portion of the term.
SECTION 5. CHAIRMAN OF THE BOARD
The Chairman of the Board, if one is elected by the Board of Directors,
shall be the chief executive officer of the Corporation, shall have general
charge and supervision of the policies and affairs of the Corporation, shall
preside at all meetings of the Board of Directors and stockholders and shall
have such other duties as are provided in these Bylaws and as from time to time
may be assigned by the Board of Directors.
SECTION 6. PRESIDENT
The President shall have such duties as are provided in these Bylaws or
as from time to time may be assigned by the Board of Directors and the Chairman
of the Board. In the absence of the Chairman of the Board of Directors or if one
is not elected, the President shall perform the duties and exercise the
functions of the Chairman of the Board of Directors.
SECTION 7. VICE PRESIDENTS
The Vice President or Vice Presidents shall have such duties and
functions as from time to time may be assigned by the Board of Directors or the
Chairman of the Board or the President, except as may otherwise be provided by
the Board of Directors.
SECTION 8. SECRETARY
The Secretary shall be responsible for the minute books of the
Corporation, in which he shall maintain and preserve the organization papers of
the Corporation, the Articles of Incorporation, the Bylaws and the proceedings
of regular and special meetings of the stockholders, the Board of Directors and
any committees. He shall be responsible for the custody of the seal of the
Corporation and shall be responsible for such other duties and functions as may
be assigned from time to time by the Board of Directors, the Chairman of the
Board or the President.
SECTION 9. TREASURER
The Treasurer shall have general charge of the financial affairs of the
Corporation. He shall in general have all powers and perform all duties and
functions incident to the office of Treasurer and such as may from time to time
be prescribed by the Board of Directors, the Chairman of the Board or the
President.
<PAGE> 9
SECTION 10. OTHER OFFICERS
Such other officers as may be elected by the Board of Directors shall
have such powers and perform such duties as the Board of Directors, the Chairman
of the Board of Directors or the President may from time to time prescribe.
SECTION 11. SALARIES
Salaries to be paid to all officers and employees shall be fixed in
such manner as the Board of Directors may determine from time to time and no
officer shall be prevented from receiving such salary by reason of the fact that
he is also a director of the Corporation.
SECTION 12. SPECIAL APPOINTMENTS
In the absence or incapacity of any officer, or in the event of a
vacancy in any office, the Board of Directors may designate any person to fill
any such office pro tempore or for any particular purpose.
SECTION 13. VOTING STOCK HELD BY THE CORPORATION
Unless otherwise ordered by the Board of Directors, the Chairman of the
Board of Directors, the President or a Vice President or other officer thereunto
duly authorized by the Chairman of the Board of Directors or the President shall
have full power and authority on behalf of the Corporation to attend and to vote
at any meeting of stockholders of any corporation in which this Corporation may
hold stock, and may exercise on behalf of the Corporation any and all of the
rights and powers incident to the ownership of such stock at any such meeting,
and shall have power and authority to execute and deliver proxies and consents
on behalf of this Corporation in connection with the exercise by this
Corporation of the rights and powers incident to the ownership of such stock.
The Board of Directors, from time to time, may confer like powers upon any other
person or persons.
ARTICLE IV - INDEMNIFICATION
The Corporation shall indemnify its directors to the fullest extent
that indemnification of directors is permitted by the Maryland General
Corporation Law. The Corporation shall indemnify its officers to the same extent
as its directors and to such further extent as is consistent with law. The
Corporation shall indemnify its directors and officers who, while serving as
directors or officers of the Corporation, also serve at the request of the
Corporation as a director, officer, partner, trustee, employee, agent or
fiduciary of another corporation, partnership, joint venture, trust, other
enterprise or employee benefit plan to the fullest extent consistent with law.
The indemnification and other rights provided by this Article shall continue as
to a person who has ceased to be a
<PAGE> 10
director or officer and shall inure to the benefit of the heirs, executors and
administrators of such a person.
Any director or officer seeking indemnification within the scope of
this Article shall be entitled to advances from the Corporation for payment of
the reasonable expenses incurred by him in connection with the matter as to
which he is seeking indemnification in the manner and to the fullest extent
permissible under the Maryland General Corporation Law without requiring a
preliminary determination of ultimate entitlement of indemnification.
The Board of Directors may make further provision consistent with law
for indemnification and advance of expenses to directors, officers, employees
and agents by resolution, agreement or otherwise. The indemnification provided
by this Article shall not be deemed exclusive of any other right, with respect
to indemnification or otherwise, to which those seeking indemnification may be
entitled under any insurance or other agreement or resolution of stockholders or
disinterested directors or otherwise.
References in this Article are to the Maryland General Corporation Law
as from time to time amended. No amendment of these Bylaws shall affect any
right of any person under this Article based on any event, omission or
proceeding prior to the amendment.
ARTICLE V - SEAL
The seal of the Corporation shall be in the form of two concentric
circles inscribed with the name of the Corporation and the year and State in
which it is incorporated.
ARTICLE VI - ISSUE AND TRANSFER OF STOCK
SECTION 1. ISSUE
Certificates representing shares of the Corporation shall be in such
form as shall be determined by the Board of Directors. Each certificate shall be
signed manually by, or bear the facsimile signature of, the Chairman of the
Board, the President, or a Vice President and countersigned by, or bear the
facsimile signature of, the Secretary or an Assistant Secretary or the Treasurer
or an Assistant Treasurer and shall be sealed with the corporate seal or a
facsimile thereof. All certificates surrendered to the Corporation for transfer
shall be cancelled, and no new certificates shall be issued until the former
certificate for a like number of shares shall have been surrendered and
cancelled, except that in case of a lost, stolen, destroyed or mutilated
certificate, a new one may be issued therefor upon such terms and indemnity to
the Corporation as the Board of Directors may prescribe.
<PAGE> 11
SECTION 2. TRANSFER OF SHARES
Transfer of shares of the Corporation shall be made only on its stock
transfer books by the holder of record thereof, or by his attorney thereunto
authorized by power of attorney duly executed and filed with the Secretary of
the Corporation, and on surrender for cancellation of the certificate for such
shares. The person in whose name shares stand on the books of the Corporation
shall be deemed to be the owner thereof for all purposes.
SECTION 3. FIXING DATE FOR DETERMINATION OF STOCKHOLDERS' RIGHTS
The Board of Directors may fix, in advance, a date as the record date
for the purpose of determining stockholders entitled to notice of, or to vote
at, any meeting of stockholders, or stockholders entitled to receive payment of
any dividend or the allotment of any rights, or in order to make a determination
of stockholders for another proper purpose. Only stockholders of record on such
date shall be entitled to notice of, and to vote at, such meeting or to receive
such dividends or rights, as the case may be and notwithstanding any transfer of
any stock on the books of the Corporation after such record date fixed as
aforesaid.
ARTICLE VII - EMERGENCIES
During the period of an emergency declared by the President of the
United States, or the person performing his functions, of a nature and
sufficient severity to prevent the conduct and management of the affairs and
business of the Corporation by its directors, officers and committees in the
manner contemplated by these Bylaws (other than this Article VII), any two or
more available members of the Board of Directors shall constitute a quorum of
the Board of Directors for the full conduct and management of the affairs and
business of the Corporation. Other provisions of the Bylaws or resolutions
contrary to or inconsistent with the provisions hereof shall be suspended until
it shall be determined by said interim Board of Directors that it shall be to
the advantage of the Corporation to resume the conduct and management of its
affairs and business under all the other provisions of the Bylaws and
resolutions.
If during any such emergency any authorized place of business of the
Corporation shall be unable to function, all or part of the business ordinarily
conducted at such location may be relocated elsewhere in suitable quarters as
may be designated by the interim Board of Directors or by such persons as are
then conducting the affairs of the Corporation. Any such temporarily relocated
place of business of the Corporation shall be returned to its authorized
location as soon as practicable.
<PAGE> 12
ARTICLE VIII - CONTROL SHARE ACQUISITION STATUTE EXEMPTIONS
Any acquisition of shares of the Corporation on or after January 21,
1991 by Alfred Lerner (or his successor in interest) ("Lerner") or by The
Progressive Corporation (or its successors in interest) ("Progressive"), or by
any present or future affiliate or associate thereof so long as such affiliate
or associate is at the time in question such an affiliate or associate (or any
person acting in concert or in a group with any of the foregoing) is, pursuant
to Section 3-702(b) of the Maryland General Corporation Law (the "MGCL") (or any
successor or replacement provision or statute), hereby approved for purposes of,
and exempted from the provisions of, Subtitle 7 of Title 3 of the MGCL (or any
successor or replacement provision or statute) with the result that any shares
acquired by any such person shall have all voting rights otherwise appurtenant
thereto, notwithstanding Subtitle 7 of Title 3 of the MGCL (or any successor or
replacement provision or statute).
Notwithstanding anything in the Charter or Bylaws of the Corporation
(as each may be amended from time to time) to the contrary, this ARTICLE may not
be amended, altered or repealed except with the unanimous approval of all of the
members of the Board of Directors and the written consent of all persons or
entities then in existence and specified above that may be adversely affected,
or that may lose any privilege or right, as a result of such amendment,
alteration or repeal.
ARTICLE IX - AMENDMENTS
These Bylaws may be altered, amended or repealed, and new Bylaws may be
adopted, by the Board of Directors. The stockholders of the Corporation shall
have no power to make, amend or repeal any Bylaw.
<PAGE> 1
EXHIBIT 4.12
THIS AGENCY AGREEMENT is dated as of July 17, 1997 AMONG:
(1) MBNA AMERICA BANK, NATIONAL ASSOCIATION, a national banking
association organized pursuant to the laws of the United
States of America (the "Bank");
(2) The First National Bank of Chicago, a national banking
association organized pursuant to the laws of the United
States of America ("First Chicago") (the "Global Agent");
and
(3) First Chicago acting through its specified office in London
("First Chicago London") as paying agent (the "London Paying
Agent") and issue agent (the "London Issuing Agent") which
expressions shall also include any successors appointed in
accordance with Section 27 of this Agreement;
(4) First Chicago acting through its specified office in New
York ("First Chicago New York") as registrar (the
"Registrar") and paying agent (the "NY Paying Agent") which
expressions shall also include any successors appointed in
accordance with Section 27 of this Agreement;
(5) Banque Indosuez Luxembourg ("Banque Indosuez") in its
capacity as transfer agent (the "Transfer Agent") and as
paying agent (the "Luxembourg Paying Agent"; together
with the London Paying Agent and the NY Paying Agent, the
"Paying Agents"; individually a "Paying Agent") which
expressions shall include any successors appointed in
accordance with Section 27 of this Agreement.
WHEREAS:
(A) The Bank has entered into a Dealer Agreement dated July 17,
1997 with certain Dealers named therein pursuant to which
the Bank may from time to time issue up to US$6,500,000,000
aggregate principal amount (or the equivalent thereof in
other currencies) of its Bank Notes (the "Notes").
(B) The Notes will be issued subject to, and with the benefit
of, this Agreement.
<PAGE> 2
(C) The Bank has made application to the Luxembourg Stock
Exchange (the "Stock Exchange") with the intention that
Notes issued under the Program may be listed on the Stock
Exchange, in connection with which application the Bank has
procured the preparation of an offering circular dated July
17, 1997 (the "Offering Circular").
IT IS HEREBY AGREED as follows:
Section 1. Definitions and Interpretation.
(a) the following terms shall have the following meanings:
"Agents" means the collective reference to the Global Agent, the
Paying Agents, the Registrar, the London Issuing Agent and the Transfer
Agent;
"Authorized Representative" shall have the meaning ascribed
thereto in Section 3(b) of this Agreement;
"Bearer Notes" means those Notes which are for the time being
in bearer form;
"Business Day" means, unless otherwise agreed, a day which is
both;
(a) a day (other than a Saturday or a Sunday) on which
commercial banks and foreign exchange markets settle payments in
New York and London; and
(b) either (i) in relation to a payment to be made in a
Specified Currency other than ECU, a day on which commercial
banks and foreign exchange markets settle payments in the
principal financial center of the country of the relevant
Specified Currency (if other than London or New York) or (ii) in
relation to a payment to be made in ECU, an ECU Settlement Date
(as defined in the ISDA Definitions);
"Cedel" means Cedel Bank, societe anonyme or any successor
thereto;
"Coupon" means an interest coupon attached on issue to an
interest-bearing Definitive Bearer Note, such coupon being substantially in
the form set out in Exhibit F hereto or in such other form as may be agreed
between the Bank and the Global Agent, and includes, where applicable, the
Talon(s) appertaining thereto;
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"Couponholders" means the several persons who are for the time
being holders of Coupons;
"Dealer" means Lehman Brothers Inc., Credit Suisse First
Boston Corporation, J.P. Morgan Securities Inc., Merrill Lynch & Co. and
Merrill Lynch, Pierce, Fenner & Smith Incorporated, Banque Lehman
Brothers, Lehman Brothers International (Europe), Credit Suisse First
Boston (Europe) Limited, J.P. Morgan Securities Ltd. and Merrill Lynch
International and any other entities appointed as dealers from time to
time pursuant to the Distribution Agreement and notice of whose
appointment is given to the Global Agent;
"Definitive Bearer Note" means a definitive Bearer Note
substantially in the form set out in Exhibit E hereto or in such other form
as may be agreed between the Bank and the Global Agent, in each case issued
or to be issued by the Bank pursuant to this Agreement in exchange for a
Permanent Global Note;
"Definitive Notes" means Definitive Bearer Notes and/or, as
the context requires, Definitive Registered Notes;
"Definitive Registered Note" means a definitive Registered Note
substantially in the form set out in Exhibit B in such other form as may be
agreed between the Bank and the Global Agent;
"Distribution Agreement" means the agreement of even date
herewith among the Bank and the Dealers concerning the sale of Notes to be
issued by the Bank and includes any amendment or supplement thereto;
"DTC" means The Depository Trust Company in New York, New
York;
"DTC Global Note" means a Registered Global Note deposited with a
custodian for, and registered in the name of a nominee of, DTC;
"Euroclear" means Morgan Guaranty Trust Company of New York,
Brussels office, as operator of the Euroclear System or any successor
thereto;
"Euroclear/Cedel Global Note" means a Registered Global Note
deposited with a common depositary for, and registered in the name of a
nominee of, Euroclear and/or Cedel;
"Global Note" means a Temporary Global Note or a Permanent
Global Note;
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"ISDA Definitions" means the 1991 ISDA Definitions, as amended
and updated from time to time, published by the International Swaps and
Derivatives Association, Inc.;
"Noteholders" means the several persons who are for the time
being holders of outstanding Notes (being, in the case of any Bearer Note,
the bearer thereof and, in the case of any Registered Note, the registered
owner thereof as reflected in the Note Register) except that for so long as
any of the Notes are represented by a Global Note, each person who is for
the time being shown in the records of Euroclear and/or Cedel as the holder
of a particular principal amount of such Notes (other than Cedel if Cedel
shall be an account holder of Euroclear and other than Euroclear if
Euroclear shall be an account holder of Cedel) (in which regard any
certificate or other document issued by Euroclear and/or Cedel as to the
principal amount of such Notes standing to the account of any person shall
be conclusive and binding for all purposes except in the case of manifest
error) shall be treated by the Bank and the Agents as a holder of such
principal amount of such Notes for all purposes other than for the payment
of principal, premium (if any) and interest on such Notes, the right to
which shall be vested, as against the Bank and the Agents, solely in the
bearer of the Global Note in accordance with and subject to its terms (and
the expressions "Noteholder", "holder of Notes" and related expressions
shall be construed accordingly);
"Note Register" shall have the meaning ascribed thereto in
Section 11(a) of this Agreement;
"Offering Circular" means the Offering Circular relating to the
Notes as revised, supplemented, amended or updated, including any Pricing
Supplement thereto relating to a particular Tranche of Notes and such
documents as are from time to time incorporated therein by reference;
"Original Issue Date" means, with respect to any Note, the
original date of issue of such Note, being in the case of any Definitive
Note, the date of issue of the Registered Global Note, Temporary Global
Note or Permanent Global Note, as the case may be, which initially
represented such Note;
"Outstanding" means, at any particular time, all Notes
theretofore issued other than (a) those which have been redeemed in full in
accordance with their terms and with this Agreement, (b) those with respect
to which the redemption date in accordance with their terms has occurred
and the redemption monies wherefor (including any premium and all interest
(if any) accrued thereon to the redemption date and any interest (if any)
payable after such date) have been duly paid to or
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<PAGE> 5
deposited to the account of the Global Agent as provided herein (and, where
appropriate, notice has been given to the Noteholders in accordance with
the terms thereof and Section 18) and remain available for payment, (c)
those which have become void in accordance with their terms, (d) those
which have been cancelled, (e) those mutilated or defaced Notes which have
been surrendered in exchange for replacement Notes in accordance with their
terms, (f) (for the purposes only of determining the aggregate principal
amount of Notes outstanding and without prejudice to the status of any Note
for any other purpose) those Notes alleged to have been lost, stolen or
destroyed and with respect to which replacement Notes have been issued in
accordance with their terms and (g) Temporary Global Notes to the extent
that they shall have been duly exchanged for Permanent Global Notes or
Definitive Bearer Notes, Permanent Global Notes to the extent that they
shall have been duly exchanged for Definitive Bearer Notes or Registered
Global Notes, Definitive Bearer Notes to the extent that they shall have
been duly exchanged for Registered Global Notes, and Registered Global
Notes to the extent that they shall have been duly exchanged for Definitive
Registered Notes, in each case pursuant to their respective terms;
"Permanent Global Note" means a global Bearer Note substantially
in the form set out in Exhibit D hereto or in such other form as may be
agreed between the Bank and the Global Agent, in each case comprising Notes
issued or to be issued by the Bank in exchange for the whole, but not the
part, of a Temporary Global Note;
"Pricing Supplement" means the pricing supplement prepared by the
Bank in relation to a particular Tranche of Notes (substantially in the
form of Annex A to the Offering Circular) as a supplement to the Offering
Circular;
"Procedures Memorandum" means the Procedures Memorandum
attached as Exhibit B to the Distribution Agreement;
"Program" means the Global Bank Note Program established by
the Distribution Agreement;
"Receipt" means a receipt attached on issue to a Definitive
Bearer Note redeemable in installments for the payment of the installments
of principal, such receipt being substantially in the form set out in
Exhibit H hereto or in such other form as may be agreed between the Bank
and the Global Agent;
"Registered Global Note" means a global Registered Note
substantially in the form set out in Exhibit A hereto or in such other form
as may be agreed upon between the Bank and the Global Agent;
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"Series" means all Notes which are denominated in the same
currency and which have the same Stated Maturity Date, interest payment
basis and interest payment dates, if any, (all as indicated in the
applicable Pricing Supplement) and the terms of which, except for the
Original Issue Date and/or the issue price (each as indicated as
aforesaid), are otherwise identical, including whether the Notes are
listed;
"Stock Exchange" means the Luxembourg Stock Exchange or any other
stock exchange(s) on which any Notes may from time to time be listed and
reference in this Agreement to the "relevant Stock Exchange" shall, in
relation to any Notes, be reference to the Stock Exchange on which such
Notes are from time to time, or will be, listed;
"Talons" means the talons, if any, for further Coupons
appertaining to an interest-bearing Definitive Bearer Note, each such talon
being substantially in the form set out in Exhibit G hereto or in such
other form as may be agreed between the Bank and the Global Agent;
"Temporary Global Note" means a global Bearer Note substantially
in the form set out in Exhibit C hereto or in such other form as may be
agreed between the Bank and the Global Agent;
"Tranche" means all Notes of the same Series with the same
Original Issue Date and the same issue price;
"US$" and "U.S. Dollars" means the lawful currency for the
time being of the United States.
(b) Terms and expressions defined in the Notes and the Offering
Circular shall have the same meanings in this Agreement, except where the
context requires otherwise.
(c) Any references to Notes shall, unless the context otherwise
requires, include any Temporary Global Notes, Permanent Global Notes,
Registered Global Notes, Definitive Bearer Notes and Definitive Registered
Notes.
Section 2. Appointment of the Global Agent, the London
Issuing Agent, the Paying Agents, the Registrar and the Transfer Agent.
(a) First Chicago is hereby appointed as agent of the Bank, to
act as Global Agent for the purposes specified in this Agreement and all
matters incidental thereto, upon the terms and subject to the conditions
specified herein.
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<PAGE> 7
(b) First Chicago New York is hereby appointed as agent of the
Bank, to act as Registrar and NY Paying Agent for the purposes specified in
this Agreement and all matters incidental thereto, including, inter alia,
completing, authenticating and issuing Notes, upon the terms and subject to
the conditions specified herein and in the Notes.
(c) First Chicago London is hereby appointed as the agent of the
Bank to act as London Paying Agent and London Issuing Agent for the
purposes specified in this Agreement, including, inter alia, completing,
authenticating and issuing Notes, upon the terms and subject to the
conditions specified herein and in the Notes.
(d) Banque Indosuez is hereby appointed as agent of the Bank, to
act as Luxembourg Paying Agent and Transfer Agent for the purposes
specified in this Agreement, upon the terms and subject to the conditions
specified herein and in the Notes.
(e) Each of the Global Agent, the Paying Agents, the Registrar,
the London Issuing Agent and the Transfer Agent shall have the powers and
authority granted to and conferred upon them, specifically, in the Notes
and hereunder to act on behalf of the Bank and such further powers and
authority to act on behalf of the Bank as may be mutually agreed upon.
(f) The obligations of the Global Agent, the Paying Agents, the
Registrar, the London Issuing Agent and the Transfer Agent shall be
several, but not joint.
(g) First Chicago is hereby appointed (i) Calculation Agent, for
the purpose of calculating any variable interest rates or other bases for
determining the payment of interest, premium or principal with respect to
the Notes from time to time pursuant to the Calculation Agent Agreement and
(ii) Exchange Rate Agent, for the purpose of determining exchanges of
currencies of such payments from time to time; and, in connection with such
appointments, the Bank and First Chicago shall endeavor to enter into a
Calculation Agent Agreement and an Exchange Agent Agreement after the date
hereof, which Calculation Agent Agreement and Exchange Agent Agreement
shall be in such form or forms as may be mutually agreed between them.
Notwithstanding the foregoing, the Bank may appoint a different Calculation
Agent or Exchange Agent for any Series of Notes (which may be the Bank or
any affiliate thereof or a Dealer purchasing such Notes or an affiliate
thereof). The relevant Pricing Supplement will set forth the name of the
Calculation Agent or Exchange Agent, if any, for such Series.
Section 3. Supply of Notes; Authorized Representatives.
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<PAGE> 8
(a) The Bank shall from time to time deliver or cause to be
delivered to the Registrar a supply of blank Registered Global Notes and to
the London Issuing Agent a supply of blank Temporary Global Notes and
Permanent Global Notes as the Bank shall determine, bearing consecutive
control numbers. Each Note shall have been executed by the manual or
facsimile signature of an Authorized Representative (as defined in Section
3(b)) of the Bank. The Registrar or the London Issuing Agent, as the case
may be, will acknowledge receipt of the Notes delivered to it and will hold
such blank Notes in safekeeping in accordance with its customary practice
and shall complete, authenticate and deliver such Notes in accordance with
the provisions hereof.
(b) From time to time, the Bank shall provide the Global Agent,
the Registrar and the London Issuing Agent with a certificate executed by
an officer of the Bank certifying the incumbency and specimen signatures of
those officers of the Bank authorized to execute Notes on behalf of the
Bank by manual or facsimile signature and to give instructions and notices
on behalf of the Bank hereunder (each an "Authorized Representative" and
collectively the "Authorized Representatives"). Until the Global Agent, the
Registrar or the London Issuing Agent receives a subsequent certificate,
the Global Agent, the Registrar and the London Issuing Agent shall be
entitled to conclusively rely on the last such certificate delivered to
them for the purposes of determining the identities of Authorized
Representatives of the Bank. Any Note bearing the manual or facsimile
signatures of persons who are Authorized Representatives of the Bank on the
date such signatures are affixed shall bind the Bank after the completion,
authentication and delivery thereof by the Registrar or the London Issuing
Agent, as the case may be, notwithstanding that such persons shall have
ceased to hold office on the date such Note is so completed, authenticated
and delivered by the Registrar or the London Issuing Agent, as the case may
be.
Section 4. Issuance Instructions.
All instructions regarding the completion, authentication and
delivery of Notes shall be given by an Authorized Representative by
facsimile transmission or by other acceptable written means by such
Authorized Representative no later than 3:00 p.m. (London time, or, as the
case may be, New York time) three Business Days prior to the proposed issue
date. Instructions for the issuance of Bearer Notes shall be transmitted to
the London Issuing Agent and for the issuance of Registered Notes shall be
transmitted to the Registrar. In addition, the Dealer who has arranged to
purchase or procure the purchase of Notes from the Bank shall notify the
London Issuing Agent or, as the case may be, the Registrar, by facsimile
transmission or by other acceptable written means no later than 3:00 p.m.
(London time) in the case of the
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<PAGE> 9
London Issuing Agent or, in the case of the Registrar 3:00 p.m. (New York
time), three Business Days prior to the proposed issue date, that payment
by the Dealer to London Issuing Agent or the Registrar, as the case may be,
of the purchase price of any Note has been or will be duly made upon
delivery and (if applicable) of details of the account to which payment is
to be made. The Bank agrees to deliver issuance instructions to the London
Issuing Agent via tested telex or facsimile and to the Registrar via
facsimile transmission.
Section 5. Issue of Registered Global Notes.
(a) Upon (x) receipt of instructions from an Authorized
Representative in accordance with Section 4 hereof and the Procedures
Memorandum regarding the completion, authentication and delivery of one or
more Registered Global Notes or (y) the occurrence of any event which
pursuant to the terms of a Permanent Global Note or Definitive Bearer
Note(s) requires the issuance of a Registered Global Note, the Registrar
shall cause to be withdrawn from safekeeping the necessary and applicable
Registered Global Note(s) and, in accordance with such written
instructions, shall:
(i) complete such Registered Global Note(s);
(ii) attach the relevant Pricing Supplement as supplied by the
Bank;
(iii) register such Registered Global Note(s) in the name of Cede
& Co., or another nominee of DTC, and/or in the name of a
nominee of Euroclear and/or Cedel, as specified in such
instructions;
(iv) authenticate such Registered Global Note(s); and
(v) (A) deliver such Registered Global Note(s) to a
custodian of DTC in accordance with such instructions
against receipt from the custodian of confirmation that
such custodian is holding the Registered Global Note(s)
so delivered in safe custody for the account of DTC and
instruct DTC to credit the Notes represented by such
Registered Global Note(s), unless otherwise agreed in
writing between the Registrar and the Bank, to the
Registrar's participant account at DTC; and/or
(B) deliver such Registered Global Note(s) to the specified
common depositary of Euroclear and Cedel in accordance with
such instructions against receipt from the common depositary
of confirmation that such common
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<PAGE> 10
depositary is holding the Registered Global Note(s) so
delivered in safe custody for the account of Euroclear
and/or Cedel and instruct Euroclear or Cedel or both of them
(as the case may be) to credit the Notes represented by such
Registered Global Note(s), unless otherwise agreed in
writing between the London Issuing Agent or the Global Agent
and the Bank, to the London Issuing Agent's or the Global
Agent's distribution account; and/or
(C) deliver such Registered Global Note(s) to the specified
common depositary of Euroclear and Cedel in exchange for
such Permanent Global Note or Definitive Bearer Note against
receipt from the common depositary of confirmation that such
common depositary is holding the Registered Global Note(s)
in safe custody for the account of Euroclear and/or Cedel in
accordance with the terms of the relevant letters of
undertaking among such common depositary and Euroclear
and/or Cedel;
provided, that instructions regarding the completion and authentication of
such Note(s) are received by the Registrar not less than three Business
Days prior to the date of settlement relating to such Note(s).
(b) The Registrar shall provide DTC, and the London Issuing Agent
shall provide Euroclear and/or Cedel with such notifications, instructions
or other information to be given by the Registrar or the London Issuing
Agent, as the case may be, to DTC, Euroclear and/or Cedel as may be
required.
Section 6. Issue of Temporary Global Notes.
(a) Upon receipt of instructions from an Authorized
Representative in accordance with Section 4 hereof and the Procedures
Memorandum regarding the completion, authentication and delivery of one or
more Temporary Global Notes, the London Issuing Agent shall cause to be
withdrawn from safekeeping the necessary and applicable Temporary Global
Note and, in accordance with such written instructions, shall:
(i) complete such Temporary Global Note(s);
(ii) attach the relevant Pricing Supplement as supplied by the
Bank;
(iii) authenticate such Temporary Global Note(s); and
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(iv) deliver such Temporary Global Note(s) to the specified
common depositary of Euroclear and Cedel in accordance
with such instructions against receipt from the common
depositary of confirmation that such common depositary is
holding the Temporary Global Note(s) in safe custody for
the account of Euroclear and/or Cedel and instruct
Euroclear or Cedel or both of them (as the case may be)
to credit the Notes represented by such Temporary Global
Note(s), unless otherwise agreed in writing between the
London Issuing Agent and the Bank, to the London Issuing
Agent's distribution account;
provided, that instructions regarding the completion and authentication of
such Note(s) are received by the London Issuing Agent not less than five
Business Days prior to the date of settlement relating to such Note(s).
(b) The London Issuing Agent shall provide Euroclear and/or Cedel
with such notifications, instructions or other information to be given by
the London Issuing Agent to Euroclear and/or Cedel as may be required.
Section 7. Issue of Permanent Global Notes.
(a) Upon the occurrence of any event which pursuant to the terms
of a Temporary Global Note requires the issue of a Permanent Global Note,
the London Issuing Agent shall cause to be withdrawn from safekeeping the
necessary and applicable Permanent Global Note and, in accordance with the
terms of the Temporary Global Note, shall:
(i) complete a Permanent Global Note in accordance with the
terms of the Temporary Global Note;
(ii) attach the relevant Pricing Supplement as supplied by the
Bank;
(iii) authenticate such Permanent Global Note; and
(iv) deliver such Permanent Global Note to the specified
common depositary that is holding the Temporary Global
Note for the time being on behalf of Euroclear and/or
Cedel in exchange for such Temporary Global Note against
receipt from the common depositary of confirmation that
such common depositary is holding the Permanent Global
Note in safe custody for the account of Euroclear and/or
Cedel.
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(b) The London Issuing Agent shall provide Euroclear and/or Cedel
with such notifications, instructions or other information to be given by
the London Issuing Agent to Euroclear and/or Cedel as may be required.
Section 8. Issue of Definitive Bearer Notes.
(a) Upon notice from Euroclear or Cedel pursuant to the terms of
a Global Note requiring the issue of one or more Definitive Bearer Notes in
exchange for the Global Note, the London Issuing Agent shall cause to be
withdrawn from safekeeping the necessary and applicable Definitive Bearer
Note(s) and, in accordance with the terms of the Permanent Global Note,
shall:
(i) complete, if applicable, an equal aggregate principal amount
of Definitive Bearer Notes of authorized denominations and
of like tenor and with identical terms as the Global Note in
accordance with the terms of the Global Note;
(ii) authenticate such Definitive Bearer Note(s); and
(iii) deliver such Definitive Bearer Note(s) to or to the order of
Euroclear and/or Cedel in exchange for such Global Note.
The London Issuing Agent shall notify the Bank forthwith upon
receipt of a request for the issuance of Definitive Bearer Note(s) in
accordance with the provisions of a Global Note.
(b) The Bank shall deliver to the London Issuing Agent, pursuant
to a request for the issue of Definitive Bearer Notes under the terms of
the relevant Permanent Global Note, a sufficient number of Definitive
Bearer Notes (with, if applicable, Receipts, Coupons and Talons attached)
executed by an Authorized Representative to enable the London Issuing Agent
to comply with its obligations under this Section 8.
Section 9. Issue of Definitive Registered Notes.
(a) Definitive Registered Notes shall be issued only if permitted
by applicable law and (i) in the case of a DTC Global Note, DTC notifies
the Bank that it is unwilling or unable to continue as depositary for the
DTC Global Note or DTC ceases to be a clearing agency registered under the
Securities Exchange Act of 1934, as amended, if so required by applicable
law or regulation, and, in either case, a successor depositary is not
appointed by the Bank within 90 days after
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receiving such notice or becoming aware that DTC is no longer so
registered, (ii) in the case of any other Registered Global Note, if the
clearing system(s) through which it is cleared and settled is closed for
business for a continuous period of 14 days (other than by reason of
holidays, statutory or otherwise) or announces an intention to cease
business permanently or does in fact do so, (iii) the Bank in its
discretion elects to issue Definitive Registered Notes or (iv) after the
occurrence of an Event of Default with respect to any Registered Global
Note, the beneficial owners representing a majority in principal amount of
such Registered Global Note advise the relevant clearing system through its
participants to cease acting as depositary for such Registered Global Note.
(b) Upon the occurrence of any event specified in Section 9(a)
which pursuant to the terms of a Registered Global Note requires the issue
of Definitive Registered Notes in exchange for the Registered Global Note,
the Registrar shall cause to be withdrawn from safekeeping the necessary
and applicable Definitive Registered Note(s) and, in accordance with the
terms of the Registered Global Note, shall:
(i) complete an equal aggregate principal amount of Definitive
Registered Note(s) of authorized denominations and of like
tenor with identical terms as the Registered Global Note in
accordance with the terms of the
Registered Global Note;
(ii) register such Definitive Registered Notes in the name or
names of such persons as the relevant clearing system shall
instruct the Registrar in writing;
(iii) authenticate such Definitive Registered Notes; and
(iv) deliver such Definitive Registered Notes to the relevant
clearing system or pursuant to such clearing system's
written instructions in exchange for such Registered Global
Note.
(c) The Bank shall deliver to the Registrar, upon the occurrence
of any event specified in Section 9(a) which pursuant to the terms of a
Registered Global Note requires the issue of Definitive Registered Notes, a
sufficient number of Definitive Registered Notes executed by an Authorized
Representative to enable the Registrar to comply with its obligations under
this Section 9.
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Section 10. Exchanges.
(a) Upon any exchange of a Temporary Global Note in whole, but
not in part, for an interest in a Permanent Global Note or for Definitive
Bearer Notes, as the case may be, the London Issuing Agent shall cancel or
arrange for cancellation such Temporary Global Note. Upon any exchange of a
Permanent Global Note for Definitive Bearer Notes, the Permanent Global
Note shall be endorsed to reflect the reduction of its principal amount by
the aggregate principal amount so exchanged. Until exchanged in full, the
holder of an interest in any Permanent Global Note shall in all respects be
entitled to the same benefits as the holder of Notes, Receipts and Coupons
authenticated and delivered hereunder, except as set forth therein. The
London Issuing Agent is hereby authorized on behalf of the Bank (i) to
endorse or to arrange for the endorsement of the relevant Permanent Global
Note to reflect the reduction in the principal amount represented thereby
by the amount so exchanged and, if appropriate, to endorse the Permanent
Global Note to reflect any increase in the principal amount represented
thereby, and in either case, to sign in the relevant space on the relevant
Permanent Global Note recording such exchange or increase and (ii) in the
case of a total exchange, to cancel or arrange for the cancellation of the
relevant Permanent Global Note.
(b) Upon any exchange of a Temporary Global Note in whole, but
not in part, for an interest in a Registered Global Note, the London
Issuing Agent shall cancel or arrange for cancellation such Temporary
Global Note. Upon any exchange of all or a portion of an interest in a
Permanent Global Note for an interest in a Registered Global Note, the
Permanent Global Note shall be endorsed to reflect the reduction of its
principal amount by the aggregate principal amount so exchanged. Until
exchanged in full, the holder of an interest in any Permanent Global Note
shall in all respects be entitled to the same benefits as the holder of
Notes, Receipts and Coupons authenticated and delivered hereunder, except
as set forth therein. The London Issuing Agent and the Registrar, as the
case may be, are hereby authorized on behalf of the Bank (i) to endorse or
to arrange for the endorsement of the relevant Permanent Global Note to
reflect the reduction in the principal amount represented thereby by the
amount so exchanged and, if appropriate, to endorse a Registered Global
Note to reflect any increase in the principal amount represented thereby,
and in either case, to sign in the relevant space on the relevant Permanent
Global Note or Registered Global Note, as the case may be, recording such
exchange or increase and (ii) in the case of a total exchange, to cancel or
arrange for the cancellation of the relevant Permanent Global Note.
(c) Upon any exchange of one or more Definitive Bearer Notes for
an interest in a Registered Global Note, the Definitive Bearer
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Note(s) so exchanged shall be cancelled by the London Issuing Agent. The
Registrar is hereby authorized on behalf of the Bank to endorse, if
appropriate, a Registered Global Note to reflect any increase in the
principal amount represented thereby and, in such case, to sign in the
relevant space on the relevant Registered Global Note recording such
increase.
Section 11. Note Register; Registration, Transfer and
Exchange; Persons Deemed Owners.
(a) The Registrar, as registrar for the Registered Notes, shall
maintain at its principal office in New York City, or such other location
as may be agreed from time to time, the note register (the "Note
Register"). The term "Note Register" shall mean the definitive register in
which shall be recorded the names, addresses and taxpayer identification
numbers of the holders of Registered Notes, the serial and CUSIP numbers
(or Code/ISIN Numbers, as the case may be) of the Registered Notes, the
Original Issue Dates thereof and details with respect to the transfer and
exchange of Registered Notes.
(b) Upon surrender for the purpose of registration of transfer at
the offices of the Registrar or any Transfer Agent of any Registered Note,
accompanied by a written instrument of transfer in form satisfactory to the
Registrar or such Transfer Agent, executed by the registered holder, in
person or by such holder's attorney thereunto duly authorized in writing,
such Registered Note shall be transferred upon the Note Register and the
Registrar shall complete, authenticate and deliver, in the name of the
designated transferee or transferees, one or more new Registered Notes of
authorized denominations of an equal aggregate principal amount and of like
tenor with identical terms and provisions; provided, however, that
Registered Notes may be delivered for the purpose of registration of
transfer by mail at the risk and expense of the transferor. Transfers and
exchanges of Registered Notes shall be subject to such restrictions as
shall be set forth herein and in the text of the Notes and such reasonable
regulations as may be prescribed by the Bank. Successive registrations and
registrations of transfers as aforesaid may be made from time to time as
desired, and each such registration shall be noted on the Note Register.
(c) Notwithstanding anything to the contrary contained in Section
11(b), if the Notes of any Series are for the time being represented by
both a DTC Global Note and a Euroclear/Cedel Global Note and an authorized
representative of DTC presents the DTC Global Note to the Registrar or any
Transfer Agent, accompanied by a written instrument of transfer in form
satisfactory to the Registrar or such Transfer Agent, executed by DTC or by
DTC's attorney thereunto duly authorized in writing, for the purpose of
registration of transfer of all or any
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portion of such DTC's interest in such DTC Global Note to Euroclear and/or
Cedel, such DTC Global Note or the relevant interest therein shall be
transferred upon the Note Register, and the Registrar shall endorse the DTC
Global Note to reflect the reduction of its principal amount by the
aggregate principal amount so transferred and the appropriate
Euroclear/Cedel Global Note shall be endorsed by the Registrar to reflect
the increase of its principal amount by the aggregate principal amount so
transferred. The Registrar is hereby authorized on behalf of the Bank (i)
to endorse or to arrange for the endorsement of the relevant DTC Global
Note to reflect the reduction in the principal amount represented thereby
by the amount so transferred and to endorse the appropriate Euroclear/Cedel
Global Note to reflect the increase in the principal amount represented
thereby by the amount so transferred and, in either case, to sign in the
relevant space on the relevant Note recording such reduction or increase
and (ii) in the case of a total exchange, to cancel or arrange for the
cancellation of the DTC Global Note.
(d) Notwithstanding anything to the contrary contained in Section
11(b), if the Notes of any Series are for the time being represented by
both a DTC Global Note and a Euroclear/Cedel Global Note and an authorized
representative of the Euroclear or Cedel presents the Euroclear/Cedel
Global Note to the Registrar or any Transfer Agent, accompanied by a
written instrument of transfer in form satisfactory to the Registrar or
such Transfer Agent, executed by the Euroclear or Cedel, as the case may
be, or by Euroclear's or Cedel's attorney thereunto duly authorized in
writing, for the purpose of registration of transfer of all or any portion
of Euroclear's or Cedel's interest in such Euroclear/Cedel Global Note to
DTC, such Euroclear/Cedel Global Note or the relevant interest therein
shall be transferred upon the Note Register, and the Registrar shall
endorse the Euroclear/Cedel Global Note to reflect the reduction of its
principal amount by the aggregate principal amount so transferred and the
appropriate DTC Global Note shall be endorsed by the Registrar to reflect
the increase of its principal amount by the aggregate principal amount so
transferred. The Registrar is hereby authorized on behalf of the Bank (i)
to endorse or to arrange for the endorsement of the relevant
Euroclear/Cedel Global Note to reflect the reduction in the principal
amount represented thereby by the amount so transferred and to endorse the
appropriate DTC Global Note to reflect the increase in the principal amount
represented thereby by the amount so transferred, and in either case, to
sign in the relevant space on the relevant Note recording such reduction or
increase and (ii) in the case of a total exchange, to cancel or arrange for
the cancellation of the Euroclear/Cedel Global Note.
(e) At the option of the holder of a Registered Note, such
Registered Note may be exchanged for other Registered Notes of any
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authorized denominations of an equal aggregate principal amount and of like
tenor with identical terms and provisions, upon surrender of the Registered
Note to be exchanged at the offices of the Registrar or any Transfer Agent.
Whenever any Registered Notes are so surrendered for exchange, the
Registrar shall complete, authenticate and deliver the Registered Notes
which the holder of the Registered Note making the exchange is entitled to
receive. Except as provided in Section 9, owners of beneficial interests in
a Registered Global Note shall not be entitled to have Notes registered in
their names, shall not receive or be entitled to receive physical delivery
of Definitive Registered Notes and shall not be considered the owners or
holders thereof under this Agreement.
(f) Notwithstanding the foregoing, neither the Registrar nor any
Transfer Agent shall register the transfer of or exchange (i) any
Registered Note that has been called for redemption in whole or in part,
except the unredeemed portion of any Registered Note being redeemed in
part, (ii) any Registered Note during the period beginning at the opening
of business 15 days before the mailing of a notice of such redemption and
ending at the close of business on the day of such mailing, or (iii) any
Registered Global Note if the Registrar or Transfer Agents learn that such
proposed transfer or exchange would violate any legend contained on the
face of such Registered Global Note.
(g) All Registered Notes issued upon any registration of transfer
or exchange of Registered Notes shall be valid obligations of the Bank,
evidencing the same debt, and entitled to the same benefits as the
Registered Notes surrendered upon such registration of transfer or
exchange.
(h) No service charge shall be made to a holder of Registered
Notes for any transfer or exchange of Registered Notes, but the Transfer
Agent will require payment of a sum sufficient to cover any stamp or other
tax, duty, assessment or governmental charge that may be imposed in
connection therewith.
(i) The Bank and the Agents and any agent of the Bank or the
Agents, may treat the holder in whose name a Registered Note is registered
as the owner of such Registered Note for all purposes, whether or not such
Registered Note be overdue, and neither the Bank, the Agents, nor any such
agent shall be affected by notice to the contrary except as required by
applicable law.
(j) The Bank and Agents and any agent of the Bank or the Agents,
may treat the holder of a Bearer Note as the owner of such Bearer Note for
all purposes, whether or not such Bearer Note be
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overdue, and neither the Bank, the Agents nor any such agent shall be
affected by notice to the contrary except as required by law.
Section 12. Terms of Issue.
(a) The Registrar and the London Issuing Agent shall ensure that
all Notes delivered to and held by it under this Agreement are issued only
in authorized denominations and otherwise in accordance with the
instructions received by it.
(b) Subject to the procedures set out in the Procedures
Memorandum, the Registrar shall be entitled to treat a facsimile
communication and the London Issuing Agent shall be entitled to treat a
tested telex or facsimile communication from a person purporting to be an
Authorized Representative as sufficient instructions and authority of the
Bank for the Registrar and the London Issuing Agent to act in accordance
with instructions received by it pursuant to Section 12(a).
(c) Unless otherwise agreed in writing between the Bank and the
Global Agent, each Note credited to the Global Agent's account with DTC,
Euroclear or Cedel following the delivery of a Registered Global Note to a
custodian of DTC or a common depositary of Euroclear and Cedel in
accordance with clause (v) of Section 5(a) or the delivery of a Temporary
Global Note to a common depositary of Euroclear and Cedel in accordance
with clause (iv) of Section 6(a), as the case may be, shall be held to the
order of the Bank. The Registrar or the London Issuing Agent, as the case
may be, shall ensure that the principal amount of Notes which the relevant
purchaser has agreed to purchase is:
(i) debited from the account of the Registrar or the London
Issuing Agent, as the case may be; and
(ii) credited to the account of such purchaser with DTC or
Euroclear or Cedel, as the case may be;
in each case only upon receipt by the Registrar or the London Issuing
Agent, as the case may be, on behalf of the Bank of the purchase price due
from the relevant purchaser with respect to such Notes.
(d) If on the relevant settlement date the purchaser does not pay
the full purchase price due from it with respect to any Note (the
"Defaulted Note") and, as a result, the Defaulted Note remains in the
account of the Registrar or the London Issuing Agent, as the case may be,
with DTC or Euroclear and/or Cedel after such settlement date, the
Registrar or the London Issuing Agent, as the case may be, shall continue
to hold the Defaulted Note to the order of the Bank. The Registrar or the
London Issuing Agent, as the case may be, shall notify
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<PAGE> 19
the Bank forthwith of the failure of the purchaser to pay the full purchase
price due from it with respect to any Defaulted Note and shall
subsequently, unless otherwise instructed by the Bank, notify the Bank
forthwith upon receipt from the purchaser of the full purchase price with
respect to such Defaulted Note.
(e) In the event of an issue of Notes which is to be listed on a
Stock Exchange, subject to timely receipt of issuance instructions from the
Bank in accordance with the terms of the Procedures Memorandum, the London
Paying Agent shall promptly, and in any event prior to the settlement date
with respect to such issue, send the Pricing Supplement with respect to
such Notes to the relevant Listing Agent (as defined in Offering Circular).
The London Paying Agent or the Luxembourg Paying Agent as the case may be,
shall take such actions as may be requested from time to time in writing by
the Bank or the Listing Agent (as defined in the Offering Circular) to
permit the Notes, if applicable, to be listed on the Stock Exchange.
(f) The Procedures Memorandum shall not be amended by the Bank
without the prior written approval of the NY Paying Agent or the London
Paying Agent.
Section 13. Payments.
(a) The New York Paying Agent or the London Paying Agent, as the
case may be, shall advise the Bank, no later than five Business Days (as
defined below) prior to the date on which any payment is to be made to the
New York Paying Agent or the London Paying Agent, as the case may be,
pursuant to this Section 13(a), of the total amount of any principal of,
premium, if any, and interest due on Notes on any Interest Payment Date or
any maturity date or date of redemption or repayment and the Bank shall (i)
before 11:00 a.m. New York City time (or London time if to the London
Paying Agent) on the second Business Day prior to the date on which any
payment with respect to any Notes become due, confirm to the New York
Paying Agent or the London Paying Agent, as the case may be, by tested
telex or facsimile or by other means acceptable to the Bank and the New
York Paying Agent or the London Paying Agent, as the case may be, that it
has been given instructions for the transfer of the relevant funds to the
New York Paying Agent or the London Paying Agent, as the case may be, and
the name and the account of the bank through which such payment is being
made and provide details of the person or department in such bank to which
communications to such bank should be addressed and (ii) not later than the
Payment Time (as defined below) on the Business Day on which any payment
with respect to any Notes becomes due, transfer to an account specified by
the New York Paying Agent or the London Paying Agent, as the case may be,
such amount in the relevant currency as shall be sufficient for the
purposes of such payment in
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funds settled through such payment system as the New York Paying Agent or
the London Paying Agent, as the case may be, and the Bank may agree. As
used in this subsection (a), the term "Payment Time" means 11:00 a.m. local
time in the principal financial center of the country of the currency in
which the payment is required to be made or, in the case of a payment in
ECU, Brussels. For the purpose of this Section 13, "Business Day" means a
day (other than a Saturday or a Sunday) on which commercial banks and
foreign exchange markets settle payments in The City of New York and
London. For the purposes of this Section 13, all payments made to the NY
Paying Agent and the London Paying Agent shall be transmitted by the Bank.
(b) Subject to the New York Paying Agent or the London Paying
Agent, as the case may be, being satisfied in its sole discretion that
payment will be duly made as provided in Section 13(a), the Global Agent or
the relevant Paying Agent shall pay or cause to be paid all amounts due
with respect to the Notes on behalf of the Bank in the manner provided in
the Notes. If any payment provided for in Section 13(a) is made late but
otherwise in accordance with the provisions of this Agreement, the Global
Agent and each Paying Agent shall nevertheless make payments with respect
to the Notes as aforesaid following receipt by it of such payment. The Bank
will reimburse the New York Paying Agent or the London Paying Agent for the
cost of funding for any amount paid out by such paying agent which is
reimbursed on a later date by the Bank.
(c) If for any reason the New York Paying Agent or the London
Paying Agent, as the case may be, considers in its sole discretion that the
amounts to be received by the New York Paying Agent or the London Paying
Agent, as the case may be, pursuant to Section 13(a) will be, or the
amounts actually received by it pursuant thereto are, insufficient to
satisfy all claims with respect to all payments then falling due with
respect to the Notes, the New York Paying Agent or the London Paying Agent,
as the case may be, shall then forthwith notify the Bank of such
insufficiency and, until such time as the New York Paying Agent or the
London Paying Agent, as the case may be, has received the full amount of
all such payments, neither the Global Agent nor any Paying Agent shall be
obliged to pay any such claims.
(d) The New York Paying Agent or the London Paying Agent, as the
case may be, shall on demand promptly reimburse, from funds received from
the Bank, each Paying Agent for payments with respect to Notes properly
made by such Paying Agent in accordance with the terms thereof and with
this Agreement unless the New York Paying Agent or the London Paying Agent,
as the case may be, has notified the Paying Agent, prior to the opening of
business in the location of the office of the Paying Agent through which
payment with respect to the Notes can be made on the
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due date of a payment with respect to the Notes, that the Global Agent or
the London Paying Agent, as the case may be, does not expect to receive
sufficient funds to make payment of all amounts falling due with respect to
such Notes.
Section 14. Determinations and Notifications with respect to
Notes.
(a) The London Paying Agent shall prepare and deliver monthly
reports to the Bank of England, the Ministry of Finance of Japan, the
German Central Bank and, if required, the Swiss National Bank, and, if
agreed between the Bank and the London Paying Agent, shall take all
necessary action to comply with such other reporting requirements of any
competent authority in respect of any relevant currency as it may be
directed, in writing, from time to time with respect to the Notes to be
issued hereunder.
(b) For purposes of monitoring the aggregate principal amount of
Notes outstanding at any time under the Program, the Exchange Rate Agent
shall determine the U.S. Dollar equivalent of the principal amount of each
Series of Notes denominated in another currency, each Series of Dual
Currency Notes, each Series of Indexed Notes, each Series of Zero Coupon
Notes and each Series of Partly Paid Notes as follows:
(i) the U.S. Dollar equivalent of Notes denominated in a
currency other than U.S. Dollars shall be determined by
the Exchange Rate Agent as of 2:30 P.M., London time, on
the Original Issue Date for such Notes by reference to
the spot rate for U.S. Dollars against the Specified
Currency provided to the Exchange Rate Agent by the Bank
or, if such spot rate is not so provided on a timely
basis, by reference to the Exchange Rate Agent's middle
market spot rate for U.S. Dollars against the Specified
Currency on the London Business Day immediately preceding
the date on which the Exchange Rate Agent receives the
Bank's instruction to issue the Notes;
(ii) the U.S. Dollar equivalent of Dual Currency Notes and
Indexed Notes shall be determined by the Exchange Rate Agent
in the manner specified in clause (i) above by reference to
the original principal amount of such Notes;
(iii) the principal amount of Zero Coupon Notes and any other
Notes issued at a discount shall be deemed to be the U.S.
Dollar equivalent, determined in the manner specified in
clause (i) above, of the face value of the Note for the
relevant issue; and
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(iv) the U.S. Dollar equivalent of Partly Paid Notes shall be
determined by the Exchange Rate Agent in the manner
specified in clause (i) above by reference to the principal
amount thereof regardless of the amount of money paid up on
such Notes.
The Exchange Rate Agent shall promptly notify the Bank of each
determination made as aforesaid. As used in this Section 14(b), "London
Business Day" means any day (other than a Saturday or Sunday) on which
commercial banks and foreign exchange markets settle payments in London.
Section 15. Notice of any Withholding or Deduction.
If the Bank is, with respect to any payments, compelled to
withhold or deduct any amount for or on account of taxes, duties,
assessments or governmental charges as specifically contemplated under the
terms of the Notes, the Bank shall give notice thereof to the Global Agent,
each other Paying Agent and the Registrar, if applicable, as soon as it
becomes aware of the requirement to make such withholding or deduction and
shall give to the Global Agent, each other Paying Agent and the Registrar,
if applicable, such information as it shall require to enable them to
comply with such requirement.
Section 16. Redemption of Notes.
(a) If any Notes are to be redeemed prior to their Stated
Maturity Date in accordance with their terms, the Bank shall notify the
Global Agent not more than 75 nor less than 45 days prior to the relevant
redemption date of the Bank's election to redeem such Notes in whole or in
part in increments of US$1,000 or the equivalent thereof in other
currencies, or as otherwise provided in the applicable Note or required by
applicable laws and regulations.
(b) Whenever less than all the Notes at any time outstanding are
to be redeemed, the terms of the Notes to be so redeemed shall be selected
by the Bank. If less than all the Notes with identical terms at any time
outstanding are to be redeemed, the Notes to be so redeemed shall be
selected by the Global Agent or any Paying Agent on its behalf by lot or in
any usual manner approved by it. The Global Agent shall promptly notify the
Bank in writing of the Notes selected for redemption and, in the case of
Notes selected for partial redemption, the principal amount thereof to be
redeemed.
(c) Unless otherwise specified in the applicable Note, notice of
redemption shall be given by the New York Paying Agent or the London
Issuing Agent, at the Bank's expense, not more than 60 nor less than 30
calendar days prior to the redemption date to each holder of a Note to
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be redeemed. Notices in respect of Registered Notes to be redeemed shall be
given by first-class mail, postage prepaid, to each holder's address
appearing in the Note Register. In the case of Bearer Notes to be redeemed,
the London Issuing Agent shall publish the notice required in connection
with any such redemption and shall at the same time also publish a separate
list of serial numbers of any Notes previously selected and not presented
for redemption. All notices of redemption shall identify the Notes to be
redeemed (including CUSIP, Common Code and ISIN numbers), the date fixed
for redemption, the redemption price, the manner in which redemption will
be effected and, in the case of a partial redemption, the serial numbers
(and principal amounts) of the Notes to be redeemed.
(d) Notice of redemption having been given as described above,
the Notes so to be redeemed shall, on the redemption date, become due and
payable at the redemption price specified in such Notes, and from and after
such date such Notes shall cease to bear interest. Upon surrender of any
such Notes for redemption in accordance with such notice, the Global Agent
or the relevant Paying Agent shall pay or cause to be paid such Notes at
the redemption price specified in such Notes, together with unpaid interest
accrued on such Notes at the applicable rate borne by such Notes to the
redemption date.
(e) Any Registered Note or Definitive Bearer Note which is to be
redeemed only in part shall be surrendered to the London Issuing Agent or
the Registrar, as the case may be, and the London Issuing Agent or the
Registrar, as the case may be, shall complete, authenticate and deliver to
a holder of such Note, without service charge, a new Registered Note or
Definitive Bearer Note, of any authorized denomination as requested by such
holder, in an aggregate principal amount equal to and in exchange for the
unredeemed portion of the principal of the Note so surrendered.
Section 17. Repayment of Notes.
(a) In order for any Note, in accordance with its terms, to be
repaid in whole or in part at the option of the holder thereof prior to its
stated maturity, such Note must be delivered by the holder thereof, with
the form entitled "Option to Elect Repayment" (set forth in such Note) duly
completed, to the Global Agent or such other Paying Agent, at the address
set forth in such form or at such place or places of which the Bank shall
from time to time notify the holders of the Notes, not more than 60 nor
less than 30 days prior to any date fixed for such repayment of such Notes
(the "Optional Repayment Date").
(b) Upon surrender of any Note for repayment in accordance with
the provisions set forth above, the Note to be repaid shall, on the
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Optional Repayment Date, become due and payable, and the Global Agent or
the relevant Paying Agent shall pay or cause to be paid such Note on the
Optional Repayment Date at a price, unless otherwise specified in such
Note, equal to 100% of the principal amount thereof, together with accrued
interest to the Optional Repayment Date.
(c) If less than the entire principal amount of any Note is to be
repaid, the holder thereof shall specify the portion thereof (which shall
be in increments of US$1,000 or the equivalent thereof in other currencies,
or as otherwise provided in the applicable Note or required by the
applicable laws and regulations for currencies other than the U.S. Dollar)
which such holder elects to have repaid and shall surrender such Note to
the Global Agent, and the London Issuing Agent or the Registrar, as the
case may be, shall complete, authenticate and deliver to the holder of such
Note, without service charge, a new Note or Notes in an aggregate principal
amount equal to and in exchange for the unrepaid portion of the principal
of the Note so surrendered and in such denominations as shall be specified
by such holder, or as otherwise provided in the applicable Note or required
by applicable laws and regulations.
Section 18. Notices to Holders.
(a) On behalf of and at the request and expense of the Bank and
except as provided by subparagraph (c), the Global Agent shall give all
notices required to be given by the Bank in accordance with the Notes.
(b) All notices with respect to Registered Notes shall be mailed
by the Global Agent by first-class mail, postage prepaid, to the holders
thereof at their addresses appearing in the Note Register.
(c) All notices with respect to Bearer Notes shall be published
by the London Issuing Agent in one leading English language daily newspaper
with circulation in London or, if that is not possible, one other English
language newspaper with general circulation in Europe as the Bank, in
consultation with the London Issuing Agent, shall decide, and, if directed
by the Bank in writing, the London Issuing Agent shall, in accordance with
such direction, also publish notices in a manner that complies with the
rules and regulations of any Stock Exchange on which the Notes are for the
time being listed. Any such notice shall be deemed to have been given on
the date of the first publication.
(d) Notwithstanding any contrary provision contained in this
Agreement, until such time as any Definitive Bearer Notes are issued, the
Global Agent may, so long as Temporary Global Notes or Permanent
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Global Notes are held in their entirety on behalf of Euroclear and Cedel,
substitute for such publication required by Section 18(c) the delivery of
the relevant notice to Euroclear and Cedel and such other clearing system
for communication by them to the beneficial owners of interests in the
Temporary Global Notes and Permanent Global Notes; provided, however, that,
so long as the rules of any Stock Exchange so require and if so directed in
writing by the Bank, such publication will nevertheless be made as
described in the preceding paragraph in respect of Bearer Notes listed on
such Stock Exchange. Any such notice shall be deemed to have been given to
the beneficial owners of interests in the Temporary Global Notes and
Permanent Global Notes on the seventh day after the day on which said
notice was given to Euroclear and/or Cedel and/or such other clearing
system.
Section 19. Cancellation of Notes, Receipts, Coupons and
Talons.
(a) All Notes which are purchased by or on behalf of the Bank,
together (in the case of Definitive Bearer Notes) with all unmatured
Receipts, Coupons or Talons (if any) attached thereto or surrendered
therewith, may, at the election of the Bank, be cancelled by the Bank.
Where any Notes, Receipts, Coupons or Talons are purchased and cancelled as
aforesaid, the Bank shall procure that all relevant details are promptly
given to the Global Agent and that all Notes, Receipts, Coupons or Talons
so cancelled are delivered to the Global Agent. All Notes which are
redeemed, all Receipts or Coupons which are paid and all Talons which are
exchanged shall be cancelled by the Global Agent or any other Paying Agent
by which they are redeemed, paid or exchanged. Each of the Paying Agents
shall give to the Global Agent details of all payments made by it and shall
deliver a certificate of destruction for all cancelled Notes, Receipts,
Coupons and Talons to the Global Agent or to any Paying Agent authorized
from time to time in writing by the Global Agent to accept delivery of
cancelled Notes, Receipts, Coupons and Talons.
(b) A certificate stating:
(i) the aggregate principal amount of Notes which have been
redeemed and the aggregate amount paid in respect thereof;
(ii) the number of Notes cancelled together (in the case of
Definitive Bearer Notes) with details of all unmatured
Receipts, Coupons or Talons (if any) attached thereto or
delivered therewith;
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(iii) the aggregate amount paid with respect to interest on the
Notes;
(iv) the total number by maturity date of Receipts, Coupons and
Talons so cancelled; and
(v) (in the case of Definitive Bearer Notes) the serial numbers
of such Notes,
shall be given to the Bank by the Global Agent as soon as reasonably
practicable upon request.
(c) Subject to being duly notified in due time and if so
requested, the Global Agent shall give a certificate to the Bank, within
three months of the date of purchase and cancellation of Notes as
aforesaid, stating:
(i) the principal amount of Notes so purchased and cancelled;
(ii) the serial numbers of such Notes; and
(iii) the total number by maturity date of the Receipts, Coupons
and Talons (if any) appertaining thereto and surrendered
therewith or attached thereto.
(d) The Global Agent, or the applicable Paying Agent, shall
destroy (in accordance with its customary procedures) all cancelled Notes,
Receipts, Coupons and Talons (unless otherwise previously instructed by the
Bank) and, if requested, forthwith upon destruction, furnish the Bank with
a certificate of the serial numbers of the Notes and the number by maturity
date of Receipts, Coupons and Talons so destroyed.
(e) Without prejudice to the obligations of the Global Agent
pursuant to Section 19(b), the Global Agent shall keep a full and complete
record of all Notes, Receipts, Coupons and Talons (other than serial
numbers of Coupons, except those which have been replaced pursuant to
Section 20) and of all replacement Notes, Receipts, Coupons or Talons
issued in substitution for mutilated, defaced, destroyed, lost or stolen
Notes, Receipts, Coupons or Talons. The Global Agent shall at all
reasonable times make such record available to the Bank and any person
authorized by any of them for inspection and for the taking of copies
thereof or extracts therefrom.
(f) All records and certificates made or given pursuant to this
Section 19 and Section 20 shall make a distinction between Notes, Receipts,
Coupons and Talons of each Series and Tranche, as appropriate.
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Section 20. Issue of Replacement Notes, Receipts, Coupons and
Talons.
(a) The Bank will cause a sufficient quantity of additional forms
of Notes, Receipts, Coupons and Talons to be available, upon request, to
the London Issuing Agent (in the case of Temporary Global Notes, Permanent
Global Notes, Receipts, Coupons and Talons) and to the Registrar (in the
case of Registered Global Notes) at their specified office for the purpose
of issuing replacement Notes, Receipts, Coupons and Talons as provided
below.
(b) The London Issuing Agent or the Registrar will, subject to
and in accordance with the terms of the Notes and the following provisions
of this Section 20, cause to be delivered any replacement Notes, Receipts,
Coupons and Talons which the Bank may determine to issue in place of Notes,
Receipts, Coupons and Talons which have been lost, stolen, mutilated,
defaced or destroyed.
(c) In the case of a mutilated or defaced Note, the London
Issuing Agent or the Registrar shall ensure that (unless otherwise covered
by such indemnity as the Bank may require) any replacement Note will only
have attached to it Receipts, Coupons and Talons corresponding to those (if
any) attached to the mutilated or defaced Note which is presented for
replacement.
(d) Neither the London Issuing Agent nor the Registrar shall
issue any replacement Note, Receipt, Coupon or Talon unless and until the
applicant therefor shall have:
(i) paid such costs as may be incurred in connection
therewith;
(ii) furnished it with such evidence (including evidence as to
the serial number of such Note, Receipt, Coupon or Talon)
and indemnity (which may include a bank guarantee) as the
Bank and the Registrar or the London Issuing Agent, as the
case may be, may require; and
(iii) in the case of any mutilated or defaced Note, Receipt,
Coupon or Talon, surrendered the same to the Registrar or
the London Issuing Agent, as the case may be.
(e) The Registrar or the London Issuing Agent, as the case may
be, shall cancel any mutilated or defaced Notes, Receipts, Coupons and
Talons with respect to which replacement Notes, Receipts, Coupons and
Talons have been issued pursuant to this Section 20 and shall, if
requested, furnish the Bank with a certificate stating the serial
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numbers of the Notes, Receipts, Coupons and Talons so cancelled and, unless
otherwise instructed by the Bank in writing, shall destroy (in accordance
with its customary procedures) such cancelled Notes, Receipts, Coupons and
Talons and, if requested, furnish the Bank with a destruction certificate
containing the information specified in Section 19(c).
(f) The Registrar or the London Issuing Agent, as the case may
be, shall, on issuing any replacement Note, Receipt, Coupon or Talon,
within three Business Days inform the Bank, the Global Agent and the Paying
Agents of the serial number of such replacement Note, Receipt, Coupon or
Talon issued and (if known) of the serial number of the Note, Receipt,
Coupon or Talon in place of which such replacement Note, Receipt, Coupon or
Talon has been issued. Whenever replacement Receipts, Coupons or Talons are
issued pursuant to the provisions of this Section 20, the Registrar or the
London Issuing Agent, as the case may be, shall also notify the Global
Agent and the Paying Agents of the maturity dates of the lost, stolen,
mutilated, defaced or destroyed Receipts, Coupons or Talons and of the
replacement Receipts, Coupons or Talons issued.
(g) The Global Agent shall keep a full and complete record of all
replacement Notes, Receipts, Coupons and Talons issued and shall make such
record available at all reasonable times to the Bank and any persons
authorized by the Bank for inspection and for the taking of copies thereof
or extracts therefrom.
(h) Whenever any Definitive Bearer Note, Receipt, Coupon or Talon
for which a replacement Note, Receipt, Coupon or Talon has been issued and
with respect to which the serial number is known is presented to the Global
Agent or any of the Paying Agents for payment, the Global Agent or, as the
case may be, the relevant Paying Agent shall immediately send notice
thereof to the Bank and the Global Agent.
Section 21. Copies of This Agreement and Each Pricing
Supplement Available for Inspection.
The Global Agent and the Paying Agents shall, for as long as any
Note remains outstanding, hold copies of this Agreement, the Offering
Circular (as amended or supplemented from time to time), each Pricing
Supplement (except that a Pricing Supplement relating to unlisted Notes
will only be available for inspection by a holder of such a Note upon
production of evidence satisfactory to the relevant Paying Agent as to the
identity of such holder), the Bank's Articles of Association and By-Laws,
as amended or restated and any documents incorporated by reference into the
Offering Circular available for
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inspection. For this purpose, the Bank shall furnish the Global Agent and
the Paying Agents with sufficient copies of each of such documents.
Section 22. Commissions and Expenses.
(a) The Bank shall pay to the Global Agent such fees and
commissions as the Bank and the Global Agent may separately agree from time
to time with respect to the services of the Agents, hereunder together with
any reasonable and properly documented expenses (including legal, printing,
postage, tax, cable and advertising expenses) incurred by the Agents in
connection with their said services. Nothing in this Agreement shall
obligate the Agents to take any action which would involve any such
expenses, unless and until the Global Agent shall have received payment in
respect thereof.
(b) The Global Agent shall make payment of the fees and
commissions due hereunder to the Agents, and shall reimburse their expenses
promptly after the receipt of the relevant monies from the Bank. The Bank
shall not be responsible for any such payment or reimbursement by the
Global Agent to the Agents.
Section 23. Indemnity.
(a) The Bank shall protect, indemnify and hold harmless the
Global Agent and each of the other Agents against any losses, liabilities,
costs, claims, actions, demands or expenses (including, but not limited to,
all reasonable costs, charges and expenses paid or incurred in disputing or
defending any of the foregoing) which the Agents may incur or which may be
made against the Agents as a result of or in connection with their
appointment by the Bank or the exercise of the Agents' powers and duties
hereunder except any losses, liabilities, costs, claims, actions, demands
or expenses as may relate to, result from or arise from the Agents' or any
Agent's willful or intentional default, negligence or bad faith or that of
their officers, directors, employees, agents, representatives or attorneys
or any breach by an Agent of the terms of this Agreement.
(b) The Global Agent, on behalf of each of the Agents and for
itself, shall protect, indemnify and hold harmless the Bank against any
losses, liabilities, costs, claims, actions, demands or expenses
(including, but not limited to, all reasonable costs, charges and expenses
paid or incurred in disputing or defending the foregoing) that may relate
to, result from or arise from the Agents' or any Agent's willful or
intentional default, negligence or bad faith or that of their officers,
directors, employees, agents, representatives or attorneys or any breach by
an Agent of the terms of this Agreement.
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(c) The obligations of the parties hereto under this section
shall survive the payment of the Notes, the resignation or removal of any
Agent and the termination of this Agreement.
(d) Without prejudice to any other provisions of this Agreement,
subject to the provisions of Section 23(b) set forth above, and in
consideration of each Agent agreeing to act on communications and
instructions given by facsimile, the Bank will on demand indemnify and keep
indemnified each Agent against any losses, liabilities, costs, expenses,
claims, actions or demands (including, without limitation, all legal fees
and expenses and any Value Added Tax payable on such sums) which such Agent
may incur or which may be made against such Agent as a result of such Agent
acting on such communications or instructions which such Agent believes in
good faith to have been given by the Bank.
Section 24. Repayment by the Global Agent.
(a) The Global Agent shall, forthwith on written demand, repay to
the Bank sums equivalent to any amounts paid by the Bank to the Global
Agent for the payment of principal (and premium, if any) or interest with
respect to any Registered Notes and remaining unclaimed at the end of two
years after the principal of such Registered Notes shall have become due
and payable (whether at the Stated Maturity Date or otherwise) and monies
sufficient therefor shall have been duly made available for payment,
provided that there is not any outstanding, bona fide and proper claim with
respect to such amounts. Upon such repayment all liability of the Global
Agent with respect to such funds shall thereupon cease.
(b) Bearer Notes, Receipts and Coupons shall become void unless
presented for payment within a period of two years from the date on which
the related payment of principal or interest shall have become due and
payable and monies sufficient therefor shall have been made available for
payment. The Global Agent shall, forthwith on written demand, repay to the
Bank sums equivalent to any amounts paid by the Bank to the Global Agent or
other Agents for the payment of principal (premium, if any) or interest
with respect to any such Bearer Note, Receipt or Coupon and remaining
unclaimed when such Bearer Note, Receipt or Coupon becomes void and all
liability with respect thereto shall thereupon cease.
Section 25. Conditions of Appointment.
(a) The Global Agent shall be entitled to deal with money paid to
it by the Bank for the purpose of this Agreement in the same manner as
other money paid to a banker by its customers except:
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(i) that it shall not exercise any right of set-off, lien or
similar claim in respect thereof;
(ii) as provided in Section 25(b) below; and
(iii) that it shall not be liable to account to the Bank for any
interest thereon except as otherwise agreed in writing
between the Bank and the Global Agent.
(b) In acting hereunder and in connection with the Notes, the
Agents shall act solely as agents of the Bank and will not thereby assume
any obligations towards or relationship of agency or trust for or with any
of the owners or holders of the Notes, Receipts, Coupons or Talons, except
that all funds held by the Global Agent or the Paying Agents for payment to
the Noteholders and deposited by the Bank for payment of specific Notes,
Receipts, Talons or Coupons shall be held for the benefit of such holders
or owners and applied as set forth herein, but need not be segregated from
other funds except as required by law.
(c) The Agents hereby undertake to the Bank to perform such
obligations and duties, and shall be obligated to perform such duties and
only such duties, as are herein, in the Notes and in the Procedures
Memorandum specifically set forth, and no implied duties or obligations
shall be read into this Agreement or the Notes or the Procedures Memorandum
against any of the Agents.
(d) The Global Agent may consult with reputable legal and other
professional advisers of its selection and the written opinion of such
advisers, rendered in good faith, shall be full and complete protection
with respect to any action taken, omitted or suffered hereunder in good
faith and in accordance with the opinion of such advisers.
(e) Each of the Agents shall be protected and shall incur no
liability for or with respect to any action taken, omitted or suffered in
good faith reliance upon any instruction, request or order from the Bank or
any notice, resolution, direction, consent, certificate, affidavit,
statement, cable, telex, facsimile or other paper or document which it
reasonably believes to be genuine and to have been delivered, signed or
sent by an Authorized Representative.
(f) Any of the Agents and any of their officers, directors and
employees may become the owner of, or acquire any interest in, any Notes,
Receipts, Coupons or Talons with the same rights that it or he would have
if such Agent(s) concerned were not appointed hereunder, and may engage or
be interested in any financial or other transaction with the Bank and may
act on, or as depositary, trustee or agent for, any
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committee or body of holders of Notes or Coupons or in connection with any
other obligations of the Bank as freely as if such Agent(s) were not
appointed hereunder.
(g) No Agent shall be required to expend or risk its own funds or
otherwise incur financial liability in the performance of any of its duties
hereunder if there is reasonable ground for believing that the repayment of
such funds or adequate indemnity against such risk or liability is not
reasonably assured to it.
(h) Any Agent may execute any of the duties or powers hereunder
or perform any duties hereunder either directly or by or through its
agents, attorneys or custodian.
Section 26. Communication Between the Parties.
A copy of all communications relating to the subject matter of
this Agreement between the Bank or any Noteholders, Receiptholders or
Couponholders and any of the Paying Agents, the Registrar, the London
Issuing Agent or the Transfer Agent shall be sent to the Global Agent by
the relevant Paying Agent or the Registrar, the London Issuing Agent or the
Transfer Agent, as the case may be.
Section 27. Changes in the Global Agent, the Paying Agents,
the Registrar, the London Issuing Agent or the Transfer Agent.
(a) The Bank agrees that, until no Note is outstanding or until
monies for the payment of all amounts with respect to all outstanding Notes
have been made available to the Global Agent (whichever is the later):
(i) so long as any Notes are listed on any Stock Exchange, there
will at all times be a Paying Agent, a Registrar, a London
Issuing Agent and a Transfer Agent having a specified office
in each location required by the rules and regulations of
the relevant Stock Exchange;
(ii) there will at all times be a Paying Agent, a Registrar, a
London Issuing Agent and a Transfer Agent with a specified
office in a city in continental Europe unless, with respect
of any Paying Agent, payments are permitted to be made in
the United States and the Bank shall have appointed a Paying
Agent in the United States; and
(iii) there will at all times be a Global Agent.
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Any variation, termination, appointment or change shall only take
effect (other than in the case of insolvency, when it shall be of immediate
effect) after not less than 30 nor more than 45 days prior notice thereof
shall have been given to the Noteholders in accordance with Section 18
provided that no such variation, termination, appointment or change shall
take effect (except in the case of insolvency) within 15 days before or
after any Interest Payment Date.
(b) The Global Agent may (subject to the provisions of Section
27(d)) at any time resign as Global Agent by giving written notice to the
Bank of such intention on its part, specifying the date on which its
desired resignation shall become effective; provided, that such date shall
never be less than two months after the receipt of such notice by the Bank
unless the Bank agrees to accept less notice.
(c) The Global Agent may (subject to the provisions of Section
27(d)) be removed at any time by the filing with it of an instrument in
writing signed on behalf of the Bank specifying such removal and the date
when it shall become effective.
(d) Any resignation under Section 27(b) or removal under Section
27(c) shall only take effect upon the appointment by the Bank (with notice
to the Global Agent) of a successor Global Agent and (other than in cases
of insolvency of the Global Agent) on the expiration of the notice to be
given under Section 27(b). If, by the day falling 20 days before the
expiration of any notice under Section 27(b), the Bank has not appointed a
successor Global Agent, then the Global Agent shall be entitled, following
such consultation with the Bank as may be practicable in the circumstances,
on behalf of the Bank, to appoint as a successor Global Agent in its place
such reputable financial institution of good standing as it may reasonably
determine to be capable of performing the duties of the Global Agent
hereunder, and, if, by the day falling 10 days before the expiration of any
notice under Section 27(b), the Global Agent has not appointed a successor
Global Agent, then the Global Agent may, at the expense of the Bank,
petition any court of competent jurisdiction for the appointment of a
successor agent to such Global Agent. Upon the appointment of a successor
agent hereunder, the parties hereto and such successor agent shall
thereafter have the same rights and obligations among them as would have
been the case had they then entered into an agreement in the form mutatis
mutandis of this Agreement.
(e) In case at any time the Global Agent resigns, or is removed,
or becomes incapable of action or is adjudged bankrupt or insolvent, or
files a voluntary petition in bankruptcy or makes an assignment for the
benefit of its creditors or consents to the appointment of an
administrator, liquidator or administrative or other
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receiver of all or a substantial part of its property, or if an
administrator, liquidator or administrative or other receiver of it or all
or a substantial part of its property is appointed, or it admits in writing
its inability to pay or meet its debts as they become due, or if an order
of any court is entered approving any petition filed by or against it under
the provisions of any applicable bankruptcy or insolvency law or if any
officer takes charge or control of it or of its property or affairs for the
purpose of rehabilitation, administration or liquidation, a successor
Global Agent may be appointed by the Bank by an instrument in writing filed
with the successor Global Agent. Upon the appointment as aforesaid of a
successor Global Agent and acceptance by the latter of such appointment and
(other than in the case of insolvency of the Global Agent) upon expiration
of the notice to be given under Section 27(b) the Global Agent so
superseded shall cease to be the Global Agent hereunder.
(f) Subject to Section 27(a), the Bank may terminate the
appointment of any Paying Agent, the Registrar, the London Issuing Agent or
the Transfer Agent at any time and/or appoint one or more further Paying
Agents, Registrars, London Paying Agents or Transfer Agents by giving to
the Global Agent, and to the relevant Paying Agent, Registrar, London
Issuing Agent or Transfer Agent, at least 45 days notice in writing to that
effect.
(g) Subject to Section 27(a), all or any of the Paying Agents or
Transfer Agents may resign their respective appointments hereunder at any
time by giving the Bank and the Global Agent at least 45 days written
notice to that effect.
(h) Upon its resignation or removal becoming effective, the
Global Agent or the relevant Paying Agent, Registrar, London Issuing Agent
or Transfer Agent:
(i) shall, in the case of the Global Agent, forthwith transfer
all monies held by it hereunder and the records referred to
in Sections 11(a), 19(c) and 20(g) to the successor Global
Agent hereunder; and
(ii) shall be entitled to the payment by the Bank of its
commissions and fees for the services theretofore rendered
hereunder in accordance with the terms of Section 22.
(i) Upon its appointment becoming effective, a successor Global
Agent and any new Paying Agent, London Issuing Agent, Registrar or Transfer
Agent shall, without further act, deed or conveyance, become vested with
all the authority, rights, powers, trust, immunities, duties
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and obligations of such predecessor with like effect as if originally named
as Global Agent or (as the case may be) a Paying Agent, London Issuing
Agent, Registrar or Transfer Agent hereunder.
Section 28. Merger and Consolidation.
Any corporation into which the Global Agent or any other Agent
may be merged, or any corporation with which the Global Agent or any other
Agent may be consolidated, or any corporation resulting from any merger or
consolidation to which the Global Agent or any other Agent shall be a
party, or any corporation to which the Global Agent or any other Agent
shall sell or otherwise transfer all or substantially all the assets or the
corporate trust business of the Global Agent or other Agent shall, on the
date when such merger, consolidation or transfer becomes effective and to
the extent permitted by any applicable laws, become the successor Global
Agent or, as the case may be, Paying Agent, London Issuing Agent, Registrar
or Transfer Agent under this Agreement without the execution or filing of
any paper or any further act on the part of the parties hereto, unless
otherwise required by the Bank, and after the said effective date all
references in this Agreement to the Global Agent or, as the case may be,
such Paying Agent, London Issuing Agent, Registrar or Transfer Agent shall
be deemed to be references to such corporation. Notice of any such merger,
consolidation or transfer shall forthwith be given to the Bank by the
relevant Agent.
Section 29. Notifications.
Following receipt of notice of resignation from the Global Agent
or any Paying Agent, Registrar, London Issuing Agent or Transfer Agent and
forthwith upon appointing a successor Global Agent or, as the case may be,
further or other Paying Agents, Registrars, London Issuing Agents or
Transfer Agents or on giving notice to terminate the appointment of any
Global Agent or, as the case may be, Paying Agent, Registrar, London
Issuing Agent or the Transfer Agent, the Bank shall give or cause to be
given not more than 45 days nor less than 30 days notice thereof to the
Noteholders in accordance with Section 18.
Section 30. Change of Specified Office.
If the Global Agent or any Paying Agent, London Issuing Agent,
Registrar or Transfer Agent determines to change its specified office it
shall give to the Bank and (if applicable) the Global Agent written notice
of such determination giving the address of the new specified office which
shall be in the same city and stating the date on which such change is to
take effect, which shall not be less than 45 days thereafter. The Global
Agent (on behalf of the Bank) shall within 15 days of receipt of such
notice (unless the appointment of the Global
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Agent or the relevant Paying Agent, London Issuing Agent, Registrar or
Transfer Agent, as the case may be, is to terminate pursuant to Section 27
on or prior to the date of such change) give or cause to be given not more
than 45 days nor less than 30 days notice thereof to the Noteholders in
accordance with Section 18.
Section 31. Notices.
Any notice or communication given to any party hereunder shall be
sufficiently given or served:
(a) if received by the person or an authorized officer within
Corporate Trust Services and at the relevant address as
specified on the signature page hereof;
(b) if sent by facsimile transmission or tested telex to the
relevant number specified on the signature page hereof and,
if so sent, shall be deemed to have been delivered upon
transmission provided such transmission is confirmed by the
answer back of the recipient (in the case of tested telex)
or when an acknowledgement of receipt is received (in the
case of facsimile transmission).
Section 32. Taxes and Stamp Duties.
Except as set forth in Section 11(h), the Bank agrees to pay any
and all stamp and other documentary taxes or duties (other than any
interest or penalties arising as a result of a failure by any other person
to account promptly to the relevant authorities for any such duties or
taxes after such person shall have received from the Bank the full amount
payable in respect thereof) which may be payable in connection with the
execution, delivery, performance and enforcement of this Agreement.
Section 33. Currency Indemnity.
If, under any applicable law and whether pursuant to a judgment
being made or registered against the Bank or for any other reason, any
payment under or in connection with this Agreement is made or is to be
satisfied in a currency (the "other currency") other than that in which the
relevant payment is expressed to be due (the "required currency") under
this Agreement, the Bank shall arrange to supply the "other currency" to
the Global Agent or the relevant Paying Agent, Registrar, London Issuing
Agent or Transfer Agent, in accordance with the payment timeframes
specified in Section 13(a) of this Agreement.
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Section 34. Amendments; Meetings of Holders.
(a) The Notes and any Receipts and Coupons attached to the
Definitive Bearer Notes may be amended by the Bank, and this Agreement may
be amended by the Bank and the Global Agent, (i) for the purpose of curing
any ambiguity, or of curing, correcting or supplementing any defective
provision contained therein or herein, (ii) to make any further
modifications of the terms of this Agreement necessary or desirable to
allow for the issuance of any additional Notes (which modifications shall
not be materially adverse to holders of outstanding Notes) or (iii) in any
manner which the Bank (and, in the case of this Agreement, the Global
Agent) may deem necessary or desirable and which shall not materially
adversely affect the interests of the holders of the Notes, Receipts and
Coupons, to all of which each holder of Notes, Receipts and Coupons shall,
by acceptance thereof, be deemed to have consented. In addition, with the
written consent of the holders of at least 66 2/3% of the principal amount
of the Notes to be affected thereby, the Bank and the Global Agent may from
time to time and at any time enter into agreements modifying or amending
this Agreement or the provisions of the Notes, Receipts and Coupons for the
purpose of adding any provisions to or changing in any manner or
eliminating any provisions of this Agreement or of modifying in any manner
the rights of the holders of Notes, Receipts and Coupons; provided,
however, that no such modification or amendment may, without the consent of
the holder of each outstanding Note affected thereby, (i) change the Stated
Maturity Date with respect to any Note or reduce or cancel the amount
payable at maturity; (ii) reduce the amount payable or modify the payment
date for any interest with respect to any Note or vary the method of
calculating the rate of interest with respect to any Note; (iii) reduce any
minimum interest rate and/or maximum interest rate with respect to any
Note; (iv) modify the currency in which payments under any Note and/or any
Coupons appertaining thereto are to be made; (v) change the obligation of
the Bank to pay Additional Amounts with respect to Notes, Receipts and
Coupons; (vi) reduce the percentage in principal amount of outstanding
Notes the consent of the holders of which is necessary to modify or amend
this Agreement or the provisions of the Notes or to waive any future
compliance or past default; or (vii) reduce the percentage in principal
amount of outstanding Notes the consent of the holders of which is required
at any meeting of holders of Notes at which a resolution is adopted. Any
instrument given by or on behalf of any holder of a Note in connection with
any consent to any such modification, amendment or waiver shall be
irrevocable once given and shall be conclusive and binding on all
subsequent holders of such Note. Any modifications, amendments or waivers
to this Agreement or the provisions of the Notes, Receipts and Coupons
shall be conclusive and binding on all holders of Notes, Receipts and
Coupons, whether or not notation of such modifications, amendments or
waivers is made upon the
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Notes, Receipts and Coupons. It will not be necessary for the consent of
the holders of Notes to approve the particular form of any proposed
amendment, but it shall be sufficient if such consent shall approve the
substance thereof.
(b) A meeting of holders of Notes may be called at any time and
from time to time to make, give or take any request, demand authorization,
direction, notice, consent, waiver or other action provided by this
Agreement or the Notes to be made, given or taken by holders of Notes.
(c) If requested by the Bank or the holders of at least 10% in
principal amount of the outstanding Notes of a Series, the Global Agent
shall call a meeting of holders of such Notes for any purpose specified in
Section 34(b) to be held at such time and at such place in The City of New
York as the Bank shall determine. Notice of every meeting of holders of
Notes, setting forth the time and the place of such meeting and in general
terms the action proposed to be taken at such meeting, shall be given by
the Global Agent on behalf of the Bank to the holders of the Notes, in the
same manner as provided in Section 18, not less than 21 nor more than 180
days prior to the date fixed for the meeting. If at any time the Bank or
the holders of at least 10% in principal amount of the outstanding Notes of
a Series shall have requested the Global Agent to call a meeting of the
holders to take any action authorized in Section 34(b), by written request
setting forth in reasonable detail the action proposed to be taken at the
meeting, and the Global Agent shall not have given notice of such meeting
within 21 days after receipt of such request or shall not thereafter
proceed to cause the meeting to be held as provided herein, then the
holders of Notes in the amount above-specified may determine the time and
the place in The City of New York for such meeting and may call such
meeting by giving notice thereof as provided in this Section 34(c).
(d) To be entitled to vote at any meeting of holders of Notes of
a Series, a person shall be a holder of outstanding Notes of such Series at
the time of such meeting, or a person appointed by an instrument in writing
as proxy for such holder.
(e) The persons entitled to vote a majority in principal amount
of the outstanding Notes of the relevant Series shall constitute a quorum.
In the absence of a quorum, within 30 minutes of the time appointed for any
such meeting, the meeting may be adjourned for a period of not less than 10
days as determined by the chairman of the meeting prior to the adjournment
of such meeting. In the absence of a quorum at any such adjourned meeting,
such adjourned meeting may be further adjourned for a period of not less
than 10 days as determined by the chairman of the meeting prior to the
adjournment of such adjourned
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meeting. Notice of the reconvening of any adjourned meeting shall be given
as provided in Section 18 except that such notice need be given not less
than five days prior to the date on which the meeting is scheduled to be
reconvened. Notice of the reconvening of an adjourned meeting shall state
expressly the percentage of the principal amount of the outstanding Notes
which shall constitute a quorum.
Subject to the foregoing, at the reconvening of any meeting
adjourned for a lack of a quorum, the persons entitled to vote 25% in
principal amount of the outstanding Notes of the relevant Series constitute
a quorum for the taking of any action set forth in the notice of the
original meeting. Any meeting of holders of Notes at which a quorum is
present may be adjourned from time to time by vote of a majority in
principal amount of the outstanding Notes represented at the meeting, and
the meeting may be held as so adjourned without further notice. At a
meeting or an adjourned meeting duly reconvened and at which a quorum is
present as aforesaid, any resolution and all matters shall be effectively
passed and decided if passed or decided by the persons entitled to vote a
majority in principal amount of the outstanding Notes of such Series
represented and voting at such meeting, provided that such amount approving
such resolution shall be not less than 25% in principal amount of the
outstanding Notes of such Series.
Section 35. References to Additional Amounts.
All references in this Agreement to principal, premium and
interest in respect of any Note shall, unless the context otherwise
requires, be deemed to mean and include all Additional Amounts, if any,
payable in respect thereof as set forth in such Note.
Section 36. Descriptive Headings.
The descriptive headings in this Agreement are for convenience of
reference only and shall not define or limit the provisions hereof.
Section 37. Governing Law.
This Agreement is governed by, and shall be construed in
accordance with, the laws of the State of New York, United States of
America without regard to conflicts of laws principles.
Section 38. Waiver of Sovereign Immunity.
To the extent that the Bank or any of its properties, assets or
revenues may have or may hereafter become entitled to, or have attributed
to it, any right of immunity, on the grounds of sovereignty or otherwise,
from any legal action, suit or proceeding, from the giving
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of any relief in respect thereof, from set-off or counterclaim, from the
jurisdiction of any court, from service of process, from attachment upon or
prior to judgment, from attachment in aid of execution of judgment, or from
execution of judgment, or other legal process or proceeding for the giving
of any relief or for the enforcement of any judgment, in any jurisdiction
in which proceedings may at any time be commenced, with respect to its
obligations, liabilities or any other matter under or arising out of or in
connection with this Agreement or the Notes, the Bank, to the maximum
extent permitted by law, hereby irrevocably and unconditionally waives, and
agrees not to plead or claim, any such immunity and consents to such relief
and enforcement. This agreement and waiver are intended to be effective
upon the execution and delivery of this Agreement by the Bank without any
further act by the Bank and are intended to inure to the benefit of the
Agents from time to time.
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Section 39. Counterparts.
This Agreement may be executed by any one or more of the parties
hereto in any number of counterparts, each of which shall be deemed to be
an original, but all such counterparts shall together constitute one and
the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.
The Bank
--------
MBNA AMERICA BANK, NATIONAL 1100 North King Street
ASSOCIATION Wilmington, Delaware 19884
Telephone:
Fax:
By: Attention:
----------------------------
Title:
The Global Agent
----------------
THE FIRST NATIONAL BANK OF
CHICAGO Telephone: (212) 373-1191
Fax: (212) 373-1383
By: Attention: Corporate Trust
---------------------------- Services
Title:
The Registrar and NY Paying Agent
--------------------------------- Telephone: (212) 240-8800
THE FIRST NATIONAL BANK OF Fax: (212) 240-8938
CHICAGO Attention: Corporate Trust
Services
By:
----------------------------
Title:
-41-
<PAGE> 42
The London Paying Agent
and London Issuing Agent
------------------------
THE FIRST NATIONAL BANK OF Telex: 8812825 FCCC LC
CHICAGO (London) Telephone: 44-171-438-4270
Fax: 44-171-867-9186
Attention: Corporate Trust
By: Services
----------------------------
Title:
The Luxembourg Paying Agent and
Transfer Agent
-------------------------------
BANQUE INDOSUEZ LUXEMBOURG Telex: 1254 INSU LU
Telephone: 352-47-67-2466
Fax: 353-74-67-3607
By: Attention: Issuer Services
----------------------------
Title:
-42-
<PAGE> 43
EXHIBIT A
FORM OF REGISTERED GLOBAL NOTE
[UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW YORK, NEW YORK) (THE
"DEPOSITARY") TO MBNA AMERICA BANK, NATIONAL ASSOCIATION (THE "BANK") OR
ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY
NOTE ISSUED UPON REGISTRATION OF TRANSFER OF, OR IN EXCHANGE FOR, OR IN
LIEU OF, THIS NOTE IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH
OTHER NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITARY (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO.), ANY TRANSFER,
PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.
THIS NOTE IS A GLOBAL SECURITY AND, UNLESS AND UNTIL THIS NOTE IS
EXCHANGED IN WHOLE OR IN PART FOR NOTES IN DEFINITIVE FORM, IT MAY NOT
BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE
DEPOSITARY OR BY THE NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR
ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH
NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR
DEPOSITARY.](1)
[SUBORDINATED NOTE: THE OBLIGATION EVIDENCED BY THIS NOTE IS AN
OBLIGATION OF MBNA AMERICA BANK, NATIONAL ASSOCIATION (THE "BANK") AND
IS SUBORDINATED TO THE CLAIMS OF DEPOSITORS AND GENERAL CREDITORS OF THE
BANK, IS INELIGIBLE AS COLLATERAL FOR A LOAN BY THE BANK AND IS NOT
SECURED. THIS OBLIGATION IS NOT A DEPOSIT AND IS NOT INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION ("FDIC") OR ANY OTHER INSURER.]
[SENIOR NOTE: THIS NOTE IS A DIRECT, UNCONDITIONAL, UNSECURED AND
UNSUBORDINATED GENERAL OBLIGATION OF MBNA AMERICA BANK, NATIONAL
ASSOCIATION (THE "BANK"). THE OBLIGATIONS EVIDENCED BY THIS NOTE RANK
PARI PASSU WITH ALL OTHER UNSECURED AND UNSUBORDINATED OBLIGATIONS OF
THE BANK, EXCEPT OBLIGATIONS, INCLUDING ITS DOMESTIC (U.S.) DEPOSITS,
THAT ARE SUBJECT TO ANY PRIORITIES OR PREFERENCES UNDER APPLICABLE LAW.
THIS NOTE DOES NOT EVIDENCE A DEPOSIT AND IS NOT INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION ("FDIC") OR ANY OTHER INSURER.
[NOTES SOLD WITHIN THE UNITED STATES: THIS NOTE IS ISSUABLE ONLY IN
FULLY REGISTERED FORM IN MINIMUM DENOMINATIONS OF US$250,000 AND
INTEGRAL MULTIPLES OF US$1,000 IN EXCESS THEREOF. EACH OWNER OF A
(1) Delete in the case of all Registered Global Notes other than DTC
Global Notes.
(A-1)
<PAGE> 44
BENEFICIAL INTEREST IN THIS NOTE MUST BE AN INSTITUTIONAL INVESTOR WHO
IS AN "ACCREDITED INVESTOR" WITHIN THE MEANING OF RULE 501 UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND IS REQUIRED TO HOLD A BENEFICIAL
INTEREST IN US$250,000 PRINCIPAL AMOUNT OR ANY INTEGRAL MULTIPLE OF
US$1,000 IN EXCESS THEREOF OF THIS NOTE AT ALL TIMES.]
No. R-______ REGISTERED
CUSIP No.: _________
ISIN No.: _________
Common Code: _________
MBNA AMERICA BANK, NATIONAL ASSOCIATION
GLOBAL BANK NOTE
(Registered Global Note)
ISSUING BRANCH (if applicable):
ORIGINAL ISSUE DATE: PRINCIPAL AMOUNT:
SPECIFIED CURRENCY:
MATURITY DATE: /_/ U.S. dollar
/_/ FIXED RATE NOTE /_/ Other:
/_/ FLOATING RATE NOTE
MBNA America Bank, NATIONAL ASSOCIATION, a national banking
association organized pursuant to the laws of the United States (the
"Bank"), for value received, hereby promises to pay to
__________________, or registered assigns, the principal amount
specified above, as adjusted in accordance with Schedule 1 hereto, on
the Maturity Date specified above (except to the extent redeemed or
repaid prior to the Maturity Date) and to pay interest thereon (i) in
accordance with the provisions set forth on the reverse hereof under the
caption "Fixed Rate Interest Provisions," if this Note is designated as
a "Fixed Rate Note" above, or (ii) in accordance with the provisions set
forth on the reverse hereof under the caption "Floating Rate Interest
Provisions," if this Note is designated as a "Floating Rate Note" above,
in each case as such provisions may be modified or supplemented by the
terms and provisions set forth in the Pricing Supplement attached hereto
(the "Pricing Supplement"), and (to the extent that the payment of such
interest shall be legally enforceable) to pay interest at the Default
Rate per annum specified in the Pricing Supplement on any overdue
principal and premium, if any, and on any overdue installment of
interest. The interest so payable, and punctually paid or duly provided
(A-2)
<PAGE> 45
for, on any Interest Payment Date will be paid to the person in whose
name this Note (or any predecessor Note) is registered at the close of
business on the fifteenth calendar day (whether or not a Business Day
(as defined on the reverse hereof)) next preceding the applicable
Interest Payment Date (unless otherwise specified in the Pricing
Supplement) (each, a "Regular Record Date"); provided, however, that
interest payable at Maturity (as defined in the Pricing Supplement) will
be payable to the person to whom principal shall be payable. Any such
interest not so punctually paid or duly provided for shall forthwith
cease to be payable to the holder as of the close of business on such
Regular Record Date, and shall instead be payable to the person in whose
name this Note (or any predecessor Note) is registered at the close of
business on a special record date for the payment of such defaulted
interest (the "Special Record Date") to be fixed by the Global Agent (as
defined below), notice whereof shall be given by the Global Agent to the
holder of this Note not less than 15 calendar days prior to such Special
Record Date.
This Note is one of a duly authorized issue of the Bank's
Global Bank Notes due from one month or more from date of issue (the
"Notes"). The Notes are issued and to be issued under an Agency
Agreement dated as of ____________ __, 1997 (as amended from time to
time, the "Agency Agreement") among the Bank, The First National Bank of
Chicago, as global agent (the "Global Agent"), the Global Agent acting
through its specified office in New York as paying agent (the "NY Paying
Agent") and as registrar (the "Registrar"), the Global Agent acting
through its specified office in London as paying agent (the "London
Paying Agent") and as issuing agent (the "London Issuing Agent") and
Banque Indosuez Luxembourg as transfer agent (the "Transfer Agent") and
as paying agent (the "Luxembourg Paying Agent"; together with the Paying
Agent and the London Paying Agent, the "Paying Agents"; individually, a
"Paying Agent"). The terms Global Agent, NY Paying Agent, Registrar,
London Paying Agent, London Issuing Agent, Luxembourg Paying Agent and
Transfer Agent shall include any additional or successor agents
appointed in such capacities by the Bank.
The Bank shall cause to be kept at the office of the Registrar
designated below a register (the register maintained in such office or
any other office or agency of the Registrar, herein referred to as the
"Note Register") in which, subject to such reasonable regulations as it
may prescribe, the Bank shall provide for the registration of Notes
issued in registered form and of transfers of such Notes. The Bank has
initially appointed the Global Agent acting through its specified office
in New York as "Registrar" for the purpose of registering Notes issued
in registered form and transfers of such Notes. The Bank reserves the
(A-3)
<PAGE> 46
right to rescind its designation as Registrar at any time, and transfer
such function to another bank or financial institution.
The transfer of this Note is registrable in the Note Register,
upon surrender of this Note for registration of transfer at the office
or agency of the Registrar, or any transfer agent maintained for that
purpose, duly endorsed by, or accompanied by a written instrument of
transfer in form satisfactory to the Registrar (or such transfer agent)
and the Global Agent duly executed by, the holder hereof or its attorney
duly authorized in writing.
Payment of principal of, premium, if any, and interest on,
this Note due at Maturity will be made in immediately available funds
upon presentation and surrender of this Note at the office of a Paying
Agent maintained for that purpose; provided, that this Note is presented
to such Paying Agent in time for such Paying Agent to make such payment
in accordance with its normal procedures. Payments of interest on this
Note (other than at Maturity) will be made by wire transfer to such
account as has been appropriately designated to the Global Agent by the
person entitled to such payments.
Reference is made to the further provisions of this Note set
forth on the reverse hereof and in the Pricing Supplement, which further
provisions shall for all purposes have the same effect as if set forth
at this place. In the event of any conflict between the provisions
contained herein or on the reverse hereof and the provisions contained
in the Pricing Supplement, the latter shall control. Reference herein
to "this Note", "hereof", "herein" and comparable terms shall include
the Pricing Supplement.
Unless the certificate of authentication hereon has been
executed by the Registrar, by manual signature of an authorized
signatory, this Note shall not be valid or obligatory for any purpose.
This Note shall be governed by, and construed in accordance
with, the laws of the State of Delaware, without regard to the conflicts
of law principles thereof.
(A-4)
<PAGE> 47
IN WITNESS WHEREOF, the Bank has caused this Note to be duly
executed.
MBNA AMERICA BANK, NATIONAL
ASSOCIATION
By: --------------------------------
Authorized Signatory
Dated:
REGISTRAR'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes referred to
in the within-mentioned Agency Agreement.
THE FIRST NATIONAL BANK OF CHICAGO,
as Registrar
By:
----------------------------------
Authorized Signatory
(A-5)
<PAGE> 48
[Reverse of Note]
[ATTACH REVERSE OF NOTE IN FORM
OF EXHIBIT I TO AGENCY AGREEMENT]
(A-6)
<PAGE> 49
ABBREVIATIONS
The following abbreviations, when used in the inscription on
the within Note, shall be construed as though they were written out in
full according to applicable laws or regulations.
TEN COM - as tenants in common
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right of survivorship and
not as tenants in common
UNIF GIFT MIN ACT - Custodian
------------ ----------
(Cust) (Minor)
under Uniform Gifts to Minors Act
----------------------------------
State
Additional abbreviations may also be used
though not in the above list.
(A-7)
<PAGE> 50
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s)
and transfer(s) unto
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PLEASE INSERT SOCIAL SECURITY NUMBER OR OTHER IDENTIFYING NUMBER OF
ASSIGNEE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Please print or typewrite name and address,
including postal zip code, of assignee)
_________________________________________________________________
the within Note and all rights thereunder, and hereby
irrevocably constitutes and appoints ____________________________
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
to transfer said Note on the books of the Bank, with full power of
substituting in the premises.
Dated:
---------------------------- --------------------------------
NOTICE: The signature to this
assignment must correspond with
the name as written upon the
within Note in every particular,
without alteration
or enlargement or any change
whatsoever.
(A-8)
<PAGE> 51
----------------------------------
Signature Guarantee
NOTICE: The signature(s) should be guaranteed by an
eligible guarantor institution (banks, stockbrokers,
savings and loan associations, and credit unions with
membership in an approved signature guarantee
medallion program), pursuant to Rule 17Ad-15
under the Securities Exchange Act of 1934.
(A-9)
<PAGE> 52
Schedule 1
----------
SCHEDULE OF TRANSFERS AND EXCHANGES
-----------------------------------
The following increases and decreases in the principal amount
of this Note have been made:
<TABLE>
<CAPTION>
Increase
(Decrease) in
Principal Amount Increase in
of this Note Due Principal Principal
to Transfer Amount of this Amount of Notation
Between Note Due to this Note made by or
Date of Registered Exchanges of After on behalf of
Transfer Global Notes Bearer Notes Transfer the Bank
<S> <C> <C> <C> <C>
_________ _________ _________ _________ _________
_________ _________ _________ _________ _________
_________ _________ _________ _________ _________
_________ _________ _________ _________ _________
</TABLE>
(A-10)
<PAGE> 53
EXHIBIT B
---------
FORM OF DEFINITIVE REGISTERED NOTE
[SUBORDINATED NOTE: THE OBLIGATION EVIDENCED BY THIS NOTE IS AN
OBLIGATION OF MBNA AMERICA BANK, NATIONAL ASSOCIATION (THE "BANK") AND
IS SUBORDINATED TO THE CLAIMS OF DEPOSITORS AND GENERAL CREDITORS OF THE
BANK, IS INELIGIBLE AS COLLATERAL FOR A LOAN BY THE BANK AND IS NOT
SECURED. THIS OBLIGATION IS NOT A DEPOSIT AND IS NOT INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION ("FDIC") OR ANY OTHER INSURER.]
[SENIOR NOTE: THIS NOTE IS A DIRECT, UNCONDITIONAL, UNSECURED AND
UNSUBORDINATED GENERAL OBLIGATION OF MBNA AMERICA BANK, NATIONAL
ASSOCIATION (THE "BANK"). THE OBLIGATIONS EVIDENCED BY THIS NOTE RANK
PARI PASSU WITH ALL OTHER UNSECURED AND UNSUBORDINATED OBLIGATIONS OF
THE BANK, EXCEPT OBLIGATIONS, INCLUDING ITS DOMESTIC (U.S.) DEPOSITS,
THAT ARE SUBJECT TO ANY PRIORITIES OR PREFERENCES UNDER APPLICABLE LAW.
THIS NOTE DOES NOT EVIDENCE A DEPOSIT AND IS NOT INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION ("FDIC") OR ANY OTHER INSURER.]
[NOTES SOLD WITHIN THE UNITED STATES: THIS NOTE IS ISSUABLE ONLY IN
FULLY REGISTERED FORM IN MINIMUM DENOMINATIONS OF US$250,000 AND
INTEGRAL MULTIPLES OF US$1,000 IN EXCESS THEREOF. EACH OWNER OF A
BENEFICIAL INTEREST IN THIS NOTE MUST BE AN INSTITUTIONAL INVESTOR WHO
IS AN "ACCREDITED INVESTOR" WITHIN THE MEANING OF RULE 501 UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND IS REQUIRED TO HOLD A BENEFICIAL
INTEREST IN US$250,000 PRINCIPAL AMOUNT OR ANY INTEGRAL MULTIPLE OF
US$1,000 IN EXCESS THEREOF OF THIS NOTE AT ALL TIMES.]
No. R- ___ REGISTERED
CUSIP No.: ____
ISIN No.: ____
Common Code: ____
(B-1)
<PAGE> 54
MBNA AMERICA BANK, NATIONAL ASSOCIATION
GLOBAL BANK NOTE
(Definitive Registered Note)
ISSUING BRANCH (if applicable):
ORIGINAL ISSUE DATE: PRINCIPAL AMOUNT:
MATURITY DATE: SPECIFIED CURRENCY:
/_/ U.S. dollar
/_/ FIXED RATE NOTE
/_/ Other:
INTEREST RATE: ____%
/_/ FLOATING RATE NOTE
INTEREST RATE DETERMINATION: OPTION TO ELECT PAYMENT IN
SPECIFIED CURRENCY
/_/ ISDA RATE (if Specified Currency is
/_/ REFERENCE RATE DETERMINATION other than the United
States dollar):
/_/ Yes /_/ No
EXCHANGE RATE AGENT: AUTHORIZED DENOMINATIONS:
MARGIN (PLUS OR MINUS) FLOATING RATE OPTION
(ISDA Rate only): (ISDA Rate only):
DESIGNATED MATURITY RESET DATE
(ISDA Rate only): (ISDA Rate only):
INITIAL INTEREST RATE INDEX MATURITY
(Reference Rate (Reference Rate
Determination only): ____% Determination only):
INTEREST RATE IF CMT RATE:
BASIS OR BASES Designated CMT
(Reference Rate Telerate Page:
Determination only): Designated CMT
Maturity Index:
IF LIBOR: INDEX CURRENCY
/_/ LIBOR Telerate (Reference Rate
/_/ LIBOR Reuters Determination only):
(B-2)
<PAGE> 55
SPREAD (PLUS OR MINUS) INITIAL INTEREST RESET
AND/OR SPREAD MULTIPLIER DATE (Reference Rate
(Reference Rate Determination Determination only):
only):
INTEREST RESET PERIOD INTEREST RESET
(Reference Rate Determination DATES (Reference Rate
only): Determination only):
INTEREST CALCULATION INTEREST PAYMENT DATES:
(Reference Rate Determination
only):
/_/ Regular Floating Rate Note INTEREST PAYMENT
/_/ Floating Rate/Fixed Rate Note PERIOD:
Fixed Rate Commencement Date:
Fixed Interest Rate:
/_/ Inverse Floating Rate Note
Fixed Interest Rate:
REGULAR RECORD DATES (if other CALCULATION AGENT:
than the 15th day prior to each
Interest Payment Date):
MAXIMUM INTEREST MINIMUM INTEREST
RATE: RATE:
INITIAL REDEMPTION ANNUAL REDEMPTION
DATE: PERCENTAGE REDUCTION:
INITIAL REDEMPTION HOLDER'S OPTIONAL
PERCENTAGE: REPAYMENT DATE(S):
(B-3)
<PAGE> 56
DAY COUNT CONVENTION
/_/ 30/360 for the period from to .
-------- --------
/_/ Actual/360 for the period from to .
-------- -------
/_/ Actual/Actual for the period from to .
-------- --------
/_/ Other:
BUSINESS DAY CONVENTION ORIGINAL ISSUE DISCOUNT
/_/ Yes
/_/ Floating Rate Convention /_/ No
/_/ Following Business Day Convention Total Amount of OID:
/_/ Modified Following Business Day Yield to Maturity:
Convention Initial Accrual Period:
/_/ Preceding Business Day Convention Issue Price: ____%
DEFAULT RATE: ____%
MBNA America Bank, National Association, a national
banking association organized pursuant to the laws of the United States
(the "Bank"), for value received, hereby promises to pay to
___________________________, or registered assigns, the principal amount
specified above on the Maturity Date specified above (except to the
extent redeemed or repaid prior to the Maturity Date) and to pay
interest thereon (i) in accordance with the provisions set forth on the
reverse hereof under the caption "Fixed Rate Interest Provisions", if
this Note is designated as a "Fixed Rate Note" above, or (ii) in
accordance with the provisions set forth on the reverse hereof under the
caption "Floating Rate Interest Provisions," if this Note is designated
as a "Floating Rate Note" above, and (to the extent that the payment of
such interest shall be legally enforceable) to pay interest at the
Default Rate per annum specified above on any overdue principal and
premium, if any, and on any overdue installment of interest. The
interest so payable, and punctually paid or duly provided for, on any
Interest Payment Date will be paid to the person in whose name this Note
(or any predecessor Note) is registered at the close of business on the
fifteenth calendar day (whether or not a Business Day (as defined on the
reverse hereof)) next preceding the applicable Interest Payment Date
(unless otherwise specified above) (each, a "Regular Record Date");
provided, however, that interest payable at Maturity (as defined on the
reverse hereof) will be payable to the person to whom principal shall be
payable. Any such interest not so punctually paid or duly provided for
shall forthwith cease to be payable to the holder as of the close of
(B-4)
<PAGE> 57
business on such Regular Record Date, and shall instead be payable to
the person in whose name this Note (or any predecessor Note) is
registered at the close of business on a special record date for the
payment of such defaulted interest (the "Special Record Date") to be
fixed by the Global Agent (as defined below), notice whereof shall be
given by the Global Agent to the holder of this Note not less than 15
calendar days prior to such Special Record Date.
This Note is one of a duly authorized issue of the
Bank's Global Bank Notes due from one month or more from date of issue
(the "Notes"). The Notes are issued and to be issued under an Agency
Agreement dated as of _____________ __, 1997 (as amended from time to
time, the "Agency Agreement") among the Bank, The First National Bank of
Chicago, as global agent (the "Global Agent"), the Global Agent acting
through its specified office in New York as paying agent (the "NY Paying
Agent") and as registrar (the "Registrar"), the Global Agent acting
through its specified office in London as paying agent (the "London
Paying Agent") and as issuing agent (the "London Issuing Agent") and
Banque Indosuez Luxembourg as transfer agent (the "Transfer Agent") and
as paying agent (the "Luxembourg Paying Agent"; together with the NY
Paying Agent and the London Paying Agent, the "Paying Agents";
individually, a "Paying Agent"). The terms Global Agent, NY Paying
Agent, Registrar, London Paying Agent, London Issuing Agent, Luxembourg
Paying Agent and Transfer Agent shall include any additional or
successor agents appointed in such capacities by the Bank.
The Bank shall cause to be kept at the office of the
Registrar designated below a register (the register maintained in such
office of any other office or agency of the Registrar, herein referred
to as the "Note Register") in which, subject to such reasonable
regulations as it may prescribe, the Bank shall provide for the
registration of Notes issued in registered form and of transfers of such
Notes. The Bank has initially appointed the Global Agent acting through
its specified office in New York as "Registrar" for the purpose of
registering Notes issued in registered form and transfers of such Notes.
The Bank reserves the right to rescind its designation as Registrar at
any time, and transfer such function to another bank or financial
institution.
The transfer of this Note is registrable in the Note
Register, upon surrender of this Note for registration of transfer at
the office or agency of the Registrar or any transfer agent maintained
for that purpose, duly endorsed by, or accompanied by a written
instrument of transfer in form satisfactory to the Registrar (or such
transfer agent) and the Global Agent duly executed by, the holder hereof
or its attorney duly authorized in writing.
(B-5)
<PAGE> 58
Payment of principal of, premium, if any, and interest
on, this Note due at Maturity will be made in immediately available
funds upon presentation and surrender of this Note at the office of a
Paying Agent maintained for that purpose; provided, that this Note is
presented to such Paying Agent in time for such Paying Agent to make
such payment in accordance with its normal procedures. Payments of
interest on this Note (other than at Maturity) will be made by check
mailed to the holder of this Note as of the Regular Record Date with
respect to such Interest Payment Date at the address shown in the Note
Register specified below; provided, however, that a holder of
US$10,000,000 or more in aggregate principal amount (or the equivalent
thereof in other currencies) of Notes (whether identical or different
terms and provisions) shall be entitled to receive payments of interest,
other than interest due at Maturity, by wire transfer of immediately
available funds if appropriate written wire transfer instructions have
been received by the Global Agent not less than 16 days prior to the
applicable Interest Payment Date.
Reference is hereby made to the further provisions of
this Note set forth on the reverse hereof, which further provisions
shall for all purposes have the same effect as if set forth at this
place.
Unless the certificate of authentication hereon has
been executed by the Registrar, by manual signature of an authorized
signatory, this Note shall not be valid or obligatory for any purpose.
This Note shall be governed by, and construed in
accordance with, the laws of the State of Delaware, without regard to
the conflicts of law principles thereof.
(B-6)
<PAGE> 59
IN WITNESS WHEREOF, the Bank has caused this Note to be
duly executed.
MBNA AMERICA BANK, NATIONAL ASSOCIATION
By:
----------------------------------
Authorized Signatory
Dated:
REGISTRAR'S
CERTIFICATE OF AUTHENTICATION
This is one of the Notes referred to
in the within-mentioned Agency Agreement.
THE FIRST NATIONAL BANK OF CHICAGO,
as Registrar
By:
------------------------------------
Authorized Signatory
(B-7)
<PAGE> 60
[Reverse of Note]
[ATTACH REVERSE OF NOTE IN FORM
OF EXHIBIT I TO AGENCY AGREEMENT]
(B-8)
<PAGE> 61
ABBREVIATIONS
The following abbreviations, when used in the
inscription on the face of the within Note, shall be construed as though
they were written out in full according to applicable laws or
regulations.
TEN COM - as tenants in common
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right of
survivorship and not as tenants in
common
UNIF GIFT MIN ACT - Custodian
------------ ----------
(Cust) (Minor)
under Uniform Gifts to Minors Act
__________________________________
State
Additional abbreviations may also be used
though not in the above list.
(B-9)
<PAGE> 62
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sell(s),
assign(s) and transfer(s) unto
--------------------------------------
------------------------------------------------------------------------
PLEASE INSERT SOCIAL SECURITY NUMBER OR OTHER IDENTIFYING NUMBER OF
ASSIGNEE
------------------------------------------------------------------------
------------------------------------------------------------------------
(Please print or typewrite name and address,
including postal zip code, of assignee)
------------------------------------------------------------------------
the within Note and all rights thereunder, and hereby
irrevocably constitutes and appoints
----------------------------------
------------------------------------------------------------------------
------------------------------------------------------------------------
to transfer said Note on the books of the Bank, with full power of
substitution in the premises.
(B-10)
<PAGE> 63
Dated:___________________________ ______________________________
NOTICE: The signature to this
assignment must correspond
with the name as written upon
the face of the within Note in
every particular, without
alteration or enlargement
or any change whatsoever.
________________________________
Signature Guarantee
NOTICE: The signature(s) should be
guaranteed by an eligible guarantor
institution (banks, stockbrokers,
savings and loan associations, and
credit unions with membership in
an approved signature guarantee
medallion program), pursuant to
Rule 17Ad-15 under the Securities
Exchange Act of 1934.
(B-11)
<PAGE> 64
EXHIBIT C
---------
FORM OF TEMPORARY GLOBAL NOTE
[SUBORDINATED NOTE: THE OBLIGATION EVIDENCED BY THIS NOTE IS AN
OBLIGATION OF MBNA AMERICA BANK, NATIONAL ASSOCIATION (THE "BANK") AND
IS SUBORDINATED TO THE CLAIMS OF DEPOSITORS AND GENERAL CREDITORS OF THE
BANK, IS INELIGIBLE AS COLLATERAL FOR A LOAN BY THE BANK AND IS NOT
SECURED. THIS OBLIGATION IS NOT A DEPOSIT AND IS NOT INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION ("FDIC") OR ANY OTHER INSURER.]
[SENIOR NOTE: THIS NOTE IS A DIRECT, UNCONDITIONAL, UNSECURED AND
UNSUBORDINATED GENERAL OBLIGATION OF MBNA AMERICA BANK, NATIONAL
ASSOCIATION (THE "BANK"). THE OBLIGATIONS EVIDENCED BY THIS NOTE RANK
PARI PASSU WITH ALL OTHER UNSECURED AND UNSUBORDINATED OBLIGATIONS OF
THE BANK EXCEPT OBLIGATIONS, INCLUDING ITS DOMESTIC (U.S.) DEPOSITS,
THAT ARE SUBJECT TO ANY PRIORITIES OR PREFERENCES UNDER APPLICABLE LAW.
THIS NOTE DOES NOT EVIDENCE A DEPOSIT AND IS NOT INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION ("FDIC") OR ANY OTHER INSURER.]
ANY UNITED STATES PERSON WHO HOLDS THIS OBLIGATION WILL BE SUBJECT TO
LIMITATIONS UNDER THE UNITED STATES INCOME TAX LAWS INCLUDING THE
LIMITATIONS PROVIDED IN SECTIONS 165(j) AND 1287(a) OF THE INTERNAL
REVENUE CODE.
[NOTES SOLD WITHIN THE UNITED STATES: THIS NOTE IS ISSUABLE ONLY IN
MINIMUM DENOMINATIONS OF US$250,000 AND INTEGRAL MULTIPLES OF US$1,000
IN EXCESS THEREOF. EACH OWNER OF A BENEFICIAL INTEREST IN THIS NOTE
MUST BE AN INSTITUTIONAL INVESTOR WHO IS AN "ACCREDITED INVESTOR" WITHIN
THE MEANING OF RULE 501 UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
AND IS REQUIRED TO HOLD A BENEFICIAL INTEREST IN US$250,000 PRINCIPAL
AMOUNT OR ANY INTEGRAL MULTIPLE OF US$1,000 IN EXCESS THEREOF OF THIS
NOTE AT ALL TIMES.]
[NOTES SOLD OUTSIDE OF THE UNITED STATES: THIS NOTE (OR ITS PREDECESSOR)
HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER, AND WAS ORIGINALLY ISSUED
IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER, THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND MAY NOT
BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF
SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER
OF THIS NOTE IS HEREBY NOTIFIED THAT THE SELLER OF THIS NOTE MAY BE
RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE
SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF THIS
(C-1)
<PAGE> 65
NOTE BY ITS ACCEPTANCE HEREOF REPRESENTS AND AGREES FOR THE BENEFIT OF
THE ISSUER AND THE DEALERS THAT (A) THIS NOTE MAY BE RESOLD, PLEDGED OR
OTHERWISE TRANSFERRED ONLY (1) TO A PERSON WHOM THE SELLER REASONABLY
BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A
UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF
SUCH RULE 144A, (2) IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH
REGULATION S UNDER THE SECURITIES ACT OR (3) PURSUANT TO AN EXEMPTION
FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144
THEREUNDER (IF AVAILABLE) AND IN EACH OF SUCH CASES IN ACCORDANCE WITH
ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY
OTHER JURISDICTION, AND THAT (B) THE HOLDER WILL, AND EACH SUBSEQUENT
HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF THIS NOTE FROM IT OF THE
TRANSFER RESTRICTIONS REFERRED TO IN (A) ABOVE. NO REPRESENTATION CAN
BE MADE AS TO AVAILABILITY OF THE EXEMPTION PROVIDED BY RULE 144 UNDER
THE SECURITIES ACT FOR RESALES OF THIS NOTE.
No. B- ___ BEARER
ISIN No.: ________
Common Code: _____
MBNA AMERICA BANK, NATIONAL ASSOCIATION
GLOBAL BANK NOTE
(Temporary Global Note)
ISSUING BRANCH (if applicable):
ORIGINAL ISSUE DATE: PRINCIPAL AMOUNT:
MATURITY DATE: SPECIFIED CURRENCY:
/_/ U.S. dollar
/_/ FIXED RATE NOTE /_/ Other:
/_/ FLOATING RATE NOTE
MBNA America Bank, National Association, a national banking
association organized pursuant to the laws of the United States (the
"Bank"), for value received, hereby promises to pay to the bearer
hereof, the principal amount specified above, as adjusted in accordance
with Schedule 2, on the Maturity Date (except to the extent redeemed or
repaid prior to the Maturity Date) specified above and to pay interest
thereon (i) in accordance with the provisions set forth on the reverse
(C-2)
<PAGE> 66
hereof under the caption "Fixed Rate Interest Provisions," if this Note
is designated as a "Fixed Rate Note" above, or (ii) in accordance with
the provisions set forth on the reverse hereof under the caption
"Floating Rate Interest Provisions," if this Note is designated as a
"Floating Rate Note" above, in each case as such provisions may be
modified or supplemented by the terms and provisions set forth in the
Pricing Supplement attached hereto (the "Pricing Supplement"), and (to
the extent that the payment of such interest shall be legally
enforceable) to pay interest at the Default Rate per annum specified in
the Pricing Supplement on any overdue principal and premium, if any, and
on any overdue installment of interest.
This Note is one of a duly authorized issue of the Bank's Global Bank
Notes due from one month or more from date of issue (the "Notes"). The
Notes are issued and to be issued under an Agency Agreement dated as of
____________ __, 1997 (as amended from time to time, the "Agency
Agreement") among the Bank, The First National Bank of Chicago, as
global agent (the "Global Agent"), the Global Agent acting through its
specified office in New York as paying agent (the "NY Paying Agent") and
as registrar (the "Registrar"), the Global Agent acting through its
specified office in London as paying agent (the "London Paying Agent")
and as issuing agent (the "London Issuing Agent") and Banque Indosuez as
transfer agent (the "Transfer Agent") and as paying agent (the
"Luxembourg Paying Agent"; together with the NY Paying Agent and the
London Paying Agent, the "Paying Agents"; individually, a "Paying
Agent"). The terms Global Agent, NY Paying Agent, Registrar, London
Paying Agent, London Issuing Agent, Luxembourg Paying Agent and Transfer
Agent shall include any additional or successor agents appointed in such
capacities by the Bank.
This Note is to be held by a common depositary for Morgan Guaranty
Trust Company of New York, Brussels Office, as operator of the Euroclear
System ("Euroclear"), and Cedel Bank societe anonyme ("Cedel") on behalf
of account holders which have beneficial interests in this Note credited
to their respective securities accounts with Euroclear or Cedel from
time to time.
Prior to the Exchange Date (as defined below), all payments (if any)
on this Note will only be made to the bearer hereof to the extent that
there is presented to the London Paying Agent by Euroclear and Cedel a
certificate, substantially in the form set out in Schedule 1 hereto, to
the effect that it has received from or with respect to a person owning
beneficially a particular principal amount of this Note (as shown by its
records) a certificate from such person in or substantially in the form
of Certificate "A" as set out in Schedule 1 hereto. After the Exchange
(C-3)
<PAGE> 67
Date the holder of this Note will not be entitled to receive any payment
of interest hereon.
Subject to the immediately succeeding sentence, on or after the date
which is 40 days after the Original Issue Date specified above (the
"Exchange Date"), this Note may be exchanged, in whole, but not in part
(free of charge), for a permanent global Note in bearer form (a
"Permanent Global Note") containing, except with respect to rights of
exchange, identical terms and provisions. From and after the date on
which definitive Notes in bearer form ("Definitive Notes") shall have
been issued in exchange for beneficial interests in a Permanent Global
Note, this Note may be exchanged, in whole, but not in part (free of
charge), only for Definitive Notes. Any such exchanges will be made
upon presentation of this Note by the bearer hereof at the offices of
the London Paying Agent (or at such other place outside the United
States of America, its territories and possessions, any State of the
United States and the District of Columbia (the "United States") as the
Global Agent may agree) and subject, in the case of an exchange for
Definitive Notes, to at least 60 days written notice expiring at least
30 days after the Exchange Date being given to the Global Agent by
Euroclear or Cedel.
The Permanent Global Note or the Definitive Notes, as the case may
be, shall be so issued and delivered in exchange for this Note only if
there shall have been presented to the London Paying Agent by Euroclear
or Cedel a certificate, substantially in the form set out in Schedule 1
hereto, to the effect that it has received from or with respect to a
person owing beneficially a particular principal amount of this Note (as
shown by its records) a certificate from such person in or substantially
in the form of Certificate "A" as set out in Schedule 1 hereto.
On an exchange of the whole of this Note, this Note shall be
surrendered to the London Paying Agent.
Unless otherwise provided herein or in the Pricing Supplement, the
principal of, and premium, if any, and interest on, this Note are
payable in the Specified Currency indicated above (or, if such Specified
Currency is not at the time of such payment legal tender for the payment
of public and private debts, in such other coin or currency of the
country which issued such Specified Currency as at the time of such
payment is legal tender for the payment of debts).
Subject to any fiscal or other laws and regulations applicable
thereto in the place of payment, payments on this Note will be made by
transfer to an account in the Specified Currency (which, in the case of
a payment in Yen to a non-resident of Japan, shall be a non-resident
(C-4)
<PAGE> 68
account) maintained by the payee with, or by a check in the Specified
Currency drawn on, a bank (which, in the case of a payment in Yen to a
non-resident of Japan, shall be an authorized foreign exchange bank) in
the principal financial center of the country of the Specified Currency;
provided, however, a check may not be delivered to an address in, and an
amount may not be transferred to an account at a bank located in, the
United States of America or its possessions by any office or agency of
the Bank, the Global Agent or any Paying Agent.
Payments of principal, premium, if any, and interest on this Note
will be made in the manner specified above against presentation or
surrender, as the case may be, of this Note at the branch office of the
London Paying Agent maintained for that purpose, subject to the
requirements as to certification provided herein. On any payment of an
installment or interest being made, details of such payment shall be
entered by or on behalf of the Bank in Schedule 3 hereto and the
relevant space in Schedule 3 hereto recording any such payment shall be
signed by or on behalf of the Bank.
The bearer of this Note shall be the only person entitled to receive
payments with respect hereto, and the Bank will be discharged by payment
to, or to the order of, the bearer of this Note with respect to each
amount so paid. Each person shown in the records of Euroclear or Cedel
as the beneficial owner of a particular principal amount of this Note
(an "Owner") must look solely to Euroclear and/or Cedel, as the case may
be, for its share of each payment so made by the Bank to, or to the
order of, the bearer of this Note. No person other than the bearer
hereof shall have any claim against the Bank with respect to payments
due hereon.
On any redemption or repayment and cancellation of all or any portion
of this Note, details of such redemption or repayment and cancellation
shall be entered by or on behalf of the Bank in Schedule 2 hereto and
the relevant space in Schedule 2 hereto recording any such redemption or
repayment and cancellation shall be signed by or on behalf of the Bank.
Upon any such redemption or repayment and cancellation, the aggregate
principal amount of this Note shall be reduced by the principal amount
so redeemed or repaid and cancelled.
Notwithstanding anything to the contrary contained herein or in the
Pricing Supplement, payments with respect to this Note will only be made
at the specified office of a Paying Agent in the United States if:
(i) the Bank has appointed Paying Agents with
specified offices outside the United States with the
reasonable expectation that such Paying Agents would be able
(C-5)
<PAGE> 69
to make payment at such specified offices outside the United
States of the full amount due with respect to this Note in
the manner provided above when due;
(ii) payment of the full amount due with respect to
this Note at such specified offices outside the United
States is illegal or effectively precluded by exchange
controls or other similar restrictions; and
(iii) such payment is then permitted under United
States law without involving, in the opinion of the Bank,
adverse tax consequences to the Bank.
If the date for payment of any amount with respect to this
Note or any coupon appertaining hereto is not a Payment Business Day in
a place of presentation, the bearer of this Note or any such coupon
shall not be entitled to payment until the next succeeding Payment
Business Day in the relevant place and shall not be entitled to further
interest or other payment with respect to such delay. For these
purposes, unless otherwise specified in the Pricing Supplement, "Payment
Business Day" means any Business Day which is also a day on which
commercial banks and foreign exchange markets settle payments in the
relevant place of presentation.
Reference is made to the further provisions of this Note set
forth on the reverse hereof and in the Pricing Supplement, which further
provisions shall for all purposes have the same effect as if set forth
at this place. In the event of any conflict between the provisions
contained herein or on the reverse hereof and the provisions contained
in the Pricing Supplement, the latter shall control. Reference herein
to "this Note", "hereof", "herein" and comparable terms shall include
the Pricing Supplement.
Unless the certificate of authentication hereon has been
executed by the London Issuing Agent, by manual signature of an
authorized signatory, this Note shall not be valid or obligatory for any
purpose.
This Note shall be governed by, and construed in accordance
with, the laws of the State of Delaware, without regard to the conflicts
of law principles thereof.
(C-6)
<PAGE> 70
IN WITNESS WHEREOF, the Bank has caused this Note to be duly
executed.
MBNA AMERICA BANK, NATIONAL ASSOCIATION
By: ________________________________
Authorized Signatory
Dated:
LONDON ISSUING AGENT'S
CERTIFICATE OF AUTHENTICATION
This is one of the Notes referred to
in the within-mentioned Agency Agreement.
THE FIRST NATIONAL BANK OF CHICAGO,
as London Issuing Agent
By: _______________________________
Authorized Signatory
(C-7)
<PAGE> 71
[Reverse of Note]
[ATTACH REVERSE OF NOTE IN FORM
OF EXHIBIT I TO AGENCY AGREEMENT]
(C-8)
<PAGE> 72
Schedule 1
----------
FORM OF CERTIFICATE TO BE PRESENTED BY
EUROCLEAR OR CEDEL
------------------
MBNA AMERICA BANK, NATIONAL ASSOCIATION
[Title of Notes]
(the "Securities")
This is to certify that, based solely on certifications we have
received in writing, by telex or by electronic transmission from member
organizations appearing in our records as persons owning beneficially a
portion of the principal amount set forth below (our "Member
Organizations") substantially to the effect set forth in the Agency
Agreement, as of the date hereof, [ ] principal amount of
above-captioned Securities (i) is owned by persons that are not citizens
or residents of the United States, partnerships, corporations or other
entities created or organized under the laws of the United States or any
estate or trust the income of which is subject to United States Federal
income taxation regardless of its source ("United States persons"), (ii)
is owned by United States persons that (a) are foreign branches of
United States financial institutions (as defined in U.S. Treasury
Regulations Section 1.165-12(c)(1)(v) ("financial institutions")
purchasing for their own account or for resale, or (b) acquired the
Securities through foreign branches of United States financial
institutions and who hold the Securities through such United States
financial institutions on the date hereof (and in either case (a) or
(b), each such United States financial institution has agreed, on its
own behalf, or through its agent, that we may advise the Bank or the
Bank's agent that it will comply with the requirements of Section
165(j)(3)(A), (B) or (C) of the Internal Revenue Code of 1986, as
amended, and the regulations thereunder), or (iii) is owned by the
United States or foreign financial institutions for purposes of resale
during the restricted period (as defined in U.S. Treasury Regulations
Section 1.163-5(c)(2)(i)(D)(7)), and to the further effect that United
States or foreign financial institutions described in clause (iii)
(whether or not also described in clause (i) or (ii)) have certified
that they have not acquired the Securities for purposes of resale
directly or indirectly to a United States person or to a person within
the United States or its possessions.
(C-9)
<PAGE> 73
As used herein, "United States" means the United States of America
(including the States and the District of Columbia); and its
"possessions" include Puerto Rico, the U.S. Virgin Islands, Guam,
American Samoa, Wake Island and the Northern Mariana Islands.
We further certify (i) that we are not making available herewith for
exchange (or, if relevant, exercise of any rights or collection of any
interest) any portion of the temporary global Security excepted in such
certifications and (ii) that as of the date hereof we have not received
any notification from any of our Member Organizations to the effect that
the statements made by such Member Organizations with respect to any
portion of the part submitted herewith for exchange (or, if relevant,
exercise of any rights or collection of any interest) are no longer true
and cannot be relied upon at the date hereof.
We will retain all certificates received from Member Organizations
for the period specified in U.S. Treasury Regulation Section
1.163-5(c)(2)(i)(D)(3)(i)(C).
We understand that this certification is required in connection with
certain tax laws of the Unites States. In connection therewith, if
administrative and legal proceedings are commenced or threatened in
connection with which this certification is or would be relevant, we
irrevocably authorize you to produce this certification to any
interested party in such proceedings.
Dated: ___________________, 199(2) .
Yours faithfully,
[MORGAN GUARANTY TRUST
COMPANY OF NEW YORK, BRUSSELS OFFICE, AS
OPERATOR OF THE EUROCLEAR SYSTEM]
or
[CEDEL BANK, SOCIETE ANONYME]
By: _______________________________
(2) This certificate is not to be dated earlier than five days
prior to the Exchange Date or relevant payment date, as
applicable.
(C-10)
<PAGE> 74
CERTIFICATE "A"
FORM OF CERTIFICATE TO BE PRESENTED TO
EUROCLEAR OR CEDEL
--------------------
MBNA AMERICA BANK, NATIONAL ASSOCIATION
[Title of Notes]
(the "Securities")
This is to certify that as of the date hereof and except as set forth
below, the above-captioned Securities held by you for our account (1)(i)
are owned by person(s) that are not citizens or residents of the United
States, partnerships, corporations or other entities created or organized
under the laws of the United States or any estate or trust the income of
which is subject to United States Federal income taxation regardless of its
source ("United States person(s)"), (ii) are owned by United States
person(s) that (a) are foreign branches of United States financial
institutions (as defined in U.S. Treasury Regulations Section 1.15512
(c)(1)(v) ("financial institutions") purchasing for their own account or
for resale, or (b) acquired the Securities through foreign branches of
United States financial institutions and who hold the Securities through
such United States financial institutions on the date hereof (and in either
case (a) or (b), each such United States financial institution hereby
agrees, on its own behalf or through its agent, that you may advise the
Bank or the Bank's agent that it will comply with the requirements of
Section 165(j)(3)(A), (B) or (C) of the Internal Revenue Code of 1986, as
amended, and the regulations thereunder), or (iii) are owned by United
States or foreign financial institutions for purposes of resale during the
restricted period (as defined in U.S. Treasury Regulations Section
1.1635(c)(2)(i)(D)(7)), and in addition if the owner of the Securities is a
United States or foreign financial institution described in clause (iii)
(whether or not also described in clause (i) or (ii)) this is further to
certify that such financial institution has not acquired the Securities for
purposes of resale directly or indirectly to a United States person or to a
person within the United States or its possessions.
As used herein, "United States" mean the United States of America
(including the States and the District of Columbia); and its
(C-11)
<PAGE> 75
"possessions" include Puerto Rico, the U.S. Virgin Islands, Guam,
American Samoa, Wake Island and the Northern Mariana Islands.
We undertake to advise you promptly by telex on or prior to the date on
which you intend to submit your certification relating to the Securities
held by you for our account in accordance with your documented procedures
if any applicable statement herein is not correct on such date, and in the
absence of any such notification it may be assumed that this certification
applies as of such date.
This certification excepts and does not relate to [ ] of such interest
in the above Securities with respect to which we are not able to certify
and as to which we understand exchange and delivery of definitive
Securities (or, if relevant, exercise of any right or collection of any
interest) cannot be made until we do so certify.
We understand that this certification is required in connection with
certain tax laws of the United States. In connection therewith, if
administrative and legal proceedings are commended or threatened in
connection with which this certification is or would be relevant, we
irrevocably authorize you to produce this certification to any interested
party in such proceedings.
Dated: __________________, 199_(3)
Yours faithfully,
Name of Person Making Certification
By: _______________________________
(3) This certificate is not to be dated earlier than fifteen days prior to the
Exchange Date or relevant payment date, as applicable.
(C-12)
<PAGE> 76
Schedule 2
SCHEDULE OF EXCHANGES FOR NOTES REPRESENTED
BY A PERMANENT GLOBAL NOTE OR FOR DEFINITIVE NOTES,
OR REDEMPTIONS OR REPAYMENTS AND CANCELLATIONS
The following redemptions or repayments and cancellation of this Note, have
been made:
<TABLE>
<CAPTION>
Principal amount
Principal amount of this Note
Date of of this Note following such Notation made
redemption or redeemed or redemption or by or on
repayment and repaid repayment and behalf of the
cancellation and cancelled cancellation Bank
<S> <C> <C> <C>
- ------------------- ---------------- ----------------- ----------------
- ------------------- ---------------- ----------------- ----------------
- ------------------- ---------------- ----------------- ----------------
- ------------------- ---------------- ----------------- ----------------
- ------------------- ---------------- ----------------- ----------------
</TABLE>
(C-13)
<PAGE> 77
Schedule 3
PART I
INTEREST PAYMENTS
<TABLE>
<CAPTION>
Confirmation
Total Amount of payment by
Interest Date of of Interest Amount of or on behalf
Payment Date Payment Payable Interest Paid of the Bank
<S> <C> <C> <C> <C>
First
--------- ------------- ------------- ------------
Second
--------- ------------- ------------- ------------
</TABLE>
[continue numbering until the appropriate number of Interest Payment
Dates for this Note is reached]
(C-14)
<PAGE> 78
PART II
-------
INSTALLMENT PAYMENTS
--------------------
<TABLE>
<CAPTION>
Total Amount Confirmation
of Amount of of payment by
Installment Date of Installments Installments or on behalf
Date Payment Payable Paid of the Bank
---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
First
--------- ------------- ------------- ------------
Second
--------- ------------- ------------- ------------
</TABLE>
[continue numbering until the appropriate number of Interest Payment
Dates for this Note is reached]
(C-15)
<PAGE> 79
EXHIBIT D
---------
FORM OF PERMANENT GLOBAL NOTE
[SUBORDINATED NOTE: THE OBLIGATION EVIDENCED BY THIS NOTE IS AN
OBLIGATION OF MBNA AMERICA BANK, NATIONAL ASSOCIATION (THE "BANK") AND
IS SUBORDINATED TO THE CLAIMS OF DEPOSITORS AND GENERAL CREDITORS OF THE
BANK, IS INELIGIBLE AS COLLATERAL FOR A LOAN BY THE BANK AND IS NOT
SECURED. THIS OBLIGATION IS NOT A DEPOSIT AND IS NOT INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION ("FDIC") OR ANY OTHER INSURER.]
[SENIOR NOTE: THIS NOTE IS A DIRECT, UNCONDITIONAL, UNSECURED AND
UNSUBORDINATED GENERAL OBLIGATION OF MBNA AMERICA BANK, NATIONAL
ASSOCIATION (THE "BANK"). THE OBLIGATIONS EVIDENCED BY THIS NOTE RANK
PARI PASSU WITH ALL OTHER UNSECURED AND UNSUBORDINATED OBLIGATIONS OF
THE BANK EXCEPT OBLIGATIONS, INCLUDING ITS DOMESTIC (U.S.) DEPOSITS,
THAT ARE SUBJECT TO ANY PRIORITIES OR PREFERENCES UNDER APPLICABLE LAW.
THIS NOTE DOES NOT EVIDENCE A DEPOSIT AND IS NOT INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION ("FDIC") OR ANY OTHER INSURER.]
ANY UNITED STATES PERSON WHO HOLDS THIS OBLIGATION WILL BE SUBJECT TO
LIMITATIONS UNDER THE UNITED STATES INCOME TAX LAWS INCLUDING THE
LIMITATIONS PROVIDED IN SECTIONS 165(j) AND 1287(a) OF THE INTERNAL REVENUE
CODE.
[NOTES SOLD WITHIN THE UNITED STATES: THIS NOTE IS ISSUABLE ONLY IN MINIMUM
DENOMINATIONS OF US$250,000 AND INTEGRAL MULTIPLES OF US$1,000 IN EXCESS
THEREOF. EACH OWNER OF A BENEFICIAL INTEREST IN THIS NOTE MUST BE AN
INSTITUTIONAL INVESTOR WHO IS AN "ACCREDITED INVESTOR" WITHIN THE MEANING
OF RULE 501 UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND IS REQUIRED
TO HOLD A BENEFICIAL INTEREST IN US$250,000 PRINCIPAL AMOUNT OR ANY
INTEGRAL MULTIPLE OF US$1,000 IN EXCESS THEREOF OF THIS NOTE AT ALL TIMES.]
No. B_______ BEARER
ISIN No.:_______
Common Code:______
(D-1)
<PAGE> 80
MBNA AMERICA BANK, NATIONAL ASSOCIATION
GLOBAL BANK NOTE
(Permanent Global Note)
ISSUING BRANCH (if applicable):
ORIGINAL ISSUE DATE: PRINCIPAL AMOUNT:
MATURITY DATE: SPECIFIED CURRENCY:
/_/ FIXED RATE NOTE /_/ U.S. dollar
/_/ FLOATING RATE NOTE /_/ Other:
MBNA America Bank, National Association, a national banking
association organized pursuant to the laws of the United States (the
"Bank"), for value received, hereby promises to pay to the bearer hereof,
the principal amount shown on Schedule 1 hereto, as adjusted from time to
time, on the Maturity Date (except to the extent redeemed or repaid prior
to the Maturity Date) specified above and to pay interest thereon (i) in
accordance with the provisions set forth on the reverse hereof under the
caption "Fixed Rate Interest Provisions," if this Note is designated as a
"Fixed Rate Note" above, or (ii) in accordance with the provisions set
forth on the reverse hereof under the caption "Floating Rate Interest
Provisions," if this Note is designated as a "Floating Rate Note" above, in
each case as such provisions may be modified or supplemented by the terms
and provisions set forth in the Pricing Supplement attached hereto (the
"Pricing Supplement"), and (to the extent that the payment of such interest
shall be legally enforceable) to pay interest at the Default Rate per annum
specified in the Pricing Supplement on any overdue principal and premium,
if any, and on any overdue installment of interest.
This Note is one of a duly authorized issue of the Bank's Global
Bank Notes due from one month or more from date of issue (the "Notes"). The
Notes are issued and to be issued under an Agency Agreement dated as of
__________ __, 1997 (as amended from time to time, the "Agency Agreement")
among the Bank, The First National Bank of Chicago, as global agent (the
"Global Agent"), the Global Agent acting through its specified office in
New York as global agent (the "NY Paying Agent") and
(D-2)
<PAGE> 81
as registrar (the "Registrar"), the Global Agent acting through its
specified office in London as paying agent (the "London Paying Agent") and
as issuing agent (the "London Issuing Agent") and Banque Indosuez
Luxembourg as transfer agent (the "Transfer Agent") and as paying agent
(the "Luxembourg Paying Agent"; together with the NY Paying Agent and the
London Paying Agent, the "Paying Agents"; individually, a "Paying Agent").
The terms Global Agent, NY Paying Agent, Registrar, London Paying Agent,
London Issuing Agent, Luxembourg Paying Agent and Transfer Agent shall
include any additional or successor agents appointed in such capacities by
the Bank.
This Note is to be held by a common depositary for Morgan Guaranty
Trust Company of New York, Brussels Office, as operator of the Euroclear
System ("Euroclear"), and Cedel Bank societe anonyme ("Cedel") on behalf of
account holders which have beneficial interests in this Note credited to
their respective securities accounts with Euroclear or Cedel from time to
time.
The interests represented by this Note were originally represented
by a temporary global Note in bearer form (a "Temporary Bearer Note")
containing, except with respect to rights of exchange, identical terms and
provisions.
This Note may be exchanged, in whole only (free of charge), for
definitive Notes in bearer form ("Definitive Notes") containing, except
with respect to rights of exchange, identical terms and provisions. Subject
as aforesaid and to at least 60 days written notice expiring at least 30
days after the Exchange Date (as defined in the Temporary Global Note
referred to above) being given to the London Issuing Agent by Euroclear or
Cedel, such exchange will be made upon presentation and surrender of this
Note by the bearer hereof on any day (other than a Saturday or a Sunday) on
which banks are open for business in London at the city office of the
London Issuing Agent. The aggregate principal amount of Definitive Notes
issued upon an exchange of this Note will be equal to the aggregate
principal amount of this Note, as adjusted, as shown in Schedule 1 hereto.
Unless otherwise specified in the Pricing Supplement, upon 60 days
written notice expiring at least 30 days after the Exchange Date being
given to the London Issuing Agent or the Registrar by Euroclear or Cedel,
this Note may be exchanged, in whole or in part (free of charge), for an
interest in a global Note in registered form (a "Registered Global Note")
containing, except with respect to rights of exchange, identical terms and
provisions. Any such exchange will be made upon presentation of this Note
by the bearer hereof at the offices of the London Issuing Agent (or at such
other place outside the United States
(D-3)
<PAGE> 82
of America, its territories and possessions, any State of the United States
and the District of Columbia (the "United States") as the Global Agent may
agree).
On an exchange of the whole of this Note, this Note shall be
surrendered to the Registrar. On an exchange of part only of this Note,
details of such exchange shall be entered by or on behalf of the Bank in
Schedule 1 hereto and the relevant space in Schedule 1 hereto recording
such exchange shall be signed by or on behalf of the Bank. If following the
issue of a Registered Global Note in exchange for less than the aggregate
principal amount of this Note, an additional principal amount of this Note
is to be exchanged for a Registered Global Note pursuant to this paragraph,
such exchange may be effected, without the issue of a new Registered Global
Note, by the Bank or its agent endorsing Schedule 1 of the Registered
Global Note previously issued to reflect an increase in the aggregate
principal amount of the Registered Global Note in the amount which
otherwise have been issued on such exchange.
Until the exchange of the whole of this Note as aforesaid, the
bearer hereof shall in all respects (except as otherwise provided herein or
in the Pricing Supplement) be entitled to the same benefits as if it were
the holder of a Definitive Note and any receipts and interest coupons
appertaining thereto.
Unless otherwise provided herein or in the Pricing Supplement, the
principal of, and premium, if any, and interest on, this Note are payable
in the Specified Currency indicated above (or, if such Specified Currency
is not at the time of such payment legal tender for the payment of public
and private debts, in such other coin or currency of the country which
issued such Specified Currency as at the time of such payment is legal
tender for the payment of debts).
Subject to any fiscal or other laws and regulations applicable
thereto in the place of payment, payments on this Note will be made by
transfer to an account in the Specified Currency (which, in the case of a
payment in Yen to a nonresident of Japan, shall be a nonresident account)
maintained by the payee with, or by a check in the Specified Currency drawn
on, a bank (which, in the case of a payment in Yen to a nonresident of
Japan, shall be an authorized foreign exchange bank) in the principal
financial center of the country of the Specified Currency; provided,
however, a check may not be delivered to an address in, and an amount may
not be transferred to an account at a bank located in, the United States by
any office or agency of the Bank, the Global Agent or any Paying Agent.
(D-4)
<PAGE> 83
Payments of principal, premium, if any, and interest on this Note
will be made in the manner specified above against presentation or
surrender, as the case may be, of this Note at the office of the London
Paying Agent maintained for that purpose, subject to the requirements as to
certification provided herein. On any payment of an installment or interest
being made, details of such payment shall be entered by or on behalf of the
Bank in Schedule 2 hereto and the relevant space in Schedule 2 hereto
recording any such payment shall be signed by or on behalf of the Bank.
The bearer of this Note shall be the only person entitled to
receive payments with respect hereto, and the Bank will be discharged by
payment to, or to the order of, the bearer of this Note with respect to
each amount so paid. Each person shown in the records of Euroclear or Cedel
as the beneficial owner of a particular principal amount of this Note (an
"Owner") must look solely to Euroclear and/or Cedel, as the case may be,
for its share of each payment so made by the Bank to, or to the order of,
the bearer of this Note. No person other than the bearer hereof shall have
any claim against the Bank with respect to payments due hereon.
On any redemption or repayment and cancellation of all or any
portion of this Note, details of such redemption or repayment and
cancellation shall be entered by or on behalf of the Bank in Schedule 1
hereto and the relevant space in Schedule 1 hereto recording any such
redemption or repayment and cancellation shall be signed by or on behalf of
the Bank. Upon any such redemption or repayment and cancellation, the
aggregate principal amount of this Note shall be reduced by the principal
amount so redeemed or repaid and cancelled.
Notwithstanding anything to the contrary contained herein or in
the Pricing Supplement, payments with respect to this Note will only be
made at the specified office of a Paying Agent in the United States if:
(i) the Bank has appointed Paying Agents with
specified offices outside the United States with the reasonable
expectation that such Paying Agents would be able to make payment
at such specified offices outside the United States of the full
amount due with respect to this Note in the manner provided above
when due;
(ii) payment of the full amount due with respect to
this Note at such specified offices outside the United States is
illegal or effectively precluded by exchange controls or other
similar restrictions; and
(D-5)
<PAGE> 84
(iii) such payment is then permitted under United States
law without involving, in the opinion of the Bank, adverse tax
consequences to the Bank.
If the date for payment of any amount with respect to this Note or
any coupon appertaining hereto is not a Payment Business Day in a place of
presentation, the bearer of this Note or any such coupon shall not be
entitled to payment until the next succeeding Payment Business Day in the
relevant place and shall not be entitled to further interest or other
payment with respect to such delay. For these purposes, unless otherwise
specified in the Pricing Supplement, "Payment Business Day" means any
Business Day which is also a day on which commercial banks and foreign
exchange markets settle payments in the relevant place of presentation.
Any action by the bearer of this Note shall bind all future
bearers of this Note, and of any Note issued in exchange or substitution
herefor or in place hereof, in respect of anything done or permitted by the
Bank or by the Global Agent in pursuance of such action.
Reference is made to the further provisions of this Note set forth
on the reverse hereof and in the Pricing Supplement, which further
provisions shall for all purposes have the same effect as if set forth at
this place. In the event of any conflict between the provisions contained
herein or on the reverse hereof and the provisions contained in the Pricing
Supplement, the latter shall control. Reference herein to "this Note",
"hereof", "herein" and comparable terms shall include the Pricing
Supplement.
Unless the certificate of authentication hereon has been executed
by the London Issuing Agent, by manual signature of an authorized
signatory, this Note shall not be valid or obligatory for any purpose.
This Note shall be governed by, and construed in accordance with,
the laws of the State of Delaware, without regard to the conflicts of law
principles thereof.
(D-6)
<PAGE> 85
IN WITNESS WHEREOF, the Bank has caused this Note to be duly
executed.
MBNA AMERICA BANK, NATIONAL
ASSOCIATION
By:__________________________________
Authorized Signatory
Dated:
LONDON ISSUING AGENT'S
CERTIFICATE OF AUTHENTICATION
This is one of the Notes referred
to in the within-mentioned Agency
Agreement.
THE FIRST NATIONAL BANK OF CHICAGO,
as London Issuing Agent
By:__________________________________
Authorized Signatory
(D-7)
<PAGE> 86
[Reverse of Note]
[ATTACH REVERSE OF NOTE IN FORM
OF EXHIBIT I TO AGENCY AGREEMENT]
(D-8)
<PAGE> 87
Schedule 1
----------
SCHEDULE OF EXCHANGES AND
REDEMPTIONS OR REPAYMENTS AND CANCELLATIONS
-------------------------------------------
The following increases (decreases) of this Note and redemptions or repayments
and cancellations of this Note have been made:
<TABLE>
<CAPTION>
Increase
(Decrease) in
principal
amount of
this Note due Principal
to exchange amount of
of Temporary Principal this Note
Date of Global Note amount following such
exchange, or or exchange of this NOte exchange or Notation made
redemption or for redeemed or redemption or by or on
repayment and Registered repaid repayment and behalf of the
cancellation Global Note and cancelled cancellation Bank
<S> <C> <C> <C> <C>
- --------------- ------------ ------------- -------------- --------------
- --------------- ------------ ------------- -------------- --------------
- --------------- ------------ ------------- -------------- --------------
- --------------- ------------ ------------- -------------- --------------
- --------------- ------------ ------------- -------------- --------------
- --------------- ------------ ------------- -------------- --------------
</TABLE>
(D-9)
<PAGE> 88
Schedule 2
PART I
INTEREST PAYMENTS
<TABLE>
<CAPTION>
Total Amount Confirmation
of Amount of of payment by
Interest Date of Interest Interest or on behalf
Payment Date Payment Payable Paid of the Bank
<S> <C> <C> <C> <C>
First
--------- ------------ --------- -------------
Second
--------- ------------ --------- -------------
</TABLE>
[continue numbering until the appropriate number of Interest Payment
Dates for this Note is reached]
(D-10)
<PAGE> 89
PART II
INSTALLMENT PAYMENTS
<TABLE>
<CAPTION>
Total Amount Confirmation
of Amount of of payment by
Installment Date of Installments Installments or on behalf
Date Payment Payable Paid of the Bank
<S> <C> <C> <C> <C>
First
-------- ------------- ------------- --------------
Second
-------- ------------- ------------- --------------
</TABLE>
[continue numbering until the appropriate number of Interest Payment
Dates for this Note is reached]
(D-11)
<PAGE> 90
EXHIBIT E
FORM OF DEFINITIVE BEARER NOTE
[SUBORDINATED NOTE: THE OBLIGATION EVIDENCED BY THIS NOTE IS AN
OBLIGATION OF MBNA AMERICA BANK, NATIONAL ASSOCIATION (THE "BANK") AND
IS SUBORDINATED TO THE CLAIMS OF DEPOSITORS AND GENERAL CREDITORS OF THE
BANK, IS INELIGIBLE AS COLLATERAL FOR A LOAN BY THE BANK AND IS NOT
SECURED. THIS OBLIGATION IS NOT A DEPOSIT AND IS NOT INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION ("FDIC") OR ANY OTHER INSURER.]
[SENIOR NOTE: THIS NOTE IS A DIRECT, UNCONDITIONAL, UNSECURED AND
UNSUBORDINATED GENERAL OBLIGATION OF MBNA AMERICA BANK, NATIONAL
ASSOCIATION (THE "BANK"). THE OBLIGATIONS EVIDENCED BY THIS NOTE RANK
PARI PASSU WITH ALL OTHER UNSECURED AND UNSUBORDINATED OBLIGATIONS OF
THE BANK EXCEPT OBLIGATIONS, INCLUDING ITS DOMESTIC (U.S.) DEPOSITS,
THAT ARE SUBJECT TO ANY PRIORITIES OR PREFERENCES UNDER APPLICABLE LAW.
THIS NOTE DOES NOT EVIDENCE A DEPOSIT AND IS NOT INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION ("FDIC") OR ANY OTHER INSURER.]
ANY UNITED STATES PERSON WHO HOLDS THIS OBLIGATION WILL BE SUBJECT TO
LIMITATIONS UNDER THE UNITED STATES INCOME TAX LAWS INCLUDING THE
LIMITATIONS PROVIDED IN SECTIONS 165(j) AND 1287(a) OF THE INTERNAL REVENUE
CODE.
[NOTES SOLD WITHIN THE UNITED STATES: THIS NOTE IS ISSUABLE ONLY IN MINIMUM
DENOMINATIONS OF US$250,000 AND INTEGRAL MULTIPLES OF US$1,000 IN EXCESS
THEREOF. EACH OWNER OF A BENEFICIAL INTEREST IN THIS NOTE MUST BE AN
INSTITUTIONAL INVESTOR WHO IS AN "ACCREDITED INVESTOR" WITHIN THE MEANING
OF RULE 501 UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND IS REQUIRED
TO HOLD A BENEFICIAL INTEREST IN US$250,000 PRINCIPAL AMOUNT OR ANY
INTEGRAL MULTIPLE OF US$1,000 IN EXCESS THEREOF OF THIS NOTE AT ALL TIMES.]
No. B BEARER
ISIN No.:
Common Code:
(E-1)
<PAGE> 91
MBNA AMERICA BANK, NATIONAL ASSOCIATION
GLOBAL BANK NOTE
(Definitive Bearer Note)
ISSUING BRANCH (if applicable):
ORIGINAL ISSUE DATE: PRINCIPAL AMOUNT:
MATURITY DATE: SPECIFIED CURRENCY:
/_/ U.S. dollar
/_/ Other:
/_/ FIXED RATE NOTE
INTEREST RATE: %
/_/ FLOATING RATE NOTE
INTEREST RATE DETERMINATION: AUTHORIZED
DENOMINATIONS:
/_/ ISDA RATE
/_/ REFERENCE RATE DETERMINATION
MARGIN (PLUS OR MINUS) FLOATING RATE OPTION
(ISDA Rate only): (ISDA Rate only):
DESIGNATED MATURITY RESET DATE
(ISDA Rate only): (ISDA Rate only):
INITIAL INTEREST RATE INDEX MATURITY
(Reference Rate (Reference Rate
Determination only): % Determination only):
INTEREST RATE IF CMT RATE:
BASIS OR BASES Designated CMT
(Reference Rate Telerate Page:
Determination only): Designated CMT
Maturity Index:
(E-2)
<PAGE> 92
IF LIBOR: INDEX CURRENCY
/_/ LIBOR Telerate (Reference Rate
/_/ LIBOR Reuters Determination only):
SPREAD (PLUS OR MINUS) INITIAL INTEREST RESET
AND/OR SPREAD MULTIPLIER DATE (Reference Rate
(Reference Rate Determination Determination only):
only):
INTEREST RESET PERIOD INTEREST RESET
(Reference Rate Determination DATES (Reference Rate
only): Determination only):
INTEREST CALCULATION INTEREST PAYMENT DATES:
(Reference Rate Determination
only):
/_/ Regular Floating Rate Note INTEREST PAYMENT
/_/ Floating Rate/Fixed Rate Note PERIOD:
Fixed Rate Commencement Date:
Fixed Interest Rate:
/_/ Inverse Floating Rate Note
Fixed Interest Rate:
CALCULATION AGENT:
MAXIMUM INTEREST RATE: MINIMUM INTEREST RATE:
INITIAL REDEMPTION ANNUAL REDEMPTION
DATE: PERCENTAGE REDUCTION:
INITIAL REDEMPTION HOLDER'S OPTIONAL
PERCENTAGE: REPAYMENT DATE(S):
DAY COUNT CONVENTION
/_/ 30/360 for the period from to .
------- --------
(E-3)
<PAGE> 93
/_/ Actual/360 for the period from to .
------- --------
/_/ Actual/Actual for the period from to .
------- --------
/_/ Other:
BUSINESS DAY CONVENTION ORIGINAL
ISSUE DISCOUNT
/_/ Floating Rate Convention /_/ Yes
/_/ Following Business Day Convention /_/ No
/_/ Modified Following Business Day Total Amount of OID:
Convention Yield to Maturity:
/_/ Preceding Business Day Initial Accrual Period:
Convention Issue Price: %
DEFAULT RATE: %
MBNA America Bank, National Association, a national
banking association organized pursuant to the laws of the United States
(the "Bank"), for value received, hereby promises to pay to the bearer
hereof, upon presentation and surrender of this Note, the principal amount
specified above on the Maturity Date (except to the extent redeemed or
repaid prior to the Maturity Date) specified above and to pay interest
thereon (i) in accordance with the provisions set forth on the reverse
hereof under the caption "Fixed Rate Interest Provisions," if this Note is
designated as a "Fixed Rate Note" above, or (ii) in accordance with the
provisions set forth on the reverse hereof under the caption "Floating Rate
Interest Provisions," if this Note is designated as a "Floating Rate Note"
above, but only, in the case of interest (other than Additional Amounts (as
defined on the reverse hereof) payable as provided herein) due on or before
Maturity (as defined on the reverse hereof), upon presentation and
surrender of the interest coupons attached hereto as they severally mature.
The Bank shall also (to the
(E-4)
<PAGE> 94
extent that the payment of such interest shall be legally enforceable) pay
interest at the Default Rate per annum specified above on any overdue
principal and premium, if any, and on any overdue installment of interest.
Interest so payable on overdue interest shall be paid to the bearer of the
interest coupon representing such overdue interest or, if there shall be no
interest coupon in respect of the same, to the bearer of this Note. In the
event that the principal of this Note shall become due and payable prior to
the Maturity Date specified above and money therefor shall have been paid
or made available for payment, all unmatured interest coupons relating to
this Note and any talons for further interest coupons (whether or not
attached) shall become void and no payment shall be made in respect
thereof.
This Note is one of a duly authorized issue of the Bank's
Global Bank Notes due from one month or more from date of issue (the
"Notes"). The Notes are issued and to be issued under an Agency Agreement
dated as of _________ __, 1997 (as amended from time to time, the "Agency
Agreement") among the Bank, The First National Bank of Chicago, as global
agent (the "Global Agent"), the Global Agent acting through its specified
office in New York as paying agent (the "NY Paying Agent") and as registrar
(the "Registrar"), the Global Agent acting through its specified office in
London as paying agent (the "London Paying Agent") and as issuing agent
(the "London Issuing Agent") and Banque Indosuez Luxembourg as transfer
agent (the "Transfer Agent") and as paying agent (the "Luxembourg Paying
Agent"; together with the NY Paying Agent and the London Paying Agent, the
"Paying Agents"; individually, a "Paying Agent"). The terms Global Agent,
NY Paying Agent, Registrar, London Paying Agent, London Issuing Agent,
Luxembourg Paying Agent and Transfer Agent shall include any additional or
successor agents appointed in such capacities by the Bank.
Unless otherwise provided herein, upon 60 days written
notice being given to the Global Agent by the bearer hereof, this Note may
be exchanged, in whole, but not in part (free of charge), for an interest
in a global Note in registered form (a "Registered Global Note"). Any such
exchange will be made upon presentation and surrender of this Note by the
bearer hereof at the offices of the London Issuing Agent (or at such other
place outside the United States of America, its territories and
possessions, any State of the United States and the District of Columbia
(the "United States") as the Global Agent may agree).
Unless otherwise provided herein, the principal of, and
premium, if any, and interest on, this Note are payable in the Specified
Currency indicated above (or, if such Specified Currency is not at the time
of such payment legal tender for the payment of public and private
(E-5)
<PAGE> 95
debts, in such other coin or currency of the country which issued such
Specified Currency as at the time of such payment is legal tender for the
payment of debts).
Subject to any fiscal or other laws and regulations
applicable thereto in the place of payment, payments on this Note will be
made by transfer to an account in the Specified Currency (which, in the
case of a payment in Yen to a nonresident of Japan, shall be a nonresident
account) maintained by the payee with, or by a check in the Specified
Currency drawn on, a bank (which, in the case of a payment in Yen to a
nonresident of Japan, shall be an authorized foreign exchange bank) in the
principal financial center of the country of the Specified Currency;
provided, however, a check may not be delivered to an address in, and an
amount may not be transferred to an account at a bank located in, the
United States by any office or agency of the Bank, the Global Agent or any
Paying Agent.
Payments of principal, premium, if any, and interest on
this Note will be made in the manner specified above against presentation
or surrender of this Note or coupons, as the case may be, at the branch
office of the London Paying Agent maintained for that purpose, or at the
office or agency of any other Paying Agent located outside the United
States.
The bearer of this Note shall be the only person entitled
to receive payments with respect hereto, and the Bank will be discharged by
payment to, or to the order of, the bearer of this Note with respect to
each amount so paid. No person other than the bearer hereof shall have any
claim against the Bank with respect to payments due hereon.
Notwithstanding anything to the contrary contained herein,
payments with respect to this Note will only be made at the specified
office of a Paying Agent in the United States if:
(i) the Bank has appointed Paying Agents with
specified offices outside the United States with the reasonable
expectation that such Paying Agents would be able to make payment
at such specified offices outside the United States of the full
amount due with respect to this Note in the manner provided above
when due;
(ii) payment of the full amount due with respect to
this Note at such specified offices outside the United States is
illegal or effectively precluded by exchange controls or other
similar restrictions; and
(E-6)
<PAGE> 96
(iii) such payment is then permitted under United States
law without involving, in the opinion of the Bank, adverse tax
consequences to the Bank.
If the date for payment of any amount with respect to this
Note or any coupon appertaining hereto is not a Payment Business Day in the
place of presentation, the bearer of this Note or any such coupon shall not
be entitled to payment until the next succeeding Payment Business Day in
the relevant place and shall not be entitled to further interest or other
payment with respect to such delay. For these purposes, unless otherwise
specified herein, "Payment Business Day" means any Business Day which is
also a day on which commercial banks and foreign exchange markets settle
payments in the relevant place of presentation.
Principal, premium, if any, and interest due upon
redemption or repayment of this Note as provided herein shall be paid upon
presentation and surrender of this Note, together with all appurtenant
interest coupons, if any, maturing subsequent to the date of redemption or
repayment, as the case may be, to any Paying Agent located outside the
United States. Notwithstanding anything to the contrary contained herein,
if this Note shall be surrendered for redemption or repayment without all
appurtenant interest coupons maturing after the date of redemption or
repayment, as the case may be, this Note shall be paid after deducting from
the amount otherwise payable on such date an amount equal to the face
amount of all missing interest coupons. If thereafter the bearer of this
Note shall surrender to any Paying Agent located outside the United States
any such missing interest coupon in respect of which a deduction shall have
been made from the redemption or repayment price, such bearer shall be
entitled to receive the amount so deducted.
Title to this Note shall pass by delivery. The Bank may
treat the bearer hereof as the absolute owner of this Note for all purposes
(whether or not this Note shall be overdue and notwithstanding any notation
of ownership or writing hereof or notice of any previous loss or theft
thereof).
Reference is hereby made to the further provisions of this
Note set forth on the reverse hereof, which further provisions shall for
all purposes have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has
been executed by London Issuing Agent, by manual signature of an
(E-7)
<PAGE> 97
authorized signatory, this Note shall not be valid or obligatory for any
purpose.
This Note shall be governed by, and construed in
accordance with, the laws of the State of Delaware, without regard to the
conflicts of law principles thereof.
(E-8)
<PAGE> 98
IN WITNESS WHEREOF, the Bank has caused this Note to be
duly executed.
MBNA AMERICA BANK, NATIONAL ASSOCIATION
By: ____________________________________
Authorized Signatory
Dated:
LONDON ISSUING AGENT'S
CERTIFICATE OF AUTHENTICATION
This is one of the Notes referred
to in the within mentioned Agency
Agreement.
THE FIRST NATIONAL BANK OF CHICAGO,
as London Issuing Agent
By: ________________________________
Authorized Signatory
(E-9)
<PAGE> 99
[Reverse of Note]
[ATTACH REVERSE OF NOTE IN FORM
OF EXHIBIT I TO AGENCY AGREEMENT]
(E-10)
<PAGE> 100
EXHIBIT F
---------
FORM OF COUPON
ANY UNITED STATES PERSON WHO HOLDS THIS OBLIGATION WILL BE
SUBJECT TO LIMITATIONS UNDER THE UNITED STATES INCOME TAX LAWS, INCLUDING
THE LIMITATIONS PROVIDED IN SECTIONS 165(j) AND 1287(a) OF THE INTERNAL
REVENUE CODE.
MBNA AMERICA BANK, NATIONAL ASSOCIATION
[If the Note to which this Coupon relates is a Fixed Rate Note:] This
is a coupon for due on .
[If the Note to which this Coupon relates is a Floating Rate Note:] This is
a Coupon for the amount due on the Interest Payment Date falling in .
This Coupon is payable to bearer (subject to the terms and
conditions of the Note to which this Coupon appertains, which shall be
binding upon the bearer of this Coupon whether or not it is for the time
being attached to such Note) at the specified offices of the Global Agent
and each Paying Agent set out on the reverse hereof (or any other Global
Agent or Paying Agent or specified office duly appointed or nominated and
notified to the Holders of Notes of the Series of which the Note to which
this Coupon appertains is a part).
[For Floating Rate Notes:] If the Note to which this
Coupon appertains shall have become due and payable before the Maturity
Date of this Coupon, this Coupon shall become void and no payment shall be
made in respect thereof.
MBNA AMERICA BANK, NATIONAL ASSOCIATION
By: ______________________________________
(F-1)
<PAGE> 101
[Reverse of Coupon]
[Names and Addresses of Paying Agents]
and/or such other or further agents and/or specified offices as may from
time to time be duly appointed or nominated and notified to Holders of
Notes of the Series of which the Note to which this Coupon appertains is a
part.
(F-2)
<PAGE> 102
EXHIBIT G
---------
FORM OF TALON
[On the front:]
ANY UNITED STATES PERSON WHO HOLDS THIS OBLIGATION WILL BE
SUBJECT TO LIMITATIONS UNDER THE UNITED STATES INCOME TAX LAWS, INCLUDING
THE LIMITATIONS PROVIDED IN SECTIONS 165(j) AND 1287(a) OF THE INTERNAL
REVENUE CODE.
MBNA AMERICA BANK, NATIONAL ASSOCIATION
After all the Coupons appertaining to the Note and issued
in the Coupon sheet to which this Talon was attached have matured, further
Coupons [and a further Talon giving entitlement to further Coupons [and a
further Talon]] will be issued at any specified office of the Paying Agents
set out on the reverse hereof (or such one or more of them and/or such
other or further Paying Agents and/or specified offices as shall have been
duly appointed or nominated and notified to the Holders of the Notes of the
Series of which this Note is a part) upon production and surrender of this
Talon, subject to the terms and conditions of such Note which shall be
binding on the Holder of this Talon whether or not it is for the time being
attached to such Note.
This Talon is separately negotiable. The Coupons to which
this Talon give entitlement may, in certain circumstances, become void
under the terms and conditions before their respective Maturity Dates.
MBNA AMERICA BANK, NATIONAL ASSOCIATION
By: ____________________________________
[PAYING AGENTS]
(G-1)
<PAGE> 103
[Reverse of Talon]
[Names and Addresses of Paying Agents]
and/or such other or further agents and/or specified offices as may from
time to time be duly appointed or nominated and notified to Holders of
Notes of the Series of which the Note to which this Talon appertains is a
part.
(G-2)
<PAGE> 104
EXHIBIT H
---------
FORM OF RECEIPT
[Face of Receipt:]
ANY UNITED STATES PERSON WHO HOLDS THIS OBLIGATION WILL BE
SUBJECT TO LIMITATIONS UNDER THE UNITED STATES INCOME TAX LAWS, INCLUDING THE
LIMITATIONS PROVIDED IN SECTIONS 165(j) AND 1287(a) OF THE INTERNAL REVENUE
CODE.
MBNA AMERICA BANK, NATIONAL ASSOCIATION
Receipt for the sum of [ ] being the installment of
principal payable in accordance with the terms and conditions of the Note to
which this Receipt appertains (the "Terms and Conditions") on [ ].
This Receipt is issued subject to and in accordance with the
Terms and Conditions which shall be binding upon the holder of this Receipt
(whether or not it is for the time being attached to such Note) and is payable
at the specified office of any of the Paying Agents set out on the reverse
hereof (and/or any other or further Paying Agents and/or specified offices as
may from time to time be duly appointed and notified to the Noteholders).
This Receipt must be presented for payment together with the
Note to which it appertains. MBNA America Bank, National Association shall have
no obligation in respect of any Receipt presented without the Note to which it
appertains or any unmatured Receipts.
MBNA AMERICA BANK, NATIONAL ASSOCIATION
By:____________________________________
(H-1)
<PAGE> 105
[Reverse of Receipt]
[Names and Addresses of Paying Agents]
and/or such other or further agents and/or specified offices as may from time to
time be duly appointed or nominated and notified to Holders of Notes of the
Series of which the Note to which this Receipt appertains is a part.
(H-2)
<PAGE> 106
EXHIBIT I
---------
FORM OF REVERSE OF NOTE
[Reverse of Note]
The Notes (other than notes sold outside of the United States)
are issuable only in denominations of US$250,000 and integral multiples of
US$1,000 in excess thereof (or equivalent denominations in other currencies,
subject to any other statutory or regulatory minimums). This Note, and any Note
issued in exchange or substitution therefor or in place hereof, or upon
registration of transfer, exchange or partial redemption or repayment of this
Note, may be issued only in an Authorized Denomination specified in the Pricing
Supplement (or, if this Note is in definitive form, specified on the face
hereof).
Unless otherwise provided herein or in the Pricing Supplement,
the principal of, and premium, if any, and interest on, this Note are payable in
the Specified Currency indicated on the face hereof (or, if such Specified
Currency is not at the time of such payment legal tender for the payment of
public and private debts, in such other coin or currency of the country which
issued such Specified Currency as at the time of such payment is legal tender
for the payment of debts). If this Note is a DTC Global Note and the Specified
Currency indicated on the face hereof is other than U.S. dollars, any such
amounts paid by the Bank will be converted by the Global Agent, or such other
agent as may be specified in the Pricing Supplement (or, if this Note is in
definitive form, specified on the face hereof), which for these purposes shall
act as currency exchange agent (the "Exchange Rate Agent"), into U.S. dollars
for payment to the holder of this Note.
If this Note is a DTC Global Note and the Specified Currency
indicated on the face hereof is other than the U.S. dollar, any U.S. dollar
amount to be received by the holder of this Note will be based on the Exchange
Rate Agent's bid quotation as of 11:00 a.m., London time, on the second day on
which banks are open for business in London and New York City preceding the
applicable payment date, for the purchase of U.S. dollars with the Specified
Currency for settlement on such payment date of the aggregate amount of the
Specified Currency payable to all holders of Notes denominated other than in the
U.S. dollar scheduled to receive U.S. dollar payments. If such bid quotation is
not available, the Exchange Rate Agent will obtain a bid quotation from a
leading foreign exchange Global Agent in London or New York City selected by the
Exchange Rate Agent for such purchase. If no such bids
(I-1)
<PAGE> 107
are available, payment of the aggregate amount due to the holder of this Note on
the payment date will be made in the Specified Currency. All currency exchange
costs will be borne by the holder of this Note by deductions from such payments.
All determinations referred to above made by the Exchange Rate Agent shall be at
its sole discretion and shall, in the absence of manifest error, be conclusive
for all purposes and binding upon the Agent and the holder of this Note.
If this Note is a DTC Global Note and the Specified Currency
indicated on the face hereof is other than the U.S. dollar, the holder of this
Note may elect to receive payment of principal (and premium, if any) and
interest on this Note in the Specified Currency indicated on the face hereof by
submitting a written notice to the Global Agent at 120 Wall Street, New York,
New York 10043, Attention: Corporate Trust Services, on or prior to the fifth
Business Day following the applicable Regular Record Date in the case of
interest and the tenth calendar day prior to the payment date for the payment of
principal. Such notice, which may be mailed or hand delivered or sent by cable,
telex or other form of facsimile transmission, shall contain (i) the holder's
election to receive all or a portion of such payment in the Specified Currency
for value on the relevant Interest Payment Date or Maturity, as the case may be,
and (ii) wire transfer instructions to an account denominated in the Specified
Currency with respect to any payment to be made in the Specified Currency. Any
such election made with respect to this Note by the holder will remain in effect
with respect to any further payments of principal of (and premium, if any) and
interest on this Note payable to the holder of this Note unless such election is
revoked on or prior to the fifth Business Day following the applicable Regular
Record Date in the case of interest and the tenth calendar day prior to the
payment date for the payment of principal.
If (i) this Note is a DTC Global Note and the holder of this
Note shall have duly made an election to receive all or a portion of a payment
of principal of (and premium, if any) or interest on this Note in the Specified
Currency indicated on the face hereof, or (ii) if this Note is not a DTC Global
Note, in the case of (i) or (ii) in the event the Specified Currency indicated
on the face hereof has been replaced by another currency (a "Replacement
Currency"), any amount due pursuant to this Note may be repaid, at the option of
the Bank, in the Replacement Currency or in U.S. Dollars, at a rate of exchange
which takes into account the conversion, at the rate prevailing on the most
recent date on which official conversion rates were quoted or set by the
national government or other authority responsible for issuing the Replacement
Currency, from the Specified Currency to the Replacement Currency and, if
necessary, the conversion of the Replacement Currency into U.S. Dollars at the
rate prevailing on the date of such conversion.
(I-2)
<PAGE> 108
Notwithstanding the foregoing, if, pursuant to the Treaty on European Union (the
"Maastricht Treaty"), all or some of the currencies of the member countries of
the European Community are replaced by a new single European currency (the
"Euro"), and this Note is denominated in any such currency, the payment of
principal of, premium (if any) or interest on this Note shall be effected in
Euro in conformity with legally applicable measures taken pursuant to, or by
virtue of, the Maastricht Treaty.
If the Specified Currency indicated on the face hereof is
other than the European Currency Unit ("ECU") and (i) this Note is a DTC Global
Note and the holder of this Note shall have duly made an election to receive all
or a portion of a payment of principal of (and premium, if any) or interest on
this Note in the Specified Currency indicated on the face hereof, or (ii) if
this Note is not a DTC Global Note, in the case of (i) or (ii) if such Specified
Currency is not available due to the imposition of exchange controls or other
circumstances beyond the control of the Bank, the Bank will be entitled to
satisfy its obligations to the holder of this Note by making such payments of
principal of (and premium, if any) or interest on this Note in U.S. dollars
until the Specified Currency is again available. In such circumstances, the U.S.
dollar amount to be received by the holder of this Note will be made on the
basis of the most recently available bid quotation from a leading foreign
exchange bank in London or New York City selected by the Exchange Rate Agent,
for the purchase of U.S. dollars with the Specified Currency for settlement on
such payment date of the aggregate amount of the Specified Currency payable to
all holders of Notes denominated other than in the U.S. dollar scheduled to
receive U.S. dollar payments. Any payment made under such circumstances in U.S.
dollars where the payment is required to be made in the Specified Currency will
not constitute an "Event of Default" with respect to this Note.
Payment in a Composite Currency
If (i) this Note is a DTC Global Note and the holder of this
Note shall have duly made an election to receive payments of principal, premium,
if any, or interest hereon in the Specified Currency indicated on the face
hereof, or (ii) if this Note is not a DTC Global Note and, in the case of (i) or
(ii), the Specified Currency is the ECU, subject to the following provisions,
the value and composition of the ECU in which such payments of principal,
premium, if any, or interest are made shall be the same as the composition of
the European Currency Unit that is from time to time used as the unit of account
of the European Communities (the "EC"). Certain changes as to the nature of
(I-3)
<PAGE> 109
the composition of the ECU may be made by the European Communities in conformity
with the provisions of the Treaty on European Union. References herein to the
ECU shall be deemed to be references to the ECU as so changed.
If, on the date on which any such payment of principal,
premium, if any, or interest with respect to this Note is due, the ECU is used
neither as the unit of account of the EC nor as the currency of the European
Union, the Exchange Rate Agent shall, without liability on its part and without
regard to the interests of individual Noteholders and after consultation with
the Bank if practicable, choose a component currency (the "Chosen Currency") of
the ECU when the ECU was most recently used as the unit of account of the EC in
which all payments due on that due date with respect to this Note shall be made.
Notice of the Chosen Currency selected by the Exchange Rate Agent shall, where
practicable, be given to the holder hereof. The amount of each payment in such
Chosen Currency shall be computed on the basis of the equivalent of the ECU in
that currency, determined as provided below, as of the fourth London Business
Day (as defined below) prior to the date on which such payment is due.
Without limiting the foregoing, on the first London Business
Day on which the ECU is used neither as the unit of account of the EC nor as the
currency of the European Union, the Exchange Rate Agent shall, without liability
on its part and without regard to the interests of individual Noteholders and
after consultation with the Agent if practicable, choose a component currency of
the ECU (also the Chosen Currency) when the ECU was most recently used as the
unit of account of the EC in which all payments with respect to this Note having
a due date prior thereto but not yet paid are to be made. The amount of each
payment in such Chosen Currency shall be computed on the basis of the equivalent
of the ECU in that currency, determined as provided below, as of such first
London Business Day.
The equivalent of the ECU in the relevant Chosen Currency as
of any date (the "Date of Valuation") shall be determined on the following basis
by the Exchange Rate Agent or such other agent as may be specified in the
Pricing Supplement (or, if this Note is in definitive form, specified on the
face hereof) which shall for these purposes act as computation agent (the
"Computation Agent"). The component currencies of the ECU for this purpose (the
"Components") shall be the currency amounts which were components of the ECU on
the last day on which the ECU was used as the unit of account of the EC;
provided, however, that if the ECU is being used for the settlement of
transactions by public institutions of or within the EC, or if it was so
(I-4)
<PAGE> 110
used after its most recent use as the unit of account of the EC, the Components
shall be:
(i) the currency amounts that are components of the ECU
as so used as of the Date of Valuation; or
(ii) the currency amounts that were components of the ECU
when it was most recently so used, as the case may
be.
The equivalent of the ECU in the Chosen Currency shall be
calculated by, first, aggregating the U.S. dollar equivalents of the Components,
and then, using the rate used for determining the U.S. dollar equivalents of the
Components in the Chosen Currency as set forth below, calculating the equivalent
in the Chosen Currency of such aggregate amount in U.S. dollars.
The U.S. dollar equivalent of each of the Components shall be
determined by the Computation Agent on the basis of the middle spot delivery
quotations prevailing at 11:00 a.m. (London time) on the Date of Valuation, as
obtained by the Computation Agent in the country of issue of the Component in
question.
If the official unit of any Component is altered by way of
combination or subdivision, the number of units of that Component shall be
divided or multiplied in the same proportion. If two or more Components are
consolidated into a single currency, the amounts of those Components shall be
replaced by an amount in such single currency equal to the sum of the amounts of
the consolidated Components expressed in such single currency. If any Component
is divided into two or more currencies, the amount of that Component shall be
replaced by the amounts of such two or more currencies each of which shall be
equal to the amount of the former Component divided by the number of currencies
into which that currency was divided.
If no direct quotations are available for a Component as of a
Date of Valuation from any of the Global Agents selected by the Computation
Agent for this purpose because foreign exchange markets are closed in the
country of issue of that currency or for any other reason, the most recent
direct quotations for that currency obtainable by the Computation Agent shall be
used in computing the equivalents of the ECU on such Date of Valuation;
provided, however, that such most recent quotations may be used only if they
were prevailing in the country of issue of such Component not more than two
London Business Days before such Date of Valuation. If the most recent
quotations obtained by the Computation Agent are those which were so prevailing
more than two
(I-5)
<PAGE> 111
London Business Days before such Date of Valuation, the Computation Agent shall
determine the U.S. dollar equivalent of such Component on the basis of cross
rates derived from the middle spot delivery quotations for such Component and
for the U.S. dollar prevailing at 11:00 a.m. (London time) by the Computation
Agent, in a country other than the country of issue of such Component. If such
most recent quotations obtained by the Computation Agent are those which were so
prevailing not more than two London Business Days before such Date of Valuation,
the Computation Agent shall determine the U.S. dollar equivalent of such
Component on the basis of such cross rates if the Computation Agent judges that
the equivalent so calculated is more representative than the U.S. dollar
equivalent calculated on the basis of such most recent direct quotations. Unless
otherwise determined by the Computation Agent, if there is more than one market
for dealing in any Component by reason of foreign exchange regulations or for
any other reason, the market to be referred to with respect to such currency
shall be that upon which a non-resident issuer of securities denominated in such
currency would purchase such currency in order to make payments with respect to
such securities.
All choices and determinations made by the Computation Agent
for the foregoing purposes shall be at its sole discretion (after consultation
with the Agent) and shall, in the absence of manifest error, be conclusive for
all purposes and binding upon the Global Agent and the holder of this Note.
Whenever a payment is to be made in a Chosen Currency as
provided herein, such Chosen Currency shall be deemed to be the Specified
Currency for all other purposes.
The provisions set forth above in "Payment in a Component
Currency" shall not apply in the event the ECU becomes a new single European
currency in its own right in some or all of the member states of the European
Communities. Under these circumstances, payments of principal, premium, if any,
and interest, if any, on any Note denominated in ECU shall be effected in Euro
at such time as is required by, and otherwise in conformity with, legally
applicable measures adopted by the European Council.
The Bank has initially appointed The First National Bank of
Chicago as global agent (the "Global Agent"), The First National Bank of Chicago
acting through its specified office in New York as paying agent (the "NY Paying
Agent"), The First National Bank of Chicago acting through its specified office
in London as paying agent (the "London Paying Agent") and Banque Indosuez
Luxembourg as paying agent (the "Luxembourg Paying Agent"; together with the
Global Agent, the NY
(I-6)
<PAGE> 112
Paying Agent and the London Paying Agents, the "Paying Agents"; individually, a
"Paying Agent"), which term shall include any additional or successor paying
agents appointed pursuant to the Agency Agreement) to act as paying agents in
respect of the Notes. If this Note is in registered form, this Note may be
presented or surrendered for payment, and notices, designations or requests in
respect of payments with respect to this Note may be served, at the office or
agency of any Paying Agent maintained for that purpose. The Global Agent may at
any time rescind any designation of a Paying Agent, appoint any additional or
successor Paying Agents or approve a change in the office through which a Paying
Agent acts.
Subject to any fiscal or other laws and regulations applicable
thereto in the place of payment, payments on Registered Notes to be made in a
Specified Currency other than the U.S. dollar and payments on Bearer Notes will
be made by a check in the Specified Currency drawn on, or by wire transfer to an
account in the Specified Currency (which, in the case of a payment in Yen to a
non-resident of Japan, shall be a non-resident account) maintained by the payee
with, a Global Agent (which, in the case of a payment in Yen to a non-resident
of Japan, shall be an authorized foreign exchange Global Agent) in the principal
financial center of the country of the Specified Currency, provided, however, a
check may not be delivered to an address in, and an amount may not be
transferred to an account at a Agent located in, the United States of America or
its possessions by any office or agency of the Agent, the Global Agent or any
Paying Agent.
Fixed Rate Interest Provisions
If this Note is designated as a "Fixed Rate Note" on the face
hereof, the Agent will pay interest on each Interest Payment Date specified in
the Pricing Supplement (or, if this Note is in definitive form, specified on the
face hereof) and on the Maturity Date or any Redemption Date or Holder's
Optional Repayment Date (as defined below) (each such Maturity Date, Redemption
Date and Holder's Optional Repayment Date and the date on which the principal or
an installment of principal is due and payable by declaration of acceleration as
provided herein being hereinafter referred to as a "Maturity" with respect to
the principal repayable on such date), commencing on the first Interest Payment
Date next succeeding the Original Issue Date specified on the face hereof, at
the Interest Rate per annum specified in the Pricing Supplement (or, if this
Note is in definitive form, specified on the face hereof), until the principal
hereof is paid or duly made available for payment.
(I-7)
<PAGE> 113
Payments of interest hereon will include interest accrued from
and including the most recent Interest Payment Date to which interest on this
Note (or any predecessor Note) has been paid or duly provided for (or, if no
interest has been paid or duly provided for, from and including the Original
Issue Date) to but excluding the relevant Interest Payment Date or Maturity, as
the case may be. Unless otherwise specified in the Pricing Supplement (or, if
this Note is in definitive form, on the face hereof), if the Maturity Date
specified on the face hereof falls more than one year from the Original Issue
Date, interest payments for this Note shall be computed and paid on the basis of
a 360-day year of twelve 30-day months. Unless otherwise specified in the
Pricing Supplement (or, if this Note is in definitive form, on the face hereof),
if the Maturity Date specified on the face hereof falls one year or less from
the Original Issue Date, interest payments for this Note shall be computed and
paid on the basis of the actual number of days in the year divided by 360.
Unless otherwise provided herein, if any Interest Payment Date
or the Maturity of this Note falls on a day which is not a Business Day, the
related payment of principal of, premium, if any, or interest on, this Note
shall be made on the next succeeding Business Day with the same force and effect
as if made on the date such payments were due, and no interest shall accrue on
the amount so payable for the period from and after such Interest Payment Date
or the Maturity, as the case may be.
Floating Rate Interest Provisions
If this Note is designated as a "Floating Rate Note" on the
face hereof, the Agent will pay interest on each Interest Payment Date specified
in the Pricing Supplement (or, if this Note is in definitive form, specified on
the face hereof) and at Maturity, commencing on the first Interest Payment Date
next succeeding the Original Issue Date specified on the face hereof (or, if the
Original Issue Date is between a Regular Record Date and the Interest Payment
Date immediately following such Regular Record Date, on the second Interest
Payment Date following the Original Issue Date), at a rate per annum determined
in accordance with the provisions hereof (and, if this Note as in global form,
in accordance with the Pricing Supplement), until the principal hereof is paid
or duly made available for payment.
Payments of interest hereon will include interest accrued from
and including the most recent Interest Payment Date to which interest on this
Note (or any predecessor Note) has been paid or duly provided for (or, if no
interest has been paid or duly provided
(I-8)
<PAGE> 114
for, from and including the Original Issue Date) to but excluding the relevant
Interest Payment Date or Maturity, as the case may be (each such period an
"Interest Period").
Unless otherwise specified herein or in the Pricing
Supplement, if any Interest Payment Date (or other date which is subject to
adjustment in accordance with a Business Day Convention specified on the face
hereof or in the Pricing Supplement) in respect of this Note (other than an
Interest Payment Date at Maturity) would otherwise fall on a day that is not a
Business Day, then, if the Business Day Convention specified on the face hereof
or in the Pricing Supplement is:
(1) the "Floating Rate Convention," such Interest Payment Date (or
other date) shall be postponed to the next succeeding day
which is a Business Day unless it would thereby fall into the
next succeeding calendar month, in which event (A) such
Interest Payment Date (or other date) shall be brought forward
to the next preceding Business Day and (B) each subsequent
Interest Payment Date (or other date) shall be the last
Business Day in the month which falls the number of months or
other period specified as the Interest Payment Period on the
face hereof after the preceding applicable Interest Payment
Date (or other date) occurred; or
(2) the "Following Business Day Convention," such Interest Payment
Date (or other date) shall be postponed to the next succeeding
day which is a Business Day; or
(3) the "Modified Following Business Day Convention," such
Interest Payment Date (or other date) shall be postponed to
the next succeeding day that is a Business Day unless it would
thereby fall into the next succeeding calendar month, in which
event such Interest Payment Date (or other date) shall be
brought forward to the next preceding Business Day; or
(4) the "Preceding Business Day Convention," such Interest Payment
Date (or other date) shall be brought forward to the next
preceding Business Day.
If the Maturity of this Note falls on a day that is not a
Business Day, the related payment of principal of, premium, if any, and interest
on, this Note will be made on the next succeeding Business Day with the same
force and effect as if made on the date such payment
(I-9)
<PAGE> 115
was due, and no interest shall accrue on the amount so payable for the period
from and after such Maturity.
If "ISDA Rate" is specified on the face hereof or in the
Pricing Supplement in connection with the determination of the rate of interest
on this Note, the rate of interest on this Note for each Interest Period will be
the relevant ISDA Rate (as defined below) plus or minus the Margin, if any,
specified on the face hereof or in the Pricing Supplement. Unless otherwise
specified on the face hereof or in the Pricing Supplement, "ISDA Rate" means,
with respect to any Interest Period, the rate equal to the Floating Rate that
would be determined by the Global Agent or other person specified on the face
hereof or in the Pricing Supplement pursuant to an interest rate swap
transaction if the Global Agent or that other person were acting as Calculation
Agent for that swap transaction in accordance with the terms of an agreement in
the form of the Interest Rate and Currency Exchange Agreement published by the
International Swaps and Derivatives Association, Inc. (the "ISDA Agreement") and
evidenced by a Confirmation (as defined in the ISDA Agreement) incorporating the
ISDA Definitions and under which:
(A) the Floating Rate Option is as specified on the face hereof or
in the Pricing Supplement;
(B) the Designated Maturity is the period specified on the face
hereof or in the Pricing Supplement; and
(C) the relevant Reset Date is either (i) if the applicable
Floating Rate Option is based on the London inter-bank offered
rate for a currency, the first day of that Interest Period or
(ii) in any other case, as specified on the face hereof or in
the Pricing Supplement.
As used in this paragraph, "Floating Rate", "Calculation Agent", "Floating Rate
Option", "Designated Maturity", and "Reset Date" have the meanings ascribed to
those terms in the ISDA Definitions.
If "Reference Rate Determination" is specified on the face
hereof or in the Pricing Supplement in connection with the determination of the
rate of interest on this Note, this Note will bear interest at a rate per annum
equal to the Initial Interest Rate specified on the face hereof or in the
Pricing Supplement until the Initial Interest Reset Date specified on the face
hereof or in the Pricing Supplement and thereafter at a rate per annum
determined as follows:
(I-10)
<PAGE> 116
1. If this Note is designated as a "Regular Floating Rate
Note" on the face hereof or in the Pricing Supplement or if no
designation is made for Interest Calculation on the face hereof or in
the Pricing Supplement, then, except as described below or in the
Pricing Supplement, this Note shall bear interest at the rate
determined by reference to the applicable Interest Rate Basis or Bases
specified on the face hereof or in the Pricing Supplement (i) plus or
minus the applicable Spread, if any, and/or (ii) multiplied by the
applicable Spread Multiplier, if any, specified and applied in the
manner described on the face hereof or in the Pricing Supplement.
Commencing on the Initial Interest Reset Date, the rate at which
interest on this Note is payable shall be reset as of each Interest
Reset Date specified on the face hereof or in the Pricing Supplement;
provided, however, that the interest rate in effect for the period from
the Original Issue Date to the Initial Interest Reset Date will be the
Initial Interest Rate.
2. If this Note is designated as a "Floating Rate/Fixed Rate
Note" on the face hereof or in the Pricing Supplement, then, except as
described below or in the Pricing Supplement, this Note shall bear
interest at the rate determined by reference to the applicable Interest
Rate Basis or Bases specified on the face hereof or in the Pricing
Supplement (i) plus or minus the applicable Spread, if any, and/or (ii)
multiplied by the applicable Spread Multiplier, if any, specified and
applied in the manner described on the face hereof or in the Pricing
Supplement. Commencing on the Initial Interest Reset Date, the rate at
which interest on this Note is payable shall be reset as of each
Interest Rate Date specified on the face hereof or in the Pricing
Supplement; provided, however, that (i) the interest rate in effect for
the period from the Original Issue Date to the Initial Interest Reset
Date shall be the Initial Interest Rate and (ii) the interest rate in
effect commencing on, and including, the Fixed Rate Commencement Date
to the Maturity Date shall be the Fixed Interest Rate, if such a rate
is specified on the face hereof or in the Pricing Supplement, or if no
such Fixed Interest Rate is so specified, the interest rate in effect
hereon on the Business Day immediately preceding the Fixed Rate
Commencement Date.
3. If this Note is designated as an "Inverse Floating Rate
Note" on the face hereof or in the Pricing Supplement, then, except as
described below or in the Pricing Supplement, this Note shall bear
interest equal to the Fixed
(I-11)
<PAGE> 117
Interest Rate indicated on the face hereof or in the Pricing Supplement minus
the rate determined by reference to the applicable Interest Rate Basis or Bases
specified on the face hereof or in the Pricing Supplement (i) plus or minus the
applicable Spread, if any, and/or (ii) multiplied by the applicable Spread
Multiplier, if any, specified and applied in the manner described on the face
hereof or in the Pricing Supplement; provided, however, that, unless otherwise
specified on the face hereof or in the Pricing Supplement, the interest rate
hereon will not be less than zero percent. Commencing on the Initial Interest
Reset Date, the rate at which interest on this Note is payable shall be reset as
of each Interest Rate Reset Date specified on the face hereof or in the Pricing
Supplement; provided, however, that the interest rate in effect for the period
from the Original Issue Date to the Initial Interest Reset Date shall be the
Initial Interest Rate.
Except as provided above, if "Reference Rate Determination" is
specified on the face hereof or in the Pricing Supplement in connection with the
determination of the rate of interest on this Note, the interest rate in effect
on each day shall be (a) if such day is an Interest Reset Date, the interest
rate determined as of the Interest Determination Date (as defined below)
immediately preceding such Interest Reset Date or (b) if such day is not an
Interest Reset Date, the interest rate determined as of the Interest
Determination Date immediately preceding the next preceding Interest Reset Date.
Each Interest Rate Basis shall be the rate determined in accordance with the
applicable provision below. If any Interest Reset Date (which term includes the
term Initial Interest Reset Date unless the context otherwise requires) would
otherwise be a day that is not a Business Day, such Interest Reset Date shall be
adjusted in accordance with the Business Day Convention specified on the face
hereof or in the Pricing Supplement.
Unless otherwise specified on the face hereof or in the
Pricing Supplement, the "Interest Determination Date" with respect to the CMT
Rate, the Commercial Paper Rate, the Federal Funds Rate, the J.J. Kenny Rate,
the CD Rate and the Prime Rate will be the second Business Day preceding each
Interest Reset Date; the "Interest Determination Date" with respect to the
Eleventh District Cost of Funds Rate will be the last working day of the month
immediately preceding each Interest Reset Date on which the Federal Home Loan
Bank of San Francisco (the "FHLB of San Francisco") publishes the Index (as
defined below); the "Interest Determination Date" with respect to LIBOR shall be
the second London Business Day (as defined below) preceding each Interest Reset
Date; the "Interest Determination Date" with respect to
(I-12)
<PAGE> 118
the Treasury Rate will be the day in the week in which the related Interest
Reset Date falls on which day Treasury Bills (as defined below) are normally
auctioned (Treasury Bills are normally sold at auction on Monday of each week,
unless that day is a legal holiday, in which case the auction is normally held
on the following Tuesday, except that such auction may be held on the preceding
Friday); provided, however, that if an auction is held on the Friday of the week
preceding the related Interest Reset Date, the related Interest Determination
Date shall be such preceding Friday; and provided, further, that if an auction
shall fall on any Interest Reset Date, then the Interest Reset Date shall
instead be the first Business Day following such auction. If the interest rate
of this Note is determined with reference to two or more Interest Rate Bases as
specified on the face hereof or in the Pricing Supplement, the Interest
Determination Date pertaining to this Note will be the latest Business Day which
is at least two Business Days prior to such Interest Reset Date on which each
Interest Rate Basis is determinable. Each Interest Rate Basis shall be
determined on such date, and the applicable interest rate shall take effect on
the Interest Reset Date.
Determination of CMT Rate. If an Interest Rate Basis for this
Note is the CMT Rate, as indicated on the face hereof or in the Pricing
Supplement, the CMT Rate shall be determined as of the applicable Interest
Determination Date (a "CMT Rate Interest Determination Date"), as the rate
displayed on the Designated CMT Telerate Page under the caption "...Treasury
Constant Maturities...Federal Reserve Board Release H.15...Mondays Approximately
3:45 P.M.," under the column for the Designated CMT Maturity Index for (i) if
the Designated CMT Telerate Page is 7055, the rate on such CMT Rate Interest
Determination Date and (ii) if the Designated CMT Telerate Page is 7052, the
week, or the month, as applicable, ended immediately preceding the week in which
the related CMT Rate Interest Determination Date occurs. If such rate is no
longer displayed on the relevant page, or if not displayed by 3:00 p.m., New
York City time, on the related Calculation Date, then the CMT Rate for such CMT
Rate Interest Determination Date will be such treasury constant maturity rate
for the Designated CMT Maturity Index as published by the Board of Governors of
the Federal Reserve System in the weekly statistical released entitled
"Statistical Release H.15(519), Selected Interest Rates," or any successor
publication of the Board of Governors of the Federal Reserve System
("H.15(519)"). If such rate is no longer published, or if not published by 3:00
p.m., New York City time, on the related Calculation Date, then the CMT Rate for
such CMT Rate Interest Determination Date will be such treasury constant
maturity rate for the Designated CMT Maturity Index (or other United States
Treasury rate for the Designated CMT Maturity Index) for the CMT Rate Interest
Determination Date with
(I-13)
<PAGE> 119
respect to such Interest Reset Date as may then be published by either the Board
of Governors of the Federal Reserve System or the United States Department of
the Treasury that the Calculation Agent determines to be comparable to the rate
formerly displayed on the Designated CMT Telerate Page and published in the
relevant H.15(519). If such information is not provided by 3:00 p.m., New York
City time, on the related Calculation Date, then the CMT Rate for the CMT Rate
Interest Determination Date will be calculated by the Calculation Agent and will
be a yield to maturity, based on the arithmetic mean of the secondary market
closing offer side prices as of approximately 3:30 p.m., New York City time, on
the CMT Rate Interest Determination Date reported, according to their written
records, by three leading primary United States government securities dealers
(each, a "Reference Dealer") in The City of New York selected by the Calculation
Agent (from five such Reference Dealers selected by the Calculation Agent and
eliminating the highest quotation (or, in the event of equality, one of the
highest) and the lowest quotation (or, in the event of equality, one of the
lowest)), for the most recently issued direct noncallable fixed rate obligations
of the United States ("Treasury Notes") with an original maturity of
approximately the Designated CMT Maturity Index and a remaining term to maturity
of not less than such Designated CMT Maturity Index minus one year. If the
Calculation Agent cannot obtain three such Treasury Note quotations, the CMT
Rate for such CMT Rate Interest Determination Date will be calculated by the
Calculation Agent and will be a yield to maturity based on the arithmetic mean
of the secondary market offer side prices as of approximately 3:30 p.m., New
York City time, on the CMT Rate Interest Determination Date of three Reference
Dealers in The City of New York (from five such Reference Dealers selected by
the Calculation Agent and eliminating the highest quotation (or, in the event of
equality, one of the highest) and the lowest quotation (or, in the event of
equality, on of the lowest)), for Treasury Notes with an original maturity of
the number of years that is the next highest to the Designated CMT Maturity
Index and a remaining term to maturity closest to the Designated CMT Maturity
Index and in an amount of at least $100 million. If three or four (and not five)
of such Reference Dealers are quoting as described above, then the CMT Rate will
be based on the arithmetic mean of the offer prices obtained and neither the
highest nor the lowest of such quotes will be eliminated; provided, however,
that if fewer than three Reference Dealers selected by the Calculation Agent are
quoting as described herein, the CMT Rate will be the CMT Rate in effect on such
CMT Rate Interest Determination Date. If two Treasury Notes with an original
maturity as described in the third preceding sentence have remaining terms to
maturity equally close to the Designated CMT Maturity Index, the quotes for the
CMT Rate Note with the shorter remaining term to maturity will be used.
(I-14)
<PAGE> 120
"Designated CMT Telerate Page" means the display on the Dow
Jones Telerate Service on the page designated on the face hereof or in the
Pricing Supplement (or any other page as may replace such page on that service
for the purpose of displaying Treasury Constant Maturities as reported in
H.15(519)), for the purpose of displaying Treasury Constant Maturities as
reported in H.15(519). If no such page is specified on the face hereof or in the
Pricing Supplement, the Designated CMT Telerate Page shall be 7052 for the most
recent week.
"Designated CMT Maturity Index" means the original period to
maturity of the U.S. Treasury securities (either 1, 2, 3, 5, 7, 10, 20 or 30
years) specified on the face hereof or in the Pricing Supplement with respect to
which the CMT Rate will be calculated. If no such maturity is specified on the
face hereof or in the Pricing Supplement, the Designated CMT Maturity Index
shall be 2 years.
Determination of Commercial Paper Rate. If an Interest Rate
Basis for this Note is the Commercial Paper Rate, as indicated on the face
hereof or in the Pricing Supplement, the Commercial Paper Rate shall be
determined as of the applicable Interest Determination Date (a "Commercial Paper
Rate Interest Determination Date"), as the Money Market Yield (as defined below)
on such date of the rate for commercial paper having the Index Maturity
specified on the face hereof or in the Pricing Supplement as published in
H.15(519) under the heading "Commercial Paper". In the event that such rate is
not published by 3:00 p.m., New York City time, on the related Calculation Date,
then the Commercial Paper Rate shall be the Money Market Yield on such
Commercial Paper Rate Interest Determination Date of the rate for commercial
paper having the Index Maturity specified on the face hereof or in the Pricing
Supplement as published in the daily statistical release entitled "Composite
3:30 P.M. Quotations for U.S. Government Securities" or any successor
publication published by the Federal Reserve Bank of New York ("Composite
Quotations") under the heading "Commercial Paper" (with an Index Maturity of one
month or three months being deemed to be equivalent to an Index Maturity of 30
days or 90 days, respectively). If by 3:00 p.m., New York City time, on the
related Calculation Date such rate is not yet published in either H.15(519) or
Composite Quotations, then the Commercial Paper Rate on such Commercial Paper
Rate Interest Determination Date shall be calculated by the Calculation Agent
and shall be the Money Market Yield of the arithmetic mean of the offered rates
at approximately 11:00 a.m., New York City time, on such Commercial Paper Rate
Interest Determination Date of three leading dealers of commercial paper in The
City of New York selected by the Calculation Agent for commercial paper having
the Index Maturity designated on the face hereof or in the Pricing Supplement
placed for an industrial issuer whose bond rating is "AA," or the equivalent,
from a
(I-15)
<PAGE> 121
nationally recognized securities rating agency; provided, however, that if any
of the dealers selected as aforesaid by the Calculation Agent are not quoting as
mentioned in this sentence, the Commercial Paper Rate determined as of such
Commercial Paper Rate Interest Determination Date shall be the rate in effect on
such Commercial Paper Rate Interest Determination Date.
"Money Market Yield" means a yield (expressed as a percentage)
calculated in accordance with the following formula:
Money Market Yield = D x 360 x 100
-------------
360 - (D x M)
where "D" refers to the applicable per annum rate for commercial paper quoted on
a bank discount basis and expressed as a decimal, and "M" refers to the actual
number of days in the interest period for which interest is being calculated.
Determination of Eleventh District Cost of Funds Rate. If an
Interest Rate Basis for this Note is the Eleventh District Cost of Funds Rate,
as indicated on the face hereof or in the Pricing Supplement, the Eleventh
District Cost of Funds Rate shall be determined as of the applicable Interest
Determination Date (an "Eleventh District Cost of Funds Rate Interest
Determination Date"), as the rate equal to the monthly weighted average cost of
funds for the calendar month immediately preceding the month in which such
Eleventh District Cost of Funds Rate Interest Determination Date falls, as set
forth under the caption "11th District" on Telerate Page 7058 (as defined below)
as of 11:00 a.m., San Francisco time, on such Eleventh District Cost of Funds
Rate Interest Determination Date. If such rate does not appear on Telerate Page
7058 on any related Eleventh District Cost of Funds Rate Interest Determination
Date, the Eleventh District Cost of Funds Rate for such Eleventh District Cost
of Funds Rate Interest Determination Date shall be the monthly weighted average
cost of funds paid by member institutions of the Eleventh Federal Home Loan Bank
District that was most recently announced (the "Index") by the FHLB of San
Francisco as such cost of funds for the calendar month immediately preceding the
date of such announcement. If the FHLB of San Francisco fails to announce such
rate for the calendar month immediately preceding such Eleventh District Cost of
Funds Rate Interest Determination Date, then the Eleventh District Cost of Funds
Rate determined as of such Eleventh District Cost of Funds Rate Interest
Determination Date shall be the Eleventh District Cost of Funds Rate in effect
on such Eleventh District Cost of Funds Rate Interest Determination Date.
(I-16)
<PAGE> 122
"Telerate Page 7058" means the display designated as page
"7058" on the Dow Jones Telerate Service (or such other page as may replace the
7058 page on that service for the purpose of displaying the monthly weighted
average cost of funds paid by member institutions of the Eleventh Federal Home
Loan Bank District).
Determination of J.J. Kenny Rate. If an Interest Rate Basis
for this Note is the J.J. Kenny Rate, as indicated on the face hereof or in the
Pricing Supplement, the J.J. Kenny Rate shall be determined as of the applicable
Interest Determination Date (a "J.J. Kenny Interest Determination Date") as the
rate in the high grade weekly index (the "Weekly Index") on such date made
available by Kenny Information Systems ("Kenny") to the Calculation Agent. The
Weekly Index Maturity is, and shall be, based upon 30-day yield evaluations at
par of bonds, the interest of which is exempt from Federal income taxation under
the Internal Revenue Code of 1986, as amended, of not less than five high grade
component issuers selected by Kenny which shall include, without limitation,
issuers of general obligation bonds. The specific issuers included among the
component issuers may be changed from time to time by Kenny in its discretion.
The bonds on which the Weekly Index is based shall not include any bonds on
which the interest is subject to a minimum tax or similar tax under the Internal
Revenue Code of 1986, as amended, unless all tax-exempt bonds are subject to
such tax. In the event Kenny ceases to make available such Weekly Index, a
successor indexing agent will be selected by the Calculation Agent, such index
to reflect the prevailing rate for bonds rated in the highest short-term rating
category by Moody's Investors Service, Inc. and Standard & Poor's Ratings Group
in respect of issuers most closely resembling the high grade component issuers
selected by Kenny for its Weekly Index, the interest on which is (i) variable on
a weekly basis, (ii) exempt from Federal income taxation under the Internal
Revenue Code of 1986, as amended, and (iii) not subject to a minimum tax or
similar tax under the Internal Revenue of Code of 1986, as amended, unless all
tax-exempt bonds are subject to such tax. If such successor indexing agent is
not available, the rate for any J.J. Kenny Interest Determination Date shall be
67% of the rate determined if the Treasury Rate option had been originally
selected.
Determination of CD Rate. If an Interest Rate Basis for this
Note is the CD Rate, as indicated on the face hereof or in the Pricing
Supplement, the CD Rate shall be determined as of the applicable Interest
Determination Date (a "CD Rate Interest Determination Date") as the rate on such
date for negotiable certificates of deposit having the Index Maturity specified
on the face hereof or in the Pricing Supplement as published in H.15(519) under
the heading "CDs (Secondary Market)". In the event that such rate is not so
published before 3:00 p.m., New
(I-17)
<PAGE> 123
York City time, on the Calculation Date pertaining to such CD Rate Interest
Determination Date, the CD Rate will be the rate on such CD Rate Interest
Determination Date for negotiable certificates of deposit having the Index
Maturity specified on the face hereof or in the Pricing Supplement as published
in Composite Quotations under the heading "Certificates of Deposit". If such
rate is published neither in H.15(519) nor in the Composite Quotations by 3:00
p.m., New York City time, on such Calculation Date, the CD Rate for such CD Rate
Interest Determination Date will be calculated by the Calculation Agent and will
be the arithmetic mean of the secondary market offered rates as of 10:00 a.m.,
New York City time, on such CD Rate Interest Determination Date, of three
leading nonbank dealers of negotiable U.S. dollar certificates of deposit in The
City of New York (which may include one or more of the Dealers) selected by the
Calculation Agent for negotiable certificates of deposit in a denomination of
US$5,000,000 of the four highest rated banks (as rated by two nationally
recognized rating agencies) of the 25 largest United States banks ranked by
asset size based on the most recent year-end survey published in The American
Banker (or a comparable publication) with a remaining maturity closest to the
Index Maturity specified on the face hereof or in the Pricing Supplement;
provided, however, that if the dealers selected as aforesaid by the Calculation
Agent are not quoting as mentioned in this sentence, the CD Rate determined on
such CD Rate Interest Determination Date will be the CD Rate in effect on such
date.
Determination of Federal Funds Rate. If an Interest Rate Basis
for this Note is the Federal Funds Rate, as indicated on the face hereof or in
the Pricing Supplement, the Federal Funds Rate shall be determined as of the
applicable Interest Determination Date (a "Federal Funds Rate Interest
Determination Date"), as the rate on such date for federal funds as published in
H.15(519) under the heading "Federal Funds (Effective)" or, if not so published
by 3:00 p.m., New York City time, on the related Calculation Date, the rate on
such Federal Funds Rate Interest Determination Date, as published in Composite
Quotations under the heading "Federal Funds/Effective Rate." If by 3:00 p.m.,
New York City time, on the related Calculation Date such rate is not published
in either H.15(519) or Composite Quotations, then the Federal Funds Rate on such
Federal Funds Rate Interest Determination Date shall be calculated by the
Calculation Agent and shall be the arithmetic mean of the rates for the last
transaction in overnight U.S. dollar federal funds arranged prior to 9:00 a.m.,
New York City time, or such Federal Funds Rate Interest Determination Date by
three leading brokers of federal funds transactions in The City of New York
selected by the Calculation Agent; provided, however, that if any of the brokers
selected as aforesaid by the Calculation Agent are not quoting as mentioned in
this sentence, the Federal Funds Rate
(I-18)
<PAGE> 124
determined as of such Federal Funds Rate Interest Determination Date shall be
the Federal Funds Rate in effect on such Federal Funds Rate Interest
Determination Date.
Determination of LIBOR. If an Interest Rate Basis for this
Note is LIBOR, as indicated on the face hereof or in the Pricing Supplement,
LIBOR shall be determined by the Calculation Agent as of the applicable Interest
Determination Date (a "LIBOR Interest Determination Date"), in accordance with
the following provisions:
(a) with respect to any LIBOR Interest Determination Date,
LIBOR will be, as specified on the face hereof or in the Pricing Supplement,
either: (i) if "LIBOR Reuters" is specified on the face hereof or in the Pricing
Supplement, the arithmetic mean of the offered rates (unless the specified
Designated LIBOR Page by its terms provides only for a single rate, in which
case such single rate shall be used) for deposits in the Index Currency having
the Index Maturity specified on the face hereof, commencing on the second London
Banking Day immediately following that LIBOR Interest Determination Date, that
appear on the Designated LIBOR Page specified on the face hereof or in the
Pricing Supplement, as of 11:00 a.m., London time, on that LIBOR Interest
Determination Date, if at least two such offered rates appear (unless, as
aforesaid, only a single rate is required) on such Designated LIBOR Page, or
(ii) if "LIBOR Telerate" is specified on the face hereof or in the Pricing
Supplement or if neither "LIBOR Telerate" nor "LIBOR Reuters" is specified as
the method for calculating LIBOR, the rate for deposits in the Index Currency
having the Index Maturity specified on the face hereof or in the Pricing
Supplement, commencing on the second London Banking Day immediately following
that LIBOR Interest Determination Date, that appears on the Designated LIBOR
Page specified on the face hereof or in the Pricing Supplement, as of 11:00
a.m., London time, on that LIBOR Interest Determination Date. If fewer than two
such offered rates appear, or if no such rate appears, as applicable, LIBOR in
respect of that LIBOR Interest Determination Date will be determined as if the
parties had specified the rate described in (b) below.
(b) With respect to a LIBOR Interest Determination Date on
which fewer than two offered rates appear, or no rate appears, as the case may
be, on the applicable Designated LIBOR Page as specified in (a) above, the
Calculation Agent will request the principal London office of each of four major
banks in the London interbank market, as selected by the Calculation Agent
("Reference Banks"), to provide the Calculation Agent with its offered quotation
for deposits in the Index Currency for the period of the Index Maturity
designated on the face hereof or in the Pricing Supplement, commencing on the
second London
(I-19)
<PAGE> 125
Banking Day immediately following that LIBOR Interest Determination Date, to
prime banks in the London interbank market at approximately 11:00 a.m., London
time, on such LIBOR Interest Determination Date and in a principal amount that
is representative for a single transaction in such Index Currency in such market
at such time. If at least two such quotations are provided, LIBOR in respect of
that LIBOR Interest Determination Date will be the arithmetic mean of such
quotations. If fewer than two quotations are provided, LIBOR in respect of that
LIBOR Interest Determination Date will be the arithmetic mean of the rates
quoted at approximately 11:00 a.m., in the applicable Principal Financial
Center, on that LIBOR Interest Determination Date by three major banks in the
applicable Principal Financial Center selected by the Calculation Agent for
loans in the Index Currency to leading European banks having the Index Maturity
designated on the face hereof or in the Pricing Supplement and in a principal
amount that is representative for a single transaction in such Index Currency in
such market at such time; provided, however, that if the banks selected as
aforesaid by the Calculation Agent are not quoting as mentioned in this
sentence, LIBOR with respect to such LIBOR Interest Determination Date will be
the rate of LIBOR in effect on such date.
"Index Currency" means the currency (including composite
currencies) specified on the face hereof or in the Pricing Supplement as the
currency for which LIBOR shall be calculated. If no such currency is specified
on the face hereof or in the Pricing Supplement, the Index Currency shall be the
U.S. dollar.
"Designated LIBOR Page" means either (a) if "LIBOR Reuters" is
specified on the face hereof or in the Pricing Supplement, the display on the
Reuters Monitor Money Rates Service for the purpose of displaying London
interbank offered rates of major banks for the applicable Index Currency, or (b)
if "LIBOR Telerate," is specified on the face hereof or in the Pricing
Supplement, or neither "LIBOR Reuters" nor "LIBOR Telerate" is specified as the
method for calculating LIBOR, the display on the Dow Jones Telerate Service (or
such other service as may be nominated by the British Bankers' Association) for
the purpose of displaying London interbank offered rates for the applicable
Index Currency.
"Principal Financial Center" will generally be the capital
city of the country of the specified Index Currency, except that with respect to
U.S. dollars, Deutsche Marks, Dutch guilders, Italian lire, Swiss francs and
ECUs, the Principal Financial Center shall be The City of New York, Frankfurt,
Amsterdam, Milan, Zurich and Luxembourg, respectively.
(I-20)
<PAGE> 126
"London Banking Day" means any day (other than a Saturday or
Sunday) on which dealings in deposits in the Index Currency are transacted in
the London interbank market.
Determination of Prime Rate. If an Interest Rate Basis for
this Note is the Prime Rate, as indicated on the face hereof or in the Pricing
Supplement, the Prime Rate shall be determined as of the applicable Interest
Determination Date (a "Prime Rate Interest Determination Date") as the rate on
such date as such rate is published in H.15(519) under the heading "Bank Prime
Loan". If such rate is not published prior to 3:00 p.m., New York City time, on
the related Calculation Date, then the Prime Rate shall be the arithmetic mean
of the rates of interest publicly announced by each bank that appears on the
Reuters Screen USPRIME1 (as defined below) as such bank's prime rate or base
lending rate as in effect for such Prime Rate Interest Determination Date. If
fewer than four such rates appear on the Reuters Screen USPRIME1 for such Prime
Rate Interest Determination Date, the Prime Rate shall be the arithmetic mean of
the prime rates quoted on the basis of the actual number of days in the year
divided by a 360-day year as of the close of business on such Prime Rate
Interest Determination Date by four major money center banks in The City of New
York selected by the Calculation Agent. If fewer than four major money center
banks provide such quotations, the Prime Rate will be determined by the
Calculation Agent and will be the arithmetic mean of four prime rates, quoted on
the basis of the actual number of days in the year divided by a 360-day year, as
of the close of business on such Prime Rate Interest Determination Date as
furnished in The City of New York by the major money center banks, if any, that
have provided quotations and as many substitute banks or trust companies as is
necessary in order to obtain four such prime rate quotations, provided such
substitute banks or trust companies are organized and doing business under the
laws of the United States, or any state thereof, each having total equity
capital of at least US$500 million and being subject to supervision or
examination by federal or state authority, selected by the Calculation Agent to
provide such rate or rates; provided, however, that if the banks or trust
companies selected as aforesaid are not quoting as mentioned in this sentence,
the Prime Rate determined as of such Prime Rate Interest Determination Date
shall be the Prime Rate in effect on such Prime Rate Interest Determination
Date.
"Reuters Screen USPRIME1" means the display designated as page
"USPRIME1" on the Reuters Monitor Money Rates Service (or such other page as may
replace the USPRIME1 page on that service for the purpose of displaying prime
rates or base lending rates of major United States banks).
(I-21)
<PAGE> 127
Determination of Treasury Rate. If an Interest Rate Basis for
this Note is the Treasury Rate, as specified on the face hereof or in the
Pricing Supplement, the Treasury Rate shall be determined as of the applicable
Interest Determination Date (a "Treasury Rate Interest Determination Date") as
the rate applicable to the most recent auction of direct obligations of the
United States ("Treasury Bills") having the Index Maturity specified on the face
hereof or in the Pricing Supplement, as such rate is published in H.15(519)
under the heading "Treasury Bills -- auction average (investment)" or, if not
published by 3:00 p.m., New York City time, on the related Calculation Date, the
auction average rate (expressed as a bond equivalent on the basis of a year of
365 or 366 days, as applicable, and applied on a daily basis) as otherwise
announced by the United States Department of the Treasury. In the event that the
results of the auction of Treasury Bills having the Index Maturity specified on
the face hereof or in the Pricing Supplement are not reported as provided by
3:00 p.m., New York City time, on such Calculation Date, or if no such auction
is held in a particular week, then the Treasury Rate shall be calculated by the
Calculation Agent and shall be a yield to maturity (expressed as a bond
equivalent on the basis of a year of 365 or 366 days, as applicable, and applied
on a daily basis) of the arithmetic mean of the secondary market bid rates, as
of approximately 3:30 p.m., New York City time, on such Treasury Rate Interest
Determination Date, of three leading primary United States government securities
dealers selected by the Calculation Agent, for the issue of Treasury Bills with
a remaining maturity closest to the Index Maturity specified on the face hereof
or in the Pricing Supplement; provided, however, that if any of the dealers
selected as aforesaid by the Calculation Agent are not quoting as mentioned in
this sentence, the Treasury Rate determined as of such Treasury Rate Interest
Determination Date shall be the Treasury Rate in effect on such Treasury Rate
Interest Determination Date.
Unless otherwise specified on the face hereof or in the
Pricing Supplement, accrued interest hereon shall be an amount calculated by
multiplying the face amount hereof by an accrued interest factor. Such accrued
interest factor shall be computed by adding the interest factor calculated for
each day in the period for which accrued interest is being calculated. Unless
otherwise specified on the face hereof or in the Pricing Supplement, the
interest factor for each such day shall be computed and paid on the basis of a
360-day year of twelve 30-day months if the Day Count Convention specified on
the face hereof or in the Pricing Supplement is "30/360" for the period
specified thereunder, or by dividing the applicable per annum interest rate by
360 if the Day Count Convention specified on the face hereof or in the Pricing
Supplement is "Actual/360" for the period specified thereunder, or by dividing
the applicable per annum interest rate by the actual
(I-22)
<PAGE> 128
number of days in the year if the Day Count Convention specified on the face
hereof or in the Pricing Supplement is "Actual/Actual" for the period specified
thereunder. If no Day Count Convention is specified on the face hereof or in the
Pricing Supplement, the interest factor for each day in the relevant Interest
Period shall be computed, if an Interest Rate Basis specified on the face hereof
or in the Pricing Supplement is the CMT Rate or Treasury Rate or if the
Specified Currency indicated on the face hereof or in the Pricing Supplement is
Sterling, as if "Actual/Actual" had been specified thereon and, in all other
cases, as if "Actual/360" had been specified thereon. Unless otherwise specified
on the face hereof or in the Pricing Supplement, if interest on this Note is to
be calculated with reference to two or more Interest Rate Bases as specified on
the face hereof or in the Pricing Supplement, the interest factor will be
calculated in each period in the same manner as if only one of the applicable
Interest Rate Bases applied.
Unless otherwise specified on the face hereof or in the
Pricing Supplement, if "Reference Rate Determination" is specified on the face
hereof or in the Pricing Supplement in connection with the determination of the
rate of interest on this Note, the "Calculation Date", if applicable, pertaining
to any Interest Determination Date will be the earlier of (i) the tenth calendar
day after such Interest Determination Date or, if such day is not a Business
Day, the next succeeding Business Day and (ii) the Business Day immediately
preceding the applicable Interest Payment Date or Maturity Date, as the case may
be. All calculations on this Note shall be made by the Calculation Agent
specified on the face hereof or such successor thereto as is duly appointed by
the Bank. The determination of any interest rate by the Calculation Agent shall,
in the absence of manifest error, be conclusive for all purposes and binding
upon the holder hereof.
All percentages resulting from any calculation on this Note be
rounded, if necessary, to the nearest one hundred-thousandth of a percentage
point, with five one-millionths of a percentage point rounded upward (e.g.,
9.876545% (or 0.09876545) would be rounded to 9.87655% (or 0.0987655) and
9.876544% (or 0.09876544) would be rounded to 9.87654% (or 0.0987654)), and all
dollar amounts used in or resulting from such calculation will be rounded to the
nearest cent or, if the Specified Currency is other than dollars, to the nearest
unit (with one-half cent or unit being rounded upward).
At the request of the holder hereof, the Calculation Agent
shall provide to the holder hereof the interest rate hereon then in effect and,
if determined, the interest rate which shall become effective for the next
Interest Period.
(I-23)
<PAGE> 129
Notwithstanding the foregoing, the interest rate hereon shall
not be greater than the Maximum Interest Rate, if any, or less than the Minimum
Interest Rate, if any, specified on the face hereof. In addition to any Maximum
Interest Rate applicable hereto pursuant to the above provisions, the interest
rate on this Note will in no event be higher than the maximum rate permitted by
New York law, as the same may be modified by United States law of general
application.
Redemption at the Option of the Bank
Unless otherwise specified on the face hereof or in the
Pricing Supplement, this Note will not be subject to any sinking fund. This Note
may be redeemed by the Bank either in whole or in part on and after the Initial
Redemption Date, if any, specified on the face hereof or in the Pricing
Supplement. If no Initial Redemption Date is specified on the face hereof or in
the Pricing Supplement, this Note may not be redeemed prior to the Maturity Date
except as provided below in the event that any Additional Amounts (as defined
below) are required to be paid by the Bank with respect to this Note. On and
after the Initial Redemption Date, if any, this Note may be redeemed in
increments of US$1,000 (or, if the Specified Currency indicated on the face
hereof is other than the U.S. dollar, in such Authorized Denominations specified
on the face hereof or in the Pricing Supplement) at the option of the Bank at
the applicable Redemption Price (as defined below), together with unpaid
interest accrued hereon at the applicable rate borne by this Note to the date of
redemption (each such date, a "Redemption Date"), on written notice given not
more than 60 nor less than 30 calendar days prior to the Redemption Date (unless
otherwise specified on the face hereof or in the Pricing Supplement); provided,
however, that, in the event of redemption of this Note in part only, the
unredeemed portion hereof shall be an Authorized Denomination specified on the
face hereof or in the Pricing Supplement. In the event of redemption of this
Note in part only, a new Note for the unredeemed portion hereof shall be issued
in the name of the holder hereof upon the surrender hereof.
The "Redemption Price" shall initially be the Initial
Redemption Percentage specified on the face hereof or in the Pricing Supplement
of the principal amount of this Note to be redeemed and shall decline at each
anniversary of the Initial Redemption Date specified on the face hereof or in
the Pricing Supplement by the Annual Redemption Percentage Reduction, if any,
specified on the face hereof or in the Pricing Supplement, of the principal
amount to be redeemed until the Redemption Price is 100% of such principal
amount.
(I-24)
<PAGE> 130
Notwithstanding the foregoing, if this Note is a Subordinated
Note, this Note may not be redeemed without the prior written consent of the
Office of the Comptroller of the Currency of the United States (the "OCC").
Repayment at the Option of the Holder
This Note may be subject to repayment at the option of the
holder hereof in accordance with the terms hereof on any Holder's Optional
Repayment Date(s), if any, specified on the face hereof or in the Pricing
Supplement. If no Holder's Optional Repayment Date is specified on the face
hereof or in the Pricing Supplement, this Note will not be repayable at the
option of the holder hereof prior to the Maturity Date. On any Holder's Optional
Repayment Date, this Note will be repayable in whole or in part in increments of
US$1,000 (or, if the Specified Currency indicated on the face hereof is other
than the U.S. dollar, in such Authorized Denominations specified on the face
hereof or in the Pricing Supplement) at the option of the holder hereof at a
repayment price equal to 100% of the principal amount to be repaid, together
with accrued and unpaid interest hereon payable to the date of repayment;
provided, however, that, in the event of repayment of this Note in part only,
the unrepaid portion hereof shall be an Authorized Denomination specified on the
face hereof or in the Pricing Supplement. For this Note to be repaid in whole or
in part at the option of the holder hereof on a Holder's Optional Repayment
Date, this Note must be delivered, with the form entitled "Option to Elect
Repayment" attached hereto duly completed, to the Global Agent at the address
set forth on such form or at such other address which the Bank shall from time
to time notify the holders of the Notes, not more than 60 nor less than 30 days
prior to such Holder's Optional Repayment Date. In the event of repayment of
this Note in part only, a new Note for the unrepaid portion hereof shall be
issued in the name of the holder hereof upon the surrender hereof. Exercise of
such repayment option by the holder hereof shall be irrevocable.
Additional Amounts
All payments of principal, premium, if any, and interest with
respect to this Note will be made without withholding or deduction at source
for, or on account of, any present or future taxes, fees, duties, assessments or
governmental charges of whatever nature imposed or levied by the United States
or any political subdivision or taxing authority thereof or therein, unless such
withholding or deduction is required by (i) the laws (or any regulations or
rulings
(I-25)
<PAGE> 131
promulgated thereunder) of the United States or any political subdivision or
taxing authority thereof or therein or (ii) an official position regarding the
application, administration, interpretation or enforcement of any such laws,
regulations or rulings (including, without limitation, a holding by a court of
competent jurisdiction or by a taxing authority in the United States or any
political subdivision thereof). If a withholding or deduction at source is
required, the Bank will, subject to certain limitations and exceptions (set
forth below), pay to the holder hereof on behalf of an owner of a beneficial
interest herein (an "Owner") who is a United States Alien (as defined below)
such additional amounts ("Additional Amounts") as may be necessary so that every
net payment of principal, premium, if any, or interest made to the holder hereof
on behalf of such Owner, after such withholding or deduction, will not be less
than the amount provided for in this Note with respect to such Owner's interest;
provided, however, that the Bank shall not be required to make any payment of
Additional Amounts for or on account of:
(a) any tax, fee, duty, assessment or other governmental
charge which would not have been imposed but for (i) the existence of
any present or former connection between such Owner (or between a
fiduciary, settlor, beneficiary, member or shareholder of, or possessor
of a power over, such Owner, if such Owner is an estate, trust,
partnership or corporation) and the United States, including, without
limitation, such Owner (or such fiduciary, settlor, beneficiary,
member, shareholder or possessor) being or having been a citizen or
resident thereof or being or having been present or engaged in trade or
business therein or having or having had a permanent establishment
therein, or (ii) the presentation of this Note for payment on a date
more than 15 days after the date on which such payment became due and
payable or the date on which payment thereof is duly provided for,
whichever occurs later;
(b) any estate, inheritance, gift, sales, transfer, personal
property or similar tax, assessment or other governmental charge;
(c) any tax, fee, duty, assessment or other governmental
charge imposed by reason of such Owner's past or present status as a
personal holding company, foreign personal holding company or
controlled foreign corporation with respect to the United States or as
a corporation which accumulates earnings to avoid United States federal
income tax;
(I-26)
<PAGE> 132
(d) any tax, fee, duty, assessment or other governmental
charge which is payable otherwise than by withholding from payments of
principal or interest with respect to this Note;
(e) any tax, fee, duty, assessment or other governmental
charge imposed on interest received by anyone who owns (actually or
constructively) 10% or more of the total combined voting power of all
classes of stock of the Bank;
(f) any tax, fee, duty, assessment or other governmental
charge required to be withheld by any Paying Agent from any payment of
principal, premium, if any, or interest with respect to this Note, if
such payment can be made without such withholding by any other Paying
Agent with respect to this Note in a western European city;
(g) any tax, fee, duty, assessment or other governmental
charge which would not have been imposed but for the failure to comply
with certification, information or other reporting requirements
concerning the nationality, residence, identity or connection with the
United States of the holder hereof or of such Owner, if such compliance
is required by statute or by regulation of the United States Treasury
Department as a precondition to relief or exemption from such tax,
assessment or other governmental charge; or
(h) any combination of items (a), (b), (c), (d), (e), (f) and
(g);
nor shall Additional Amounts be paid to any holder of this Note on behalf of any
Owner who is a fiduciary or partnership or other than the sole Owner to the
extent a beneficiary or settlor with respect to such fiduciary or a member of
such partnership or Owner would not have been entitled to payment of the
Additional Amounts had such beneficiary, settlor, member or Owner been the sole
Owner of this Note.
As used herein, the term "United States Alien" means any
corporation, individual, fiduciary or partnership that for United States federal
income tax purposes is a foreign corporation, nonresident alien individual,
nonresident alien fiduciary of a foreign estate or trust, or foreign partnership
one or more members of which is a foreign corporation, nonresident alien
individual or nonresident alien fiduciary of a foreign estate or trust.
(I-27)
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If this Note is in bearer form and the Bank shall determine,
based upon a written opinion of independent counsel selected by the Bank, that
any payment made outside the United States by the Bank or any of its Paying
Agents of the full amount of the next scheduled payment of either principal (and
premium, if any) or interest due with respect to this Note would, under any
present or future laws or regulations of the United States affecting taxation or
otherwise, be subject to any certification, information or other reporting
requirements of any kind, the effect of which requirements is the disclosure to
the Bank, any of its Paying Agents or any governmental authority of the
nationality, residence or identity (as distinguished from status as a United
States Alien) of any Owner of this Note who is a United States Alien (other than
such requirements which (i) would not be applicable to a payment made to a
custodian, nominee or other agent of the Owner, or which can be satisfied by
such a custodian, nominee or other agent certifying to the effect that such
Owner is a United States Alien; provided, however, in each case that payment by
such custodian, nominee or agent to such Owner is not otherwise subject to any
requirements referred to in this sentence, (ii) are applicable only to payment
by a custodian, nominee or other agent of the Owner to or on behalf of such
Owner, or (iii) would not be applicable to a payment made by any other paying
agent of the Bank), the Bank shall redeem this Note as a whole but not in part
at a redemption price equal to the principal amount hereof (or, if this is an
Original Issue Discount Note, the Amortized Face Amount (as defined herein)
hereof determined as of the date of redemption), together, if appropriate, with
accrued interest to, but excluding, the date fixed for redemption, such
redemption to take place on such date not later than one year after notice of
such determination has been given as described herein. If the Bank becomes aware
of an event that might give rise to such certification, information or other
reporting requirements, the Bank shall, as soon as practicable, solicit advice
of independent counsel selected by the Bank to establish whether such
certification, information or other reporting requirements will apply and, if
such requirements will, in the written opinion of such counsel, apply, the Bank
shall give prompt notice of such determination (a "Tax Notice") stating in such
notice the effective date of such certification, information or other reporting
requirements and, if applicable, the date by which the redemption shall take
place. Notwithstanding the foregoing, the Bank shall not redeem this Note if the
Bank, based upon the written opinion of independent counsel selected by the
Bank, shall subsequently determine not less than 30 days prior to the date fixed
for redemption that subsequent payments would not be subject to any such
requirements, in which case the Bank shall give prompt notice of such
determination and any earlier redemption notice shall thereby be revoked and of
no further effect.
(I-28)
<PAGE> 134
Notwithstanding the foregoing, if and so long as the
certification, information or other reporting requirements referred to in the
preceding paragraph would be fully satisfied by payment of a withholding, backup
withholding tax or similar charge, the Bank may elect prior to giving the Tax
Notice to have the provisions described in this paragraph apply in lieu of the
provisions described in the preceding paragraph, in which case the Tax Notice
shall state the effective date of such certification, information or reporting
requirements and that the Bank has elected to pay Additional Amounts rather than
redeem this Note. In such event, the Bank will also pay as Additional Amounts
such sums as may be necessary so that every net payment made following the
effective date of such certification, information or reporting requirements
outside the United States by the Bank or any of its Paying Agents of principal,
premium, if any, or interest due with respect to this Note to the bearer hereof
who certifies to the effect that the beneficial owners of this Note are United
States Aliens (provided that such certification shall not have the effect of
communicating to the Bank or any of its Paying Agents or any governmental
authority the nationality, residence or identity of such beneficial owners)
after deduction or withholding for or on account of such withholding, backup
withholding tax or similar charge (other than a withholding, backup withholding
tax or similar charge which (i) is imposed as a result of certification,
information or other reporting requirements referred to in the second
parenthetical clause of the first sentence of the preceding paragraph, or (ii)
is imposed as a result of the fact that the Bank or any of its Paying Agents has
actual knowledge that the bearer hereof or any beneficial owner of this Note is
not a United States Alien but is within the category of persons, corporations or
other entities described in clause (a)(i) of the third preceding paragraph, or
(iii) is imposed as a result of presentation of this Note for payment more than
15 days after the date on which such payment becomes due and payable or on which
payment thereof is duly provided for, whichever occurs later), will not be less
than the amount provided for in this Note to be then due and payable. In the
event the Bank elects to pay such Additional Amounts, the Bank will have the
right, at its sole option, at any time, to redeem this Note, as a whole but not
in part, at a redemption price equal to the principal amount hereof (or, if this
is an Original Issue Discount Note, the Amortized Face Amount hereof determined
as of the date of redemption), together, if appropriate, with accrued interest
to the date fixed for redemption including any Additional Amounts required to be
paid under this paragraph. If the Bank has made the determination described in
the preceding paragraph with respect to certification, information or other
reporting requirements applicable to interest only and subsequently makes a
determination in the manner and of the nature referred to in such preceding
paragraph with respect to such requirements applicable to
(I-29)
<PAGE> 135
principal, the Bank will redeem this Note in the manner and on the terms
described in the preceding paragraph (except as provided below), unless the Bank
elects to have the provisions of this paragraph apply rather than the provisions
of the immediately preceding paragraph. If in such circumstances this Note is to
be redeemed, the Bank will be obligated to pay Additional Amounts with respect
to interest, if any, accrued to the date of redemption. If the Bank has made the
determination described in the preceding paragraph and subsequently makes a
determination in the manner and of the nature referred to in such preceding
paragraph that the level of withholding applicable to principal or interest has
been increased, the Bank will redeem this Note in the manner and on the terms
described in the preceding paragraph (except as provided below), unless the Bank
elects to have the provisions of this paragraph apply rather than the provisions
of the immediately preceding paragraph. If in such circumstances this Note is to
be redeemed, the Bank will be obligated to pay Additional Amounts with respect
to the original level of withholding on principal and interest, if any, accrued
to the date of redemption.
Whenever in this Note there is mentioned, in any context, the
payment of the principal of, or premium, if any, or interest on, or in respect
of, this Note, such mention shall be deemed to include mention of the payment of
Additional Amounts provided for herein to the extent that, in such context,
Additional Amounts are, were or would be payable in respect thereof pursuant to
the provisions of this Note and express mention of the payment of Additional
Amounts (if applicable) in any provisions hereof shall not be construed as
excluding Additional Amounts in those provisions hereof where such express
mention is not made.
Except as specifically provided herein or in the Pricing
Supplement, (i) neither the Bank nor any Paying Agent shall be required to make
any payment with respect to any tax, fee, duty, assessment or other governmental
charge imposed by any government or a political subdivision or taxing authority
thereof or therein; (ii) a Paying Agent on behalf of the Bank shall have the
right, but not the duty, to withhold from any amounts otherwise payable to a
holder of this Note such amount as is necessary for the payment of any such
taxes, fees, duties, assessments or other governmental charges; and (iii) if
such an amount is withheld, the amount payable to the holder of this Note shall
be the amount otherwise payable reduced by the amount so withheld.
The Bank may redeem this Note in whole but not in part at any
time at a redemption price equal to the principal amount hereof (or, if this is
an Original Issue Discount Note, the Amortized Face Amount hereof determined as
of the date of redemption), together with
(I-30)
<PAGE> 136
accrued interest to but excluding the date fixed for redemption, if the Bank
shall determine, based upon a written opinion of independent counsel selected by
the Bank, that as a result of any change in or amendment to the laws (or any
regulations or rulings promulgated thereunder) of the United States or of any
political subdivision or taxing authority thereof or therein affecting taxation,
or any change in application or official interpretation of any such laws,
regulations or rulings, which amendment or change is effective on or after the
Original Issue Date, the Bank would be required to pay Additional Amounts on the
occasion of the next payment due with respect to such Note.
Notice of intention to redeem this Note, in whole but not in
part, pursuant to the immediately preceding paragraph will be given to the
registered holder of this Note (or, if this Note is in bearer form, to the
bearer of this Note) at least once not less than 30 days nor more than 60 days
prior to the date fixed for redemption, provided that no such notice of
redemption shall be given earlier than 90 days prior to the effective date of
such change or amendment and that at the time notice of such redemption is
given, such obligation to pay such Additional Amounts remains in effect and
cannot be avoided by the Bank's taking reasonable measures available to it. From
and after any redemption date, if monies for the redemption of this Note shall
have been made available for redemption on such redemption date, this Note shall
cease to bear interest (and, if this Note is a definitive bearer note, any
interest coupons appertaining hereto (whether or not attached) maturing after
the redemption date shall become void and no payment shall be made in respect
thereof), and the only right of the holder of this Note shall be to receive
payment of the principal amount hereof (or, if this is an Original Issue
Discount Note, the Amortized Face Amount hereof) and all unpaid interest accrued
to such redemption date.
Events of Default; Acceleration of Maturity
Senior Notes. If this Note is a Senior Note, the occurrence of
any of the following events shall constitute an "Event of Default" with respect
to this Note: (i) default in the payment of any interest (including any
Additional Amounts) with respect to this Note when due, which continues for 30
days; (ii) default in the payment of any principal of, or premium, if any, on,
this Note when due; (iii) default in the performance of any covenant or
agreement of the Bank contained in this Note, which continues for 90 days after
written notice (as provided herein) to the Bank and the Global Agent by the
holder hereof, specifying such default or breach and requiring it to be
remedied; (iv) the entry by a court having jurisdiction in the premises of (a) a
decree or order for relief in respect of the Bank in an
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<PAGE> 137
involuntary case or proceeding under any applicable United States federal or
state bankruptcy, insolvency, reorganization or other similar law or (b) a
decree or order appointing a conservator, receiver, liquidator, assignee,
trustee, sequestrator or any other similar official of the Bank, or of
substantially all of the property of the Bank, or ordering the winding up or
liquidation of the affairs of the Bank, and the continuance of any such decree
or order for relief or any such other decree or order unstayed and in effect for
a period of 60 consecutive days; or (v) the commencement by the Bank of a
voluntary case or proceeding under any applicable United States federal or state
bankruptcy, insolvency, reorganization or other similar law or of any other case
or proceeding to be adjudicated as bankrupt or insolvent, or the consent by the
Bank to the entry of a decree or order for relief in an involuntary case or
proceeding under any applicable United States federal or state bankruptcy,
insolvency, reorganization or other similar law or to the commencement of any
bankruptcy or insolvency case or proceeding, or the filing by the Bank of a
petition or answer or consent seeking reorganization or relief under any
applicable United States federal or state bankruptcy, insolvency, reorganization
or similar law, or the consent by the Bank to the filing of such petition or to
the appointment of or taking possession by a custodian, receiver, liquidator,
assignee, trustee, sequestrator or similar official of the Bank or of
substantially all of the property of the Bank, or the making by the Bank of an
assignment for the benefit of creditors, or the taking of corporate action by
the Bank in furtherance of any such action. If an Event of Default shall occur
and be continuing, the holder of this Note may declare the principal amount of,
and accrued interest and premium, if any, on, this Note due and payable
immediately by written notice to the Bank and the Global Agent. Upon such
declaration and notice, such principal amount, accrued interest and premium, if
any, shall become immediately due and payable. Any Event of Default with respect
to this Note may be waived by the holder hereof.
Subordinated Notes. If this Note is a Subordinated Note, the
occurrence of any of the following events shall constitute an "Event of Default"
with respect to this Note: (i) the entry by a court having jurisdiction in the
premises of (a) a decree or order for relief in respect of the Bank in an
involuntary case or proceeding under any applicable United States federal or
state bankruptcy, insolvency reorganization or other similar law or (b) a decree
or order appointing a conservator, receiver, liquidator, assignee, trustee,
sequestrator or any other similar official of the Bank, or of substantially all
of the property of the Bank, or ordering the winding up or liquidation of the
affairs of the Bank, and the continuance of any such decree or order for relief
or any such other decree or order unstayed and in effect for a period of 60
consecutive days; or (ii) the commencement by the Bank of a
(I-32)
<PAGE> 138
voluntary case or proceeding under any applicable United States federal or state
bankruptcy, insolvency, reorganization or other similar law or of any other case
or proceeding to be adjudicated as bankrupt or insolvent, or the consent by the
Bank to the entry of a decree or order for relief in an involuntary case or
proceeding under any applicable United States federal or state bankruptcy,
insolvency, reorganization or other similar law or to the commencement of any
bankruptcy or insolvency case or proceeding, or the filing by the Bank of a
petition or answer or consent seeking reorganization or relief under any
applicable United States federal or state bankruptcy, insolvency, reorganization
or similar law, or the consent by the Bank to the filing of such petition or to
the appointment of or taking possession by a custodian, receiver, liquidator,
assignee, trustee, sequestrator or similar official of the Bank or of
substantially all of the property of the Bank, or the making by the Bank of an
assignment for the benefit of creditors, or the taking of corporate action by
the Bank in furtherance of any such action. If an Event of Default shall occur
and be continuing, the bearer of this Note may declare the principal amount of,
and accrued interest and premium, if any, on, this Note due and payable
immediately by written notice to the Bank and the Global Agent. Upon such
declaration and notice, such principal amount, accrued interest and premium, if
any, shall become immediately due and payable. Any Event of Default with respect
to this Note may be waived by the bearer hereof. The bearer of this Note, by its
acceptance hereof, agrees that the indebtedness of the Bank evidenced by this
Note, including the principal, premium, if any, and interest (including any
Additional Amounts), is unsecured and subordinate and junior in right of payment
to the Bank's obligations to its depositors, its obligations under banker's
acceptances and letters of credit, and its obligations to its other creditors
(including any obligations to any Federal Reserve Bank and the FDIC), whether
outstanding at the time this Note is issued or thereafter incurred (except any
obligations which by their express terms rank on a parity with or junior to this
Note), in that in the case of any insolvency proceedings, receivership,
conservatorship, reorganization, readjustment of debt, marshalling of assets and
liabilities or similar proceedings or any liquidation or winding up of or
relating to the Bank, whether voluntary or involuntary, all such obligations
(except obligations which rank on a parity with or junior to this Note) shall be
entitled to be paid in full before any payment shall be made on account of the
principal of or interest on this Note. In the event of any such proceeding,
after payment in full of all sums owing with respect to such prior obligations,
the bearer of this Note, together with the holders of any obligations of the
Bank ranking on a parity with this Note, shall be entitled to be paid pro rata
from the remaining assets of the Bank the unpaid principal of, and the unpaid
interest on, this Note or such other obligations before any payment or other
distribution, whether in cash,
(I-33)
<PAGE> 139
property, or otherwise, shall be made on account of any capital stock or any
obligations of the Bank ranking junior to this Note.
Notwithstanding any other provisions of this Note, including
specifically those set forth in the sections relating to subordination, Events
of Default and covenants of the Bank, it is expressly understood and agreed that
the OCC or any receiver of the right in the performance of his legal duties, and
as part of any transaction or plan of reorganization or liquidation designed to
protect or further the continued existence of the Bank or the rights of any
parties or agencies with an interest in, or claim against, the Bank or its
assets, to transfer or direct the transfer of the obligations of this Note to
any national banking association, state bank or bank holding company selected by
such official which shall expressly assume the obligation of the due and
punctual payment of the unpaid principal, interest, and premium, if any, on this
Note and the due and punctual performance of all covenants and conditions
hereof; and that the completion of such transfer and assumption shall serve to
supersede and void any default, acceleration or subordination which may have
occurred, or which may occur due or related to such transaction, plan, transfer
or assumption, pursuant to the provisions of this Note, and shall serve to
return the bearer of this Note to the same position, other than for substitution
of the obligor, it would have occupied had no default, acceleration or
subordination occurred; except that any interest and principal previously due,
other than by reason of acceleration, and not paid shall, in the absence of a
contrary agreement by the bearer of this Note, be deemed to be immediately due
and payable as of the date of such transfer and assumption, together with the
interest from its original due date at the rate provided for herein.
This Note contains no limitation on the amount of senior debt,
deposits or other obligations that rank senior to this Note that may be
hereafter incurred or assumed by the Bank.
Miscellaneous
Notwithstanding anything to the contrary contained herein, if
this Note is identified as an Original Issue Discount Note on the face hereof or
in the Pricing Supplement, the amount payable to the holder of this Note in the
event of redemption, repayment or acceleration of maturity will be equal to (i)
the Amortized Face Amount (as defined below) as of the date of such event, plus
(ii) with respect to any redemption of this Note (other than as provided above
in the event that Additional Amounts are required to be paid by the Bank with
respect to this Note), the Initial Redemption Percentage specified on the face
hereof or in the Pricing Supplement (as adjusted by the Annual
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<PAGE> 140
Redemption Percentage Reduction, if any) minus 100% multiplied by the Issue
Price specified on the face hereof or in the Pricing Supplement, net of any
portion of such Issue Price which has been paid prior to the date of redemption,
or the portion of the Issue Price (or the net amount) proportionate to the
portion of the unpaid principal amount to be redeemed, plus (iii) any accrued
interest to the date of such event the payment of which would constitute
qualified stated interest payments within the meaning of U.S. Treasury
Regulation 1.1273-1(c) under the Internal Revenue Code of 1986, as amended (the
"Code"). The "Amortized Face Amount" shall mean an amount equal to (i) the Issue
Price plus (ii) the aggregate portions of the original issue discount (the
excess of the amounts considered as part of the "stated redemption price at
maturity" of this Note within the meaning of Section 1273(a)(2) of the Code,
whether denominated as principal or interest, over the Issue Price) which shall
theretofore have accrued pursuant to section 1272 of the Code (without regard to
Section 1272(a)(7) of the Code) from the date of issue of this Note to the date
of determination, minus (iii) any amount considered as part of the "stated
redemption price at maturity" of this Note which has been paid from the date of
issue to the date of determination.
As used herein, "Business Day" means, unless otherwise
specified on the face hereof or in the Pricing Supplement, any day (other than a
Saturday or Sunday) on which banking institutions in The City of New York and
London are generally not authorized or obligated by law or executive order to
close. As used herein, "London Business Day" means any day (other than a
Saturday or Sunday) on which commercial banks and foreign exchange markets
settle payments in London.
Any action by the holder of this Note shall bind all future
holders of this Note, and of any Note issued in exchange or substitution herefor
or in place hereof, in respect of anything done or permitted by the Bank or by
the Global Agent in pursuance of such action.
In case any Note shall at any time become mutilated, defaced,
destroyed, lost or stolen, and such Note or evidence of the loss, theft or
destruction thereof satisfactory to the Bank and the Registrar or London Issuing
Agent, as the case may be, and such other documents or proof as may be required
by the Bank and the Registrar or London Issuing Agent, as the case may be, shall
be delivered to the Registrar or London Issuing Agent, as the case may be, the
Registrar or London Issuing Agent, as the case may be, shall issue a new Note,
of like tenor and principal amount, having a serial number not contemporaneously
outstanding, in exchange and substitution for the mutilated or defaced Note or
in lieu of the Note destroyed, lost or
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<PAGE> 141
stolen but, in the case of any destroyed, lost or stolen Note, only upon receipt
of evidence satisfactory to the Bank and the Registrar or London Issuing Agent,
as the case may be, that such Note was destroyed, stolen or lost, and, if
required, upon receipt of indemnity satisfactory to the Bank. Upon the issuance
of any substituted Note, the Bank may require the payment of a sum sufficient to
cover all expenses and reasonable charges connected with the preparation and
delivery of a new Note. If any Note which has matured or has been redeemed or
repaid or is about to mature or to be redeemed or repaid shall become mutilated,
defaced, destroyed, lost or stolen, the Bank may, instead of issuing a
substitute Note, pay or authorize the payment of the same (without surrender
thereof except in the case of a mutilated or defaced Note) upon compliance by
the holder with the provisions of this paragraph.
No recourse shall be had for the payment of principal of,
premium, if any, or interest on, this Note for any claim based hereon, or
otherwise in respect hereof, against any shareholder, employee, agent, officer
or director, as such, past, present or future, of the Bank or of any successor
corporation, either directly or through the Bank or any successor corporation,
whether by virtue of any constitution, statute or rule of law or by the
enforcement of any assessment or penalty or otherwise, all such liability being,
by the acceptance hereof and as part of the consideration for the issue hereof,
expressly waived and released.
The Notes are issued and to be issued subject to, and with the
benefit of, the provisions of the Agency Agreement. The Notes, and any receipts
or interest coupons appertaining thereto, may be amended by the Bank, and the
Agency Agreement may be amended by the Bank and the Global Agent, (i) for the
purpose of curing any ambiguity, or of curing, correcting or supplementing any
defective provision contained therein, (ii) to make any further modifications of
the terms of the Agency Agreement necessary or desirable to allow for the
issuance of any additional Notes (which modifications shall not be materially
adverse to holders of outstanding Notes) or (iii) in any manner which the Bank
(and, in the case of the Agency Agreement, the Global Agent) may deem necessary
or desirable and which shall not materially adversely affect the interests of
the holders of the Notes, or any receipts or interest coupons appertaining
thereto, to all of which each holder of Notes, receipts or interest coupons
shall, by acceptance thereof, be deemed to have consented. In addition, with the
written consent of the holders of at least 66 2/3% of the principal amount of
the Notes to be affected thereby, the Bank and the Global Agent may from time to
time and at any time enter into agreements modifying or amending the Agency
Agreement for the purpose of adding any provisions to or changing in any manner
or eliminating any provisions of the Agency Agreement.
(I-36)
<PAGE> 142
No provision of this Note shall alter or impair the obligation
of the Bank, which is absolute and unconditional, to pay principal of, premium,
if any, and interest on, and any Additional Amounts with respect to, this Note
in the Specified Currency indicated on the face hereof (of if no such currency
is designated, as provided herein, in U.S. dollars) at the times, places and
rate herein prescribed.
No service charge shall be made to a holder of this Note for
any transfer or exchange of this Note, but the Bank may require payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection therewith.
If this Note is in registered form, prior to due presentment
of this Note for registration of transfer, the Bank, the Global Agent, the NY
Paying Agent, the Registrar, the London Paying Agent, the Luxembourg Paying
Agent and the Transfer Agent (collectively, together with any successors
thereto, the "Agents") or any agent of the Bank or the Agents may treat the
holder in whose name this Note is registered as the owner hereof for all
purposes, whether or not this Note be overdue, and neither the Bank, the Agents
nor any such agent shall be affected by notice to the contrary except as
required by applicable law.
All notices to the Bank under this Note shall be in writing
and addressed to the Bank at 400 Christiana Road, Newark, Delaware 19713,
Attention: ________________, or to such other address of the Bank as the Bank
may notify the holders of the Notes.
(I-37)
<PAGE> 143
OPTION TO ELECT REPAYMENT
-------------------------
The undersigned hereby irrevocably request(s) and instruct(s)
the Bank to repay this Note (or portion hereof specified below) pursuant to its
terms at a price equal to 100% of the principal amount hereof to be repaid,
together with accrued and unpaid interest hereon, payable to the date of
repayment, to the undersigned, at
________________________________________________________________.
(Please print or typewrite name and address of the undersigned)
For this Note to be repaid, the undersigned must give to the
London Paying Agent, if this Note is in bearer form, at 336 Strand, London WC2R
1HB, England or, if this Note is in registered form, to the NY Paying Agent at
111 Wall Street, New York, New York 10043, or to the London Paying Agent at its
address, as the case may be, or at such other place or places of which the Bank
shall from time to time notify the holders of the Notes, not more than 60 days
nor less than 30 days prior to the date of repayment, this Note (and, if this
Note is in definitive bearer form, all interest coupons appertaining hereto
maturing after the repayment date) with this "Option to Elect Repayment" form
duly completed.
If less than the entire principal amount of this Note is to be
repaid, specify the portion hereof (which shall be increments of US$1,000, or
equivalent denominations in other currencies) which the holder elects to have
repaid and specify the denomination or denominations (which shall be an
Authorized Denomination specified on the face of the within Note) of the Notes
to be issued to the holder for the portion of this Note not being repaid (in the
absence of any such specification, one such Note will be issued for the portion
not being repaid):
US$_____________________________ ______________________________
Signature
NOTICE: The signature on this
Dated: __________________________ "Option to Elect Repayment"
form must correspond with the
name as written upon the face
of the within Note in every
particular, without alteration
or enlargement or any change
whatsoever.
________________________________
Signature Guarantee
(I-38)
<PAGE> 144
NOTICE: The signature(s) should be guaranteed by an eligible guarantor
institution (banks, stockbrokers, savings and loan associations, and credit
unions with membership in an approved signature guarantee medallion program),
pursuant to Rule 17Ad-15 under the Securities Exchange Act of 1934.
(I-39)
<PAGE> 145
Dated as of July 17, 1997
-------------------------
MBNA AMERICA BANK, NATIONAL ASSOCIATION
as Issuer
-and-
THE FIRST NATIONAL BANK OF CHICAGO,
as Global Agent
THE FIRST NATIONAL BANK OF CHICAGO, London Office,
as London Paying Agent and London Issuing Agent
THE FIRST NATIONAL BANK OF CHICAGO, New York Office,
as NY Paying Agent and Registrar
-and-
BANQUE INDOSUEZ LUXEMBOURG
as Luxembourg Paying Agent and Transfer Agent
____________________
AGENCY AGREEMENT
with respect to a
GLOBAL BANK NOTE PROGRAM
____________________
<PAGE> 146
TABLE OF CONTENTS
-----------------
Section Page
- ------- ----
Section 1. Definitions and Interpretation . . . . . . . . . . . . . . . . 1
Section 2. Appointment of the Global Agent, the London Issuing Agent, the
Paying Agents, the Registrar and the Transfer Agent . . . . . 4
Section 3. Supply of Notes; Authorized Representatives . . . . . . . . . 5
Section 4. Issuance Instructions . . . . . . . . . . . . . . . . . . . . 5
Section 5. Issue of Registered Global Notes . . . . . . . . . . . . . . . 6
Section 6. Issue of Temporary Global Notes . . . . . . . . . . . . . . . 7
Section 7. Issue of Permanent Global Notes . . . . . . . . . . . . . . . 7
Section 8. Issue of Definitive Bearer Notes . . . . . . . . . . . . . . . 7
Section 9. Issue of Definitive Registered Notes . . . . . . . . . . . . . 8
Section 10. Exchanges . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 11. Note Register; Registration, Transfer and Exchange; Persons
Deemed Owners . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 12. Terms of Issue . . . . . . . . . . . . . . . . . . . . . . . 11
Section 13. Payments . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 14. Determinations and Notifications with respect to Notes . . . 13
Section 15. Notice of any Withholding or Deduction . . . . . . . . . . . 14
Section 16. Redemption of Notes . . . . . . . . . . . . . . . . . . . . . 14
Section 17. Repayment of Notes . . . . . . . . . . . . . . . . . . . . . 15
Section 18. Notices to Holders . . . . . . . . . . . . . . . . . . . . . 15
Section 19. Cancellation of Notes, Receipts, Coupons and Talons . . . . . 16
-i-
<PAGE> 147
Section 20. Issue of Replacement Notes, Receipts, Coupons and Talons . . 17
Section 21. Copies of This Agreement and Each Pricing Supplement
Available for Inspection . . . . . . . . . . . . . . . . . .18
Section 22. Commissions and Expenses . . . . . . . . . . . . . . . . . . 18
Section 23. Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 24. Repayment by the Global Agent . . . . . . . . . . . . . . . . 19
Section 25. Conditions of Appointment . . . . . . . . . . . . . . . . . . 19
Section 26. Communication Between the Parties . . . . . . . . . . . . . . 20
Section 27. Changes in the Global Agent, the Paying Agents, the
Registrar, the London Issuing Agent or the Transfer Agent . .20
Section 28. Merger and Consolidation . . . . . . . . . . . . . . . . . . 22
Section 29. Notifications . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 30. Change of Specified Office . . . . . . . . . . . . . . . . . 22
Section 31. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 32. Taxes and Stamp Duties . . . . . . . . . . . . . . . . . . . 23
Section 33. Currency Indemnity . . . . . . . . . . . . . . . . . . . . . 23
Section 34. Amendments; Meetings of Holders . . . . . . . . . . . . . . . 23
Section 35. References to Additional Amounts . . . . . . . . . . . . . . 24
Section 36. Descriptive Headings . . . . . . . . . . . . . . . . . . . . 24
Section 37. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 38. Waiver of Sovereign Immunity . . . . . . . . . . . . . . . . 25
-ii-
<PAGE> 148
Exhibits
Form of Registered Global Note Exhibit A
Form of Definitive Registered Note Exhibit B
Form of Temporary Global Note Exhibit C
Form of Permanent Global Note Exhibit D
Form of Definitive Bearer Note Exhibit E
Form of Coupon Exhibit F
Form of Talon Exhibit G
Form of Receipt Exhibit H
Form of Reverse of Note Exhibit I
-iii-
<PAGE> 149
(1)____________________
(2)
I-iv
<PAGE> 1
EXHIBIT 10.6
AMENDMENT
AMENDMENT (this "Amendment") dated as of October 1, 1997 between MBNA
CORPORATION, a Maryland corporation (the "Company"), and THE BANK OF NEW YORK, a
New York corporation (the "Bank").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Company and the Bank are parties to a certain Credit
Agreement dated as of October 5, 1994, as amended October 5, 1994, as of October
4, 1995, as of June 28, 1996 and as of October 2, 1996 (the "Credit Agreement");
and
WHEREAS, the Company and the Bank desire to amend the Credit Agreement
in certain respects;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein contained, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
1. All capitalized terms used herein shall have the meanings
assigned to such terms in the Credit Agreement.
2. As used in the Credit Agreement, each reference to the
Credit Agreement shall mean the Credit Agreement as amended by this Amendment
and as the same may from time to time be further amended, supplemented or
otherwise modified.
3. The definition of "Termination Date" in Section 1.01 of the
Credit Agreement is hereby amended in its entirety to read as follows:
"'Termination Date' shall mean the earlier to occur
of:
(a) September 30, 1998 (or any later date
agreed to between the Bank and the Company as specified in
Section 2.01(b)); and
(b) the date on which the Commitment shall
terminate in accordance with the provisions of this
Agreement."
4. The Company represents and warrants to the Bank as follows:
(a) The Company has all requisite power and authority
to execute and deliver this Amendment and to incur the obligations
provided for in this Amendment and
<PAGE> 2
in the Credit Agreement as amended by this Amendment (the "Amended
Credit Agreement"), which execution, delivery and incurrence have been
duly authorized by all necessary and proper action. Except for the
consents and approvals previously delivered to the Bank, no consent or
approval or the taking of any other action (including, without
limitation, of or by shareholders or of or by any governmental
department, commission, board, bureau, instrumentality or agency) is
required as a condition to the execution, delivery, performance,
validity or enforceability of this Amendment or the Amended Credit
Agreement.
(b) This Amendment has been duly executed and
delivered by the Company. Each of this Amendment and the Amended Credit
Agreement constitutes the valid and legally binding obligation of the
Company, enforceable against the Company in accordance with its terms,
except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the rights of
creditors generally or by equitable principles relating to
enforceability.
(c) The execution, delivery and performance by the
Company of this Amendment and of the Amended Credit Agreement do not
(i) violate any provision of the Company's Organization Documents, (ii)
violate any order, decree or judgment, or any provision of any statute,
rule or regulation, (iii) violate or conflict with, result in a breach
of or constitute (with notice or lapse of time or both) a default under
any Contractual Obligation to which the Company is a party, or (iv)
result in the creation or imposition of any lien, charge or encumbrance
of any nature whatsoever upon any property or asset of the Company.
(d) All of the representations and warranties set
forth in the Amended Credit Agreement are true and correct in all
material respects on and as of the date hereof as if made on the date
hereof.
(e) As of the date hereof, there exists no Default or
Event of Default which has occurred and is continuing.
5. Simultaneously with the execution and delivery of this
Amendment, the Company will execute and deliver to the Bank (a) a certificate of
the Secretary or an Assistant Secretary of the Company (the "Certificate") which
states that attached thereto or set forth therein is a true and correct copy of
all action taken by the Company (which action has not been modified, amended or
rescinded and is in full force and effect) to authorize the execution, delivery
and performance by the Company of this Amendment (including, without limitation,
the extension of the Termination Date effected by this Amendment) and the
performance of the Amended Credit Agreement and (b) a favorable written opinion
of John W. Scheflen, General Counsel of the Company, dated the date of this
Amendment and in the form of Annex 1 attached to this Amendment (the "Opinion").
6. The amendments of the Credit Agreement set forth in this
Amendment are limited precisely as written, and, except as expressly amended by
this Amendment, nothing contained in this Amendment shall be deemed (a) to be a
waiver, amendment, modification or
<PAGE> 3
other change of any term, condition or provision of the Credit Agreement (or a
consent to any such waiver, amendment, modification or other change), (b) to
prejudice any right or rights which the Bank may have under the Credit
Agreement, or (c) to entitle the Company to a waiver, amendment, modification or
other change of any term, condition or provision of the Credit Agreement (or a
consent to any such waiver, amendment, modification or other change), or to a
consent, in similar or different circumstances.
7. Except as expressly amended by this Amendment, the terms
and provisions of the Credit Agreement shall remain in full force and effect.
8. THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
9. This Amendment may be executed in two or more counterparts,
each of which shall constitute but one instrument, and shall be effective as of
October 1, 1997 when copies hereof, which, when taken together, bear the
signatures of each of the parties hereto, shall be delivered to the Bank,
together with the Certificate and the Opinion.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their duly authorized officers as of the date first written above.
MBNA CORPORATION
By: ______________________________
Name: _______________________
Title: _______________________
THE BANK OF NEW YORK
By: ______________________________
Name: _______________________
Title: _______________________
<PAGE> 4
ANNEX 1
FORM OF OPINION OF JOHN W. SCHEFLEN
October 1, 1997
The Bank of New York
One Wall Street
New York, New York 10286
Ladies and Gentlemen:
I am General Counsel for MBNA Corporation (the "Company") and in that
capacity have acted as counsel to the Company in connection with the Credit
Agreement (the "Credit Agreement") dated as of October 5, 1994, as heretofore
amended, between the Company and The Bank of New York (the "Bank") and the
Amendment thereto dated as of October 2, 1996 between the Bank and the Company
(the "Amendment"; the Credit Agreement as amended by the Amendment is referred
to herein as the "Amended Credit Agreement"). This opinion is rendered to the
Bank pursuant to Paragraph 5(b) of the Amendment. Capitalized terms used in this
opinion without definition have the same meanings as in the Amended Credit
Agreement.
In my capacity as such counsel, I have examined and relied upon such
records, documents, certificates, opinions and other matters as are in my
judgment necessary or appropriate to enable me to render the opinion expressed
herein. Based on the foregoing, I am of the opinion that:
1. Corporate Existence and Power. The Company and each of its
Significant Subsidiaries:
(a) Is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation;
(b) Has the power and authority and all governmental licenses,
authorization, consents and approvals to own its assets, carry on its business,
execute and deliver the Amendment and execute, deliver, and perform its
obligations under the Amended Credit Agreement;
(c) Is duly qualified as a foreign corporation, licensed and
in good standing under the laws of each jurisdiction where its ownership, lease
or operation of property or the conduct of its business requires such
qualification; and
(d) Is in compliance with all Requirements of Law;
<PAGE> 5
2
except, in each case referred to in clause (c) or clause (d), to the extent that
the failure to do so would not reasonably be expected to have a Material Adverse
Effect.
2. Corporate Authorization; No Contravention. The execution and
delivery by the Company of the Amendment and the execution, delivery and
performance by the Company of the Amended Credit Agreement have been duly
authorized on behalf of the Company by all necessary corporate action, and do
not and will not:
(a) Contravene the terms of any of the Company's Organization
Documents;
(b) Conflict with or result in any breach or contravention of,
or the creation of any lien under, any document known to me evidencing any
Contractual Obligation to which the Company is a party or any order, injunction,
writ or decree of any Governmental Authority to which the Company or its
Property is subject which, in the aggregate, would be reasonably likely to
result in a Material Adverse Effect; or
(c) Violate any Requirement of Law.
3. Governmental Authorization. No approval, consent, exemption,
authorization, or other action by, or notice to, or filing with, any
Governmental Authority is necessary or required in connection with the
execution, delivery or performance by, or validity of or enforcement against,
the Company of the Amendment or the Amended Credit Agreement.
4. Regulated Entities. None of the Company, any Person controlling the
Company or any Subsidiary of the Company, is an "Investment Company" within the
meaning of the Investment Company Act of 1940.
I am admitted to the bar of the State of Maryland and express no
opinion as to the laws of any jurisdiction other than the laws of the State of
Maryland and the federal laws of the United States of America.
The opinion may be relied upon by the Bank and by Participants and
Assignees. A copy of this opinion may also be made available to governmental or
regulatory authorities. Without my prior written consent, this opinion may not
be furnished or quoted to, or relied upon by, any other person or entity for any
purpose.
Very truly yours,
John W. Scheflen
Executive Vice President
General Counsel and Secretary
<PAGE> 6
AMENDMENT
AMENDMENT (this "Amendment") dated as of March 9, 1998 between MBNA
CORPORATION, a Maryland corporation (the "Company"), and THE BANK OF NEW YORK, a
New York corporation (the "Bank").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Company and the Bank are parties to a certain Credit
Agreement dated as of October 5, 1994, as amended October 5, 1994, as of October
4, 1995, as of June 28, 1996, as of October 2, 1996 and as of October 1, 1997
(the "Credit Agreement"); and
WHEREAS, the Company and the Bank desire to amend the Credit Agreement
in certain respects;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein contained, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
1. All capitalized terms used herein shall have the meanings
assigned to such terms in the Credit Agreement.
2. As used in the Credit Agreement, each reference to the
Credit Agreement shall mean the Credit Agreement as amended by this Amendment
and as the same may from time to time be further amended, supplemented or
otherwise modified.
3. Section 2.01 of the Credit Agreement is hereby amended by
deleting "Twenty Five Million Dollars ($25,000,000)" from the sixth to seventh
lines thereof and inserting in lieu thereof "Fifty Million Dollars
($50,000,000)".
4. The Company represents and warrants to the Bank as follows:
(a) The Company has all requisite power and authority
to execute and deliver this Amendment and to incur the obligations
provided for in this Amendment and in the Credit Agreement as amended
by this Amendment (the "Amended Credit Agreement"), which execution,
delivery and incurrence have been duly authorized by all necessary and
proper action. Except for the consents and approvals previously
delivered to the Bank, no consent or approval or the taking of any
other action (including, without limitation, of or by shareholders or
of or by any governmental department, commission, board, bureau,
instrumentality or agency) is required as a condition to the execution,
delivery, performance, validity or enforceability of this Amendment or
the Amended Credit Agreement.
<PAGE> 7
(b) This Amendment has been duly executed and
delivered by the Company. Each of this Amendment and the Amended Credit
Agreement constitutes the valid and legally binding obligation of the
Company, enforceable against the Company in accordance with its terms,
except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the rights of
creditors generally or by equitable principles relating to
enforceability.
(c) The execution, delivery and performance by the
Company of this Amendment and of the Amended Credit Agreement do not
(i) violate any provision of the Company's Organization Documents, (ii)
violate any order, decree or judgment, or any provision of any statute,
rule or regulation, (iii) violate or conflict with, result in a breach
of or constitute (with notice or lapse of time or both) a default under
any Contractual Obligation to which the Company is a party, or (iv)
result in the creation or imposition of any lien, charge or encumbrance
of any nature whatsoever upon any property or asset of the Company.
(d) All of the representations and warranties set
forth in the Amended Credit Agreement are true and correct in all
material respects on and as of the date hereof as if made on the date
hereof.
(e) As of the date hereof, there exists no Default or
Event of Default which has occurred and is continuing.
5. Simultaneously with the execution and delivery of this
Amendment, the Company will execute and deliver to the Bank (a) a certificate of
the Secretary or an Assistant Secretary of the Company (the "Certificate") which
states that attached thereto or set forth therein is a true and correct copy of
all action taken by the Company (which action has not been modified, amended or
rescinded and is in full force and effect) to authorize the execution, delivery
and performance by the Company of this Amendment (including, without limitation,
the extension of the Termination Date effected by this Amendment) and the
performance of the Amended Credit Agreement and (b) a favorable written opinion
of John W. Scheflen, General Counsel of the Company, dated the date of this
Amendment and in the form of Annex 1 attached to this Amendment (the "Opinion").
6. The amendment of the Credit Agreement set forth in this
Amendment is limited precisely as written, and, except as expressly amended by
this Amendment, nothing contained in this Amendment shall be deemed (a) to be a
waiver, amendment, modification or other change of any term, condition or
provision of the Credit Agreement (or a consent to any such waiver, amendment,
modification or other change), (b) to prejudice any right or rights which the
Bank may have under the Credit Agreement, or (c) to entitle the Company to a
waiver, amendment, modification or other change of any term, condition or
provision of the Credit Agreement (or a consent to any such waiver, amendment,
modification or other change), or to a consent, in similar or different
circumstances.
7. Except as expressly amended by this Amendment, the terms
and provisions of the Credit Agreement shall remain in full force and effect.
<PAGE> 8
8. THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
9. This Amendment may be executed in two or more counterparts,
each of which shall constitute but one instrument, and shall be effective as of
March 9, 1998 when copies hereof, which, when taken together, bear the
signatures of each of the parties hereto, shall be delivered to the Bank,
together with the Certificate and the Opinion.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their duly authorized officers as of the date first written above.
MBNA CORPORATION
By: ______________________________
Name: _______________________
Title: _______________________
THE BANK OF NEW YORK
By: ______________________________
Name: _______________________
Title: _______________________
<PAGE> 9
ANNEX 1
FORM OF OPINION OF JOHN W. SCHEFLEN
March 9, 1998
The Bank of New York
One Wall Street
New York, New York 10286
Ladies and Gentlemen:
I am General Counsel for MBNA Corporation (the "Company") and in that
capacity have acted as counsel to the Company in connection with the Credit
Agreement (the "Credit Agreement") dated as of October 5, 1994, as heretofore
amended, between the Company and The Bank of New York (the "Bank") and the
Amendment thereto dated as of March 9, 1998 between the Bank and the Company
(the "Amendment"; the Credit Agreement as amended by the Amendment is referred
to herein as the "Amended Credit Agreement"). This opinion is rendered to the
Bank pursuant to Paragraph 5(b) of the Amendment. Capitalized terms used in this
opinion without definition have the same meanings as in the Amended Credit
Agreement.
In my capacity as such counsel, I have examined and relied upon such
records, documents, certificates, opinions and other matters as are in my
judgment necessary or appropriate to enable me to render the opinion expressed
herein. Based on the foregoing, I am of the opinion that:
1. Corporate Existence and Power. The Company and each of its
Significant Subsidiaries:
(a) Is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation;
(b) Has the power and authority and all governmental licenses,
authorizations, consents and approvals to own its assets, carry on its business,
execute and deliver the Amendment and execute, deliver, and perform its
obligations under the Amended Credit Agreement;
(c) Is duly qualified as a foreign corporation, licensed and
in good standing under the laws of each jurisdiction where its ownership, lease
or operation of property or the conduct of its business requires such
qualification; and
(d) Is in compliance with all Requirements of Law;
<PAGE> 10
2
except, in each case referred to in clause (c) or clause (d), to the extent that
the failure to do so would not reasonably be expected to have a Material Adverse
Effect.
2. Corporate Authorization; No Contravention. The execution and
delivery by the Company of the Amendment and the execution, delivery and
performance by the Company of the Amended Credit Agreement have been duly
authorized on behalf of the Company by all necessary corporate action, and do
not and will not:
(a) Contravene the terms of any of the Company's Organization
Documents;
(b) Conflict with or result in any breach or contravention of,
or the creation of any lien under, any document known to me evidencing any
Contractual Obligation to which the Company is a party or any order, injunction,
writ or decree of any Governmental Authority to which the Company or its
Property is subject which, in the aggregate, would be reasonably likely to
result in a Material Adverse Effect; or
(c) Violate any Requirement of Law.
3. Governmental Authorization. No approval, consent, exemption,
authorization, or other action by, or notice to, or filing with, any
Governmental Authority is necessary or required in connection with the
execution, delivery or performance by, or validity of or enforcement against,
the Company of the Amendment or the Amended Credit Agreement.
4. Regulated Entities. None of the Company, any Person controlling the
Company or any Subsidiary of the Company, is an "Investment Company" within the
meaning of the Investment Company Act of 1940.
I am admitted to the bar of the State of Maryland and express no
opinion as to the laws of any jurisdiction other than the laws of the State of
Maryland and the federal laws of the United States of America.
The opinion may be relied upon by the Bank and by Participants and
Assignees. A copy of this opinion may also be made available to governmental or
regulatory authorities. Without my prior written consent, this opinion may not
be furnished or quoted to, or relied upon by, any other person or entity for any
purpose.
Very truly yours,
John W. Scheflen
Executive Vice President
General Counsel and Secretary
<PAGE> 11
AMENDMENT
AMENDMENT (this "Amendment") dated as of September 29, 1999 between
MBNA CORPORATION, a Maryland corporation (the "Company"), and THE BANK OF NEW
YORK, a New York corporation (the "Bank").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Company and the Bank are parties to a certain Credit
Agreement dated as of October 5, 1994, as amended October 5, 1994, as of October
4, 1995, as of June 28, 1996, as of October 2, 1996, as of October 1, 1997, as
of March 9, 1998 and as of September 30, 1998 (the "Credit Agreement"); and
WHEREAS, the Company and the Bank desire to amend the Credit Agreement
in certain respects;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein contained, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
1. All capitalized terms used herein shall have the meanings
assigned to such terms in the Credit Agreement.
2. As used in the Credit Agreement, each reference to the
Credit Agreement shall mean the Credit Agreement as amended by this Amendment
and as the same may from time to time be further amended, supplemented or
otherwise modified.
3. The definition of "Applicable Margin" in Section 1.01 of
the Credit Agreement is hereby amended in its entirety to read as follows:
"'Applicable Margin' means, for CD Rate Loans, 0.500%
and, for Offshore Rate Loans, 0.375%."
4. Section 1.01 of the Credit Agreement is hereby amended by
inserting the following new definition immediately after the definition of
"Significant Subsidiary" in said Section 1.01:
"'Subject Period' means the period from December 15,
1999 through and including January 17, 2000."
5. The definition of "Termination Date" in Section 1.01 of the
Credit Agreement is hereby amended in its entirety to read as follows:
<PAGE> 12
"'Termination Date' means the earlier to occur of:
(a) September 27, 2000 (or any later date
agreed to between the Bank and the Company as specified in
Section 2.01(b)); and
(b) the date on which the Commitment shall
terminate in accordance with the provisions of this
Agreement."
6. Section 1.01 of the Credit Agreement is hereby amended by
inserting the following new definitions immediately after the definition of
"Wholly-Owned Subsidiary" in said Section 1.01:
"'Year 2000 Issue' means the failure of computer
software, hardware and firmware systems and equipment
containing embedded computer chips to properly receive,
transmit, process, manipulate, store, retrieve, re-transmit or
in any other way utilize data and information due to the
occurrence of the year 2000 or the inclusion of dates on or
after January 1, 2000."
"'Year 2000 Problem' means any significant risk that
computer hardware or software used in the receipt,
transmission, processing, manipulation, storage, retrieval,
retransmission or other utilization of data or in the
operation of mechanical or electrical systems of any kind will
not, in the case of dates or time periods occurring after
December 31, 1999, function as effectively as in the case of
dates or time periods occurring prior to January 1, 2000.
7. Clause (C) of subsection 2.03(a) of the Credit Agreement is
hereby amended by inserting "subject to subsection 2.03(a)," immediately before
"whether" at the start of said clause (C).
8. Clause (D) of subsection 2.03(a) of the Credit Agreement is
hereby amended by inserting "if applicable," immediately before "the duration"
at the start of said clause (D).
9. Subsection 2.03(b) of the Credit Agreement is hereby
amended in its entirety to read as follows:
"(b) Notwithstanding anything in this Agreement to
the contrary, unless the Bank shall otherwise agree, (i)
during the existence of a Default or Event of Default, the
Company may not elect to have a Loan be made as, or converted
into or continued as, an Offshore Rate Loan or a CD Rate Loan,
and (ii) during the Subject Period, the Company may not elect
to have a Loan be made as, or converted into or continued as,
an Offshore Rate Loan or a CD Rate Loan."
<PAGE> 13
10. Subsection 2.04(a) of the Credit Agreement is hereby
amended by inserting the following immediately before the period at the end of
said subsection 2.04(a):
"; and provided further that any conversion of Loans into and
continuation of Loans as Offshore Rate Loans and CD Rate Loans
shall be subject to subsection 2.03(b)"
11. Subsection 2.08(a) of the Credit Agreement is hereby
amended in its entirety to read as follows:
"(a) Subject to subsection 2.03(b), each Loan shall
bear interest on the outstanding principal amount thereof from
the date when made to the date it becomes due at a rate per
annum equal to the CD Rate for the applicable Interest Period
plus the Applicable Margin, the Offshore Rate for the
applicable Interest Period plus the Applicable Margin or the
Base Rate, as the case may be."
12. The first sentence of subsection 2.09(b) of the Credit
Agreement is hereby amended in its entirety to read as follows:
"The Company shall pay to the Bank a facility fee at a rate
per annum of 0.125%, payable quarterly in arrears on the last
day of each calendar quarter based upon the Commitment less
the aggregate principal amount of Loans outstanding as of the
first day of such quarter."
13. Article V of the Credit Agreement is hereby amended by
inserting the following new Section 5.13 immediately after Section 5.12 of the
Credit Agreement:
"5.13 Year 2000.
"(a) The Company has reviewed the effect of
the Year 2000 Issue on the computer software, hardware and
firmware systems and equipment containing embedded microchips
owned or operated by or for the Company or any of its
Subsidiaries or used or relied upon in the conduct of the
businesses of the Company and its Subsidiaries (including
systems and equipment supplied by others or with which such
computer systems of the Company or any of its Subsidiaries (or
any of them) interface). The costs to the Company and its
Subsidiaries of any reprogramming required as a result of the
Year 2000 Issue to permit the proper functioning of such
systems and equipment and the proper processing of data, and
the testing of such reprogramming, and of the reasonably
foreseeable consequences of the Year 2000 Issue to the Company
and its Subsidiaries (including reprogramming errors and the
failure of systems or equipment supplied by others) are not
reasonably expected to have a Material Adverse Effect.
<PAGE> 14
"(b) The Company is currently meeting
scheduled events with regard to its formulated plan to
remediate any problems or issues arising from the Year 2000
Problem."
14. The Company represents and warrants to the Bank as
follows:
(a) The Company has all requisite power and authority
to execute and deliver this Amendment and to incur the obligations
provided for in this Amendment and in the Credit Agreement as amended
by this Amendment (the "Amended Credit Agreement"), which execution,
delivery and incurrence have been duly authorized by all necessary and
proper action. Except for the consents and approvals previously
delivered to the Bank, no consent or approval or the taking of any
other action (including, without limitation, of or by shareholders or
of or by any governmental department, commission, board, bureau,
instrumentality or agency) is required as a condition to the execution,
delivery, performance, validity or enforceability of this Amendment or
the Amended Credit Agreement.
(b) This Amendment has been duly executed and
delivered by the Company. Each of this Amendment and the Amended Credit
Agreement constitutes the valid and legally binding obligation of the
Company, enforceable against the Company in accordance with its terms,
except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the rights of
creditors generally or by equitable principles relating to
enforceability.
(c) The execution, delivery and performance by the
Company of this Amendment and of the Amended Credit Agreement do not
(i) violate any provision of the Company's Organization Documents, (ii)
violate any order, decree or judgment, or any provision of any statute,
rule or regulation, (iii) violate or conflict with, result in a breach
of or constitute (with notice or lapse of time or both) a default under
any Contractual Obligation to which the Company is a party, or (iv)
result in the creation or imposition of any lien, charge or encumbrance
of any nature whatsoever upon any property or asset of the Company.
(d) All of the representations and warranties set
forth in the Amended Credit Agreement are true and correct in all
material respects on and as of the date hereof as if made on the date
hereof.
(e) As of the date hereof, there exists no Default or
Event of Default which has occurred and is continuing.
15. Simultaneously with the execution and delivery of this
Amendment, the Company will execute and deliver to the Bank (a) a certificate of
the Secretary or an Assistant Secretary of the Company (the "Certificate") which
states that attached thereto or set forth therein is a true and correct copy of
all action taken by the Company (which action has not been modified, amended or
rescinded and is in full force and effect) to authorize the execution, delivery
and performance by the Company of this Amendment (including, without limitation,
the
<PAGE> 15
extension of the Termination Date effected by this Amendment) and the
performance of the Amended Credit Agreement and (b) a favorable written opinion
of John W. Scheflen, General Counsel of the Company, dated the date of this
Amendment and in the form of Annex 1 attached to this Amendment (the "Opinion").
16. The amendments of the Credit Agreement set forth in this
Amendment are limited precisely as written, and, except as expressly amended by
this Amendment, nothing contained in this Amendment shall be deemed (a) to be a
waiver, amendment, modification or other change of any term, condition or
provision of the Credit Agreement (or a consent to any such waiver, amendment,
modification or other change), (b) to prejudice any right or rights which the
Bank may have under the Credit Agreement, or (c) to entitle the Company to a
waiver, amendment, modification or other change of any term, condition or
provision of the Credit Agreement (or a consent to any such waiver, amendment,
modification or other change), or to a consent, in similar or different
circumstances.
17. Except as expressly amended by this Amendment, the terms
and provisions of the Credit Agreement shall remain in full force and effect.
18. THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
19. This Amendment may be executed in two or more
counterparts, each of which shall constitute but one instrument, and shall be
effective as of September 29, 1999 when copies hereof, which, when taken
together, bear the signatures of each of the parties hereto, shall be delivered
to the Bank, together with the Certificate and the Opinion.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their duly authorized officers as of the date first written above.
MBNA CORPORATION
By: ______________________________
Name: _______________________
Title: _______________________
THE BANK OF NEW YORK
By: ______________________________
Name: _______________________
Title: _______________________
<PAGE> 16
ANNEX 1
FORM OF OPINION OF JOHN W. SCHEFLEN
September 29, 1999
The Bank of New York
One Wall Street
New York, New York 10286
Ladies and Gentlemen:
I am General Counsel for MBNA Corporation (the "Company") and in that
capacity have acted as counsel to the Company in connection with the Credit
Agreement (the "Credit Agreement") dated as of October 5, 1994, as heretofore
amended, between the Company and The Bank of New York (the "Bank") and the
Amendment thereto dated as of September 29, 1999 between the Bank and the
Company (the "Amendment"; the Credit Agreement as amended by the Amendment is
referred to herein as the "Amended Credit Agreement"). This opinion is rendered
to the Bank pursuant to Paragraph 15(b) of the Amendment. Capitalized terms used
in this opinion without definition have the same meanings as in the Amended
Credit Agreement.
In my capacity as such counsel, I have examined and relied upon such
records, documents, certificates, opinions and other matters as are in my
judgment necessary or appropriate to enable me to render the opinion expressed
herein. Based on the foregoing, I am of the opinion that:
1. Corporate Existence and Power. The Company and each of its
Significant Subsidiaries:
(a) Is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation;
(b) Has the power and authority and all governmental licenses,
authorizations, consents and approvals to own its assets, carry on its business,
execute and deliver the Amendment and execute, deliver, and perform its
obligations under the Amended Credit Agreement;
(c) Is duly qualified as a foreign corporation, licensed and
in good standing under the laws of each jurisdiction where its ownership, lease
or operation of property or the conduct of its business requires such
qualification; and
<PAGE> 17
(d) Is in compliance with all Requirements of Law; except, in
each case referred to in clause (c) or clause (d), to the extent that the
failure to do so would not reasonably be expected to have a Material Adverse
Effect.
2. Corporate Authorization; No Contravention. The execution and
delivery by the Company of the Amendment and the execution, delivery and
performance by the Company of the Amended Credit Agreement have been duly
authorized on behalf of the Company by all necessary corporate action, and do
not and will not:
(a) Contravene the terms of any of the Company's Organization
Documents;
(b) Conflict with or result in any breach or contravention of,
or the creation of any lien under, any document known to me evidencing any
Contractual Obligation to which the Company is a party or any order, injunction,
writ or decree of any Governmental Authority to which the Company or its
Property is subject which, in the aggregate, would be reasonably likely to
result in a Material Adverse Effect; or
(c) Violate any Requirement of Law.
3. Governmental Authorization. No approval, consent, exemption,
authorization, or other action by, or notice to, or filing with, any
Governmental Authority is necessary or required in connection with the
execution, delivery or performance by, or validity of or enforcement against,
the Company of the Amendment or the Amended Credit Agreement.
4. Regulated Entities. None of the Company, any Person controlling the
Company or any Subsidiary of the Company, is an "Investment Company" within the
meaning of the Investment Company Act of 1940.
I am admitted to the bar of the State of Maryland and express no
opinion as to the laws of any jurisdiction other than the laws of the State of
Maryland and the federal laws of the United States of America.
The opinion may be relied upon by the Bank and by Participants and
Assignees. A copy of this opinion may also be made available to governmental or
regulatory authorities. Without my prior written consent, this opinion may not
be furnished or quoted to, or relied upon by, any other person or entity for any
purpose.
Very truly yours,
John W. Scheflen
Executive Vice President
General Counsel and Secretary
<PAGE> 1
EXHIBIT 12: COMPUTATION OF RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND
PREFERRED STOCK DIVIDEND REQUIREMENTS (dollars in thousands)
<TABLE>
<CAPTION>
For the Year Ended December 31,
------------------------------------------------------------------
1999 1998 1997 1996 1995
------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INCLUDING INTEREST ON DEPOSITS
Earnings:
Income before income taxes .................... $1,654,964 $1,254,065 $1,022,108 $ 731,294 $ 584,601
Fixed charges ................................. 1,341,993 1,238,596 1,035,069 755,884 609,742
Interest capitalized during period, net
of amortization of previously
capitalized interest ........................ (2,949) (5,400) (4,967) (2,370) (3,409)
------------------------------------------------------------------
Earnings, for computation purposes ............ $2,994,008 $2,487,261 $2,052,210 $1,484,808 $1,190,934
==================================================================
Fixed Charges and Preferred Stock
Dividend Requirements:
Interest on deposits, short-term borrowings,
and long-term debt and bank notes, expensed
or capitalized .............................. $1,331,860 $1,229,503 $1,023,765 $ 746,008 $ 600,047
Portion of rents representative of the
interest factor ............................. 10,133 9,093 11,304 9,876 9,695
------------------------------------------------------------------
Fixed charges ................................. 1,341,993 1,238,596 1,035,069 755,884 609,742
Preferred stock dividend requirements ......... 23,123 23,089 32,065 23,269 2,432
------------------------------------------------------------------
Fixed charges and preferred stock dividend
requirements, including interest on deposits,
for computation purposes .................... $1,365,116 $1,261,685 $1,067,134 $ 779,153 $ 612,174
==================================================================
Ratio of earnings to combined fixed charges
and preferred stock dividend requirements,
including interest on deposits 2.19 1.97 1.92 1.91 1.95
EXCLUDING INTEREST ON DEPOSITS
Earnings:
Income before income taxes .................... $1,654,964 $1,254,065 $1,022,108 $ 731,294 $ 584,601
Fixed charges ................................. 422,567 422,492 341,149 227,999 171,585
Interest capitalized during period, net
of amortization of previously
capitalized interest ........................ (2,970) (5,421) (4,988) (2,391) (3,430)
------------------------------------------------------------------
Earnings, for computation purposes ............ $2,074,561 $1,671,136 $1,358,269 $ 956,902 $ 752,756
==================================================================
Fixed Charges and Preferred Stock
Dividend Requirements:
Interest on short-term borrowings and
long-term debt and bank notes expensed
or capitalized .............................. $ 412,434 $ 413,399 $ 329,845 $ 218,123 $ 161,890
Portion of rents representative of the
interest factor ............................. 10,133 9,093 11,304 9,876 9,695
------------------------------------------------------------------
Fixed charges ................................. 422,567 422,492 341,149 227,999 171,585
Preferred stock dividend requirements ......... 23,123 23,089 32,065 23,269 2,432
------------------------------------------------------------------
Fixed charges and preferred stock dividend
requirements, excluding interest on
deposits, for computation purposes .......... $ 445,690 $ 445,581 $ 373,214 $ 251,268 $ 174,017
==================================================================
Ratio of earnings to combined fixed charges
and preferred stock dividend requirements,
excluding interest on deposits 4.65 3.75 3.64 3.81 4.33
</TABLE>
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, expensed or
capitalized, on borrowings (including or excluding deposits, as applicable), and
the portion of rental expense which is deemed representative of interest. The
preferred stock dividend requirements represent the pretax earnings which would
have been required to cover such dividend requirements on the Corporation's
preferred stock outstanding.
<PAGE> 1
[MBNA CORPORATION LOGO]
- --------------------------------------------------------------------------------
[PHOTO] credit cards
SUCCESS IS GETTING THE RIGHT CUSTOMERS...
AND KEEPING THEM.
- --------------------------------------------------------------------------------
1999 ANNUAL REPORT
- - - - - - - - - - - -
<PAGE> 2
<TABLE>
CONTENTS
- --------------------------------------------------------------------------------
<S> <C>
2 TEN-YEAR SUMMARY
3 FINANCIAL HIGHLIGHTS
4 1999 HIGHLIGHTS
5 TO OUR STOCKHOLDERS
6 WHAT WE DO
7 WHERE WE ARE TODAY
8 UNIQUE MARKETING PROPOSITION
10 JUDGMENTAL LENDING
11 SERVING CUSTOMERS ONE AT A TIME
12 PREPARING FOR THE FUTURE
14 THE MBNA DIFFERENCE--PEOPLE
16 MBNA.COM
18 MBNA EDUCATION FOUNDATION
20 MBNA INTERNATIONAL MAP
21 FINANCIALS
75 SENIOR EXECUTIVES
76 DIRECTORS AND OFFICERS
</TABLE>
[PHOTO] people
<PAGE> 3
[PHOTO] automobile
"IT'S YOUR ATTITUDE, NOT YOUR APTITUDE,
THAT DETERMINES YOUR ALTITUDE."
<PAGE> 4
[PHOTO] automobile
TEN-YEAR SUMMARY
<TABLE>
<CAPTION>
EARNINGS PER COMMON SHARE--ASSUMING DILUTION
90 91 92 93 94 95 96 97 98 99
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
.17 .20 .23 .27 .35 .46 .59 .76 .97 1.21
</TABLE>
<TABLE>
<CAPTION>
NET INCOME
(millions)
90 91 92 93 94 95 96 97 98 99
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
129.0 149.2 172.7 207.8 266.6 353.1 474.5 622.5 776.3 1,024.4
</TABLE>
<TABLE>
<CAPTION>
MANAGED LOANS (ending)
(billions)
90 91 92 93 94 95 96 97 98 99
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
7.4 8.8 9.9 12.4 18.7 26.7 38.6 49.4 59.6 72.3
</TABLE>
<TABLE>
<CAPTION>
SALES AND CASH ADVANCE VOLUME
(billions)
90 91 92 93 94 95 96 97 98 99
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
11.5 12.9 14.5 17.9 25.1 34.3 48.7 66.4 83.0 105.8
</TABLE>
2
<PAGE> 5
[PHOTO] credit cards
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1999 1998 1997 1996 1995
- -------------------------------------------------------------------------------------------------------------------------------
(dollars in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C>
PER COMMON SHARE DATA FOR THE YEAR
- -------------------------------------------------------------------------------------------------------------------------------
Earnings ............................. $ 1.26 $ 1.01 $ .80 $ .61 $ .47
Earnings--assuming dilution .......... 1.21 .97 .76 .59 .46
Dividends (a) ........................ .28 .24 .21 .19 .17
Book value ........................... 4.97 2.90 2.34 1.87 1.48
RATIOS
- -------------------------------------------------------------------------------------------------------------------------------
Return on average total assets ....... 3.62% 3.38% 3.25% 3.26% 3.09%
Return on average stockholders'
equity ............................. 27.18 36.91 35.56 34.46 35.51
Stockholders' equity to total
assets ............................. 13.61 9.27 9.25 10.00 9.56
FINANCIAL STATEMENT DATA FOR THE YEAR
- -------------------------------------------------------------------------------------------------------------------------------
Net interest income .................. $ 933,765 $ 742,339 $ 692,390 $ 640,477 $ 544,226
Other operating income ............... 4,207,821 3,228,969 2,812,879 1,895,923 1,424,618
- -------------------------------------------------------------------------------------------------------------------------------
NET INCOME .............................. 1,024,423 776,266 622,500 474,495 353,099
- -------------------------------------------------------------------------------------------------------------------------------
Deposits ............................. 18,714,753 15,407,040 12,913,213 10,151,686 8,608,914
Stockholders' equity ................. 4,199,443 2,391,035 1,970,050 1,704,308 1,265,058
MANAGED LOAN DATA
- -------------------------------------------------------------------------------------------------------------------------------
Managed loans at year end ............ $ 72,255,513 $ 59,641,106 $ 49,379,860 $ 38,623,533 $ 26,711,704
Sales and cash advance volume ........ 105,806,935 82,968,874 66,399,425 48,666,129 34,272,909
===============================================================================================================================
</TABLE>
(a) On January 10, 2000, the Board of Directors approved an increase of 14.3%
in the quarterly dividend to $.08 per common share.
3
<PAGE> 6
[PHOTO] credit cards
"We don't have a culture, we have an attitude. MBNA America . . . 22,000
people, and every single one with an attitude--Satisfy the Customer."
BRUCE L. HAMMONDS
Chief Operating Officer
JOHN R. COCHRAN
Chief Marketing Officer
M. SCOT KAUFMAN
Chief Financial Officer
[PHOTO]
1999 Highlights
- - Continued consistent earnings record, averaging an increase of 25%, in each of
the 36 quarters or nine years since becoming a public company.
- - Grew managed loans $12.6 billion, or 21% from 1998, to $72.3 billion--nearly
four times the industry's overall growth rate.
- - Added 12.5 million new accounts--leading the industry.
- - Maintained superior credit quality with charge-offs at 4.33% for the year,
well below the published industry average of 6%.
- - Acquired endorsements of 400 new groups, including the Marine Corps
Association, GO Network, American Automobile Association (AAA), Montreal
Canadiens, Northwestern University, Auburn University, Royal Canadian Legion,
Chester College (U.K.), The Irish Cycling Federation, Medsite.com, Toronto
Raptors, Rugby Football League (U.K.), and the Association of the U.S. Army.
- - Extended exclusive endorsement agreements with more than 800 organizations,
including Clemson University, American Nurses Association, Gateway, Inc.,
BoatU.S., National Society of Professional Engineers, American Institute of
Architects, American College of Physicians, University of Georgia, University
of Delaware, and the Baltimore Orioles.
- - Continued expansion of MBNA International to 4.4 million Customers with $7.2
billion in loan balances, up 46% from 1998. Completed the second full year of
operations in Canada with $900 million in loan balances and 250 group
endorsements.
4
<PAGE> 7
MBNA IS A COMPANY OF
PEOPLE COMMITTED TO:
Providing the Customer with the finest
products backed by consistently
top-quality service.
-
Delivering these products and services
efficiently, thus ensuring fair prices
to the Customer and a sound investment
for the stockholder.
-
Treating the Customer as we expect to be
treated--putting the Customer first
every day--and meaning it.
-
Being leaders in innovation, quality,
efficiency and Customer satisfaction. Being
known for doing the little things and big
things well.
Expecting and accepting from ourselves
nothing short of the best. Remembering that
each of us, the people of MBNA, makes
the unassailable
difference.
- --------------------------------------------------
Getting the right Customers and keeping them
is the foundation of our business. It demands
a single-minded commitment to Customer
satisfaction. Meeting this commitment requires
tough standards, good people, and constant
attention to the importance of each individual
Customer. It means having an attitude. Written
by Charlie Cawley, and introduced during the
summer of 1986, the precepts above express
our attitude. They are displayed throughout
the company, and each person carries a copy.
These words have been reviewed every year
since they were written, including this year, and
have never been changed. They are simple and
straightforward, and we mean every single word.
<PAGE> 8
MBNA COMMON STOCK
PRICE PERFORMANCE
<TABLE>
<CAPTION>
IPO 91 92 93 94 95 96 97 98 99
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SPLIT ADJUSTED 1.48 2.34 3.27 4.4 4.62 7.29 12.33 18.21 24.81 27.25
</TABLE>
ONE SHARE PURCHASED ON 1/22/91 AT THE INITIAL PUBLIC OFFERING PRICE OF $22.50
($1.49 ADJUSTED FOR STOCK SPLITS) HAS GROWN TO 15.2 SHARES WORTH A TOTAL OF
$413.85 ($27.25 PER SHARE ADJUSTED FOR SPLITS). DURING THE PERIOD SINCE THE IPO,
THE CORPORATION'S AVERAGE ANNUAL TOTAL RETURN TO STOCKHOLDERS HAS BEEN 44%.
<PAGE> 9
[PHOTO]
ALFRED LERNER
Chairman and Chief Executive Officer, MBNA Corporation
CHARLES M. CAWLEY
President, MBNA Corporation
Chief Executive Officer, MBNA America Bank, N.A.
It is always the
thousands of little
things done right
that add up to
the unassailable
advantage.
TO OUR STOCKHOLDERS
This report presents MBNA's full-year results for 1999, our 18th year in
business and our best year yet. Earnings increased 32.0% to $1.024
billion--bringing to 36 the number of consecutive quarters of consistent
earnings growth averaging 25% since MBNA became a public company in 1991. Loans
outstanding grew to $72.3 billion, a $12.6 billion increase over year-end 1998.
This 21% growth rate was nearly four times that of our industry. We also added
12.5 million new accounts. The characteristics of new cardholders are consistent
with the superior quality of the company's existing Customers. The typical new
Customer has a $62,000 average annual household income, has been employed for 11
years, owns a home, and has a 16-year history of paying bills promptly. Loan
losses continue to be significantly lower than published industry levels. In
1999, our managed loan losses were 4.33%, compared to the industry average of
6%.
MBNA is in the business of allowing people to have the things they want today
while paying for them sensibly out of future income. It is an enduring business
and we like it. Although credit cards will continue to be our core business, we
are investing in other areas to strengthen the company for the future. This
year, for example, we grew our international business, expanded our consumer
finance business, and introduced new insurance products.
The Internet is emerging as an interesting and potentially significant
contributor to future growth. As use of the Internet increases, our Customers
are using their MBNA cards for purchases with increasing frequency. This year,
3.5 million MBNA Customers made over $1.5 billion in purchases on the
Internet--and this is just the beginning.
This report is a print version of presentations we make to investors throughout
the year. It's intended to give you an accurate overview of your company. We
hope you enjoy it.
/s/ ALFRED LERNER /s/ CHARLES M. CAWLEY
5
<PAGE> 10
[PHOTO] person
The difference
between good and
great is attitude.
WHAT WE DO
MBNA Corporation is a holding company comprised of three banks: MBNA America
Bank, N.A., a national bank in the United States; MBNA International Bank
Limited, a fully chartered bank in the United Kingdom; and MBNA Canada Bank, a
fully chartered bank in Canada. Like all traditional banks, we take deposits and
make loans. Our Customers have more than $18 billion on deposit with us in
money market and certificate of deposit accounts with an average individual
balance of $26,000. We also offer a variety of loan products. Currently these
loans total $6.2 billion.
But that is where the similarity to a traditional bank ends. At MBNA, there are
no branches, no commercial loans, and only a small number of checking accounts.
We specialize in making loans to individuals through credit cards, providing a
service that frees people from the need to carry cash and lets them have the
things they need today while paying for them out of future income. It is a good
business, and we like it.
Our basic product is one for which there is universal demand. There are
approximately 150 million people in the United States, 25 million people in the
United Kingdom, and 15 million people in Canada who would qualify for a credit
card. And this number continually refreshes itself as young people enter
adulthood.
It is a business with no concentration of risk. There are no geographic,
industry, or Customer concentrations. Our $72 billion loan portfolio is spread
among 21 million active borrowers in the United States, the United Kingdom, and
Canada.
The credit card is a product that nearly everyone wants. Although this is a
strength, it also makes it a business in which success only comes to those who
can differentiate themselves. We do so through the methods we use to attract
new Customers and satisfy them once we have them. If you're not good at both of
these things, nothing else matters, and MBNA is very good at both.
ON THE CHART AT RIGHT, THE LINE REPRESENTS MBNA'S GROWTH IN MANAGED LOANS, WHILE
THE BARS INDICATE THE GROWTH IN NET INCOME. MBNA HAS REPORTED INCREASED
EARNINGS, AVERAGING 25%, IN EACH OF THE 36 QUARTERS THAT IT HAS BEEN A PUBLIC
COMPANY.
- --------------------------------------------------------------------------------
CONSISTENT PROFITABLE GROWTH
<TABLE>
<CAPTION>
82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Managed Loans ($ Billions)
0 0 1 2 67 75 90 104 129 149 173 208 267 353 474 623 776 1,024
Net Income ($ Millions)
</TABLE>
<PAGE> 11
[PHOTO] person
MBNA SPECIALIZES IN MAKING LOANS TO INDIVIDUALS THROUGH CREDIT CARDS. OUR
CUSTOMERS USED THEIR MBNA CREDIT CARDS 790 MILLION TIMES IN 1999, SPENDING MORE
THAN $100 BILLION.
Success is getting the right Customers and keeping them.
[PHOTO] authorization terminal
WHERE WE ARE TODAY
During 1999, MBNA recorded its ninth consecutive year of earnings growth,
averaging 25%, since its initial public offering in 1991. The company's business
fundamentals continued to be as strong as ever. Managed loans grew $12.6 billion
to $72.3 billion, a 21% growth rate that was nearly four times the rate of the
overall U.S. credit card industry. MBNA expanded its market share of credit card
loans in the United States and the United Kingdom to 14% and 13%, respectively,
and solidified its position as the largest independent credit card lender in the
world.
This year also marked the fourth consecutive year in which loans grew by more
than $10 billion. The addition of 12.5 million new accounts and 400 new
endorsements from organizations strengthened future growth prospects. Today,
thousands of affinity organizations endorse MBNA products to their members, and
the company's products are used by more than 40 million people worldwide.
DURING 1999, MBNA ADDED 12.5 MILLION NEW ACCOUNTS--LEADING THE
INDUSTRY.
In 1999, MBNA continued to grow its international and consumer finance
businesses and expanded its insurance business with a new partnership with
American International Group (AIG). In addition, MBNA acquired several
high-quality credit card portfolios from prominent financial institutions. We
entered into long-term marketing agreements with most of these institutions,
including SunTrust Banks and PNC Bank, the ninth and thirteenth largest banks in
the U.S., respectively.
MBNA's formula for success remains very simple: Success is getting the right
Customers and keeping them. We have a unique marketing proposition, affinity
marketing, and a very stringent underwriting process that ensures that we lend
money to only the most qualified individuals. Just as important, we are able to
retain Customers by providing top-quality service, one Customer at a time.
This approach to business is the reason MBNA has achieved consistent, profitable
growth. Success has been and is a result of an intense focus on the quality of
each Customer. This is the most important facet of our business, especially
during times of rapid growth. In lending, quality is achieved by choosing
Customers who have the capacity to repay, proven stability, and a habit of being
financially responsible. MBNA Customers have all of these characteristics--and
they have not changed over time. The typical new Customer has an average annual
household income of $62,000, owns a home, and has a 16-year history of paying
bills promptly. The quality of MBNA's Customers is reflected in loan losses that
have remained significantly below industry averages. The company's consistent
focus on Customer quality is the most reliable predictor of the future.
7
<PAGE> 12
[PHOTO] person
[PHOTO] credit cards
[PHOTO] credit cards
[PHOTO] credit cards
UNIQUE MARKETING PROPOSITION
MBNA's approach to the credit card business is unique. We sell to people who
share common interests and focus on groups with strong ties to their members,
fans, and Customers.
Getting the right Customer begins in sales and marketing. When an organization
such as a professional society, an alumni association, or a sports team chooses
to endorse MBNA, that decision is based on the belief that we will deliver
top-quality service to their members or Customers.
Today, more than 4,500 organizations in the United States, the United Kingdom,
and Canada endorse MBNA products to their members. Our $16 billion Professional
sector counts more than 1,300 organizations, including 37 state dental, 41 state
bar, 36 state medical, and 49 state nurses associations. In 1999, we added 84
groups to this sector, including the North Carolina Medical Society and the U.S.
Marine Corps Association. These groups join organizations as diverse as the
Association of Trial Lawyers of America, the American Medical Student
Association, and the National Society of Professional Engineers. Overall, MBNA
credit cards are carried by 58% of all physicians, 43% of all lawyers, 66% of
all dentists, and more than a quarter of all nurses, teachers, engineers, and
architects in the United States.
DURING 1999, MBNA
RENEWED ENDORSEMENTS WITH
MORE THAN 800 ORGANIZATIONS.
MBNA's roster of sports organizations also continued to grow in 1999. More than
4.3 million Customers now carry MBNA credit cards featuring their favorite
teams, racecar drivers, or other sports-related activities. We added more than
one million new Customers in the Sports sector, and outstanding loans reached $5
billion. We issue the official credit cards of the National Football League,
Major League Baseball, the National Hockey League, NASCAR, the Professional
Golfers Association, and 14 of the National Basketball Association teams. In
addition, the NFL endorsement enables us to market to the fans of 31 teams, now
happily including the Cleveland Browns.
MBNA products are also endorsed by more than 500 colleges and universities,
including nine of the Big 10 schools and six of the PAC 10 schools. More than
three million alumni and students from these schools use MBNA products,
producing $5 billion in loans. The Colleges and Universities sector enables us
to attract high-quality Customers as they enter the work force after graduation.
Although MBNA doesn't have branches, our products are sold in more than 10,000
bank offices across the United States and the United Kingdom through the
endorsement of 650 financial institutions. More than four million
8
<PAGE> 13
[PHOTO]
GREGG BACCHIERI
Senior Vice Chairman, CEO of MBNA Consumer Finance
"We keep Customers by treating them well--by thinking of ourselves as Customers
every minute of every day."
[PHOTO]
MICHELLE D. SHEPHERD
Vice Chairwoman, Advertising and Internet Marketing
"Customer loyalty is something that is earned through exceeding Customer
expectations during every contact--this is the reason MBNA Customers use their
cards 47% more than the average credit card holder."
<PAGE> 14
[PHOTO]
CHARLES C. KRULAK
Senior Vice Chairman, Administration
"Success comes from hiring the right people--people with the right attitude
about satisfying Customers--and then equipping them with the tools and education
to do their jobs."
[PHOTO]
JANINE D. MARRONE
Chief Executive Officer, MBNA Consumer Services
"By building on our strengths in marketing and Customer service, we can achieve
great success in our new business endeavors as well."
<PAGE> 15
[PHOTO] NASCAR race
MBNA'S NASCAR CREDIT CARD PROGRAM ADDED A RECORD NUMBER OF ACCOUNTS IN 1999
THANKS IN PART TO MBNA'S SUPPORT OF JOE GIBBS RACING AND DRIVER BOBBY LABONTE,
WHO EARNED FIVE WINS TO SECURE SECOND PLACE IN WINSTON CUP SERIES POINTS.
[PHOTO] credit cards
financial institution Customers have produced $6.5 billion in loans for MBNA.
In addition, we've developed hundreds of affinity programs for people who have a
strong common interest but do not belong to a formal organization. These
programs include the "Don't mess with Texas" card and the Irish-American
Heritage card. In 1999, such programs produced 1.3 million new Customers.
DIVERSIFIED ACQUISITION METHODS
After signing an affinity group or developing an affinity program, we implement
an effective marketing campaign to get the right Customer. In 1999, MBNA's 12.5
million new accounts came through a variety of acquisition channels, including
through the mail, over the phone, through television or other media, in person
at events, and via the Internet.
During the year, direct mail continued to be the most effective means of
marketing. Our full-service, in-house advertising agency customized mailings for
thousands of affinity groups and hundreds of common-interest marketing programs.
The internal design and production of these programs enable the company's
marketing managers to work closely with the advertising agency, resulting in
creative, targeted, and cost-effective programs that produce consistent results.
To complement direct mail, we continue to operate a large telephone sales
program. MBNA Marketing Systems, Inc., has telephone sales units throughout the
United States and in the United Kingdom and generated more than two million new
accounts in 1999. Each telephone call was shaped by the Customer's group
affiliation or personal interests. For example, representatives in our Dublin,
Ireland, office were very successful marketing MBNA's Irish-American Heritage
card in the United States.
MBNA's person-to-person marketing efforts generated nearly one million new
accounts during 6,500 events in 1999. This method is especially successful at
NASCAR races, NFL games, and professional conventions.
MBNA products are also offered over the Internet through the Web sites of nearly
1,000 endorsing organizations. Affinity marketing and effective acquisition
methods have resulted in loan growth that is consistently higher than that of
other lenders in the credit card industry.
9
<PAGE> 16
[PHOTO] people/credit card
We are looking for people who like other people.
JUDGMENTAL LENDING
Getting the right Customer begins with effective targeted marketing and ends
with the work of the credit analyst or lender. MBNA's credit professionals
reviewed more than 18 million applications in 1999. They rely on sophisticated
technology and behavioral scoring systems to assist them in choosing the right
Customer and assigning the right credit line. However, the most important tool
they rely on is their good judgment. In one of the many ways MBNA is different
from other credit card issuers, people--not computers--decide whether or not to
approve a loan.
When a credit analyst (lender) is reviewing an application, he or she has the
flexibility to say "yes," "no," or "maybe." If the answer is "maybe," which
happens 25% of the time, the analyst contacts the applicant for additional
information, thus gaining a better understanding of the applicant's
circumstances before making a final decision. A computer would make the decision
without having this additional information--information that is critical in
making the right decision.
This personal approach has helped build a superior Customer base. A typical MBNA
Customer has an average household income of $62,000, owns a home, and has a
16-year history of paying bills on time. Not only do our Customers look good,
they perform well. Our Customers use their cards 47% more than the average
credit card holder does, with typical purchase amounts 46% higher than the
average credit card transaction. The result is higher loan balances per Customer
and greater revenue for MBNA. In addition, loss rates in 1999 were 28% below the
industry average. The characteristics of our Customers have remained relatively
unchanged over the last 18 years, and we are confident that this will continue.
MAINTAINING CUSTOMER QUALITY IS MBNA'S TOP PRIORITY. IN 1999, THE COMPANY'S LOAN
LOSSES CONTINUED TO BE SIGNIFICANTLY LOWER THAN PUBLISHED INDUSTRY LEVELS.
- --------------------------------------------------------------------------------
LOAN LOSS COMPARISON
<TABLE>
<CAPTION>
1992 1993 1994 1995 1996 1997 1998 1999
<S> <C>
INDUSTRY [PLOT POINT INFORMATION NOT AVAILABLE]
MBNA [PLOT POINT INFORMATION NOT AVAILABLE]
</TABLE>
10
<PAGE> 17
[PHOTO] magazines
Think of yourself as a Customer.
[PHOTO] person
SERVING CUSTOMERS ONE AT A TIME
Getting the right Customer is just part of MBNA's strategy for producing
consistent results. Keeping our Customers once we get them determines our future
success. MBNA keeps Customers by treating them well. Maintaining high levels of
Customer satisfaction has enabled us to retain 97% of our profitable Customers
year after year. In fact, MBNA's Platinum Plus credit card, carried by 17
million Customers, was ranked highest in Customer loyalty among Platinum Visa
and MasterCard credit cards in the 1999 Comprehensive Credit Cardholder
Satisfaction Study by J.D. Power and Associates.
In 1999, we received more than 80 million Customer inquiries, ranging from
requests for duplicate statements and account information to questions about
card benefits and transaction history. Each contact represents an opportunity to
let the Customer know how important he or she is to us.
MBNA's commitment to providing superior Customer service starts by hiring people
who like other people and giving them the tools they need to satisfy Customers.
We have an environment that makes people feel good about where they work. This
environment includes ample educational opportunities, cutting-edge technology, a
comfortable work setting, and programs that help balance the demands of family
and work. In 1999, Fortune ranked MBNA in the top ten on its list of the "100
Best Companies to Work For in America," and for the sixth consecutive year
Working Mother magazine named MBNA among the nation's top companies for working
mothers. Additionally, Business Week named MBNA among the best companies for
work and family. People who feel good about where they work do a better job of
satisfying Customers.
MBNA uses superior technology to support world-class service levels. Unlike most
credit card issuers, MBNA controls every aspect of the Customer relationship.
Our own processing systems enable us effectively to insure a top-quality
product. In 1999, MBNA efficiently handled more than 175 million Customer
payments, 375 million statements and letters, and 790 million individual
Customer transactions totaling $106 billion. We develop technology internally to
ensure the reliability and responsiveness of the computer and telecommunication
systems used to satisfy Customers.
At MBNA, we focus on satisfying one Customer at a time. This approach
strengthens our relationship with individual Customers as well as with the
thousands of membership groups that endorse our products.
11
<PAGE> 18
[PHOTO] flags
PREPARING FOR THE FUTURE
MBNA has consistently produced significant expansion in its U.S. credit card
business, and there is still plenty of opportunity to grow. Although credit
cards will remain the company's primary business, we continue to invest in other
products and services. In 1999, we expanded our international, consumer finance,
and insurance businesses.
MBNA INTERNATIONAL
MBNA's international business in the United Kingdom, Ireland, and Canada has
grown to 4.3 million Customers with $7.2 billion in loans, a 46% increase from
the end of 1998.
In 1999, MBNA Europe expanded its market share to 13% in the United Kingdom and
Ireland and acquired nearly 1 million new Customers. Internationally, we utilize
the same business strategy as in the United States--marketing to people with
strong common interests. MBNA Europe earned endorsements from 56 new groups in
1999 and now has more than 700 membership organizations, including the Royal
College of Physicians, Manchester United Football Club, and The Irish Cycling
Federation. Two thousand people working at four locations in the U.K. and
Ireland support our European operations.
MBNA Canada finished its second full year of marketing and is producing results
similar to those of the United Kingdom at a comparable point in time. In 1999,
outstanding loans more than doubled to $900 million with more than
IN LESS THAN TWO YEARS, MBNA HAS EARNED THE ENDORSEMENTS OF 250 ORGANIZATIONS IN
CANADA, WITH $900 MILLION IN LOANS.
[PHOTO] credit cards
12
<PAGE> 19
[PHOTO]
RONALD W. DAVIES
Senior Vice Chairman, Chief Technology Officer
"Technology supports every aspect of MBNA's business--and we have an ongoing
commitment to developing state-of-the-art systems that enable us to better
satisfy Customers."
[PHOTO]
RICHARD K. STRUTHERS
Senior Vice Chairman, MBNA International
"Ours is not a complicated business, but success nonetheless depends on being
constantly vigilant about the service you provide to Customers."
<PAGE> 20
[PHOTO]
TERRI C. MURPHY
Division Head, Personnel
"Our success comes down to the people who work here, and that's never going to
change."
[PHOTO]
LANCE L. WEAVER
Senior Vice Chairman
"MBNA is a company of people who like other people. So, it follows that MBNA
people genuinely care for Customers and, just as importantly, for the people who
live in the communities where we live and work.
<PAGE> 21
[PHOTO] people
IN 1999, MBNA'S SALES FINANCE BUSINESS GREW 75% AND NOW HAS $1.8 BILLION IN
LOANS.
Excellence does not come by chance . . . it comes by choice.
[PHOTO] person
1 million Customers. We strengthened our position in Canada by signing new
endorsements with 122 membership organizations, including the Montreal
Canadiens, the Royal Canadian Legion, and the Toronto Maple Leafs. In total, 250
organizations endorse MBNA Canada's products. Now more than 400 people work for
MBNA Canada at its two locations in Ottawa, Ontario, and Montreal, Quebec. The
international business will continue to be an important part of the company's
growth.
CONSUMER FINANCE
In addition to credit cards, MBNA lends people money through a variety of other
loan products. These products are marketed through the mail and over the
telephone and are endorsed by more than 2,000 of our affinity groups. Our sales
finance business also provides fixed-term, unsecured loans for Customers to
finance larger purchases such as computers and furniture.
MBNA Consumer Finance has $6.2 billion in loans and generated nearly 1 million
new accounts in 1999. Sales finance, which reached $1.8 billion in outstanding
loans, was a major driver of growth in 1999, contributing 800,000 new accounts.
In 1999, MBNA pioneered immediate Web-based decisions for loan applications,
which accelerated loan growth and enhanced Customer satisfaction.
INSURANCE
MBNA has been selling credit-related insurance since 1987 and has more than two
million Customers. In 1999, MBNA formed a partnership with AIG to market
insurance to our Customers. We market automobile insurance through the mail and
by referrals from our Customer service representatives. The quality of MBNA
Customers makes them good candidates for a variety of insurance products. In
addition, more than 100 organizations that endorse MBNA loan products also
endorse insurance products, including Penn State University, Purdue University,
ASPCA, and the Indiana University Alumni Association.
We are also expanding our relationship with AIG to include several new products,
including homeowners, personal umbrella insurance, and annuities. This ability
to cross-sell financial service products to more than 40 million Customers
provides tremendous opportunities for the future.
13
<PAGE> 22
[PHOTO] precepts
The MBNA Difference--People
The single most important ingredient in our success has always been the people
of MBNA.
MBNA distinguishes itself because the people of the company all have an
attitude--satisfy the Customer. This attitude has driven our
Attitude is Everything.
success and will continue to drive everything that we do. The fanciest program
or product will only take a company so far. It is the people behind the product
that make the difference.
Seven out of every ten people who join the company are referred by people who
already work here. Our thorough hiring process involves people currently in
similar jobs, supervisors, experienced personnel recruiters, and senior
executives. In addition to determining an applicant's technical ability, each
interviewer uses his or her experience and skill to determine whether the
candidate is a person who likes other people. People who like other people find
it easy to think of themselves as Customers--they find it easy to "satisfy the
Customer."
After the right people are in place, our next steps to ensure success are
straightforward: set aggressive goals and define expectations for performance;
measure results and reward achievement; provide the tools and education people
need to do their jobs; insure a work environment that enables people to "satisfy
the Customer."
There are many things about MBNA that distinguish it from other companies, among
them our affinity marketing strategy and personalized approach to lending. None
of our distinctive differences, however, are more important--or have a greater
impact on our success--than the people of MBNA.
[PHOTO] people
[PHOTO] people
[PHOTO] people
[PHOTO] people
14
<PAGE> 23
If every company is a portrait
of its people . . .
[PHOTO] people
[PHOTO] people
[PHOTO] people
MBNA is a masterpiece.
[PHOTO] people
[PHOTO] people
[PHOTO] people
15
<PAGE> 24
[PHOTO] computer mouse
[GRAPHIC] affinity logos
MBNA.com
Use of the Internet for business continues to grow. MBNA's Internet strategy
builds on the thousands of affinity relationships we have and offers Customers a
comprehensive group of Web services. In 1999, the company sharpened its Internet
focus in three main areas: Internet marketing, electronic commerce, and online
banking. MBNA.com includes mbna offers.com, a home page with links to various
Web sites; mbnawallet.com; mbnanetaccess.com; and several Internet shopping
destination sites.
INTERNET MARKETING
MBNA has been marketing credit cards on the Web sites of its affinity groups
since 1995. While modest in comparison to our other acquisition channels,
Internet results are improving rapidly. Nearly 400,000 new Customers were added
in 1999--twice as many as the year before, and we expect over one million this
year.
Rather than marketing through banner ads, MBNA uses a targeted approach to
attract new Customers. This approach increases response rates and is more
cost-effective. MBNA's products are currently featured on nearly 1,000 endorsing
organizations' Web sites, including for example, the National Education
Association, the National Football League, and the Penn State Alumni
Association. Through these endorsements, MBNA has launched numerous personalized
e-mail campaigns using addresses provided by endorsing organizations, often
yielding better response rates than direct mail.
The Internet is more than just another marketing channel. It offers additional
opportunities for us to develop valuable affinity relationships. For example, in
1999, MBNA signed several agreements with top-quality Internet-related
organizations whose members share strong common interests. These include
Medsite.com, a Web site for medical professionals, and womenCONNECT.com, a Web
site for professional women and female business owners.
IN 1999, MBNA ENHANCED CUSTOMER SATISFACTION BY CREATING AN ONLINE BANKING SITE
THAT ALLOWS CUSTOMERS TO VIEW ACCOUNT ACTIVITY AND MAKE ACCOUNT CHANGES AND
INQUIRIES THROUGH THE INTERNET.
[PHOTO] person
16
<PAGE> 25
[PHOTO]
MICHAEL G. RHODES
Vice Chairman, Marketing
"We continued to produce consistently good results in 1999 by adhering to our
basic strategy--success is getting the right Customers and keeping them."
[PHOTO]
DAVID W. SPARTIN
Vice Chairman
"Our consistent financial performance in each of the 36 quarters or nine years
since becoming a public company is the direct result of the attitude and
commitment of the people of MBNA."
<PAGE> 26
[PHOTO]
KENNETH F. BOEHL
Vice Chairman, Chief Control Officer
"We control all aspects of our business, paying particular attention to those
that affect the quality and effectiveness of our service--and this gives us a
major competitive advantage."
[PHOTO]
JULES J. BONAVOLONTA
Vice Chairman, Administrative Services
"The single most important factor in our success has always been the people of
MBNA."
<PAGE> 27
[PHOTO] people
MBNA continues to employ a targeted approach to attract new Customers on the
Internet.
In March 1999, MBNA and Infoseek announced an exclusive, multi-year agreement
for the GO Network, which serves more than 22 million users. Through GO Network
partners, including ESPN.com, NASCAR.com, and ABCNEWS.com, we are able to
target people effectively and offer products consistent with their online
interests.
MBNA Consumer Finance is also attracting new Customers through the Internet.
Having pioneered the instant loan application decision through the Gateway
computer sales finance program, we expanded this technology to other products.
The technology enables Customers to apply for a loan at the point of sale,
receive their account information, and complete the purchase online within
seconds.
MBNAWALLET.COM
In 1999, e-commerce spending was more than twice 1998's level, exceeding $20
billion. This number is expected to triple within two years, with credit cards
being the predominant method of payment.
To meet the demand of e-commerce Customers, increase Internet transaction
volume, and stimulate card usage, MBNA launched an e-wallet product,
mbnawallet.com. MBNAwallet simplifies online shopping by allowing Customers to
save credit card and prefilled shipping information once, store it securely in
the network data center, and then simply activate it with a click of the mouse.
In addition to making online shopping easier, the service offers enhancements
such as special offers with select merchants, transaction records, links to
merchants' Customer service, shipping status, and promotional offers featuring
other MBNA products. Also, MBNAwallet allows Customers to create their own
shopping hubs with Internet merchants--in a sense creating personalized,
"virtual" shopping malls.
MBNANETACCESS.COM
In April 1999, MBNA launched an online banking site for its Customers. The site,
mbnanetaccess.com, allows Customers to view account activity, pay their MBNA
credit card bills online, view past statements, and make account changes and
inquiries through secure e-forms. NetAccess also includes a revenue-enhancing
page called the Cash Center that allows Customers to initiate balance transfers,
receive cash advance checks, and move funds to their checking and savings
accounts. NetAccess will increase Customer satisfaction and decrease service
cost. In addition, we can expand the service to promote other products through
customized online marketing.
[GRAPHIC] affinity logos
17
<PAGE> 28
[PHOTO] brochures
MBNA Education Foundation
MBNA focuses much of its community effort on education. The MBNA Education
Foundation was established to improve the quality and availability of education,
especially to economically disadvantaged young people, and to provide financial
support for innovative academic programs. In 1998, MBNA doubled the Foundation's
original funding to $60 million, $50 million from the corporation and $10
million from the personal donations of MBNA people. In an overwhelming show of
support for the work of the Education Foundation, 12,600 MBNA people and their
families and friends raised $2.8 million during this year's Delaware and Maine
Walks for Education, increasing the two-year total to nearly $5 million. In
March 1999, the company announced a $10 million commitment to provide financial
and educational support to students and schools in Cleveland, Ohio, in addition
to those in Delaware and Maine.
The Foundation has two major components: the Excellence in Education Grants
Program, which provides grants to teachers and schools for the development of
results-oriented academic initiatives; and the College Scholarship Program,
which provides college scholarships to help ensure that financially needy
students with a desire to succeed acquire a high-quality education. To date,
$10.2 million in scholarships has been awarded to more than 600 young people to
pursue higher education at accredited colleges and universities in Delaware and
Maine.
The Excellence in Education Grants Program enables teachers and principals of
public, private, and parochial schools to apply for grants to fund the
development of initiatives that enhance their students' educational experience.
The program encourages teachers and school administrators to apply for grants
for programs that will improve the learning environment. MBNA people actively
assist the teachers during the application process. The grant applications are
then reviewed by
THE PEOPLE OF MBNA AND THEIR FAMILIES AND FRIENDS HAVE RAISED NEARLY $5
MILLION OVER THE LAST TWO YEARS DURING THE COMPANY'S WALKS FOR EDUCATION.
[PHOTO] people
18
<PAGE> 29
[PHOTO]
HELEN F. GRAHAM
1941-1999
Helen F. Graham, a lifelong advocate for people with developmental disabilities
and executive director of both MBNA's Support Services department and the Helen
F. Graham Foundation, passed away on December 31, 1999.
A member of the company's Senior Operating Committee, Helen joined MBNA in 1995
and created the Support Services department to provide employment opportunities
for people with developmental disabilities. The department began with five
people working in the Crozier Center. Today, more than 170 Support Services
people work throughout MBNA offices in Delaware and Maine as a result of Helen's
vision.
As a senior manager of MBNA, Helen was able to use her unique combination of
skills to change people's lives. Her drive, compassion, and
intelligence--coupled with a profound respect for the abilities of every
person--resulted in a program that benefited hundreds. The mark she has made is
indelible.
(over)
<PAGE> 30
"All of us who knew Helen admired her for her energy and enthusiasm, for her
intolerance for anything but equal treatment for all, and for her unwavering
dedication to people with handicaps. She was strong and insisted that everyone
live up to their potential and she loved and supported all those who made an
effort to do so."
--Charlie Cawley
Inspired by a "very special" disabled family member, Helen began a career in
special education as a student teacher at Ithaca College in New York. She went
on to earn a master's degree in special education from the University of Arizona
and a master's equivalency in counseling and psychology at Loyola College of
Maryland. She taught special education for the Department of Defense and then
worked for 13 years at the Ridge School in Baltimore County, Maryland.
Helen's extraordinary commitment to special education lies at the very core of
the Helen F. Graham Foundation for people with developmental disabilities, which
MBNA created in 1999. The Foundation is being funded initially over five years
by a $5 million grant from MBNA and its senior managers.
Grants from the Helen F. Graham Foundation will be awarded to schools for
initiatives involving children who receive special education services and to
nonprofit organizations dedicated to expanding educational opportunities for
people with developmental disabilities.
<PAGE> 31
independent grant committees comprised of community leaders in Delaware, Maine,
and Cleveland. Since the program's inception, $10.8 million in grants has been
awarded to support 2,000 innovative programs.
The grants from the Foundation provide direct funding for programs that teachers
have always wanted to implement but lacked the financial support to do so. For
example, William Penn High School in New Castle, Delaware, used a $7,050
Excellence in Education grant to help reestablish the high school's theater
program after a 20-year hiatus. A teacher from North Haven Island in Maine's
Penobscot Bay used an $8,800 grant to teach his students about their
boat-building heritage while constructing a 32-foot Boston Pilot Lifesaving
boat. MBNA's Cleveland Education Initiative awarded its first grant to Miles
Elementary School to fund a kindergarten literacy program.
MBNA people contributed more than 250,000 hours of their personal time to
charitable and educational causes in 1999.
In addition, MBNA operates college and career counseling to complement the MBNA
Scholars' learning outside the classroom. This helps students realize their
ultimate educational objectives through tutorial assistance, SAT preparation,
college planning, and resume writing. More than 1,000 Scholars working as
interns at MBNA have participated in mentoring programs, community service, and
career development seminars. Delaware, Maine, and
[PHOTO]
MBNA's Excellence in Education Grants Program encourages teachers and school
administrators to apply for grants for programs that will improve the learning
environment.
Cleveland Scholars are also matched with MBNA people who act as advisors to help
them achieve college success, maintain scholarship eligibility, and prepare for
careers.
Though it was established just three years ago, the Foundation is already having
a profound impact. Students and teachers are benefiting from educational
opportunities and programs that were unavailable to them before.
As the Foundation continues its work, its impact in the community will widen
with the happy result of significantly improving the quality of future people of
MBNA.
[PHOTO] people
19
<PAGE> 32
[PHOTO] globe
MBNA International
[PHOTO] map
Key
-- Headquarters
-- Regional Centers
-- Sales Offices
HEADQUARTERS
- -- MBNA Corporation
Wilmington, DE 19884
(800) 441-7048
UNITED STATES OFFICES
REGIONAL CENTERS
- -- 16001 N. Dallas Pkwy.
Dallas, TX 75248
(800) 435-9672
- -- 44 Montgomery St.
San Francisco, CA 94104
(800) 585-4956
- -- 11333 McCormick Rd.
Hunt Valley, MD 21031
(888) 680-6945
- -- 1 Hatley Rd.
Belfast, ME 04915
(800) 843-3526
- -- 25875 Science Park Dr.
Beachwood, OH 44122
(800) 410-6262
- -- 1501 Yamato Rd.
Boca Raton, FL 33431
(800) 841-6845
SALES OFFICES
- -- 9 W. 57th St.
New York, NY 10019
(800) 746-6262
- -- 676 North Michigan Ave.
Chicago, IL 60611
(800) 906-6262
- -- 2600 Century Pkwy.
Atlanta, GA 30345
(800) 446-7048
MARKETING SYSTEMS
32 Washington St.
Camden, ME 04843
(800) 386-6262
16 Godfrey Dr.
Orono, ME 04473
(800) 503-6262
901 Washington Ave.
Portland, ME 04103
(800) 626-2488
5 Industrial Pkwy.
Brunswick, ME 04011
(800) 645-6682
260 Main St.
Presque Isle, ME 04769
(800) 545-2977
100 Main St.
Dover, NH 03820
(800) 330-5929
16001 N. Dallas Pkwy.
Dallas, TX 75248
(800) 435-9672
1501 Yamato Rd.
Boca Raton, FL 33431
(800) 841-6845
11333 McCormick Rd.
Hunt Valley, MD 21031
(888) 680-6945
400 Christiana Rd.
Newark, DE 19713
(800) 441-7048
860 Silver Lake Blvd.
Dover, DE 19904
(800) 346-2620
2568 Park Centre Blvd.
State College, PA 16801
(800) 471-6262
25875 Science Park Dr.
Beachwood, OH 44122
(800) 410-6262
388 S. Main St.
Akron, OH 44311
(800) 731-9260
274 Front St.
Farmington, ME 04938
(888) 465-3110
50 Pleasant St.
Fort Kent, ME 04743
(888) 336-6262
Newark, NJ
(To open in 2000)
INTERNATIONAL OFFICES
CANADA
- -- 1600 James Naismith Dr.
Gloucester,
Ontario K1B 5N8
(888) 871-6262
- -- 1000 de la Gauchetiere
Suite 4300
Montreal, Quebec
H3B 4W5
(514) 390-2151
ENGLAND
- -- Stansfield House
Chester Business Park
Wrexham Rd.
Chester, Cheshire
CH4 9QQ
United Kingdom
(011) 44-1244-672000
- -- 86 Jermyn St.
London SW1Y 6JD
United Kingdom
(011) 44-171-389-6200
IRELAND (The Republic Of)
- -- 46 St. Stephen's Green
Dublin 2, Ireland
(011) 353-1-619-6000
SCOTLAND
- -- One St. Colme Street
Edinburgh,
Scotland EH3 6AA
(011) 44-131-220-8240
20
<PAGE> 33
[PHOTO] trading floor
FINANCIAL CONTENTS
22 TEN-YEAR STATISTICAL SUMMARY
24 GLOSSARY OF FINANCIAL TERMS
25 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
42 SUPPLEMENTAL FINANCIAL INFORMATION
43 MANAGEMENT'S REPORT ON CONSOLIDATED FINANCIAL STATEMENTS AND INTERNAL
CONTROL
44 CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
45 CONSOLIDATED STATEMENTS OF INCOME
46 CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
47 CONSOLIDATED STATEMENTS OF CASH FLOWS
48 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
71 REPORT OF INDEPENDENT AUDITORS
72 QUARTERLY DATA
73 PREFERRED STOCK PRICE RANGE AND DIVIDENDS
74 COMMON STOCK PRICE RANGE AND DIVIDENDS
21
<PAGE> 34
MBNA CORPORATION AND SUBSIDIARIES
TEN-YEAR STATISTICAL SUMMARY
- --------------------------------------------------------------------------------
(dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1999 1998 1997 1996
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCOME STATEMENT DATA FOR THE YEAR
Net interest income............................... $ 933,765 $ 742,339 $ 692,390 $ 640,477
Provision for possible credit losses.............. 408,914 310,039 260,040 178,224
Other operating income............................ 4,207,821 3,228,969 2,812,879 1,895,923
Other operating expense........................... 3,077,708 2,407,204 2,223,121 1,626,882
Net income........................................ 1,024,423 776,266 622,500 474,495
PER COMMON SHARE DATA FOR THE YEAR
Earnings (a)...................................... $ 1.26 $ 1.01 $ .80 $ .61
Earnings--assuming dilution (a)................... 1.21 .97 .76 .59
Dividends......................................... .28 .24 .21 .19
Book value........................................ 4.97 2.90 2.34 1.87
RATIOS
Return on average total assets.................... 3.62% 3.38% 3.25% 3.26%
Return on average stockholders' equity............ 27.18 36.91 35.56 34.46
Average receivables to average deposits........... 85.33 86.04 88.82 92.50
Stockholders' equity to total assets.............. 13.61 9.27 9.25 10.00
Loan portfolio:
Delinquency (c)............................... 3.82 3.86 3.93 3.59
Net credit losses............................. 2.63 2.39 2.14 1.98
Managed loans (d):
Delinquency................................... 4.45 4.62 4.59 4.28
Net credit losses............................. 4.33 4.31 3.97 3.35
Net interest margin (e)....................... 7.42 7.47 7.50 7.62
MANAGED LOAN DATA (d)
At year end:
Loans held for securitization................. $ 9,692,616 $ 1,692,268 $ 2,900,198 $ 2,469,974
Loan portfolio................................ 7,971,093 11,776,099 8,261,876 7,659,078
Securitized loans............................. 54,591,804 46,172,739 38,217,786 28,494,481
----------------- ------------------ ---------------- --------------
Total managed loans........................ $ 72,255,513 $ 59,641,106 $ 49,379,860 $ 38,623,533
================ ================= ================ ==============
Average for the year:
Loans held for securitization................. $ 4,071,394 $ 2,577,482 $ 2,875,212 $ 2,529,484
Loan portfolio................................ 10,351,101 9,352,807 7,563,301 6,174,095
Securitized loans............................. 49,706,760 40,970,936 32,746,963 22,514,014
----------------- ----------------- ---------------- --------------
Total managed loans................... $ 64,129,255 $ 52,901,225 $ 43,185,476 $ 31,217,593
================= ================ ================ ==============
For the year:
Sales and cash advance volume................. $ 105,806,935 $ 82,968,874 $ 66,399,425 $ 48,666,129
BALANCE SHEET DATA AT YEAR END
Investment securities and money market instruments $ 4,572,052 $ 5,440,939 $ 4,594,709 $ 3,194,664
Loans held for securitization..................... 9,692,616 1,692,268 2,900,198 2,469,974
Credit card loans................................. 6,060,564 8,975,051 5,830,221 5,722,299
Other consumer loans.............................. 1,910,529 2,801,048 2,431,655 1,936,779
---------------- ------------------ ------------------ --------------
Total loans............................ 7,971,093 11,776,099 8,261,876 7,659,078
Reserve for possible credit losses................ (355,959) (216,911) (162,476) (118,427)
----------------- ------------------ ------------------ --------------
Net loans............................. 7,615,134 11,559,188 8,099,400 7,540,651
Total assets...................................... 30,859,132 25,806,260 21,305,513 17,035,342
Total deposits.................................... 18,714,753 15,407,040 12,913,213 10,151,686
Long-term debt and bank notes..................... 5,708,880 5,939,025 5,478,917 3,950,358
Stockholders' equity.............................. 4,199,443 2,391,035 1,970,050 1,704,308
AVERAGE BALANCE SHEET DATA FOR THE YEAR
Investment securities and money market instruments $ 5,797,141 $ 4,905,943 $ 3,851,867 $ 2,927,351
Loans held for securitization..................... 4,071,394 2,577,482 2,875,212 2,529,484
Credit card loans................................. 8,184,713 6,820,538 5,456,349 4,907,814
Other consumer loans.............................. 2,166,388 2,532,269 2,106,952 1,266,281
----------------- ------------------ ----------------- --------------
Total loans........................... 10,351,101 9,352,807 7,563,301 6,174,095
Reserve for possible credit losses................ (299,754) (192,024) (143,277) (111,041)
---------------- ------------------ ----------------- --------------
Net loans............................. 10,051,347 9,160,783 7,420,024 6,063,054
Total assets...................................... 28,310,222 22,982,349 19,125,282 14,571,288
Total deposits.................................... 16,901,334 13,866,645 11,752,887 9,408,843
Long-term debt and bank notes..................... 5,974,276 5,873,122 4,639,430 3,029,250
Stockholders' equity.............................. 3,769,539 2,103,043 1,750,459 1,377,072
Weighted average common shares outstanding (000) 801,020 751,856 751,837 751,812
Weighted average common shares outstanding and
common stock equivalents (000)................... 837,083 789,421 789,801 778,473
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Earnings per common share is computed using net income
applicable to common stock and weighted average common shares
outstanding, whereas, earnings per common share--assuming
dilution includes the potential dilutive effect of common stock
equivalents in accordance with Statement of Financial Accounting
Standards No. 128, "Earnings per Share." MBNA Corporation's ("the
Corporation") common stock equivalents are solely related to
employee stock options. The Corporation has no other common stock
equivalents. For comparative purposes, earnings per common share
and earnings per common share--assuming dilution for the year
ended December 31, 1990, is presented on a pro forma basis.
(b) During 1991, the Corporation became an independent corporation
traded publicly on the New York Stock Exchange. Accordingly,
dividends per common share, book value per common share, and
stockholders' equity ratios have not been presented for the year
ended December 31, 1990.
(c) Loan portfolio delinquency does not include loans held for
securitization or securitized loans.
22
<PAGE> 35
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 544,226 $ 532,108 $ 474,323 $ 357,515 $ 239,599 $ 164,315
138,176 108,477 98,795 97,534 57,951
1,424,618 1,013,580 739,968 577,505 540,708 451,863
1,246,067 996,110 924,872 565,467 459,035 354,462
353,099 266,593 207,796 172,732 149,213 128,998
$ .47 $ .35 $ .28 $ .23 .20 $ .17
.46 .35 .27 .23 .20 .17
.17 .14 .13 .12 .11 (b)
1.48 1.22 1.02 .88 .79 (b)
3.09% 3.16% 3.15% 2.96% 2.79% 3.87%
35.51 32.70 30.01 28.55 28.55 (b)
91.60 93.05 85.34 69.98 71.77 103.51
9.56 9.51 10.51 10.25 9.86 (b)
3.11 2.60 3.03 3.78 4.39 4.15
1.91 1.96 2.43 2.87 2.65 1.79
3.70 3.03 3.27 3.99 4.40 4.52
2.74 2.59 2.97 3.33 3.05 2.21
7.42 8.16 8.47 7.22 6.36 6.55
$ 3,168,427 $ 2,299,026 $ 741,869 $ 678,000 $ 600,000 $ 567,000
4,967,491 3,407,974 3,725,509 3,300,650 2,886,405 2,672,733
18,575,786 13,036,864 7,891,140 5,881,479 5,327,901 4,137,950
----------- ----------- ---------- ------------- ---------- -----------
$ 26,711,704 $ 18,743,864 $ 12,358,518 $ 9,860,129 $ 8,814,306 $ 7,377,683
=========== =========== =========== ============= ========== ===========
$ 2,269,362 $ 1,330,011 $ 642,750 $ 733,473 $ 560,447 $ 707,632
4,792,536 4,000,271 3,425,935 2,659,305 2,707,535 1,907,208
15,440,499 9,462,401 6,596,387 5,528,394 4,563,279 3,798,409
----------- ----------- ----------- -------------- ----------- -----------
$ 22,502,397 $ 14,792,683 $ 10,665,072 $ 8,921,172 7,831,261 $ 6,413,249
=========== =========== =========== ============== =========== ===========
$ 34,272,909 $ 25,078,918 $ 17,889,747 $ 14,523,570 $ 12,915,104 $ 11,541,181
$ 2,669,402 $ 2,269,081 $ 1,440,684 $ 1,345,995 $ 1,768,048 $ 540,660
3,168,427 2,299,026 741,869 678,000 600,000 567,000
4,090,553 2,882,232 2,949,995 2,659,007 2,299,912 2,216,604
876,938 525,742 775,514 641,643 586,493 456,129
----------- ----------- ----------- ----------- ----------- -----------
4,967,491 3,407,974 3,725,509 3,300,650 2,886,405 2,672,733
(104,886) (101,519) (97,580) (97,580) (97,580) (97,580)
----------- ----------- ----------- ----------- ----------- -----------
4,862,605 3,306,455 3,627,929 3,203,070 2,788,825 2,575,153
13,228,889 9,671,858 7,319,756 6,454,511 6,009,028 4,579,514
8,608,914 6,632,489 5,241,883 4,568,791 5,094,011 4,202,159
2,657,600 1,687,357 779,553 470,601 - -
1,265,058 919,578 769,131 661,290 592,230 214,098
$ 2,451,783 $ 1,684,316 $ 1,364,350 $ 1,572,911 $ 1,401,469 $ 160,356
2,269,362 1,330,011 642,750 733,473 560,447 707,632
4,160,230 3,207,110 2,735,191 2,050,487 2,176,144 1,529,759
632,306 793,161 690,744 608,818 531,391 377,449
----------- ----------- ----------- ----------- ----------- -----------
4,792,536 4,000,271 3,425,935 2,659,305 2,707,535 1,907,208
(103,568) (99,175) (97,580) (97,580) (93,284) (76,509)
----------- ----------- ----------- ----------- ----------- -----------
4,688,968 3,901,096 3,328,355 2,561,725 2,614,251 1,830,699
11,425,721 8,432,511 6,596,419 5,829,052 5,347,990 3,330,155
7,709,840 5,728,432 4,767,669 4,847,911 4,553,186 2,526,109
2,212,591 1,199,520 537,609 116,301 - -
994,287 815,243 692,460 605,079 522,721 258,719
751,839 751,840 751,840 752,360 751,878 751,781
770,464 762,515 760,118 760,187 756,576 751,781
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(d) Managed loans include the Corporation's loans held for
securitization, loan portfolio, and securitized loans.
(e) Managed net interest margin is
presented on a fully taxable equivalent basis.
The consolidated financial highlights for the year ended December 31, 1990,
reflect the combined results of the "Credit Card and Certain Related Banking
Activities of MBNA America Bank, N.A., and Certain Affiliates" prior to the
organization of the Corporation.
23
<PAGE> 36
MBNA CORPORATION AND SUBSIDIARIES
GLOSSARY OF FINANCIAL TERMS
The following definitions may be helpful when reading Management's Discussion
and Analysis of Financial Condition and Results of Operations of MBNA
Corporation ("the Corporation").
ASSET SECURITIZATION
Asset securitization removes loan receivables from the consolidated statements
of financial condition by selling them, generally to a trust. Asset
securitization converts interest income, interchange, credit card and other
fees, and insurance income in excess of interest paid to investors; credit
losses; and other trust expenses into securitization income, while reducing the
Corporation's on-balance-sheet assets.
BORROWED FUNDS
Borrowed funds include both short-term borrowings and long-term debt and bank
notes.
CREDIT CARD FEES
Credit card fees include annual, late, overlimit, returned check, cash advance,
and other miscellaneous fees.
CREDIT RISK
Credit risk is the possibility that a loss may occur should a borrower or
counterparty fail to honor the terms of a contract.
DIRECT DEPOSITS
Direct deposits are deposits marketed to and received from individual Customers
without the use of a third-party intermediary.
FOREIGN ACTIVITIES
The Corporation's foreign activities are primarily performed through MBNA
America Bank, N.A.'s ("the Bank") two foreign bank subsidiaries, MBNA
International Bank Limited ("MBNA Europe") and MBNA Canada Bank ("MBNA
Canada"). The Bank also has a foreign branch office in the Grand Cayman
Islands.
FOREIGN CURRENCY EXCHANGE RATE RISK
Foreign currency exchange rate risk refers to the potential changes in current
and future earnings or capital arising from movements in foreign exchange rates
and occurs as a result of cross-currency investment and funding activities. The
Corporation's foreign currency exchange rate risk is primarily limited to the
unhedged position of the Corporation's net investment in its foreign
subsidiaries.
FULLY TAXABLE EQUIVALENT (FTE) BASIS
FTE basis represents the income on total interest-earning assets that is either
tax-exempt or taxed at a reduced rate, adjusted to give effect to the prevailing
incremental federal income tax rate, and adjusted for nondeductible carrying
costs and state income taxes, where applicable. Yield calculations, where
appropriate, include these adjustments.
INSURANCE INCOME
Insurance income representa the fee the Corporation receives for marketing
credit-related Life and Disability, Automobile, and Life and Health insurance
products. The Corporation does not retain any of the uderwriting risk
associated with the insurance products it markets.
INTERCHANGE INCOME
Interchange income is a fee paid by a merchant bank to the card-issuing bank
through the interchange network as compensation for risk, grace period, and
other operating costs. Such fees are set annually by MasterCard International
and Visa International.
INTEREST RATE RISK
Interest rate risk refers to potential changes in current and future net
interest income resulting from changes in interest rates, and differences in the
repricing characteristics between interest rate sensitive assets and
liabilities.
INTEREST RATE SENSITIVE ASSETS/LIABILITIES
Interest rate sensitive assets/liabilities have yields/rates that can change
within a designated time period due to their maturity, a change in an underlying
index rate, or the contractual ability of the Corporation to change the
yield/rate.
INVESTMENT SECURITIES
Investment securities include both those available-for-sale and those
held-to-maturity. The Corporation does not hold investment securities for
trading purposes.
LOAN PORTFOLIO
Loan portfolio includes credit card and other consumer loans, excluding loans
held for securitization, as reported on the consolidated statements of financial
condition as total loans.
LOAN RECEIVABLES
Loan receivables consist of the Corporation's loans held for securitization and
loan portfolio.
MANAGED LOANS
Managed loans consist of the Corporation's loans held for securitization, loan
portfolio, and securitized loans.
MONEY MARKET INSTRUMENTS
Money market instruments include interest-earning time deposits in other banks
and federal funds sold and securities purchased under resale agreements.
NET INTEREST INCOME
Net interest income represents interest income on total interest-earning assets,
on an FTE basis where appropriate, less interest expense on total
interest-bearing liabilities.
OFF-BALANCE-SHEET FINANCIAL INSTRUMENTS
Off-balance-sheet financial instruments include interest rate swap agreements,
forward exchange contracts, and foreign exchange swap agreements. The
Corporation uses interest rate swap agreements to change fixed-rate funding
sources to floating-rate funding sources to better match the rate sensitivity of
the Corporation's assets. The Corporation uses forward exchange contracts and
foreign exchange swap agreements to reduce its exposure to foreign currency
exchange rate risk primarily related to its foreign bank subsidiaries.
The Corporation does not hold or issue off-balance-sheet financial instruments
for trading purposes.
24
<PAGE> 37
MBNA CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
This discussion is intended to further the reader's understanding of the
consolidated financial statements, financial condition, and results of
operations of MBNA Corporation. It should be read in conjunction with the
consolidated financial statements, notes, tables, and glossary of financial
terms included in this report.
INTRODUCTION
MBNA Corporation ("the Corporation"), a bank holding company located in
Wilmington, Delaware, is the parent company of MBNA America Bank, N.A. ("the
Bank"), a national bank and the Corporation's principal subsidiary. The Bank has
two wholly owned foreign bank subsidiaries, MBNA International Bank Limited
("MBNA Europe") located in the United Kingdom and MBNA Canada Bank ("MBNA
Canada") located in Canada. Through the Bank, the Corporation is the largest
independent credit card lender in the world and is the leading issuer of
affinity credit cards, marketed primarily to members of associations and
Customers of financial institutions. In addition to its credit card lending, the
Corporation also makes other consumer loans and offers insurance and deposit
products.
<TABLE>
<CAPTION>
NET INCOME
(MILLIONS)
97 98 99
<S> <C> <C>
$ 622.5 $ 776.3 $ 1,024.4
</TABLE>
The Corporation generates interest and other income through finance charges
assessed on outstanding loan receivables, interchange income, credit card and
other fees, securitization income, insurance income, and interest earned on
investment securities and money market instruments. The Corporation's primary
costs are the costs of funding its loan receivables and investment securities
and money market instruments, which include interest paid on deposits,
short-term borrowings, and long-term debt and bank notes; credit losses;
royalties paid to affinity groups and financial institutions; business
development and operating expenses; and income taxes.
<TABLE>
<CAPTION>
EARNINGS PER COMMON SHARE-ASSUMING DILUTION
(BILLIONS)
90 91 92 93 94 95 96 97 98 99
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
.17 .20 .23 .27 .35 .46 .59 .76 .97 1.21
</TABLE>
EARNINGS SUMMARY
Net income for 1999 increased 32.0% to $1.0 billion or $1.21 per common share
from $776.3 million or $.97 per common share in 1998. Net income for 1998
increased 24.7% from $622.5 million or $.76 per common share in 1997. Earnings
per common share amounts are presented assuming dilution.
The overall growth in earnings is primarily attributable to the growth in the
Corporation's managed loans outstanding. Managed loans at December 31, 1999,
increased $12.6 billion to $72.3 billion from December 31, 1998, as the
Corporation acquired 400 new endorsements from organizations and added 12.5
million new accounts. During 1998, managed loans increased $10.3 billion from
$49.4 billion at December 31, 1997. During 1998, the Corporation acquired 475
new endorsements from organizations and added 9.3 million new accounts. The
Corporation's average managed loans increased $11.2 billion to $64.1 billion in
1999 from 1998, while average managed loans increased $9.7 billion to $52.9
billion in 1998 from 1997. The Corporation's growth in managed loans in both
1999 and 1998 was a result of the Corporation's continued marketing efforts and
loan portfolio acquisitions.
The Corporation continues to be an active participant in the asset
securitization market. Asset securitization is the sale of loans to investors,
generally through a trust, that converts interest income, interchange, credit
card and other fees, and insurance income in excess of interest paid to
investors; credit losses; and other trust expenses into securitization income,
while reducing the Corporation's on-balance-sheet assets. Gains are recognized
by the Corporation in securitization income at the time of initial sale and each
subsequent sale of loan receivables in a securitization. During 1999, the
Corporation securitized $13.3 billion of credit card and other consumer loan
receivables, bringing the total amount of outstanding securitized loans to
$54.6 billion at December 31, 1999. During 1998, the Corporation securitized
$10.7 billion of credit card and other consumer loan receivables, bringing the
total amount of outstanding securitized loans to $46.2 billion at December 31,
1998.
<TABLE>
<CAPTION>
RETURN ON AVERAGE TOTAL ASSETS
97 98 99
<S> <C> <C>
3.25% 3.38% 3.62%
</TABLE>
<TABLE>
<CAPTION>
RETURN ON AVERAGE STOCKHOLDERS'S EQUITY
97 98 99
<S> <C> <C>
35.56% 36.91% 7.18%
</TABLE>
The Corporation's return on average total assets in 1999 increased to 3.62% from
3.38% in 1998 and 3.25% in 1997. The increases in return on average total assets
are a result of the Corporation's net income growing faster than its average
total assets as a result of asset securitization. The Corporation's return on
average stockholders' equity is 27.18% in 1999, compared to 36.91% in 1998 and
35.56% in 1997. The lower return on average stockholders' equity in 1999 is
primarily a result of an increase in average stockholders' equity from the
issuance of 50 million shares of common stock in January 1999 for $1.2 billion,
net of issuance costs. The increase in the return on average stockholders'
equity in 1998 was primarily a result of an increase in net income partially
offset by the growth in average stockholders' equity. To the extent stock
options are exercised or restricted shares are awarded from time to time under
the Corporation's Long-Term Incentive Plans, the Board of Directors has approved
the purchase, on the open market or in privately negotiated transactions, of the
number of common shares issued.
25
<PAGE> 38
MBNA CORPORATION AND SUBSIDIARIES
TABLE 1: STATEMENTS OF AVERAGE BALANCES, YIELDS AND RATES, INCOME OR EXPENSE
(dollars in thousands, yields and rates on a fully taxable equivalent basis)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1999 1998
- ------------------------------------------------------------------------------------------------------------------------------------
Average Yield/ Income Average Yield/ Income
Amount Rate or Expense Amount Rate or Expense
--------------------------------------- -------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Interest-earning assets:
Interest-earning time deposits in other banks:
Domestic...................................... $ 3,450 3.91% $ 135 $ 8,806 4.69% $ 413
Foreign....................................... 2,309,914 5.20 120,099 2,349,929 5.75 135,007
----------- ---------- ----------- -----------
Total interest-earning time deposits
in other banks......................... 2,313,364 5.20 120,234 2,358,735 5.74 135,420
Federal funds sold and securities purchased
under resale agreements....................... 936,265 5.05 47,264 538,009 5.35 28,783
----------- ---------- ----------- -----------
Total money market instruments......... 3,249,629 5.15 167,498 2,896,744 5.67 164,203
Investment securities (a):
Taxable....................................... 2,451,511 5.38 131,818 1,917,645 5.79 111,092
Tax-exempt (b)................................ 96,001 5.75 5,519 91,554 5.72 5,238
----------- ---------- ----------- -----------
Total investment securities............ 2,547,512 5.39 137,337 2,009,199 5.79 116,330
Loans held for securitization:
Domestic......................................... 3,163,296 13.67 432,570 1,853,805 14.36 266,190
Foreign.......................................... 908,098 13.52 122,735 723,677 14.64 105,952
----------- ---------- ----------- -----------
Total loans held for securitization.... 4,071,394 13.64 555,305 2,577,482 14.44 372,142
Loans:
Domestic:
Credit card................................ 7,183,094 13.43 964,912 6,174,766 14.19 876,094
Other consumer............................. 1,988,622 14.14 281,117 2,288,374 13.94 318,958
----------- ---------- ----------- -----------
Total domestic loans................... 9,171,716 13.59 1,246,029 8,463,140 14.12 1,195,052
Foreign.......................................... 1,179,385 13.40 158,034 889,667 13.52 20,278
----------- ---------- ----------- -----------
Total loans............................ 10,351,101 13.56 1,404,063 9,352,807 14.06 1,315,330
----------- ---------- ----------- -----------
Total loan receivables................. 14,422,495 13.59 1,959,368 11,930,289 14.14 1,687,472
----------- ---------- ----------- -----------
Total interest-earning assets.......... 20,219,636 11.20 2,264,203 16,836,232 11.69 1,968,005
Cash and due from banks.............................. 541,644 459,842
Premises and equipment, net.......................... 1,651,977 1,633,761
Other assets......................................... 6,196,719 4,244,538
Reserve for possible credit losses................... (299,754) (192,024)
----------- -----------
Total assets......................................... $28,310,222 $22,982,349
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest-bearing liabilities:
Interest-bearing deposits:
Domestic:
Time deposits (c).............................. $11,193,882 5.90 660,933 $ 8,965,995 6.27 562,161
Money market deposit accounts.................. 4,308,305 5.01 215,705 3,564,300 5.40 192,384
Interest-bearing transaction accounts.......... 36,895 4.27 1,574 31,644 4.67 1,478
Savings accounts............................... 37,808 4.33 1,636 11,303 4.60 520
----------- ---------- ----------- -----------
Total domestic interest-bearing deposits..... 15,576,890 5.65 879,848 12,573,242 6.02 756,543
Foreign:
Time deposits..................................... 742,210 5.33 39,578 865,975 6.88 59,561
----------- ---------- ----------- -----------
Total interest-bearing deposits................. 16,319,100 5.63 919,426 13,439,217 6.07 816,104
Borrowed funds:
Short-term borrowings:
Domestic....................................... 441,993 5.67 25,047 223,437 5.53 12,347
Foreign........................................ 222,383 5.08 11,290 225,065 6.08 13,691
----------- ---------- ----------- -----------
Total short-term borrowings.................. 664,376 5.47 36,337 448,502 5.81 26,038
Long-term debt and bank notes:
Domestic (c)...................................... 5,450,998 6.18 336,728 5,643,825 6.44 363,593
Foreign........................................... 523,278 6.88 36,015 229,297 7.89 18,098
----------- ---------- ----------- -----------
Total long-term debt and bank notes............ 5,974,276 6.24 372,743 5,873,122 6.50 381,691
----------- ---------- ----------- -----------
Total borrowed funds........................... 6,638,652 6.16 409,080 6,321,624 6.45 407,729
----------- ---------- ----------- -----------
Total interest-bearing liabilities............. 22,957,752 5.79 1,328,506 19,760,841 6.19 1,223,833
Demand deposits...................................... 582,234 427,428
Other liabilities.................................... 1,000,697 691,037
----------- -----------
Total liabilities............................. 24,540,683 20,879,306
Stockholders' equity................................. 3,769,539 2,103,043
----------- -----------
Total liabilities and stockholders' equity.... $28,310,222 $22,982,349
=========== ---------- =========== -----------
Net interest income........................... $ 935,697 $ 744,172
========== ===========
Net interest margin........................... 4.63 4.42
Interest rate spread.......................... 5.41 5.50
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1997
- ----------------------------------------------------------------------------------------------------
Average Yield/ Income
Amount Rate or Expense
----------------------------------------
<S> <C> <C> <C>
ASSETS
Interest-earning assets:
Interest-earning time deposits in other banks:
Domestic...................................... $ 2,683 3.80% $ 102
Foreign....................................... 848,229 5.77 48,971
----------- ----------
Total interest-earning time deposits
in other banks......................... 850,912 5.77 49,073
Federal funds sold and securities purchased
under resale agreements....................... 430,614 5.56 23,962
----------- ----------
Total money market instruments......... 1,281,526 5.70 73,035
Investment securities (a):
Taxable....................................... 2,480,722 5.70 141,429
Tax-exempt (b)................................ 89,619 6.03 5,402
----------- ----------
Total investment securities........... 2,570,341 5.71 146,831
Loans held for securitization:
Domestic...................................... 2,486,520 14.50 360,506
Foreign....................................... 388,692 14.44 56,139
----------- ----------
Total loans held for securitization... 2,875,212 14.49 416,645
Loans:
Domestic:
Credit card................................... 5,196,643 14.16 735,971
Other consumer................................ 1,938,292 14.49 280,822
----------- ----------
Total domestic loans.................. 7,134,935 14.25 1,016,793
Foreign....................................... 428,366 13.91 59,600
----------- ----------
Total loans........................... 7,563,301 14.23 1,076,393
----------- ----------
Total loan receivables................ 10,438,513 14.30 1,493,038
----------- ----------
Total interest-earning assets......... 14,290,380 11.99 1,712,904
Cash and due from banks.............................. 495,835
Premises and equipment, net.......................... 1,292,284
Other assets......................................... 3,190,060
Reserve for possible credit losses................... (143,277)
-----------
Total assets.......................... $19,125,282
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest-bearing liabilities:
Interest-bearing deposits:
Domestic:
Time deposits (c).............................. $ 8,011,904 6.30 504,742
Money market deposit accounts.................. 2,908,901 5.42 157,786
Interest-bearing transaction accounts.......... 27,779 4.72 1,310
Savings accounts............................... 11,578 4.68 542
----------- ----------
Total domestic interest-bearing deposits..... 10,960,162 6.06 664,380
Foreign:
Time deposits..................................... 452,530 6.53 29,540
----------- ----------
Total interest-bearing deposits................. 11,412,692 6.08 693,920
Borrowed funds:
Short-term borrowings:
Domestic....................................... 285,894 5.69 16,257
Foreign........................................ 52,261 6.75 3,527
----------- ----------
Total short-term borrowings.................. 338,155 5.85 19,784
Long-term debt and bank notes:
Domestic (c)...................................... 4,459,829 6.52 290,814
Foreign........................................... 179,601 7.85 14,105
----------- ----------
Total long-term debt and bank notes............ 4,639,430 6.57 304,919
----------- ----------
Total borrowed funds........................... 4,977,585 6.52 324,703
----------- ----------
Total interest-bearing liabilities............. 16,390,277 6.21 1,018,623
Demand deposits...................................... 340,195
Other liabilities.................................... 644,351
-----------
Total liabilities............................. 17,374,823
Stockholders' equity................................. 1,750,459
-----------
Total liabilities and stockholders' equity.... $19,125,282
=========== ----------
Net interest income........................... $ 694,281
==========
Net interest margin........................... 4.86
Interest rate spread.......................... 5.78
- ----------------------------------------------------------------------------------------------------
</TABLE>
(a) Average amounts for investment securities available-for-sale are based on
market values; if these securities were carried at amortized cost, there
would be no impact on the net interest margin.
(b) The fully taxable equivalent adjustment for the years ended December 31,
1999, 1998, and 1997, was $1,932, $1,833, and $1,891, respectively.
(c) Includes the impact of interest rate swap agreements used to change
fixed-rate funding sources to floating-rate funding sources.
26
<PAGE> 39
MBNA CORPORATION AND SUBSIDIARIES
TABLE 2: RATE-VOLUME VARIANCE ANALYSIS (a)
(dollars in thousands, on a fully taxable equivalent basis)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1999 COMPARED TO 1998
- -------------------------------------------------------------------------------------------------------------------------
Volume Rate Total
-----------------------------------------------
<S> <C> <C> <C>
INTEREST-EARNING ASSETS
Interest-earning time deposits in other banks:
Domestic ........................................................ $ (218) $ (60) $ (278)
Foreign ......................................................... (2,266) (12,642) (14,908)
---------- ---------- ----------
Total interest-earning time deposits in other banks ..... (2,484) (12,702) (15,186)
Federal funds sold and securities purchased under resale agreements 20,190 (1,709) 18,481
---------- ---------- ----------
Total money market instruments .......................... 17,706 (14,411) 3,295
Investment securities:
Taxable ......................................................... 29,162 (8,436) 20,726
Tax-exempt ...................................................... 256 25 281
---------- ---------- ----------
Total investment securities ............................. 29,418 (8,411) 21,007
Loans held for securitization:
Domestic ........................................................ 179,635 (13,255) 166,380
Foreign ......................................................... 25,406 (8,623) 16,783
---------- ---------- ----------
Total loans held for securitization ..................... 205,041 (21,878) 183,163
Loans:
Domestic:
Credit card ................................................... 137,322 (48,504) 88,818
Other consumer ................................................ (42,316) 4,475 (37,841)
---------- ---------- ----------
Total domestic loans .................................... 95,006 (44,029) 50,977
Foreign ......................................................... 38,831 (1,075) 37,756
---------- ---------- ----------
Total loans ............................................. 133,837 (45,104) 88,733
---------- ---------- ----------
Total loan receivables .................................. 338,878 (66,982) 271,896
---------- ---------- ----------
Total interest income ................................... 386,002 (89,804) 296,198
INTEREST-BEARING LIABILITIES
Interest-bearing deposits:
Domestic:
Time deposits ................................................. 133,091 (34,319) 98,772
Money market deposit accounts ................................. 37,999 (14,678) 23,321
Interest-bearing transaction accounts ......................... 231 (135) 96
Savings accounts .............................................. 1,149 (33) 1,116
---------- ---------- ----------
Total domestic interest-bearing deposits ................ 172,470 (49,165) 123,305
Foreign:
Time deposits ................................................. (7,769) (12,214) (19,983)
---------- ---------- ----------
Total interest-bearing deposits ......................... 164,701 (61,379) 103,322
Borrowed funds:
Short-term borrowings:
Domestic ................................................... 12,377 323 12,700
Foreign .................................................... (161) (2,240) (2,401)
---------- ---------- ----------
Total short-term borrowings ............................. 12,216 (1,917) 10,299
Long-term debt and bank notes:
Domestic ................................................... (12,191) (14,674) (26,865)
Foreign .................................................... 20,503 (2,586) 17,917
---------- ---------- ----------
Total long-term debt and bank notes ..................... 8,312 (17,260) (8,948)
---------- ---------- ----------
Total borrowed funds .................................... 20,528 (19,177) 1,351
---------- ---------- ----------
Total interest expense .................................. 185,229 (80,556) 104,673
---------- ---------- ----------
Net interest income ..................................... $ 200,773 $ (9,248) $ 191,525
========== ========== ==========
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1998 COMPARED TO 1997
- -------------------------------------------------------------------------------------------------------------------------
Volume Rate Total
------------------------------------------------
<S> <C> <C> <C>
INTEREST-EARNING ASSETS
Interest-earning time deposits in other banks:
Domestic ........................................................ $ 282 $ 29 $ 311
Foreign ......................................................... 86,276 (240) 86,036
---------- ---------- ----------
Total interest-earning time deposits in other banks ..... 86,558 (211) 86,347
Federal funds sold and securities purchased under resale agreements 5,776 (955) 4,821
---------- ---------- ----------
Total money market instruments .......................... 92,334 (1,166) 91,168
Investment securities:
Taxable ......................................................... (32,585) 2,248 (30,337)
Tax-exempt ...................................................... 115 (279) (164)
---------- ---------- ----------
Total investment securities ............................. (32,470) 1,969 (30,501)
Loans held for securitization:
Domestic ........................................................ (90,884) (3,432) (94,316)
Foreign ......................................................... 49,034 779 49,813
---------- ---------- ----------
Total loans held for securitization ..................... (41,850) (2,653) (44,503)
Loans:
Domestic:
Credit card ................................................... 138,777 1,346 140,123
Other consumer ................................................ 49,129 (10,993) 38,136
---------- ---------- ----------
Total domestic loans .................................... 187,906 (9,647) 178,259
Foreign ......................................................... 62,412 (1,734) 60,678
---------- ---------- ----------
Total loans ............................................. 250,318 (11,381) 238,937
---------- ---------- ----------
Total loan receivables .................................. 208,468 (14,034) 194,434
---------- ---------- ----------
Total interest income ................................... 268,332 (13,231) 255,101
INTEREST-BEARING LIABILITIES
Interest-bearing deposits:
Domestic:
Time deposits ................................................. 59,832 (2,413) 57,419
Money market deposit accounts ................................. 35,379 (781) 34,598
Interest-bearing transaction accounts ......................... 181 (13) 168
Savings accounts .............................................. (13) (9) (22)
---------- ---------- ----------
Total domestic interest-bearing deposits ................ 95,379 (3,216) 92,163
Foreign:
Time deposits ................................................. 28,356 1,665 30,021
---------- ---------- ----------
Total interest-bearing deposits ......................... 123,735 (1,551) 122,184
Borrowed funds:
Short-term borrowings:
Domestic ................................................... (3,463) (447) (3,910)
Foreign .................................................... 10,545 (381) 10,164
---------- ---------- ----------
Total short-term borrowings ............................. 7,082 (828) 6,254
Long-term debt and bank notes:
Domestic ................................................... 76,317 (3,538) 72,779
Foreign .................................................... 3,922 71 3,993
---------- ---------- ----------
Total long-term debt and bank notes ..................... 80,239 (3,467) 76,772
---------- ---------- ----------
Total borrowed funds .................................... 87,321 (4,295) 83,026
---------- ---------- ----------
Total interest expense .................................. 211,056 (5,846) 205,210
---------- ---------- ----------
Net interest income ..................................... $ 57,276 $ (7,385) $ 49,891
========== ========== ==========
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) The rate-volume variance for each category has been allocated on a
consistent basis between rate and volume variances based on the percentage
of the rate or volume variance to the sum of the two absolute variances.
NET INTEREST INCOME
Net interest income represents interest income on total interest-earning assets,
on a fully taxable equivalent basis where appropriate, less interest expense on
total interest-bearing liabilities. Table 2 illustrates the impact that rate and
volume changes had on the Corporation's net interest income for the years
presented.
Net interest income, on a fully taxable equivalent basis, increased $191.5
million to $935.7 million in 1999 from 1998. The increase in net interest income
in 1999 is primarily a result of a $3.4 billion increase in average
interest-earning assets from 1998, offset by a $3.2 billion increase in average
interest-bearing liabilities. The increase in average interest-earning assets
for the year ended December 31, 1999, is primarily a result of an increase in
average loan receivables of $2.5 billion. Average investment securities and
money market instruments also increased $891.2 million during 1999 as compared
to the same period in 1998. The increase in interest-bearing liabilities
resulted primarily from funding the increase in interest-earning assets,
accounts receivable from securitizations, and the value of acquired Customer
accounts. The value of acquired Customer accounts represents the premiums paid
by the Corporation in excess of acquired loan receivables. Both accounts
receivable from securitizations and the value of acquired Customer accounts are
included in other assets in Table 1. For the year ended December 31, 1999, the
yield earned on average interest-earning assets decreased 49 basis points, while
the rate paid on average interest-bearing liabilities declined 40 basis points
as compared to the same period in 1998. The decline in the yield earned on
average interest-earning assets and rates paid on average interest-bearing
liabilities reflects actions by the Federal Reserve Board
27
<PAGE> 40
MBNA CORPORATION AND SUBSIDIARIES
during the last four months of 1998 which impacted overall market interest rates
in 1999. Also the Corporation reduced rates on loan products in order to attract
and retain Customers and grow loan receivables.
<TABLE>
<CAPTION>
NET INTEREST INCOME (FULLY TABLE EQUIVALENT BASIS)
(millions)
97 98 99
<S> <C> <C>
664.3 744.2 935.7
</TABLE>
Net interest income, on a fully taxable equivalent basis, increased $49.9
million to $744.2 million in 1998 from $694.3 million in 1997. The increase in
net interest income in 1998 was primarily a result of a $2.5 billion increase
in average interest-earning assets from 1997, offset by a $3.4 billion increase
in average interest-bearing liabilities and a 30 basis point decline in the
yield earned on average interest-earning assets for the same period. The
increase in average interest-earning assets for 1998 was a result of a $1.5
billion increase in average loan receivables combined with a $1.0 billion
increase in average investment securities and money market instruments, as
compared to the same period in 1997. The increase in interest-bearing
liabilities resulted primarily from funding the increase in interest-earning
assets and accounts receivable from securitizations.
Net interest margin represents net interest income on a fully taxable equivalent
basis expressed as a percentage of average total interest-earning assets. The
Corporation's net interest margin, on a fully taxable equivalent basis, was
4.63% in 1999, compared to 4.42% in 1998 and 4.86% in 1997.
INVESTMENT SECURITIES AND MONEY MARKET INSTRUMENTS
Interest income on investment securities in 1999, on a fully taxable equivalent
basis, increased $21.0 million to $137.3 million from 1998. The increase in 1999
was primarily the result of a $538.3 million increase in average investment
securities, offset by a 40 basis point decrease in the yield earned on these
securities. Interest income on investment securities, on a fully taxable
equivalent basis, decreased $30.5 million to $116.3 million in 1998 from 1997.
The decrease in 1998 was primarily the result of a $561.1 million decrease in
average investment securities, offset by an 8 basis point increase in the yield
earned on these securities.
<TABLE>
<CAPTION>
INVESTMENT SECURITIES INTEREST INCOME
(FULLY TAXABLE EQUIVALENT BASIS)
(millions)
97 98 99
<S> <C> <C>
146.8 116.3 137.3
</TABLE>
Interest income on money market instruments increased $3.3 million to $167.5
million in 1999 from 1998. The increase in 1999 was primarily the result of an
increase of $352.9 million in average money market instruments from 1998, offset
by a 52 basis point decrease in the yield earned on these instruments. Interest
income on money market instruments increased $91.2 million to $164.2 million in
1998 from 1997. The increase in 1998 was primarily the result of an increase of
$1.6 billion in average money market instruments from 1997, offset by a 3 basis
point decrease in the yield earned on these instruments.
<TABLE>
<CAPTION>
MONEY MARKET INSTRUMENTS
INTEREST INCOME BASIS)
(millions)
97 98 99
<S> <C> <C>
73.0 164.2 167.5
</TABLE>
Average investment securities and money market instruments are affected by the
timing of the receipt of funds from asset securitizations, deposits, loan
payments, long-term debt and bank notes, and maturities of investment
securities. Funds received from these sources are invested in short-term, liquid
money market instruments and investment securities available-for-sale until the
funds are needed for loan growth and other liquidity needs. Average money
market instruments were also higher during 1999 as a result of the investment of
the net proceeds from the issuance
TABLE 3: INVESTMENT SECURITIES
(dollars in thousands, yields on a fully taxable equivalent basis)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
ESTIMATED MATURITIES AT DECEMBER 31, 1999
- ------------------------------------------------------------------------------------------------------------------------
WITHIN 1 YEAR 1-5 YEARS 6-10 YEARS
BOOK YIELD BOOK YIELD BOOK YIELD
---------------------- --------------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT SECURITIES AVAILABLE-FOR-SALE
U.S. Treasury and other U.S. government
agencies obligations............................ $324,528 4.79% $1,252,824 5.40% $ - -%
State and political subdivisions of the
United States................................... 97,791 7.62 - - - -
Asset-backed and other securities................. 380,902 6.46 648,798 6.33 36,293 6.64
-------- ---------- --------
Total investment securities available-for-sale. $803,221 5.93 $1,901,622 5.72 $ 36,293 6.64
======== ========== ========
INVESTMENT SECURITIES HELD-TO-MATURITY
U.S. Treasury and other U.S. government
agencies obligations............................ $ - - $ - - $ - -
State and political subdivisions of the
United States................................... 95 4.60 207 4.73 - -
Asset-backed and other securities................. - - 12,906 6.90 - -
-------- ---------- --------
Total investment securities held-to-maturity... $ 95 4.60 $ 13,113 6.87 $ - -
======== ========== ========
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
ESTIMATED MATURITIES AT DECEMBER 31, 1999
- ---------------------------------------------------------------------------------------------------
OVER 10 YEARS TOTAL
BOOK YIELD BOOK YIELD
------------------ ------------------------
<S> <C> <C> <C> <C>
INVESTMENT SECURITIES AVAILABLE-FOR-SALE
U.S. Treasury and other U.S. government
agencies obligations............................ $ - -% $1,577,352 5.27%
State and political subdivisions of the
United States................................... - - 97,791 7.62
Asset-backed and other securities................. 11,527 6.63 1,077,520 6.39
-------- ----------
Total investment securities available-for-sale. $ 11,527 6.63 $2,752,663 5.79
======== ==========
INVESTMENT SECURITIES HELD-TO-MATURITY
U.S. Treasury and other U.S. government
agencies obligations............................ $248,652 5.44 $ 248,652 5.44
State and political subdivisions of the
United States................................... 5,861 5.52 6,163 5.48
Asset-backed and other securities................. 25,920 6.00 38,826 6.30
-------- ----------
Total investment securities held-to-maturity... $280,433 5.49 $ 293,641 5.55
======== ==========
- ---------------------------------------------------------------------------------------------------
</TABLE>
28
<PAGE> 41
MBNA CORPORATION AND SUBSIDIARIES
of common stock by the Corporation in January 1999, until used to complete the
acquisition of the credit card business of PNC Bank N.A. ("PNC") in March 1999,
and for other general corporate purposes. The growth in money market
instruments was offset in the fourth quarter of 1999 as the Corporation
reinvested funds from maturing money market instruments in treasury
obligations, included in the investment securities available-for-sale
portfolio, as part of the Corporation's Year 2000 readiness planning.
The Corporation tries to maintain its investment securities and money market
instruments position at a level appropriate for the Corporation's anticipated
liquidity needs. Average investment securities and money market instruments as a
percentage of average interest-earning assets was 28.7% in 1999, compared to
29.1% in 1998 and 27.0% in 1997.
Table 3 reflects the estimated maturities of the Corporation's investment
securities and weighted average yields, on a fully taxable equivalent basis, at
December 31, 1999.
Note D to the audited consolidated financial statements provides further detail
regarding the Corporation's investment securities.
LOAN RECEIVABLES
Interest income generated by the Corporation's loan receivables increased $271.9
million to $2.0 billion in 1999. The increase is the result of a $2.5 billion
increase in average loan receivables, offset by a decrease of 55 basis points in
the yield earned on these receivables.
During 1998, interest income on loan receivables increased $194.4 million to
$1.7 billion. The increase in interest income during 1998 was the result of a
$1.5 billion increase in average loan receivables, offset by a decrease of 16
basis points in the yield earned on these loan receivables.
Table 4 presents the Corporation's loan receivables at year end distributed by
loan type, excluding securitized loans. Loan receivables increased 31.1% to
$17.7 billion at December 31, 1999, compared to $13.5 billion and $11.2 billion
at December 31, 1998 and 1997, respectively.
<TABLE>
<CAPTION>
LOAN RECEIVABLES INTEREST INCOME
(billions)
97 98 99
<S> <C> <C>
1.5 1.7 2.0
</TABLE>
Domestic credit card loan receivables increased to $13.0 billion at December
31, 1999, compared to $9.1 billion and $7.8 billion at December 31, 1998 and
1997, respectively. The increases in credit card loan receivables in 1999 and
1998 were a result of the Corporation's marketing programs, such as the MBNA
Platinum Plus MasterCard and Visa programs, and loan portfolio acquisitions.
The Corporation acquired $4.7 billion of domestic credit card loan receivables
during 1999, including the acquisition of $2.7 billion of credit card loan
receivables from PNC during the first quarter of 1999 and a $1.4 billion credit
card loan portfolio from SunTrust Banks during the fourth quarter of 1999, which
are included in loans held for securitization. The Corporation acquired $2.1
billion of credit card loan portfolios in 1998. The growth in outstanding
domestic loan receivables is offset by the Corporation's continued
securitization of domestic credit card loan receivables. In 1999, the
Corporation securitized $10.8 billion of domestic credit card loan receivables,
while $4.9 billion of previously securitized credit card loan receivables
amortized back into the Corporation's loan portfolio. In 1998, the Corporation
securitized $7.8 billion of domestic credit card loan receivables, while $2.5
billion of previously securitized credit card loan receivables amortized back
into the Corporation's loan portfolio.
Domestic other consumer loan receivables decreased to $2.3 billion at December
31, 1999, compared to $2.9 billion and $2.2 billion at December 31, 1998 and
1997, respectively. The decrease in domestic
TABLE 4: LOAN RECEIVABLES DISTRIBUTION
(dollars in thousands)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
DECEMBER 31, 1999 1998 1997
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
LOANS HELD FOR SECURITIZATION (a)
Domestic:
Credit card................... $ 7,835,429 44.3% $1,135,004 8.4% $2,297,400 20.6%
Other consumer................ 1,001,271 5.7 114,747 .9 - -
----------- ----- ---------- ----- ----------- -----
Total domestic loans held for
securitization............. 8,836,700 50.0 1,249,751 9.3 2,297,400 20.6
Foreign (b)..................... 855,916 4.9 442,517 3.3 602,798 5.4
----------- ----- ---------- ----- ----------- -----
Total loans held for
securitization............. 9,692,616 54.9 1,692,268 12.6 2,900,198 26.0
LOAN PORTFOLIO
Domestic:
Credit card................... 5,116,381 28.9 7,981,106 59.2 5,475,933 49.0
Other consumer................ 1,268,019 7.2 2,748,511 20.4 2,187,216 19.6
----------- ----- ---------- ----- ----------- -----
Total domestic loan portfolio 6,384,400 36.1 10,729,617 79.6 7,663,1496 8.6
Foreign (b)..................... 1,586,693 9.0 1,046,482 7.8 598,727 5.4
----------- ----- ---------- ----- ----------- -----
Total loan portfolio........ 7,971,093 45.1 11,776,099 87.4 8,261,876 74.0
----------- ----- ---------- ----- ----------- -----
Total loan receivables...... $17,663,709 100.0% $13,468,367 100.0% $11,162,074 100.0%
=========== ===== ========== ===== =========== =====
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
DECEMBER 31, 1996 1995
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
LOANS HELD FOR SECURITIZATION (a)
Domestic:
Credit card................... $2,206,218 21.8% $2,780,802 34.2%
Other consumer................ - - - -
----------- ----- ---------- -----
Total domestic loans held for
securitization............. 2,206,218 21.8 2,780,802 34.2
Foreign (b)..................... 263,756 2.6 387,625 4.7
----------- ----- ---------- -----
Total loans held for
securitization............. 2,469,974 24.4 3,168,427 38.9
LOAN PORTFOLIO
Domestic:
Credit card................... 5,514,326 54.4 3,957,129 48.7
Other consumer................ 1,840,052 18.2 870,893 10.7
----------- ----- ---------- -----
Total domestic loan portfolio 7,354,378 72.6 4,828,022 59.4
Foreign (b)..................... 304,700 3.0 139,469 1.7
----------- ----- ---------- -----
Total loan portfolio........ 7,659,078 75.6 4,967,491 61.1
----------- ----- ---------- -----
Total loan receivables...... $10,129,052 100.0% $ 8,135,918 100.0%
=========== ===== ========== =====
- -------------------------------------------------------------------------------------------
</TABLE>
(a) Loans held for securitization includes loan receivables in which certain
affinity groups or financial institutions have the contractual right to
acquire the loans from the Corporation at fair value after a stated
contractual period of time.
(b) Note T to the audited consolidated financial statements provides the
foreign loan receivables distribution between credit card and other
consumer loans.
29
<PAGE> 42
MBNA CORPORATION AND SUBSIDIARIES
other consumer loan receivables in 1999 is primarily related to the sale of the
Corporation's home equity loan portfolio of approximately $760.0 million in
October 1999, offset by loan growth in the Corporation's lines of credit
accessed through checks and by other consumer loan portfolio acquisitions of
$227.1 million. The Corporation realized a net gain from the sale of the home
equity loan portfolio which was not material to the Corporation's 1999 financial
results. The increase in domestic other consumer loan receivables in 1998 was a
result of the Corporation's acquisition of $1.0 billion in 1998 of domestic
other consumer loan portfolios combined with origination of loans through lines
of credit accessed through checks and home equity loans. The Corporation
securitized domestic other consumer loans of $1.0 billion in 1999, and had a net
increase in securitized domestic other consumer loans of $565.7 million in 1998.
Foreign loan receivables increased $953.6 million to $2.4 billion at December
31, 1999, as compared to $1.5 billion at December 31, 1998, and $1.2 billion at
December 31, 1997. The growth in foreign loan receivables is a result of the
marketing programs at the Corporation's two foreign bank subsidiaries, MBNA
Europe and MBNA Canada. Also, during 1998 the Corporation acquired $213.9
million of foreign credit card loan receivables. The Corporation securitized
$1.5 billion of foreign credit card loan receivables in 1999 and $1.8 billion of
foreign loan receivables in 1998.
<TABLE>
<CAPTION>
LOAN RECEIVABLES DISTRIBUTION
(millions)
DECEMBER 31, 1999 DECEMBER 31, 1998
<S> <C> <C>
Domestic credit card loan receivables $12,951.8 $9,116.1
Domestic other consumer loan receivables $ 2,269.3 $2,863.3
Foreign loan receivables $ 2,442.6 $1,489.0
</TABLE>
Note C to the audited consolidated financial statements provides further detail
regarding the Corporation's loan receivables.
CROSS-BORDER OUTSTANDINGS
The Corporation periodically holds cross-border outstandings, which are
generally interest-earning time deposits in other banks. At December 31, 1999,
the Corporation had cross-border outstandings in excess of 1% of total
consolidated assets of $696.1 million in the United Kingdom. The Corporation had
cross-border outstandings in excess of 1% of total consolidated assets of $358.7
million in the United Kingdom, $402.8 million in Germany, and $325.9 million in
Canada at December 31, 1998, and $255.0 million in Canada at December 31, 1997.
The Corporation does not have significant local currency outstandings in these
countries that are not hedged or funded by local currency borrowings. The
cross-border outstandings in the above countries are primarily short-term in
nature.
DEPOSITS
Total interest expense on deposits was $919.4 million in 1999, compared to
$816.1 million and $693.9 million in 1998 and 1997, respectively. The increase
in interest expense of $103.3 million during 1999 was primarily the result of a
$2.9 billion increase in average interest-bearing deposits, offset by a 44 basis
point decrease in the rate paid on average interest-bearing deposits. The
increase in interest expense on deposits of $122.2 million during 1998 was
primarily the result of a $2.0 billion increase in average interest-bearing
deposits.
The increase in average interest-bearing deposits in 1999 was a result of the
Corporation's continued emphasis on marketing certificates of deposit and money
market deposit accounts as well as obtaining other deposits through the use of
third-party intermediaries to fund loan and other asset growth and diversify
funding sources. The increase in average interest-bearing deposits in 1998 was a
result of the Corporation's continued marketing of certificates of deposit and
money market deposit accounts. In addition, foreign average interest-bearing
deposits increased $413.4 million in 1998, which provided funding for the
Corporation's foreign bank subsidiaries' loan growth.
BORROWED FUNDS
Interest expense on short-term borrowings increased to $36.3 million in 1999,
compared to $26.0 million and $19.8 million in 1998 and 1997, respectively. The
increase in interest expense on short-term borrowings in 1999 was primarily the
result of an increase in average short-term borrowings of $215.9 million from
1998, offset by a 34 basis point decrease in the rate paid on average short-term
borrowings. The increase in average short-term borrowings in 1999 was to provide
funding for the Corporation's short-term liquidity needs. The increase in
interest expense on short-term borrowings in 1998 was primarily the result of an
increase in average short-term borrowings of $110.3 million from 1997, offset by
a 4 basis point decrease in the rate paid on average short-term borrowings. The
increase in short-term borrowings in 1998 was to provide funding for the
Corporation's domestic and foreign loan growth.
Note G to the audited consolidated financial statements provides further detail
regarding the Corporation's short-term borrowings.
Interest expense on long-term debt and bank notes decreased to $372.7 million in
1999, compared to $381.7 million in 1998 and $304.9 million in 1997. The
decrease in interest expense in 1999 was primarily a result of a 26 basis point
decline in the rate paid on average long-term debt and bank notes, as the rate
on the Corporation's variable-rate long-term debt and bank notes decreased as a
result of lower market rates. Also, the Corporation replaced maturing higher
rate long-term debt and bank notes with lower rate long-term debt and bank notes
during 1999. The decrease in interest expense in 1999 is offset by a $101.2
million increase in average long-term debt and bank notes as the Corporation's
foreign bank subsidiaries issued additional long-term debt and bank notes. The
increase in interest expense in 1998 primarily reflects the issuance of
additional long-term debt and bank notes by the Corporation to diversify its
funding sources, to fund both domestic and foreign loan growth, and for
30
<PAGE> 43
MBNA CORPORATION AND SUBSIDIARIES
other general corporate purposes. Average long-term debt and bank notes
increased to $5.9 billion in 1998 as compared to $4.6 billion in 1997.
Note H to the audited consolidated financial statements provides further detail
regarding the Corporation's long-term debt and bank notes.
OTHER OPERATING INCOME
Total other operating income increased 30.3% or $978.9 million to $4.2 billion
in 1999 from 1998. The increase in other operating income during 1999 was
primarily attributable to a $799.0 million or 28.1% increase in securitization
income, which grew to $3.6 billion from 1998. The increase in securitization
income was the result of an $8.7 billion or 21.3% increase in average
securitized loans to $49.7 billion from 1998, in addition to a decline in the
average rate paid to investors in the Corporation's securitized loans. Also,
during the three months ended March 31, 1999, the Corporation increased the fees
charged to its credit card and other consumer loan Customers. As a result, loan
servicing fees related to securitized loans, credit card fees and other income
increased in 1999 as compared to 1998.
<TABLE>
<CAPTION>
OTHER OPERATING INCOME
(billions)
97 98 99
<S> <C> <C>
2.8 3.2 4.2
</TABLE>
Total other operating income increased 14.8% or $416.1 million to $3.2 billion
in 1998 from 1997. The increase in other operating income during 1998 was
primarily attributable to an increase of 13.5% or $337.4 million in
securitization income from 1997. The increase in securitization income was the
result of an $8.2 billion or 25.1% increase in average securitized loans to
$41.0 billion from 1997.
On January 1, 1997, the Corporation adopted Statement of Financial Accounting
Standards No. 125, "Accounting for Transfers and Servicing of Financial Assets
and Extinguishments of Liabilities" ("Statement No. 125"), effective for all
transactions occurring after December 31, 1996. In accordance with Statement No.
125, gains are recognized in securitization income at the time of initial sale
and each subsequent sale of loan receivables in a securitization. Securitization
income includes the gains recognized by the Corporation, in addition to other
fees received by the Corporation for the servicing of securitized loans. As a
result of Statement No. 125, securitization income increased $23.3 million in
1999, $17.9 million in 1998, and $325.1 million in 1997. These increases may
not be representative of future periods. The Corporation periodically reviews
the assumptions used in determining the net impact related to Statement No. 125.
If these assumptions change, the related receivable and securitization income
would be affected.
Insurance income decreased $19.3 million to $59.6 million in 1999, as compared
to 1998. The Corporation suspended marketing new automobile insurance policies
through its underwriter in July 1998. During 1999 the Corporation began
marketing automobile insurance to the Corporation's Customers through American
International Group, Inc. ("AIG"), its new insurance underwriter. Insurance
income increased $36.5 million to $79.0 million in 1998, primarily as a result
of the growth in fee income generated from the Corporation's insurance agency
business.
Interchange income increased $81.9 million during 1999, as compared to an
increase of $23.8 million in 1998. The increases in interchange income in 1999
and 1998 are a result of the increases in the Corporation's sales volume in
addition to an increase in the interchange rate set by MasterCard and Visa in
1999.
OTHER OPERATING EXPENSE
Total other operating expense increased 27.9% to $3.1 billion in 1999 from $2.4
billion in 1998, compared to an increase of 8.3% in 1998 from $2.2 billion in
1997. The growth in other operating expense reflects the Corporation's continued
investment in business development activities to enhance the ability of the
Corporation to attract and retain Customers. The Corporation added 12.5 million
new accounts in 1999, compared to 9.3 million new accounts in 1998 and 9.4
million new accounts in 1997. The Corporation added 400 new endorsements from
organizations in 1999, compared to 475 in 1998 and 563 in 1997. The Corporation
also has continued to invest in its other consumer loan, foreign, and insurance
agency businesses. The growth in other operating expense also includes
amortization of intangible assets which increased $116.5 million to $170.6
million for the year ended December 31, 1999, as a result of the Corporation's
loan portfolio acquisitions, including the acquisition of the credit card
business of PNC in March 1999 and the acquisition of the credit card loan
portfolio of SunTrust Banks in November 1999. Based on the Corporation's
portfolio acquisitions in 1999, the Corporation expects amortization expense
related to intangible assets to be higher in 2000. Total other operating expense
in 1997 included the Corporation's investment in additional business development
efforts of an amount equivalent to the increase in securitization income
recognized by the Corporation as a result of the adoption of Statement No. 125,
and therefore the adoption of Statement No. 125 did not materially impact the
Corporation's 1997 consolidated net income.
Note Q to the audited consolidated financial statements provides further detail
regarding the Corporation's other operating expenses.
YEAR 2000 READINESS DISCLOSURE
PROJECT OVERVIEW
Like most major financial institutions, the Corporation is highly dependent upon
technology to deliver products and services to its Customers. Credit card
transactions and authorizations require a variety of voice and data networks and
service providers to operate successfully. Sophisticated computer and
telecommunication systems enable the Corporation to process these transactions
and service Customer accounts. Many computer applications had been written using
two digits rather than four to define the applicable year, and therefore may not
have recognized a date using "00" as the Year 2000. Computer applications may
not have been able to properly process transactions with dates in the Year 2000
or thereafter.
31
<PAGE> 44
MBNA CORPORATION AND SUBSIDIARIES
The Corporation began its Year 2000 Project ("the Project") to address this
issue in 1994. The Project included all hardware and software for mission
critical applications, including systems that service and support loans,
deposits, Customer service activities, and financial systems. The Project
included all vendor supplied services, non-technology equipment, such as
building operation and security systems, tele-communication components and
services, local area network and desktop computing environments, and other
areas.
PROJECT READINESS
The Corporation completed all planned project components including the
assessment, renovation, validation and implementation phases, four readiness
test cycles, and an independent review of substantial portions of the
Corporation's computer applications by third-party vendors.
The Corporation successfully completed the transition into the Year 2000 with no
material issues. All business areas completed validation checks and there were
no disruptions in Customer service or system availability.
The Corporation relies on various third parties to perform processing services
and to supply critical system applications. Critical third-party-provided
software applications were tested regardless of vendor statements of fitness to
ensure Year 2000 compliance. Regular meetings and site visits were held and will
continue to be held with MasterCard International, Visa International, and other
critical third-party service providers to evaluate and monitor their compliance.
The Corporation considers all critical vendor-supplied products to be compliant.
COSTS
The total cost associated with required modifications to become Year 2000
compliant were not material to the Corporation's consolidated financial
statements. The estimated total cost of the Project is expected to be
approximately $40 million. Costs incurred and expensed through December 31,
1999, were approximately $38 million. The majority of the remaining cost is
associated with testing and preparation for validating leap year processing.
INCOME TAXES
The Corporation recognized applicable income taxes of $630.5 million in 1999,
compared to $477.8 million in 1998 and $399.6 million in 1997. This represents
an effective tax rate of 38.1% in 1999 and 1998, and 39.1% in 1997. Note S to
the audited consolidated financial statements reconciles reported applicable
income taxes to the amount computed by applying the federal statutory rate to
income before income taxes.
LOAN QUALITY
The Corporation's loan quality at any time reflects, among other factors, the
quality of the Corporation's credit card and other consumer loans, the general
economic conditions, the success of the Corporation's collection efforts, and
the seasoning of the Corporation's loans. As new loans season, the delinquency
rate on these loans generally rises and then stabilizes.
DELINQUENCIES
An account is contractually delinquent if the minimum payment is not received by
the specified date on the Customer's statement. However, the Corporation
generally continues to accrue interest until the loan is either paid or charged
off. Delinquency as a percentage of the Corporation's loan portfolio was 3.82%
at December 31, 1999, compared with 3.86% and 3.93% at December 31, 1998 and
1997, respectively. Delinquency as a percentage of managed loans was 4.45% at
December 31, 1999, compared to 4.62% and 4.59% at December 31, 1998 and 1997,
respectively. Table 5 presents the stages of delinquency of the Corporation's
loan portfolio, excluding loans held for securitization.
The Corporation may modify the terms of its credit card and other consumer loan
agreements with borrowers who have experienced financial difficulties, by either
reducing their interest rate or placing them on nonaccrual status. These other
nonperforming loans, excluding loans held for securitization, are presented in
Table 6.
The Corporation's total managed other nonperforming loans as a percentage of
ending managed loans was 2.51% at December 31, 1999, compared to 2.01% and 1.77%
at December 31, 1998 and 1997, respectively.
TABLE 5: DELINQUENT LOANS
(dollars in thousands)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
DECEMBER 31, 1999 1998 1997 1996 1995
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Loan portfolio......... $7,971,093 $11,776,099 $8,261,876 $7,659,078 $4,967,491
Loans delinquent:
30 to 59 days....... $ 105,667 1.33% $ 166,352 1.41% $ 125,870 1.52% $ 114,382 1.49% $ 65,651 1.32%
60 to 89 days....... 60,452 .76 93,699 .80 64,275 .78 52,857 .69 30,162 .61
90 or more days..... 138,531 1.73 194,472 1.65 134,865 1.63 107,679 1.41 58,894 1.18
---------- ---- ----------- ---- ---------- ---- ---------- ---- ---------- ----
Total $ 304,650 3.82% $ 454,523 3.86% $ 325,010 3.93% $ 274,918 3.59% $ 154,707 3.11%
========== ==== =========== ==== ========== ==== ========== ==== ========== ====
Loans delinquent by
geographic area:
Domestic............ $ 271,139 4.25% $ 424,324 3.95% $ 313,467 4.09% $ 269,035 3.66% $ 151,316 3.13%
Foreign............. 33,511 2.11 30,199 2.89 11,543 1.93 5,883 1.93 3,391 2.43
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
32
<PAGE> 45
MBNA CORPORATION AND SUBSIDIARIES
- --------------------------------------------------------------------------------
TABLE 6: OTHER NONPERFORMING LOANS
(dollars in thousands)
<TABLE>
<CAPTION>
DECEMBER 31, 1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
Nonaccrual loans ........................................ $ 12,245 $ 3,182 $ 2,520 $ 1,820 $ 1,037
Reduced-rate loans ...................................... 153,082 157,737 114,218 72,134 28,526
-------- -------- -------- ------- -------
Total other nonperforming loans ...................... $165,327 $160,919 $116,738 $73,954 $29,563
======== ======== ======== ======= =======
Other nonperforming loans as a % of ending loan
portfolio ............................................. 2.07% 1.37% 1.41% .97% .60%
----------------------------------------------------------------------------------------------------------------------------
</TABLE>
NET CREDIT LOSSES
The Corporation's policy is generally to charge off accounts when they become
180 days contractually past due. The Corporation sells charged-off receivables
and records the proceeds received from these sales as recoveries, thereby
reducing net credit losses.
Net credit losses during 1999 were $379.5 million, compared to $285.4 million in
1998 and $223.8 million in 1997. Net credit losses do not include credit losses
from securitized loans, which are charged to the related trusts in accordance
with their respective contractual agreements. The increases in net credit losses
for 1999 and 1998 reflect increases in the Corporation's outstanding loan
receivables, the general economic conditions, and the seasoning of the
Corporation's accounts, offset by recoveries from the sale of charged-off
receivables.
Net credit losses as a percentage of average loan receivables increased to 2.63%
during 1999, compared to 2.39% in 1998 and 2.14% in 1997. The Corporation's
managed credit losses as a percentage of average managed loans in 1999 was
4.33%, compared to 4.31% and 3.97% in 1998 and 1997, respectively.
RESERVE AND PROVISION FOR POSSIBLE CREDIT LOSSES
The loan portfolio is regularly reviewed to determine an appropriate reserve for
possible credit losses based upon the impact of economic conditions on the
borrowers' ability to repay, past collection experience, the risk
characteristics of the portfolio, and other factors. A provision is charged to
operating expense to maintain the reserve at an appropriate level. Table 7
presents an analysis of the Corporation's reserve for possible credit losses.
The provision for possible credit losses for the year ended December 31, 1999,
increased 31.9% to $408.9 million compared to
TABLE 7: RESERVE FOR POSSIBLE CREDIT LOSSES
(dollars in thousands)
<TABLE>
<CAPTION>
DECEMBER 31, 1999 1998 1997
<S> <C> <C> <C>
Reserve for possible credit losses, beginning of year .............. $ 216,911 $ 162,476 $ 118,427
Reserves acquired ............................................... 109,757 29,932 7,975
Provision for possible credit losses ............................ 408,914 310,039 260,040
Foreign currency translation .................................... (96) (125) (203)
Credit losses:
Domestic:
Credit card ............................................... (422,504) (330,952) (294,608)
Other consumer ............................................ (104,268) (86,407) (57,970)
------------ ------------ ------------
Total domestic credit losses ........................... (526,772) (417,359) (352,578)
Foreign ...................................................... (41,157) (22,754) (6,964)
------------ ------------ ------------
Total credit losses .................................... (567,929) (440,113) (359,542)
Recoveries:
Domestic:
Credit card ............................................... 147,851 133,172 126,012
Other consumer ............................................ 21,301 12,656 7,555
------------ ------------ ------------
Total domestic recoveries .............................. 169,152 145,828 133,567
Foreign ...................................................... 19,250 8,874 2,212
------------ ------------ ------------
Total recoveries ....................................... 188,402 154,702 135,779
------------ ------------ ------------
Net credit losses ............................................... (379,527) (285,411) (223,763)
------------ ------------ ------------
Reserve for possible credit losses, end of year .................... $ 355,959 $ 216,911 $ 162,476
============ ============ ============
Net credit losses as a % of average loan receivables ............... 2.63% 2.39% 2.14%
Net credit losses as a % of beginning reserve ...................... 174.97 175.66 188.95
Reserve for possible credit losses as a % of ending loan
receivables ...................................................... 2.02 1.61 1.46
Ending loan receivables ............................................ $ 17,663,709 $ 13,468,367 $ 11,162,074
Average loan receivables ........................................... 14,422,495 11,930,289 10,438,513
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1996 1995
<S> <C> <C>
Reserve for possible credit losses, beginning of year .............. $ 104,886 $ 101,519
Reserves acquired ............................................... 7,553 -
Provision for possible credit losses ............................ 178,224 138,176
Foreign currency translation .................................... 488 (90)
Credit losses:
Domestic:
Credit card ............................................... (226,067) (161,004)
Other consumer ............................................ (23,504) (10,553)
------------ -----------
Total domestic credit losses ........................... (249,571) (171,557)
Foreign ...................................................... (4,846) (3,336)
------------ -----------
Total credit losses .................................... (254,417) (174,893)
Recoveries:
Domestic:
Credit card ............................................... 76,605 37,765
Other consumer ............................................ 4,438 2,273
------------ -----------
Total domestic recoveries .............................. 81,043 40,038
Foreign ...................................................... 650 136
------------ -----------
Total recoveries ....................................... 81,693 40,174
------------ -----------
Net credit losses ............................................... (172,724) (134,719)
------------ -----------
Reserve for possible credit losses, end of year .................... $ 118,427 $ 104,886
============ ===========
Net credit losses as a % of average loan receivables ............... 1.98% 1.91%
Net credit losses as a % of beginning reserve ...................... 164.68 132.70
Reserve for possible credit losses as a % of ending loan
receivables ...................................................... 1.17 1.29
Ending loan receivables ............................................ $ 10,129,052 $ 8,135,918
Average loan receivables ........................................... 8,703,579 7,061,898
- -------------------------------------------------------------------------------------------------------
</TABLE>
33
<PAGE> 46
MBNA CORPORATION AND SUBSIDIARIES
- --------------------------------------------------------------------------------
TABLE 8: ALLOCATION OF RESERVE FOR POSSIBLE CREDIT LOSSES
(dollars in thousands)
<TABLE>
<CAPTION>
DECEMBER 31, 1999 1998 1997
<S> <C> <C> <C> <C> <C> <C>
Domestic:
Credit card ......................... $287,767 80.9% $152,405 70.3% $134,910 83.0%
Other consumer ...................... 51,672 14.5 54,752 25.2 23,031 14.2
-------- ----- -------- ------ -------- -----
Domestic reserve for possible
credit losses .................. 339,439 95.4 207,157 95.5 157,941 97.2
Foreign ................................ 16,520 4.6 9,754 4.5 4,535 2.8
-------- ----- -------- ------ -------- -----
Reserve for possible credit losses $355,959 100.0% $216,911 $100.0% $162,476 100.0%
======== ===== ======== ====== ======== =====
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1996 1995
<S> <C> <C> <C> <C>
Domestic:
Credit card ......................... $ 95,253 80.4% $ 82,596 78.7%
Other consumer ...................... 18,446 15.6 18,009 17.2
-------- ----- -------- -----
Domestic reserve for possible
credit losses .................. 113,699 96.0 100,605 95.9
Foreign ................................ 4,728 4.0 4,281 4.1
-------- ----- -------- -----
Reserve for possible credit losses $118,427 100.0% $104,886 100.0%
======== ===== ======== =====
</TABLE>
$310.0 million in 1998 and $260.0 million in 1997. For the year ended December
31, 1999, the Corporation recorded $109.8 million of reserves acquired in
connection with the credit card business of PNC and other loan portfolios. The
Corporation internally allocates the reserve for possible credit losses among
domestic credit card loans, domestic other consumer loans, and foreign loans, as
presented in Table 8. The reserve for possible credit losses is a general
allowance applicable to the Corporation's loan portfolio and does not include an
allocation for credit risk related to securitized loans. Losses on securitized
loans are absorbed directly by the related trusts under their respective
contractual agreements, and reduce securitization income rather than the reserve
for possible credit losses.
In February 1999, the Federal Financial Institutions Examination Council
published a revised policy statement on the classification of consumer loans.
The revised policy establishes uniform guidelines for the charge-off of loans to
delinquent, bankrupt, and deceased borrowers, for charge-off of fraudulent
accounts, and for re-aging, extending, deferring or rewriting delinquent
accounts. The guidelines must be implemented by December 31, 2000. The
Corporation expects to complete and implement the guidelines prior to or on
December 31, 2000. The Corporation will accelerate charge-off of some
delinquent loans when it implements the guidelines, and does not expect
implementation to have a material impact on the Corporation's consolidated
statement of income for the year ended December 31, 2000.
CAPITAL ADEQUACY
The Corporation is subject to risk-based capital guidelines adopted by the
Federal Reserve Board for bank holding companies. The Bank is also subject to
similar capital requirements adopted by the Comptroller of the Currency. Under
these requirements, the federal bank regulatory agencies have established
quantitative measures to ensure that minimum thresholds for Tier 1 Capital,
Total Capital, and Leverage ratios are maintained. Failure to meet these minimum
capital requirements can initiate certain mandatory, and possible additional
discretionary, actions by the federal bank regulators that, if undertaken, could
have a direct material effect on the Corporation's and the Bank's financial
statements. Under the capital adequacy guidelines and the regulatory framework
for prompt corrective action, the Corporation and the Bank must meet specific
capital guidelines that involve quantitative measures of their assets,
liabilities, and certain off-balance-sheet items as calculated under regulatory
accounting practices.
The Corporation's and the Bank's capital amounts and classification are also
subject to qualitative judgments by the federal bank regulators about
components, risk weightings, and other factors. At December 31, 1999, and
December 31, 1998, the Corporation's and the Bank's capital exceeded all minimum
regulatory requirements to which they are subject, and the Bank was
"well-capitalized" as defined under the federal bank regulatory guidelines. The
risk-based capital ratios, shown in Table 9, have been computed in accordance
with regulatory accounting practices.
TABLE 9: REGULATORY CAPITAL RATIOS
<TABLE>
<CAPTION>
MINIMUM WELL-CAPITALIZED
DECEMBER 31, 1999 1998 REQUIREMENTS REQUIREMENTS
<S> <C> <C> <C> <C>
MBNA CORPORATION
Tier 1 ................ 14.72% 11.44% 4.00% (a)
Total ................. 17.02 13.96 8.00 (a)
Leverage .............. 14.90 11.34 4.00 (a)
MBNA AMERICA BANK, N.A
Tier 1 ................ 11.06 11.69 4.00 6.00%
Total ................. 13.44 14.28 8.00 10.00
Leverage .............. 11.61 11.55 4.00 5.00
- --------------------------------------------------------------------------------
</TABLE>
(a) Not applicable for bank holding companies.
34
<PAGE> 47
MBNA CORPORATION AND SUBSIDIARIES
- --------------------------------------------------------------------------------
In January 1999, the Corporation issued 50 million shares of common stock,
raising $1.2 billion of capital, net of issuance costs. The Corporation
contributed $300.0 million of the net proceeds from this offering to the Bank in
order to complete the acquisition of the credit card business of PNC. The
Corporation used the remaining portion for other general corporate purposes.
At December 31, 1999 and 1998, the Corporation had $566.3 million issued and
outstanding of guaranteed preferred beneficial interests in Corporation's junior
subordinated deferrable interest debentures, which mature in 2026 and 2027.
The Corporation also has 4.5 million shares of 71/2% Cumulative Preferred Stock,
Series A, and 4.0 million shares of Adjustable Rate Cumulative Preferred Stock,
Series B, both with a $25 stated value per share, outstanding at December 31,
1999 and 1998. The shares of the Series A Preferred Stock are redeemable, in
whole or in part, solely at the option of the Corporation on or after January
15, 2001, while the shares of the Series B Preferred Stock are redeemable, in
whole or in part, solely at the option of the Corporation on or after October
15, 2001. The Series B Preferred Stock may also be redeemed in whole at the
option of the Corporation in the event of certain amendments to the Internal
Revenue Code of 1986 with respect to the dividends-received deduction.
Shares of the Series A and B Preferred Stock are not convertible into other
securities of the Corporation. Dividends on the preferred stock are cumulative
from the date of original issue and are payable quarterly.
The guaranteed preferred beneficial interests in Corporation's junior
subordinated deferrable interest debentures and preferred stock both qualify as
regulatory capital under the Federal Reserve Board guidelines and enhance the
Corporation's regulatory capital, while also providing a long-term source of
funds.
The Bank has $450.0 million of Subordinated Notes outstanding at December 31,
1999 and 1998, that qualify as regulatory capital under the Comptroller of the
Currency's guidelines. These Subordinated Notes enhance the Bank's regulatory
capital while also providing a long-term source of funds.
Note M to the audited consolidated financial statements provides further detail
regarding the Corporation's capital adequacy.
DIVIDEND LIMITATIONS
The payment of dividends in the future and the amount of such dividends, if any,
will be at the discretion of the Corporation's Board of Directors. The payment
of preferred and common stock dividends by the Corporation may be limited by
certain factors, including regulatory capital requirements, broad enforcement
powers of the federal bank regulatory agencies, and tangible net worth
maintenance requirements under the Corporation's revolving credit facilities.
The payment of common stock dividends may also be limited by the terms of
outstanding preferred stock. If the Corporation has not paid scheduled
dividends on the preferred stock, or declared the dividends and set aside funds
for payment, the Corporation may not declare or pay any cash dividends on the
common stock. In addition, if the Corporation defers interest for consecutive
periods covering 10 semiannual periods or 20 consecutive quarterly periods,
depending upon the series, on its guaranteed preferred beneficial interests in
Corporation's junior subordinated deferrable interest debentures, the
Corporation may not be permitted to declare or pay any cash dividends on the
Corporation's capital stock or interest on debt securities that have equal or
lower priority than the junior subordinated deferrable interest debentures.
During 1999, the Corporation declared dividends of $14.3 million on its
preferred stock and $224.5 million on its common stock.
On January 10, 2000, the Corporation's Board of Directors declared a quarterly
dividend of $.08 per common share, payable April 1, 2000 to shareholders of
record as of March 16, 2000. Also, on January 10, 2000, the Corporation's Board
of Directors declared a quarterly dividend of $.46875 per share on the 71/2%
Cumulative Preferred Stock, Series A, and a quarterly dividend of $.3997 per
share on the Adjustable Rate Cumulative Preferred Stock, Series B. The preferred
stock dividends are payable April 15, 2000, to stockholders of record as of
March 31, 2000.
Table 10 reflects the Corporation's return on average total assets and
stockholders' equity, and other equity ratios, including the Corporation's
dividend payout ratio.
TABLE 10: RETURN ON AVERAGE TOTAL ASSETS AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1999 1998 1997
<S> <C> <C> <C>
Return on average total assets......................... 3.62% 3.38% 3.25%
Return on average stockholders' equity................. 27.18 36.91 35.56
Average stockholders' equity to average total assets... 13.32 9.15 9.15
Dividend payout ratio.................................. 23.14 24.74 27.63
- -----------------------------------------------------------------------------------------
</TABLE>
The Corporation is a legal entity separate and distinct from its banking and
other subsidiaries. The primary source of funds for payment of preferred and
common stock dividends by the Corporation is dividends received from the Bank.
The amount of dividends that a bank may declare in any year is subject to
certain regulatory restrictions. Generally, dividends declared in a given year
by a national bank are limited to its net profit, as defined by regulatory
agencies, for that year, combined with its retained net income for the preceding
two years, less any required transfers to surplus or to a fund for the
retirement of any preferred stock. In addition, a national bank may not pay any
dividends in an amount greater than its undivided profit. Under current
regulatory practice, national banks may pay dividends only out of current
operating earnings. Also, a bank may not declare dividends if such declaration
would leave the bank inadequately capitalized. Therefore, the ability of the
Bank to declare dividends will depend on its future net income and capital
requirements. At December 31, 1999, the amount of retained earnings available
for declaration and payment of dividends from the Bank to the Corporation was
$1.6 billion. Payment of dividends by the Bank to the Corporation, however, can
be further limited by federal bank regulatory agencies.
35
<PAGE> 48
MBNA CORPORATION AND SUBSIDIARIES
- --------------------------------------------------------------------------------
The Bank's payment of dividends to the Corporation may also be limited by a
tangible net worth requirement under the Bank's revolving credit facility. This
facility was not drawn upon as of December 31, 1999. If this facility had been
drawn upon as of December 31, 1999, the amount of retained earnings available
for declaration of dividends would have been further limited to $426.2 million.
LIQUIDITY AND RATE SENSITIVITY
The Corporation seeks to maintain prudent levels of liquidity, interest rate
risk, and foreign currency exchange rate risk.
LIQUIDITY MANAGEMENT
Liquidity management is the process by which the Corporation manages the use and
availability of various funding sources to meet its current and future operating
needs. These needs change as loans grow, deposits mature, and payments on
obligations are made. Because the characteristics of the Corporation's assets
and liabilities change, liquidity management is a dynamic process, affected by
the pricing and maturity of loans, deposits, and other assets and liabilities.
This process is also affected by changes in the relationship between short-term
and long-term interest rates.
To facilitate liquidity management, the Corporation uses a variety of funding
sources to establish a maturity pattern that provides a prudent mixture of
short- and long-term funds. The Corporation obtains funds through deposits and
debt issuance, and uses securitization of the Corporation's loan receivables as
a major funding alternative.
<TABLE>
<CAPTION>
FUNDING SOURCES
(millions)
DECEMBER 31, 1999 DECEMBER 31, 1998
<S> <C> <C>
Direct Deposits $12,987.8 $11,617.2
Other Deposits $ 5,727.0 $ 3,789.9
Borrowed Funds $ 6,747.9 $ 7,170.2
Stockholders' Equity $ 4,199.4 $ 2,391.0
</TABLE>
The funding programs established by the Corporation include medium-term notes,
senior notes, and committed credit facilities.
At December 31, 1999, the Corporation has $1.4 billion in Senior Medium-Term
Notes outstanding that mature in varying amounts from 2000 to 2004, as compared
to $1.8 billion at December 31, 1998. In addition, the Corporation has $100.0
million in Senior Notes outstanding at December 31, 1999, that mature in 2005 as
compared to $250.0 million at December 31, 1998. The Corporation expects to pay
the interest on both the Senior Medium-Term Notes and Senior Notes from dividend
and other payments received from the Bank.
At December 31, 1999, the Corporation has two one-year revolving credit
facilities totaling $75.0 million. These credit facilities were renewed during
1999 with $25.0 million committed through February 2000 and $50.0 million
committed through September 2000. The Corporation may take advances under these
facilities subject to certain conditions, including requirements for tangible
net worth. These facilities may be used for general corporate purposes and were
not drawn upon as of December 31, 1999.
Funding programs established by the Corporation's bank subsidiaries include
deposits, bank notes, and committed credit facilities.
Total deposits at December 31, 1999, were $18.7 billion, compared with $15.4
billion and $12.9 billion at December 31, 1998 and 1997, respectively. The
increase in deposits from 1998 is the result of a $1.4 billion increase in
direct deposits and a $1.9 billion increase in other deposits. Other deposits
are deposits generally obtained through the use of a third-party intermediary.
The Corporation began increasing its use of other deposits as a cost-effective
funding source. The increase in deposits from 1997 was the result of a $1.7
billion increase in direct deposits. These increases in direct deposits were
primarily the result of the Corporation's emphasis on marketing its deposit
products and offering competitive rates. Table 11 provides the maturities of the
Corporation's deposits at December 31, 1999. Included in the deposit maturity
category of three months or less are money market deposit accounts,
noninterest-bearing demand deposits, interest-bearing transaction accounts, and
savings accounts totaling $5.0 billion.
TABLE 11: MATURITIES OF DEPOSITS
(dollars in thousands)
<TABLE>
<CAPTION>
DECEMBER 31, 1999 DIRECT OTHER TOTAL
<S> <C> <C> <C>
Three months or less .............. $ 6,339,727 $1,385,416 $ 7,725,143
Over three months through
twelve months ................... 3,532,930 1,223,375 4,756,305
Over one year through five years... 3,109,932 3,118,181 6,228,113
Over five years ................... 5,192 - 5,192
----------- ---------- -----------
Total deposits ............... $12,987,781 $5,726,972 $18,714,753
=========== ========== ===========
</TABLE>
In addition, Table 12 presents the maturity distribution of the Corporation's
domestic time deposits in amounts of $100,000 or more for the most recent three
years. The Corporation also has $810.7 million of foreign time deposits at
December 31, 1999. The majority of the foreign time deposits were in amounts in
excess of $100,000 and mature within one year.
36
<PAGE> 49
MBNA CORPORATION AND SUBSIDIARIES
- --------------------------------------------------------------------------------
TABLE 12: DOMESTIC TIME DEPOSITS OF $100,000 OR MORE
(dollars in thousands)
<TABLE>
<CAPTION>
DECEMBER 31, 1999 1998 1997
<S> <C> <C> <C> <C> <C> <C>
Three months or less ................ $ 438,018 20.5% $ 448,223 23.3% $ 467,227 26.8%
Over three months through six months 429,521 20.1 356,045 18.6 314,060 18.0
Over six months through twelve months 618,406 29.0 483,843 25.2 370,052 21.3
Over twelve months .................. 649,351 30.4 632,533 32.9 590,838 33.9
---------- ----- ---------- ----- ---------- -----
Total ......................... $2,135,296 100.0% $1,920,644 100.0% $1,742,177 100.0%
========== ===== ========== ===== ========== =====
</TABLE>
An additional source of funding for the Bank is provided by a global bank note
program. These notes may be issued with maturities of one week or more from the
date of issue. During 1999, the Bank issued $315.0 million of bank notes,
compared to $106.5 million in 1998. At December 31, 1999, the Bank has $2.4
billion of bank notes outstanding, which are included in long-term borrowings.
At December 31, 1998, the Bank had $2.6 billion of bank notes outstanding, of
which $36.5 million were included in short-term borrowings.
The Bank has a $2.0 billion syndicated revolving credit facility committed
through February 2001. Advances are subject to covenants and conditions
customary in a transaction of this kind. These conditions include requirements
for the Corporation to maintain a minimum level of tangible net worth, in
addition to managed loan receivables 90 days or more past due plus nonaccrual
receivables not to exceed 6% of managed credit card receivables. Should managed
credit card losses equal or exceed 5% for a period of four consecutive quarters,
a ratio of qualifying loan receivables to outstanding borrowings under the
facility of at least 115% will be required in order to draw under this facility.
At December 31, 1999, the minimum tangible net worth requirement for this
facility is $1.8 billion. The facility may be used for general corporate
purposes and was not drawn upon as of December 31, 1999.
MBNA Europe has a Pound Sterling 300.0 million (approximately $484.7 million at
December 31, 1999) multi-currency syndicated revolving credit facility committed
through October 2000. MBNA Europe may take advances under the facility subject
to certain conditions, including requirements for tangible net worth,
outstanding loan receivables, and account delinquencies. The facility may be
used for general corporate purposes and was not drawn upon as of December 31,
1999.
MBNA Europe also has Pound Sterling 165.0 million (approximately $266.6
million), EUR165.5 million (approximately $166.2 million), and $10.0 million
Euro Medium-Term Notes outstanding at December 31, 1999. These notes were
issued by MBNA Europe during 1999 and are unconditionally and irrevocably
guaranteed in all respects to all payments by the Bank.
MBNA Canada has a CAD$300.0 million (approximately $206.5 million at December
31, 1999) multi-currency syndicated revolving credit facility committed through
December 2001. This facility was not drawn upon at December 31, 1999.
MBNA Canada also has CAD$217.3 million (approximately $149.6 million) of
short-term deposit notes outstanding at December 31, 1999. In addition, MBNA
Canada has CAD$290.1 million (approximately $199.7 million) of Medium-Term
Deposit Notes outstanding at December 31, 1999. The deposit notes are
unconditionally and irrevocably guaranteed in all respects to all payments by
the Bank.
The Corporation also held $3.0 billion in investment securities and $1.5 billion
in money market instruments at December 31, 1999, compared to $1.9 billion in
investment securities and $3.6 billion in money market instruments at December
31, 1998. The investment securities primarily consist of high-quality, AAA-rated
securities, most of which can be used as collateral under repurchase
agreements. Of the investment securities at December 31, 1999, $803.3 million
is anticipated to mature within 12 months. The Corporation's investment
securities available-for-sale portfolio, which consists primarily of short-term
and variable-rate securities, was $2.8 billion at December 31, 1999, compared to
$1.7 billion at December 31, 1998, as the Corporation increased its investment
in U.S. Treasury securities as part of its contingency funding plans related to
its Year 2000 readiness planning. These investment securities, along with the
money market instruments, provide increased liquidity and flexibility to support
the Corporation's funding requirements.
<TABLE>
<CAPTION>
INVESTMENT SECURITIES AND MONEY MARKET INSTRUMENTS
(millions)
DECEMBER 31, 1999 DECEMBER 31, 1998
<S> <C> <C>
Interest-earning time
deposits in other banks $1,525.7 $2,831.2
Federal funds sold and
securities purchased
under resale agreements $ 0 $ 730.0
Investment securities
available-for-sale $2,752.7 $1,663.7
Investment securities
held-to-maturity $ 293.6 $ 216.0
</TABLE>
37
<PAGE> 50
MBNA CORPORATION AND SUBSIDIARIES
- --------------------------------------------------------------------------------
INTEREST RATE SENSITIVITY
Interest rate sensitivity refers to the change in earnings resulting from
fluctuations in interest rates, variability in spread relationships, and the
differences in repricing intervals between assets and liabilities. The
management of interest rate sensitivity attempts to maximize earnings by
minimizing any negative impacts of changing market rates, asset and liability
mix, and prepayment trends.
The Corporation analyzes its level of interest rate risk using several
analytical techniques which include the impact of on-balance-sheet financial
instruments. In addition to on-balance-sheet activities, interest rate risk
includes the interest rate sensitivity of securitization income from securitized
loans and the impact of off-balance-sheet financial instruments.
Off-balance-sheet financial instruments include interest rate swap agreements.
The Corporation uses interest rate swap agreements to change fixed-rate funding
sources to floating-rate funding sources to better match the rate sensitivity of
the Corporation's assets. For this reason, the Corporation includes a managed
adjustment to quantify and capture the full impact of interest rate risk on the
Corporation's earnings.
The Corporation's interest rate risk using the static gap methodology is
presented in Table 13. This method reports the difference between interest rate
sensitive assets and liabilities at a specific point in time. Management uses
the static gap methodology to identify the Corporation's directional interest
rate risk. Interest rate sensitive assets and liabilities are reported based on
estimated and contractual repricings. Fixed-rate credit card loans, which may be
repriced by the Corporation at any time by giving notice to the Customer, are
placed in the table using a seventeen-month repricing schedule. The Corporation
also offers variable-rate credit card loans. At December 31, 1999, variable-rate
loans made up 12.4% of total managed loans, compared to 17.1% of total managed
loans at December 31, 1998. These variable-rate loans are generally indexed to
the U.S. Prime Rate published in The Wall Street Journal and reprice quarterly.
Including the managed adjustment, results of the gap analysis show that, within
one year, the Corporation's liabilities reprice faster than its assets,
indicating an earnings risk from rising interest rates.
Although the static gap methodology is widely accepted for its simplicity in
identifying interest rate risk, it ignores many changes that can occur, such as
repricing strategies, market spread adjustments, and anticipated hedging
transactions. For these reasons, the Corporation analyzes its level of interest
rate risk using several other analytical techniques, including simulation
analysis. All of the analytical techniques used by the Corporation to measure
interest rate risk include the impact of on-balance-sheet and off-balance-sheet
financial instruments.
Key assumptions in the Corporation's simulation analysis include cash flows and
maturities of interest rate sensitive instruments, changes in market conditions,
loan volumes and pricing, consumer preferences, fixed-rate credit card
repricings as part of the Corporation's normal planned business strategy, and
management's capital plans. Also included in the analysis are various actions
which the Corporation would undertake to minimize the impact of adverse
movements in interest rates. The Corporation has the contractual right to
reprice fixed-rate credit card loans at any time, by giving notice to the
Customer. Accordingly, a key assumption in the simulation analysis is the
repricing of fixed-rate credit card loans in response to an upward movement in
interest rates, with a lag of approximately 45 days between interest rate
movements and fixed-rate credit card loan repricings. The Corporation has
repriced its fixed-rate credit card loans on numerous occasions in the past, and
expects to continue to do so in response to changes in interest rates, market
conditions, or other factors.
Based on the simulation analysis at December 31, 1999, the Corporation could
experience a decrease in projected 2000 net income of approximately $36 million,
as compared to a decrease of approximately $33 million in projected 1999 net
income based on the simulation analysis at December 31, 1998, if interest rates
at the time the simulation analysis was performed increased 100 basis points
over 12 months.
These assumptions are inherently uncertain and, as a result, the analysis cannot
precisely predict the impact of higher interest rates on net income. Actual
results would differ from simulated results due to timing, magnitude, and
frequency of interest rate changes, changes in market conditions, and management
strategies to offset the Corporation's potential exposure, among other factors.
FOREIGN CURRENCY EXCHANGE RATE SENSITIVITY
Foreign currency exchange rate risk refers to the potential changes in current
and future earnings or capital arising from movements in foreign exchange
rates. The Corporation's foreign currency exchange rate risk is primarily
limited to the unhedged position of the Corporation's net investment in its
foreign subsidiaries. The Corporation uses forward exchange contracts and
foreign exchange swap agreements to reduce its exposure to foreign currency
exchange rate risk. Management reviews the foreign currency exchange rate risk
of the Corporation on a routine basis. During this review, management considers
the net impact to stockholders' equity under various foreign exchange rate
scenarios. At December 31, 1999, the Corporation would expect a decrease in
stockholders' equity, net of tax, of approximately $33 million, as compared to a
decrease of approximately $22 million in stockholders' equity, net of tax, at
December 31, 1998, as a result of a 10% depreciation of the Corporation's
unhedged foreign exposure to the U.S. dollar position.
The Corporation does not have any other off-balance-sheet financial instruments.
38
<PAGE> 51
MBNA CORPORATION AND SUBSIDIARIES
- --------------------------------------------------------------------------------
TABLE 13: INTEREST RATE SENSITIVITY SCHEDULE
(dollars in thousands)
<TABLE>
<CAPTION>
DECEMBER 31, 1999 SUBJECT TO REPRICING
Within 1 Year 1-5 Years After 5 Years Total
--------------- ------------- ---------------- --------
INTEREST-EARNING ASSETS
<S> <C> <C> <C> <C>
Interest-earning time deposits in other banks:
Domestic ..................................................... $ 3,536 $ - $ - $ 3,536
Foreign ...................................................... 1,522,212 - - 1,522,212
------------ ------------ --------- ------------
Total interest-earning time deposits in other banks .... 1,525,748 - - 1,525,748
Investment securities (a):
Available-for-sale ........................................... 1,367,384 1,385,279 - 2,752,663
Held-to-maturity ............................................. 1,095 12,113 280,433 293,641
Loans held for securitization:
Domestic ..................................................... 8,836,700 - - 8,836,700
Foreign ...................................................... 855,916 - - 855,916
------------ ------------ --------- ------------
Total loans held for securitization .................... 9,692,616 - - 9,692,616
Loans:
Domestic:
Credit card ............................................... 3,970,801 1,145,580 - 5,116,381
Other consumer ............................................ 774,287 282,918 210,814 1,268,019
------------ ------------ --------- ------------
Total domestic loans ................................... 4,745,088 1,428,498 210,814 6,384,400
Foreign ................................................... 918,076 668,617 - 1,586,693
------------ ------------ --------- ------------
Total loans ............................................ 5,663,164 2,097,115 210,814 7,971,093
------------ ------------ --------- ------------
Total interest-earning assets .......................... 18,250,007 3,494,507 491,247 22,235,761
INTEREST-BEARING LIABILITIES
Interest-bearing deposits:
Domestic:
Time deposits ............................................. 6,656,733 6,227,863 5,192 12,889,788
Money market deposit accounts ............................. 4,397,909 - - 4,397,909
Interest-bearing transaction accounts ..................... 39,388 - - 39,388
Savings accounts .......................................... 9,262 - - 9,262
------------ ------------ --------- ------------
Total domestic interest-bearing deposits ............... 11,103,292 6,227,863 5,192 17,336,347
Foreign:
Time deposits ............................................. 810,470 250 - 810,720
------------ ------------ --------- ------------
Total interest-bearing deposits ........................ 11,913,762 6,228,113 5,192 18,147,067
Borrowed funds:
Short-term borrowings:
Domestic .................................................. 890,000 - - 890,000
Foreign ................................................... 149,004 - - 149,004
------------ ------------ --------- ------------
Total short-term borrowings ............................ 1,039,004 - - 1,039,004
Long-term debt and bank notes:
Domestic .................................................. 3,124,136 1,077,955 654,370 4,856,461
Foreign ................................................... 610,113 242,306 - 852,419
------------ ------------ --------- ------------
Total long-term debt and bank notes .................... 3,734,249 1,320,261 654,370 5,708,880
------------ ------------ --------- ------------
Total borrowed funds ................................... 4,773,253 1,320,261 654,370 6,747,884
------------ ------------ --------- ------------
Total interest-bearing liabilities ..................... 16,687,015 7,548,374 659,562 24,894,951
------------ ------------ --------- ------------
Gap before managed adjustments .................................. 1,562,992 (4,053,867) (168,315) (2,659,190)
Managed adjustments (b) ......................................... (9,107,364) 11,174,038 (343,723) 1,722,951
------------ ------------ --------- ------------
Gap after managed adjustments ................................... $ (7,544,372) $ 7,120,171 $(512,038) $ (936,239)
============ ============ ========= ============
Cumulative gap after managed adjustments ........................ $ (7,544,372) $ (424,201) $(936,239)
============ ============ =========
Cumulative gap after managed adjustments as a % of managed
assets ........................................................ (8.83)% (.50)% (1.10)%
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Investment securities are presented using estimated maturities.
(b) Managed adjustments reflect the impact interest rates have on securitized
loans and off-balance-sheet financial instruments.
39
<PAGE> 52
MBNA CORPORATION AND SUBSIDIARIES
- --------------------------------------------------------------------------------
ASSET SECURITIZATION
Asset securitization of loan receivables is accomplished primarily through the
public and private issuance of asset-backed securities. As loan receivables are
securitized, the Corporation's on-balance-sheet funding needs are reduced by the
amount of loans securitized.
<TABLE>
<CAPTION>
MANAGED LOAN DISTRIBUTION
(billions)
97 98 99
<S> <C> <C>
PLOT POINTS TO COME FROM CLIENT
</TABLE>
<TABLE>
<CAPTION>
SECURITIZED LOANS
(billions)
97 98 99
<S> <C> <C>
38.2 45.2 54.6
</TABLE>
Asset securitization involves the sale, generally to a trust, of a pool of loan
receivables. The Corporation continues to own the accounts which generate the
loan receivables. In addition, the Corporation also sells the rights to new loan
receivables, including most fees generated by and payments received from the
accounts. The trust sells undivided interests in the trust to investors, while
the Corporation retains the remaining undivided interest. The senior classes of
the asset-backed securities receive a AAA credit rating at the time of issuance.
This AAA credit rating is generally achieved through the sale of lower rated
subordinated classes of asset-backed securities. The Corporation continues to
service the accounts and receives a servicing fee for doing so.
During the revolving period, which generally ranges from 24 months to 108
months, the trust makes no principal payments to the investors. Instead, the
trust uses principal payments received on the accounts to purchase new loan
receivables generated by these accounts, in accordance with the terms of the
transaction, so that the principal dollar amount of the investor's undivided
interest remains unchanged. Once the revolving period ends, the trust
distributes principal payments to the investors according to the terms of the
transaction. When the trust allocates principal payments to the investors, the
Corporation's loan receivables increase by the amount of any new purchases or
cash advance activity on the accounts.
Distribution of principal to the investors may begin sooner if the average
annualized yield (generally including interest income, interchange, and other
fees) for three consecutive months drops below a minimum yield (generally equal
to the sum of the coupon rate payable to investors, contractual servicing fees,
and principal credit losses during the period) or certain other events occur.
During 1999, the Corporation securitized credit card loan receivables totaling
$12.3 billion, including the securitization of Pound Sterling 750.0 million
(approximately $1.2 billion) by MBNA Europe and CAD$500.0 million (approximately
$342.3 million) by MBNA Canada. The Corporation also increased its
securitization of other consumer loans through a $1.0 billion increase in a
private multi-seller commercial paper conduit to $4.0 billion at December 31,
1999, from $3.0 billion at December 31, 1998. In 1998, the Corporation
securitized a total of $9.3 billion of its credit card loan receivables,
including the securitization of credit card loan receivables of Pound Sterling
750.0 million (approximately $1.3 billion) by MBNA Europe and CAD$250.0 million
(approximately $161.4 million) by MBNA Canada. The Corporation also increased
its securitization of other consumer loans through a net increase in a private
multi-seller commercial paper conduit to $3.0 billion at December 31, 1998, from
$2.4 billion in 1997, and the securitization of Pound Sterling 225.0 million
(approximately $374.3 million) of installment loans by MBNA Europe. The total
amount of outstanding securitized loans was $54.6 billion or 75.6% of managed
loans as of December 31, 1999, compared to $46.2 billion or 77.4% at December
31, 1998.
Table 14 shows the Corporation's securitized loan distribution.
TABLE 14: SECURITIZED LOAN DISTRIBUTION
(dollars in thousands)
<TABLE>
<CAPTION>
DECEMBER 31, 1999 1998 1997
<S> <C> <C> <C>
SECURITIZED LOANS
Domestic:
Credit card .................. $45,851,922 $39,739,387 $34,181,350
Other consumer ............... 3,987,180 3,007,858 2,442,116
----------- ----------- -----------
Total domestic
securitized loans ....... 49,839,102 42,747,245 36,623,466
Foreign:
Credit card .................. 4,565,996 3,052,070 1,594,320
Other consumer ............... 186,706 373,424 -
----------- ----------- -----------
Total foreign
securitized loans ....... 4,752,702 3,425,494 1,594,320
----------- ----------- -----------
Total securitized loans ... $54,591,804 $46,172,739 $38,217,786
=========== =========== ===========
- --------------------------------------------------------------------------
</TABLE>
During 1999, $5.1 billion of previously securitized loans amortized back into
the Corporation's loan portfolio or matured, compared to $3.0 billion in 1998.
After the revolving period, new charges and cash advances are for the account of
the Corporation, which increases the Corporation's on-balance-sheet assets.
Table 15 presents the amounts, at December 31, 1999, of investor principal (face
value) in securitized loan receivables scheduled to amortize into the
Corporation's loan receivables in future years or mature. The amortization
amounts are based upon estimated amortization periods which are subject to
change.
TABLE 15: AMORTIZATIONS OF INVESTOR PRINCIPAL (FACE VALUE)
(dollars in thousands)
<TABLE>
<S> <C>
2000 ......................................... $ 5,103,181
2001 ......................................... 7,280,488
2002 ......................................... 10,058,913
2003 ......................................... 8,811,460
2004 ......................................... 8,966,152
Thereafter ................................... 13,234,463
-----------
Total amortizations of investor principal . 53,454,657
Accrued interest included in securitized loans 1,137,147
-----------
Total securitized loans ................... $54,591,804
===========
- ------------------------------------------------------------
</TABLE>
40
<PAGE> 53
- -------------------------------------------------------------------------------
Table 16 compares the average annualized yield for the three-month period ended
December 31, 1999, to the minimum yield for each transaction. The yield for each
of the transactions is presented on a cash basis and includes various credit
card or other fees as specified in the securitization agreements.
TABLE 16: YIELDS ON SECURITIZED TRANSACTIONS (a)
<TABLE>
<CAPTION>
THREE-MONTH AVERAGE
Yield in
Annualized Minimum Excess of
Yield Yield Minimum
- ----------------------------------------------------------------------------------
<S> <C> <C> <C>
MasterTrust II 94-C .................. 18.69% 13.25% 5.44%
MasterTrust II 94-E .................. 18.69 13.02 5.67
MasterTrust II 95-A .................. 18.69 13.31 5.38
MasterTrust II 95-B .................. 18.69 13.17 5.52
MasterTrust II 95-C .................. 18.69 13.24 5.45
MasterTrust II 95-D .................. 18.69 13.10 5.59
MasterTrust II 95-E .................. 18.69 13.24 5.45
Cards No. 1 .......................... 20.18 12.04 8.14
MasterTrust II 95-F .................. 18.69 13.73 4.96
MasterTrust II 95-G .................. 18.69 13.24 5.45
MasterTrust II 95-I .................. 18.69 13.18 5.51
MasterTrust II 95-J .................. 18.69 13.25 5.44
MasterTrust II 96-A .................. 18.69 13.22 5.47
MasterTrust II 96-B .................. 18.69 13.29 5.40
MasterTrust II 96-C .................. 18.69 13.16 5.53
MasterTrust II 96-D .................. 18.69 13.16 5.53
Cards No. 2 .......................... 20.18 11.62 8.56
MasterTrust II 96-E .................. 18.69 13.19 5.50
MasterTrust II 96-F .................. 19.67 13.30 6.37
MasterTrust II 96-G .................. 18.69 13.20 5.49
MasterTrust II 96-H .................. 18.72 13.19 5.53
MasterTrust II 96-I .................. 18.72 12.98 5.74
MasterTrust II 96-J .................. 18.69 13.16 5.53
MasterTrust II 96-K .................. 18.69 13.14 5.55
MasterTrust II 96-M .................. 18.72 13.24 5.48
Cards No. 3 .......................... 20.18 11.54 8.6
MasterTrust II 97-A .................. 18.72 13.02 5.70
MasterTrust II 97-B .................. 18.69 13.22 5.47
MasterTrust II 97-C .................. 18.69 13.12 5.57
MasterTrust II 97-D .................. 18.72 13.19 5.53
MasterTrust II 97-E .................. 18.72 13.47 5.25
MasterTrust II 97-F .................. 18.69 13.07 5.62
MasterTrust II 97-G .................. 18.69 13.17 5.52
Cards No. 4 .......................... 20.18 12.44 7.74
MasterTrust II 97-H .................. 18.72 13.10 5.62
MasterTrust II 97-I .................. 18.69 13.10 5.59
MasterTrust II 97-J .................. 18.69 13.13 5.56
Consumer Loan MasterTrust 97-1 (b) ... 18.68 13.51 5.17
MasterTrust II 97-K .................. 18.69 13.14 5.55
MasterTrust II 97-L .................. 18.72 13.09 5.63
MasterTrust II 97-M .................. 18.72 13.50 5.22
MasterTrust II 97-N .................. 18.72 13.16 5.56
MasterTrust II 97-O .................. 18.69 13.18 5.51
MasterTrust II 98-A .................. 18.69 13.12 5.57
Cards No. 5 .......................... 20.18 12.76 7.42
MasterTrust II 98-B .................. 18.72 13.51 5.21
MasterTrust II 98-C .................. 18.69 13.08 5.61
MasterTrust II 98-D .................. 18.69 12.99 5.70
MasterTrust II 98-E .................. 18.72 13.55 5.17
MasterTrust II 98-F .................. 18.72 13.06 5.66
MasterTrust II 98-G .................. 18.69 13.17 5.52
MasterTrust II 98-H .................. 18.69 13.03 5.66
Cards No. 6 .......................... 20.18 12.15 8.03
MasterTrust II 98-I .................. 18.69 13.29 5.40
MasterTrust II 98-J .................. 18.69 12.26 6.43
MasterTrust II 98-K .................. 18.69 13.29 5.40
UK 98-A (b) .......................... 15.64 12.91 2.73
Cards No. 7 .......................... 20.18 12.37 7.81
Gloucester Credit Card Trust 98-1 .... 17.44 10.00 7.44
MasterTrust II 98-L .................. 18.69 12.94 5.75
MasterTrust II 99-A .................. 18.69 13.17 5.52
MasterTrust II 99-B .................. 18.69 13.12 5.57
Acquired Portfolio MasterTrust 99-1 .. 19.76 13.37 6.39
MasterTrust II 99-C .................. 18.72 13.32 5.40
Cards No. 8 .......................... 20.18 12.09 8.09
MasterTrust II 99-D .................. 18.69 13.23 5.46
MasterTrust II 99-E .................. 18.69 13.16 5.53
MasterTrust II 99-F .................. 18.72 13.00 5.72
MasterTrust II 99-G .................. 18.69 13.24 5.45
Cards No. 9 .......................... 20.18 12.11 8.07
MasterTrust II 99-H .................. 18.73 13.69 5.04
MasterTrust II 99-I .................. 18.61 13.05 5.56
MasterTrust II 99-J .................. 18.63 13.22 5.41
Gloucester Credit Card Trust 99-1 .... 17.33 9.97 7.36
</TABLE>
(a) MasterTrust II 99-K issued October 27, 1999, MasterTrust II 99-L issued
November 5, 1999, MasterTrust II 99-M issued December 1, 1999, Gloucester
Credit Card Trust 99-2 issued December 3, 1999, and Cards No. 10 issued
December 9, 1999, are excluded from the yields presented above as a
result of their recency.
(b) Yields are provided for informational purposes only. Distribution to
investors may begin sooner if the credit enhancement amount falls below a
predetermined contractual level.
41
<PAGE> 54
MBNA CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL FINANCIAL INFORMATION
- -------------------------------------------------------------------------------
(unaudited)
The following supplemental financial information presents selected managed asset
data and managed ratios pertaining to the Corporation. This information is used
to evaluate the Corporation's financial condition as well as the impact asset
securitizations have on the Corporation's managed assets.
<TABLE>
<CAPTION>
MANAGED ASSET DATA
(dollars in thousands)
YEAR ENDED DECEMBER 31, 1999 1998 1997
At Year End
<S> <C> <C> <C>
Loans held for securitization................................................... $ 9,692,616 $ 1,692,268 $ 2,900,198
Loan portfolio.................................................................. 7,971,093 11,776,099 8,261,876
Securitized loans............................................................... 54,591,804 46,172,739 38,217,786
---------- ---------- -----------
Total managed loans .................................................... $ 72,255,513 $ 59,641,106 $ 49,379,860
=========== =========== ===========
Average for the Year
Loans held for securitization .................................................. $ 4,071,394 $ 2,577,482 $ 2,875,212
Loan portfolio ................................................................. 10,351,101 9,352,807 7,563,301
Securitized loans .............................................................. 49,706,760 40,970,936 32,746,963
---------------- --------------- --------------
Total managed loans .................................................... $ 64,129,255 $ 52,901,225 $ 43,185,476
================ =============== ==============
Managed Ratios
Delinquency .................................................................... 4.45% 4.62% 4.59%
Net credit losses .............................................................. 4.33 4.31 3.97
Net interest margin(on an FTE basis) ........................................... 7.42 7.47 7.50
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ENDING LOANS
(managed)
97 98 99
<S> <C> <C>
49.4 59.6 72.3
</TABLE>
<TABLE>
<CAPTION>
DELINQUENCY
(managed)
97 98 99
<S> <C> <C>
4.59 4.62 4.45
</TABLE>
<TABLE>
<CAPTION>
NET CREDIT LOSSES
(managed)
97 98 99
<S> <C> <C>
3.97 4.31 4.33
</TABLE>
<TABLE>
<CAPTION>
NET INTEREST MARGIN
(managed)
97 98 99
<S> <C> <C>
7.50 7.41 7.42
</TABLE>
42
<PAGE> 55
MBNA CORPORATION AND SUBSIDIARIES
MANAGEMENT'S REPORT ON CONSOLIDATED FINANCIAL STATEMENTS AND INTERNAL CONTROL
- -------------------------------------------------------------------------------
The accompanying consolidated financial statements were prepared by management,
which is responsible for the integrity and objectivity of the information
presented, including amounts that must necessarily be based on judgments and
estimates. The consolidated financial statements were prepared in conformity
with generally accepted accounting principles, and in situations where
acceptable alternative accounting principles exist, management selected the
method that was appropriate in the circumstance. Financial information appearing
throughout this Annual Report to Stockholders is consistent with the
consolidated financial statements.
Management depends upon MBNA Corporation's systems of internal control in
meeting its responsibilities for reliable consolidated financial statements. In
management's opinion, these systems provide reasonable assurance that assets are
safeguarded and that transactions are properly recorded and executed in
accordance with management's authorizations. Judgments are required to assess
and balance the relative cost and expected benefits of these controls. As an
integral part of the systems of internal control, the Corporation maintains a
professional staff of internal auditors who conduct operational and special
audits and coordinate audit coverage with the independent auditors.
The consolidated financial statements have been audited by the Corporation's
independent auditors, Ernst & Young LLP, whose independent professional opinion
appears separately.
The Audit Committee of the Board of Directors, composed solely of outside
directors, meets periodically with the internal auditors, the independent
auditors, and management to review the work of each and ensure that each is
properly discharging its responsibilities. The independent auditors have free
access to the Committee to discuss the results of their audit work and their
evaluations of the adequacy of internal controls and the quality of financial
reporting.
/s/ ALFRED LERNER /s/ CHARLES M. CAWLEY
Alfred Lerner Charles M. Cawley
Chairman and President
Chief Executive Officer MBNA Corporation
MBNA Corporation
/s/ M. SCOT KAUFMAN /s/ KENNETH F. BOEHL
M. Scot Kaufman Kenneth F. Boehl
Chief Financial Officer General Auditor
MBNA Corporation MBNA Corporation
43
<PAGE> 56
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
- -------------------------------------------------------------------------------
(dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
DECEMBER 31, 1999 1998
Assets
<S> <C> <C>
Cash and due from banks ......................................................................... $ 488,386 $ 382,882
Interest-earning time deposits in other banks ................................................... 1,525,748 2,831,215
Federal funds sold and securities purchased under resale agreements ............................. -- 730,000
Investment securities:
Available-for-sale (at market value, amortized cost of $2,772,305 and $1,666,123
at December 31, 1999 and 1998, respectively) ................................................. 2,752,663 1,663,704
Held-to-maturity (market value of $264,832 and $211,473 at December 31, 1999 and
1998, respectively) .......................................................................... 293,641 216,020
Loans held for securitization ................................................................... 9,692,616 1,692,268
Loans:
Credit card ................................................................................... 6,060,564 8,975,051
Other consumer ................................................................................ 1,910,529 2,801,048
------------- -------------
Total loans ................................................................................ 7,971,093 11,776,099
Reserve for possible credit losses ............................................................ (355,959) (216,911)
------------- -------------
Net loans .................................................................................. 7,615,134 11,559,188
Premises and equipment, net ..................................................................... 1,659,446 1,617,596
Accrued income receivable ....................................................................... 216,867 193,019
Accounts receivable from securitizations ........................................................ 4,128,046 3,595,556
Prepaid expenses and deferred charges ........................................................... 274,894 237,587
Other assets .................................................................................... 2,211,691 1,087,225
------------- -------------
Total assets ............................................................................... $ 30,859,132 $ 25,806,260
============= =============
Liabilities
Deposits:
Time deposits ................................................................................. $ 13,700,508 $ 10,745,062
Money market deposit accounts ................................................................. 4,397,909 4,125,523
Noninterest-bearing demand deposits ........................................................... 567,686 462,266
Interest-bearing transaction accounts ......................................................... 39,388 35,399
Savings accounts .............................................................................. 9,262 38,790
------------- -------------
Total deposits ............................................................................. 18,714,753 15,407,040
Short-term borrowings ........................................................................... 1,039,004 1,231,195
Long-term debt and bank notes ................................................................... 5,708,880 5,939,025
Accrued interest payable ........................................................................ 182,990 153,201
Accrued expenses and other liabilities .......................................................... 1,014,062 684,764
------------- -------------
Total liabilities .......................................................................... 26,659,689 23,415,225
Stockholders' Equity
Preferred stock ($.01 par value, 20,000,000 shares authorized,
8,573,882 shares issued and outstanding at December 31, 1999 and 1998) ......................... 86 86
Common stock ($.01 par value, 1,500,000,000 shares authorized, 801,781,250 shares
and 751,795,674 shares issued and outstanding at December 31, 1999 and 1998,
respectively) .................................................................................. 8,018 7,518
Additional paid-in capital ...................................................................... 1,305,935 271,050
Retained earnings ............................................................................... 2,897,964 2,112,374
Accumulated other comprehensive income .......................................................... (12,560) 7
------------- -------------
Total stockholders' equity ................................................................. 4,199,443 2,391,035
------------- -------------
Total liabilities and stockholders' equity ................................................. $ 30,859,132 $ 25,806,260
============= =============
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
44
<PAGE> 57
CONSOLIDATED STATEMENTS OF INCOME
- -------------------------------------------------------------------------------
(dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1999 1998 1997
<S> <C> <C> <C>
Interest Income
Loans ................................................................... $ 1,404,063 $ 1,315,330 $ 1,076,393
Investment securities:
Taxable ................................................................. 131,818 111,092 141,429
Tax-exempt .............................................................. 3,587 3,405 3,511
Time deposits in other banks ............................................... 120,234 135,420 49,073
Federal funds sold and securities purchased under resale agreements ........ 47,264 28,783 23,962
Loans held for securitization .............................................. 555,305 372,142 416,645
------------- ------------- -------------
Total interest income ................................................. 2,262,271 1,966,172 1,711,013
Interest Expense
Deposits ................................................................... 919,426 816,104 693,920
Short-term borrowings ...................................................... 36,337 26,038 19,784
Long-term debt and bank notes .............................................. 372,743 381,691 304,919
------------- ------------- -------------
Total interest expense ................................................ 1,328,506 1,223,833 1,018,623
------------- ------------- -------------
Net Interest Income ........................................................ 933,765 742,339 692,390
Provision for possible credit losses ....................................... 408,914 310,039 260,040
------------- ------------- -------------
Net interest income after provision for possible credit losses ............. 524,851 432,300 432,350
Other Operating Income
Interchange ................................................................ 220,298 138,415 114,598
Credit card fees ........................................................... 199,485 129,758 103,144
Securitization income ...................................................... 3,643,209 2,844,244 2,506,817
Insurance .................................................................. 59,638 78,981 42,455
Other ...................................................................... 85,191 37,571 45,865
------------- ------------- -------------
Total other operating income .......................................... 4,207,821 3,228,969 2,812,879
Other Operating Expense
Salaries and employee benefits ............................................. 1,261,491 1,070,909 990,039
Occupancy expense of premises .............................................. 126,881 119,879 85,552
Furniture and equipment expense ............................................ 181,091 170,975 150,410
Other ...................................................................... 1,508,245 1,045,441 997,120
------------- ------------- -------------
Total other operating expense ......................................... 3,077,708 2,407,204 2,223,121
------------- ------------- -------------
Income Before Income Taxes ................................................. 1,654,964 1,254,065 1,022,108
Applicable income taxes .................................................... 630,541 477,799 399,608
------------- ------------- -------------
Net Income ................................................................. $ 1,024,423 $ 776,266 $ 622,500
============ ============ ============
Earnings Per Common Share .................................................. $ 1.26 $ 1.01 $ .80
Earnings Per Common Share--Assuming Dilution ............................... 1.21 .97 .76
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
45
<PAGE> 58
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
- -------------------------------------------------------------------------------
(dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
OUTSTANDING SHARES
Preferred Common Preferred Common
(000) (000) Stock Stock
---------------------------------------------------------
<S> <C> <C> <C> <C>
Balance, December 31, 1996 ................................ 12,000 751,781 $ 120 $ 7,518
Comprehensive income:
Net income .............................................. - - - -
Foreign currency translation, net of tax
(accumulated amount of $2,924 at
December 31, 1997) .................................. - - - -
Net unrealized gains on investment securities
available-for-sale and other financial
instruments, net of tax (accumulated amount of
$6,783 at December 31, 1997) .......................... - - - -
Other comprehensive income, net of tax ..................
Comprehensive income.......................................
Cash dividends:
Common--$.21 per share .................................. - - - -
Preferred ............................................... - - - -
Exercise of stock options and other awards ................ - 9,464 - 95
Acquisition and retirement of common stock ................ - (9,464) - (95)
Acquisition and retirement of preferred stock ............. (3,426) - (34) -
---------------------------------------------------------
Balance, December 31, 1997 ................................ 8,574 751,781 86 7,518
Comprehensive income:
Net income .............................................. - - - -
Foreign currency translation, net of tax
(accumulated amount of $2,422 at
December 31, 1998) .................................. - - - -
Net unrealized losses on investment securities
available-for-sale and other financial
instruments, net of tax (accumulated amount
of $2,160 at December 31, 1998) ..................... - - - -
Minimum benefit plan liability adjustment, net
of tax(accumulated amount of ($4,575) at
December 31, 1998) .................................. - - - -
Other comprehensive income, net of tax
Comprehensive income
Cash dividends:
Common--$.24 per share .................................. - - - -
Preferred ............................................... - - - -
Exercise of stock options and other awards ................ - 11,923 - 119
Acquisition and retirement of common stock ................ - (11,908) - (119)
---------------------------------------------------------
Balance, December 31, 1998 ................................ 8,574 751,796 86 7,518
Comprehensive income:
Net income .............................................. - - - -
Foreign currency translation, net of tax
(accumulated amount of ($4,316) at December
31, 1999) ........................................... - - - -
Net unrealized losses on investment securities
available-for-sale and other financial
instruments, net of tax (accumulated
amount of ($8,244) at December 31, 1999) ............ - - - -
Minimum benefit plan liability adjustment, net
of tax(accumulated amount of $0 at
December 31, 1999) .................................. - - - -
Other comprehensive income, net of tax
Comprehensive income.......................................
Cash dividends:
Common--$.28 per share .................................. - - - -
Preferred ............................................... - - - -
Exercise of stock options and other awards ................ - 7,719 - 77
Issuance of common stock, net of issuance costs ........... - 50,000 - 500
Acquisition and retirement of common stock ................ - (7,734) - (77)
----------- ----------- ----------- -----------
Balance, December 31, 1999 ................................ 8,574 801,781 $ 86 $ 8,018
=========== =========== =========== ===========
<CAPTION>
Accumulated
Additional Other Total
Paid-in Retained Comprehensive Stockholders
Capital Earnings Income Equity
---------------------------------------------------------
<S> <C> <C> <C> <C>
Balance, December 31, 1996 ................................ $ 599,725 $ 1,088,312 $ 8,633 $ 1,704,308
Comprehensive income:
Net income .............................................. - 622,500 - 622,500
Foreign currency translation, net of tax
(accumulated amount of $2,924 at
December 31, 1997) .................................. - - (4,986) (4,986)
Net unrealized gains on investment securities
available-for-sale and other financial
instruments, net of tax (accumulated amount of
$6,783 at December 31, 1997) .......................... - - 6,060 6,060
-----------
Other comprehensive income, net of tax .................. 1,074
-----------
Comprehensive income ...................................... 623,574
Cash dividends:
Common--$.21 per share .................................. - (160,417) - (160,417)
Preferred ............................................... - (16,394) - (16,394)
Exercise of stock options and other awards ................ 65,116 - - 65,211
Acquisition and retirement of common stock ................ (157,351) - - (157,446)
Acquisition and retirement of preferred stock ............. (85,619) (3,133) - (88,786)
--------------------------------------------------------
Balance, December 31, 1997 ................................ 421,871 1,530,868 9,707 1,970,050
Comprehensive income:
Net income .............................................. - 776,266 - 776,266
Foreign currency translation, net of tax
(accumulated amount of $2,422 at
December 31, 1998) .................................. - - (502) (502)
Net unrealized losses on investment securities
available-for-sale and other financial
instruments, net of tax (accumulated amount
of $2,160 at December 31, 1998) ..................... - - (4,623) (4,623)
Minimum benefit plan liability adjustment, net
of tax (accumulated amount of ($4,575) at
December 31, 1998) .................................. - - (4,575) (4,575)
-----------
Other comprehensive income, net of tax .................. (9,700)
-----------
Comprehensive income ...................................... 766,566
Cash dividends:
Common--$.24 per share .................................. - (180,468) - (180,468)
Preferred ............................................... - (14,292) - (14,292)
Exercise of stock options and other awards ................ 96,320 - - 96,439
Acquisition and retirement of common stock ................ (247,141) - - (247,260)
--------------------------------------------------------
Balance, December 31, 1998 ................................ 271,050 2,112,374 7 2,391,035
Comprehensive income:
Net income .............................................. - 1,024,423 - 1,024,423
Foreign currency translation, net of tax
(accumulated amount of ($4,316) at December
31, 1999) ........................................... - - (6,738) (6,738)
Net unrealized losses on investment securities
available-for-sale and other financial
instruments, net of tax (accumulated
amount of ($8,244) at December 31, 1999) ............ - - (10,404) (10,404)
Minimum benefit plan liability adjustment, net
of tax (accumulated amount of $0 at
December 31, 1999) .................................. - - 4,575 4,575
-----------
Other comprehensive income, net of tax .................. (12,567)
-----------
Comprehensive income....................................... 1,011,856
Cash dividends:
Common--$.28 per share .................................. - (224,520) - (224,520)
Preferred ............................................... - (14,313) - (14,313)
Exercise of stock options and other awards ................ 72,559 - - 72,636
Issuance of common stock, net of issuance costs ........... 1,173,586 - - 1,174,086
Acquisition and retirement of common stock ................ (211,260) - - (211,337)
----------- ----------- ----------- -----------
Balance, December 31, 1999 ................................ $ 1,305,935 $ 2,897,964 $ (12,560) $ 4,199,443
=========== =========== =========== ===========
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
46
<PAGE> 59
CONSOLIDATED STATEMENTS OF CASH FLOWS
- -------------------------------------------------------------------------------
(dollars in thousands)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1999 1998 1997
Operating Activities
<S> <C> <C> <C>
Net income ..................................................................... $ 1,024,423 $ 776,266 $ 622,500
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for possible credit losses ........................................ 408,914 310,039 260,040
Depreciation, amortization, and accretion ................................... 426,443 256,587 145,957
(Benefit) provision for deferred income taxes ............................... (46,604) 6,689 41,349
Increase in accrued income receivable ....................................... (23,848) (46,055) (48,804)
Increase in accounts receivable from securitizations ........................ (532,490) (759,725) (1,058,508)
Increase in accrued interest payable ........................................ 29,789 15,986 30,028
Decrease (increase) in other operating activities ........................... 122,226 (49,466) 130,103
------------ ------------ ------------
Net cash provided by operating activities ................................ 1,408,853 510,321 122,665
Investing Activities
Net decrease (increase) in money market instruments ............................ 2,035,467 (1,475,150) (1,209,451)
Proceeds from maturities of investment securities available-for-sale ........... 828,800 2,113,501 8,546,878
Purchases of investment securities available-for-sale .......................... (1,945,110) (1,604,699) (8,947,215)
Proceeds from maturities of investment securities held-to-maturity ............. 44,718 215,239 305,206
Purchases of investment securities held-to-maturity ............................ (100,186) (84,791) (53,269)
Proceeds from securitization of loans .......................................... 13,287,994 10,681,836 13,172,133
Acquisition of credit card business of PNC Bank, N.A. .......................... (3,191,786) - -
Loan portfolio acquisitions .................................................... (2,726,633) (3,654,132) (1,307,038)
Proceeds from sale of loan portfolios .......................................... 764,263 171,769 34,734
Amortization of securitized loans .............................................. (5,084,811) (3,008,978) (3,637,385)
Net loan originations .......................................................... (8,616,649) (7,119,584) (9,728,725)
Net purchases of premises and equipment ........................................ (235,124) (214,640) (660,046)
------------ ------------ ------------
Net cash used in investing activities .................................... (4,939,057) (3,979,629) (3,484,178)
Financing Activities
Net increase in money market deposit accounts, noninterest-bearing
demand deposits, interest-bearing transaction accounts, and savings accounts .. 352,267 1,183,936 485,796
Net increase in time deposits .................................................. 2,955,446 1,309,891 2,275,731
Net (decrease) increase in short-term borrowings ............................... (192,191) 1,038,572 (500,764)
Proceeds from issuance of long-term debt and bank notes ........................ 891,495 876,126 1,803,231
Maturity of long-term debt and bank notes ...................................... (1,134,257) (424,677) (312,770)
Acquisition and retirement of preferred stock .................................. - - (52,483)
Proceeds from exercise of stock options and other awards ....................... 27,932 42,454 31,948
Acquisition and retirement of common stock ..................................... (211,337) (247,260) (157,446)
Proceeds from issuance of common stock ......................................... 1,174,086 - -
Dividends paid ................................................................. (227,733) (189,916) (173,729)
------------ ------------ ------------
Net cash provided by financing activities ................................ 3,635,708 3,589,126 3,399,514
------------ ------------ ------------
Increase in Cash and Cash Equivalents .......................................... 105,504 119,818 38,001
Cash and cash equivalents at beginning of year ................................. 382,882 263,064 225,063
------------ ------------ ------------
Cash and cash equivalents at end of year........................................ $ 488,386 $ 382,882 $ 263,064
============ ============ ===========
Supplemental Disclosures
Interest expense paid........................................................... $ 1,295,597 $ 1,207,603 $ 988,675
============ ============ ===========
Income taxes paid............................................................... $ 610,806 $ 406,191 $ 224,840
============ ============ ===========
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
47
<PAGE> 60
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
NOTE A: SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed in the
preparation of the consolidated financial statements.
BUSINESS
MBNA Corporation ("the Corporation") is a registered bank holding company,
incorporated under the laws of Maryland. It is the parent company of MBNA
America Bank, N.A. ("the Bank"), a national bank and the Corporation's principal
subsidiary. The Bank has two wholly owned foreign bank subsidiaries, MBNA
International Bank Limited ("MBNA Europe") located in the United Kingdom and
MBNA Canada Bank ("MBNA Canada") located in Canada. Through the Bank, the
Corporation is the largest independent credit card lender in the world and is
the leading issuer of affinity credit cards, marketed primarily to members of
associations and Customers of financial institutions. In addition to its credit
card lending, the Corporation also makes other consumer loans and offers
insurance and deposit products.
BASIS OF PRESENTATION
The accompanying consolidated financial statements have been prepared in
accordance with generally accepted accounting principles in the United States
that require the Corporation's management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the consolidated financial
statements as well as the reported amount of revenues and expenses during the
reporting period. Actual results could differ from these estimates.
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include, after intercompany
elimination, the accounts of all subsidiaries of the Corporation, all of which
are wholly owned. For purposes of comparability, certain prior year amounts have
been reclassified.
FOREIGN ACTIVITIES
The Corporation's foreign activities are primarily performed through the Bank's
two foreign bank subsidiaries, MBNA Europe and MBNA Canada. The Bank also has a
foreign branch office in the Grand Cayman Islands.
FOREIGN CURRENCY TRANSLATION AND TRANSACTIONS
The financial statements of the Corporation's foreign subsidiaries have been
translated into U.S. dollars in accordance with generally accepted accounting
principles. Assets and liabilities have been translated using the exchange rate
at year end. Income and expense amounts have been translated using the
appropriate exchange rate for the period in which the transaction took place.
The translation gains and losses resulting from the change in exchange rates
have been reported as a component of comprehensive income included in
stockholders' equity, net of tax. The effect on the consolidated statements of
income from foreign currency transaction gains and losses is immaterial for all
years presented.
INVESTMENT SECURITIES
Investment securities available-for-sale are recorded at market value with
unrealized gains and losses, net of tax, reported as a component of
comprehensive income included in stockholders' equity. Investment securities
held-to-maturity are reported at cost (adjusted for amortization of premiums and
accretion of discounts). The Corporation does not hold investment securities for
trading purposes. Realized gains and losses and other-than-temporary impairments
related to investment securities are determined using the specific
identification method and are reported in other operating income as gains or
losses on investment securities.
LOANS HELD FOR SECURITIZATION
Loans held for securitization are the lesser of loans eligible for
securitization or sale, or loans that management intends to securitize or sell
within one year. Also included are loan receivables in which certain affinity
groups or financial institutions have the contractual right to acquire the loans
from the Corporation at fair value after a stated contractual period of time.
These loans are carried at the lower of aggregate cost or market value.
INTEREST INCOME ON LOANS
Interest income is recognized based upon the principal amount of loans
outstanding. Interest income is generally recognized until the loan is charged
off. The accrued interest portion of the charged-off loan balance is deducted
from current period interest income, while the principal balance is charged off
against the reserve for possible credit losses.
CREDIT CARD FEES AND COSTS
Credit card fees include annual, late, overlimit, returned check, cash advance,
and other miscellaneous fees. These fees are assessed according to agreements
with the Corporation's credit card Customers. Accrued credit card fees
previously recognized on charged-off accounts are deducted from current period
credit card fee income.
Annual credit card fees and incremental direct loan origination costs are
deferred and amortized on a straight-line basis over the one-year period to
which they pertain. The Corporation does not charge an annual credit card fee
during the first year the account is originated, while incremental direct loan
origination costs are deferred only in the first year. These costs are included
in prepaid expenses and deferred charges. At December 31, 1999 and 1998, the
incremental direct loan origination costs deferred were $41.6 million and $42.4
million, respectively.
LOAN RECEIVABLE FRAUD LOSSES
The Corporation incurs loan receivable fraud losses from the unauthorized use of
Customer accounts and counterfeiting. These fraudulent transactions, when
identified, are reclassified to other assets from loans and reduced to estimated
net recoverable values through a charge to operating expense. The remaining net
recoverable values are generally charged off after four months (sooner if the
collectibility of the account is no longer assured).
48
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RESERVE FOR POSSIBLE CREDIT LOSSES
The Corporation makes certain estimates and assumptions that affect the
determination of the reserve for possible credit losses. The loan portfolio is
regularly reviewed to determine an appropriate reserve for possible credit
losses based upon the impact of economic conditions on the borrowers' ability to
repay, past collection experience, the risk characteristics of the portfolio,
and other factors. Significant changes in these factors could impact the
appropriate reserve for possible credit losses. A provision is charged to
operating expense to maintain the reserve at an appropriate level. The
Corporation's policy is generally to charge off accounts when they become 180
days contractually past due. The Corporation records acquired reserves for
current period loan acquisitions. The reserve for possible credit losses is a
general allowance applicable to the Corporation's loan portfolio and does not
include an allocation for credit risk related to securitized loans. Losses on
securitized loans are absorbed directly by the related trusts under their
respective contractual agreements, and reduce securitization income rather than
the reserve for possible credit losses.
PREMISES AND EQUIPMENT
Premises and equipment are stated at cost less accumulated depreciation and
amortization, computed principally by the straight-line method over the
estimated useful lives of the assets. Maintenance and repairs are included in
operating expense, while the cost of improvements is capitalized.
PREPAID EXPENSES AND DEFERRED CHARGES
The principal components of prepaid expenses and deferred charges include direct
loan origination costs, royalties advanced to the Corporation's affinity groups
and financial institutions, and commissions paid on brokered certificates of
deposit. These costs are deferred and amortized over the period the Corporation
receives a benefit or the remaining term of the liability.
INTERCHANGE
Interchange income is a fee paid by a merchant bank to the card-issuing bank
through the interchange network as compensation for risk, grace period, and
other operating costs. Such fees are set annually by MasterCard International
and Visa International. The Corporation recognizes interchange income as earned.
INTEREST RATE SWAP AGREEMENTS
The Corporation uses interest rate swap agreements to change fixed-rate funding
sources to floating-rate funding sources to better match the rate sensitivity of
the Corporation's assets. Interest rate swap agreements are agreements between
counterparties to exchange cash flows based on the difference between two
interest rates, applied to a notional principal amount for a specific period.
Interest rate swap agreements may subject the Corporation to market risk
associated with changes in interest rates, as a result of the change to
floating-rate funding sources, as well as the risk of default by a counterparty
to the agreement.
Amounts paid or received related to outstanding interest rate swap contracts
that are used in the asset/liability management process are accrued and
recognized in earnings, as an adjustment to the related interest income or
expense of the hedged asset/liability, over the life of the related agreement.
For interest rate swap agreements to qualify for hedge accounting treatment the
following conditions must be met: the underlying asset/liability being hedged by
the interest rate swap agreement exposes the Corporation to interest rate risk;
the interest rate swap agreement reduces the Corporation's sensitivity to
interest rate risk; and the interest rate swap agreements are designated and
deemed effective in hedging the Corporation's exposure to interest rate risk.
All of the Corporation's interest rate swap agreements qualify for hedge
accounting treatment. The Corporation does not hold or issue interest rate swap
agreements for trading purposes. Gains and losses associated with the
termination of interest rate swap agreements for identified positions are
deferred and amortized over the remaining lives of the related agreements as an
adjustment to the yield. Unamortized deferred gains and losses on terminated
interest rate swap agreements are included in the underlying assets/liabilities
hedged.
FOREIGN EXCHANGE SWAP AGREEMENTS
The Corporation enters into foreign exchange swap agreements to reduce its
exposure to foreign currency exchange rate risk primarily related to activity
associated with its foreign bank subsidiaries. Foreign exchange swap agreements
are agreements to exchange principal amounts of different currencies, usually at
a prevailing exchange rate. When the agreement matures, the underlying principal
or notional amount will be reexchanged at the agreed-upon exchange rate. These
foreign exchange swap agreements are marked to market with any unrealized gains
or losses recognized in other operating income. The Corporation does not hold or
issue foreign exchange swap agreements for trading purposes.
FORWARD EXCHANGE CONTRACTS
The Corporation enters into forward exchange contracts to reduce its exposure to
foreign currency exchange rate risk primarily related to activity associated
with its foreign bank subsidiaries. Forward exchange contracts are commitments
to buy or sell foreign currency at a future date for a contracted price. These
off-balance-sheet financial instruments may expose the Corporation to varying
degrees of credit and market risk and are subject to the same credit and risk
limitations as the Corporation's on-balance-sheet financial instruments. The
premium paid or received for these contracts is amortized over the life of the
agreement to other operating income. For contracts to effectively hedge foreign
currency exchange risk, they must reduce the Corporation's sensitivity to
foreign currency exchange rate risk. For contracts that are designated and
effective as hedges of its net investment in the Bank's foreign subsidiaries,
gains and losses are deferred and reported in stockholders' equity, net of tax,
as an offset to translation gains and losses. Contracts, or portions thereof,
that are not effective as hedges are marked to market with any gains or losses
recognized in other operating income. The Corporation only has forward exchange
contracts that are designated and effective as hedges. The Corporation does not
hold or issue forward exchange contracts for trading purposes. For any contracts
that are terminated early, the remaining premium or discount is immediately
recognized in other operating income.
The Corporation can also enter into forward exchange contracts to reduce its
exposure to foreign currency exchange rate risk related to its deposits. The
contracts are marked to market with gains or losses recognized in other
operating income.
49
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STOCK-BASED EMPLOYEE COMPENSATION
The Corporation measures compensation cost for employee stock options and
similar instruments using the intrinsic-value-based method of accounting
prescribed by Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees" ("APB Opinion No. 25").
INCOME TAXES
The Corporation accounts for income taxes using the liability method. Under the
liability method, deferred tax assets and liabilities are determined based on
the differences between the financial statement carrying amounts and the tax
bases of existing assets and liabilities (i.e., temporary differences) and are
measured at the prevailing enacted tax rates that will be in effect when these
differences are settled or realized.
STATEMENTS OF CASH FLOWS
The Corporation has presented the consolidated statements of cash flows using
the indirect method, which involves the reconciliation of net income to net cash
flow from operating activities. In addition, the Corporation nets certain cash
receipts and cash payments relating to deposits placed with and withdrawn from
other financial institutions; time deposits accepted and repayments of those
deposits; and loans made to Customers and principal collections of those loans.
For purposes of the consolidated statements of cash flows, cash and cash
equivalents include cash and due from banks.
INTANGIBLE ASSETS
Intangible assets, including the value of acquired Customer accounts and
goodwill, are amortized over the periods the Corporation receives a benefit, not
exceeding fifteen years. The Corporation amortizes its intangible assets
generally using the straight-line method or may use an accelerated method in
order to better match the expected future cash flows from the use of the asset.
Intangible assets, which are included in other assets, had a net book value of
$1.6 billion and $671.4 million at December 31, 1999 and 1998, respectively. The
increase in intangible assets in 1999 is a result of the acquisition of the
credit card business of PNC Bank, N.A. ("PNC"), the credit card loan portfolio
of SunTrust Banks, and other loan portfolios. The Corporation had accumulated
amortization related to its intangible assets of $314.3 million and $144.1
million at December 31, 1999 and 1998, respectively.
The Corporation periodically reviews the carrying value of its intangible
assets for impairment. The intangible assets are carried at the lower of net
book value or fair value, with the fair value determined by discounting the
expected future cash flows from the use of the asset, using an appropriate
discount rate. The Corporation performs this valuation based on the size and
nature of the intangible asset. For intangible assets that are not considered
material, the Corporation performs this calculation by grouping the assets by
year of acquisition. The Corporation makes certain estimates and assumptions
that affect the determination of the fair value of the intangible assets.
Significant changes in these factors could impact the amortization of the
Corporation's intangible assets.
CREDIT CARD BUSINESS ACQUISITION
On March 28, 1999, the Bank acquired the credit card business of PNC for
approximately $3.2 billion. The acquisition, accounted for as a purchase,
included $2.7 billion of credit card loan receivables. The Bank funded the
acquisition from the proceeds of the issuance of shares of common stock by the
Corporation in January 1999, from securitization of credit card loan
receivables, and from the proceeds of maturing money market investments.
NEW ACCOUNTING PRONOUNCEMENTS
Statement of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("Statement No. 133"), establishes
accounting and reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts, and hedging activities. In
June 1999, Statement of Financial Accounting Standards No. 137, "Accounting for
Derivative Instruments and Hedging Activities--Deferral of the Effective Date of
FASB Statement No. 133" ("Statement No. 137"), was issued and extends the
effective date for Statement No. 133 to all fiscal quarters of all fiscal years
beginning after June 15, 2000. Based on the Corporation's current level of
derivative and hedging activities, the implementation of Statement No. 133, as
amended by Statement No. 137, should not have a material impact on the
Corporation's consolidated financial statements.
In February 1999, the Federal Financial Institutions Examination Council
published a revised policy statement on the classification of consumer loans.
The revised policy establishes uniform guidelines for the charge-off of loans to
delinquent, bankrupt, and deceased borrowers, for charge-off of fraudulent
accounts, and for re-aging, extending, deferring or rewriting delinquent
accounts. The guidelines must be implemented by December 31, 2000. The
Corporation expects to complete and implement the guidelines prior to or on
December 31, 2000. The Corporation will accelerate charge-off of some delinquent
loans when it implements the guidelines, and does not expect implementation to
have a material impact on the Corporation's consolidated statement of income for
the year ended December 31, 2000.
NOTE B: EARNINGS PER COMMON SHARE
Earnings per common share ("basic") is computed using net income applicable to
common stock and weighted average common shares outstanding during the period.
Earnings per common share--assuming dilution ("diluted") is computed using net
income applicable to common stock and weighted average common shares outstanding
during the period after consideration of the potential dilutive effect of common
stock equivalents, based on the treasury stock method using an average market
price for the period. The Corporation's common stock equivalents are solely
related to employee stock options. The Corporation does not have any other
common stock equivalents.
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<TABLE>
<CAPTION>
COMPUTATION OF EARNINGS PER COMMON SHARE
(dollars in thousands, except per share amounts)
YEAR ENDED DECEMBER 31, 1999 1998 1997
<S> <C> <C> <C>
Basic
Net income ......................................................................... $ 1,024,423 $ 776,266 $ 622,500
Less: preferred stock dividend requirements ........................................ 14,313 14,292 19,527
------------ ------------ ------------
Net income applicable to common stock .............................................. $ 1,010,110 $ 761,974 $ 602,973
============ ============ ===========
Weighted average common shares outstanding (000) ................................... 801,020 751,856 751,837
============ ============ ===========
Earnings per common share .......................................................... $ 1.26 $ 1.01 $ .80
============ ============ ===========
Diluted
Net income ......................................................................... $ 1,024,423 $ 776,266 $ 622,500
Less: preferred stock dividend requirements ........................................ 14,313 14,292 19,527
------------ ------------ ------------
Net income applicable to common stock .............................................. $ 1,010,110 $ 761,974 $ 602,973
============ ============ ===========
Weighted average common shares outstanding (000) ................................... 801,020 751,856 751,837
Net effect of dilutive stock options--based on the treasury stock method using
average market price (000) ........................................................ 36,063 37,565 37,964
------------ ------------ ------------
Weighted average common shares outstanding and common stock equivalents (000) ...... 837,083 789,421 789,801
============ ============ ===========
Earnings per common share--assuming dilution ....................................... $ 1.21 $ .97 $ .76
============ ============ ===========
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
There were 9,762,000 stock options with an average option price of $26.86 per
share outstanding at December 31, 1999, which were not included in the
computation of earnings per common share--assuming dilution for 1999 as a result
of the stock options' exercise price being greater than the average market price
of the common shares. These stock options expire in 2009.
NOTE C: GEOGRAPHIC DIVERSIFICATION OF LOANS
The Corporation originates credit card and other consumer loans, primarily
throughout the United States, the United Kingdom, and Canada. The table below
details the geographic distribution of the Corporation's loan receivables,
securitized loans, and managed loans. Credit card and other consumer loans
originated in the United States are broadly distributed throughout the United
States' geographic regions. Credit card and other consumer loans issued by MBNA
Europe are primarily located in the United Kingdom, while MBNA Canada issues
credit card loans in Canada.
The Corporation's loans are generally made on an unsecured basis after reviewing
each potential Customer's credit application and evaluating the applicant's
financial history and ability and willingness to repay. The maximum credit line
to individual credit card Customers is generally $100,000, the average line is
$11,100, and the average balance outstanding per account is $3,400 at December
31, 1999.
<TABLE>
<CAPTION>
GEOGRAPHIC DISTRIBUTION OF LOAN RECEIVABLES, SECURITIZED LOANS, AND MANAGED LOANS
(dollars in thousands)
LOAN RECEIVABLES SECURITIZED LOANS MANAGED LOANS
December 31, 1999
United States:
<S> <C> <C> <C> <C> <C> <C>
Northern ..................... $ 1,895,220 10.7% $ 6,885,785 12.6% $ 8,781,005 12.1%
Mid-Atlantic ................. 2,768,038 15.7 8,151,305 14.9 10,919,343 15.1
Southern ..................... 3,216,351 18.2 8,328,543 15.3 11,544,894 16.0
Central ...................... 2,502,055 14.2 8,905,188 16.3 11,407,243 15.8
Western ...................... 2,788,430 15.8 9,997,587 18.3 12,786,017 17.7
Southwestern ................. 1,899,273 10.7 7,459,175 13.7 9,358,448 12.9
United Kingdom .................. 2,058,872 11.7 4,229,987 7.7 6,288,859 8.7
Canada .......................... 383,737 2.2 522,715 1.0 906,452 1.3
Other ........................... 151,733 .8 111,519 .2 263,252 .4
----------- ----------- ----------- ----------- ----------- -----------
Total .................... $17,663,709 100.0% $54,591,804 100.0% $72,255,513 100.0%
=========== =========== =========== =========== =========== ===========
December 31, 1998
United States:
Northern ..................... $ 1,547,570 11.5% $ 5,823,424 12.6% $ 7,370,994 12.4%
Mid-Atlantic ................. 1,917,398 14.2 6,823,748 14.8 8,741,146 14.6
Southern ..................... 1,995,097 14.8 7,149,923 15.5 9,145,020 15.3
Central ...................... 2,007,707 14.9 7,340,829 15.9 9,348,536 15.7
Western ...................... 2,659,009 19.7 8,974,906 19.4 11,633,915 19.5
Southwestern ................. 1,824,832 13.6 6,536,971 14.2 8,361,803 14.0
United Kingdom .................. 1,247,682 9.3 3,262,905 7.1 4,510,587 7.6
Canada .......................... 241,317 1.8 162,589 .3 403,906 .7
Other ........................... 27,755 .2 97,444 .2 125,199 .2
----------- ----------- ----------- ----------- ----------- -----------
Total .................... $13,468,367 100.0% $46,172,739 100.0% $59,641,106 100.0%
=========== =========== =========== =========== =========== ===========
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
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NOTE D: INVESTMENT SECURITIES
<TABLE>
<CAPTION>
SUMMARY OF INVESTMENT SECURITIES
(dollars in thousands)
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAINS LOSSES VALUE
December 31, 1999
Investment securities available-for-sale:
<S> <C> <C> <C> <C>
U.S. Treasury and other U.S. government agencies obligations ..... $ 1,593,232 $ - $ (15,880) $ 1,577,352
State and political subdivisions of the United States ............ 97,792 - (1) 97,791
Asset-backed and other securities ................................ 1,081,281 149 (3,910) 1,077,520
----------- ----------- ----------- -----------
Total investment securities available-for-sale ................. $ 2,772,305 $ 149 $ (19,791) $ 2,752,663
=========== =========== =========== ===========
Investment securities held-to-maturity:
U.S. Treasury and other U.S. government agencies obligations ..... $ 248,652 $ - $ (28,086) $ 220,566
State and political subdivisions of the United States ............ 6,163 33 (720) 5,476
Asset-backed and other securities ................................ 38,826 - (36) 38,790
----------- ----------- ----------- -----------
Total investment securities held-to-maturity ................... $ 293,641 $ 33 $ (28,842) $ 264,832
=========== =========== =========== ===========
December 31, 1998
Investment securities available-for-sale:
U.S. Treasury and other U.S. government agencies obligations...... $ 526,192 $ 1,340 $ (48) $ 527,484
State and political subdivisions of the United States ............ 89,529 40 - 89,569
Asset-backed and other securities ................................ 1,050,402 189 (3,940) 1,046,651
----------- ----------- ----------- -----------
Total investment securities available-for-sale ................. $ 1,666,123 $ 1,569 $ (3,988) $ 1,663,704
=========== =========== =========== ===========
Investment securities held-to-maturity:
U.S. Treasury and other U.S. government agencies obligations ..... $ 194,418 $ 412 $ (5,189) $ 189,641
State and political subdivisions of the United States ............ 2,685 255 - 2,940
Asset-backed and other securities ................................ 18,917 - (25) 18,892
=========== =========== =========== ===========
Total investment securities held-to-maturity ................... $ 216,020 $ 667 $ (5,214) $ 211,473
=========== =========== =========== ===========
December 31, 1997
Investment securities available-for-sale:
U.S. Treasury and other U.S. government agencies obligations ..... $ 1,074,179 $ 1,371 $ (170) $ 1,075,380
State and political subdivisions of the United States ............ 91,282 48 (14) 91,316
Asset-backed and other securities ................................ 995,408 720 (360) 995,768
----------- ----------- ----------- -----------
Total investment securities available-for-sale ................. $ 2,160,869 $ 2,139 $ (544) $ 2,162,464
=========== =========== =========== ===========
Investment securities held-to-maturity:
U.S. Treasury and other U.S. government agencies obligations ..... $ 285,747 $ 105 $ (4,142) $ 281,710
State and political subdivisions of the United States ............ 1,628 105 (265) 1,468
Asset-backed and other securities ................................ 58,805 97 (212) 58,690
----------- ----------- ----------- -----------
Total investment securities held-to-maturity ................... $ 346,180 $ 307 $ (4,619) $ 341,868
=========== =========== =========== ===========
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ESTIMATED MATURITIES OF INVESTMENT SECURITIES
(dollars in thousands)
AMORTIZED MARKET
DECEMBER 31, 1999 COST VALUE
Investment Securities Available-for-Sale
<S> <C> <C>
Due within one year .............................................. $ 806,256 $ 803,221
Due after one year through five years ............................ 1,918,014 1,901,622
Due after five years through ten years ........................... 36,460 36,293
Due after ten years .............................................. 11,575 11,527
----------- -----------
Total investment securities available-for-sale ................. $ 2,772,305 $ 2,752,663
=========== ===========
Investment Securities Held-to-Maturity
Due within one year .............................................. $ 95 $ 95
Due after one year through five years ............................ 13,113 13,074
Due after five years through ten years ........................... - -
Due after ten years .............................................. 280,433 251,663
----------- -----------
Total investment securities held-to-maturity ................... $ 293,641 $ 264,832
=========== ===========
- ----------------------------------------------------------------------------------------------------
</TABLE>
The Corporation did not sell any investment securities during 1999, 1998, and
1997. The Corporation has pledged investment securities with a book value of
$767.9 million at December 31, 1999. These investment securities are pledged at
the Federal Reserve Bank as part of the Corporation's funding plans related to
its Year 2000 readiness planning. No investment securities were pledged by the
Corporation at December 31, 1998.
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NOTE E: RESERVE FOR POSSIBLE CREDIT LOSSES
<TABLE>
<CAPTION>
CHANGES IN THE RESERVE FOR POSSIBLE CREDIT LOSSES
(dollars in thousands)
DECEMBER 31, 1999 1998 1997
<S> <C> <C> <C>
Reserve for possible credit losses,
beginning of year ................................................................. $ 216,911 $ 162,476 $ 118,427
Reserves acquired ............................................................... 109,757 29,932 7,975
Provision for possible credit losses ............................................ 408,914 310,039 260,040
Foreign currency translation .................................................... (96) (125) (203)
Credit losses ................................................................... (567,929) (440,113) (359,542)
Recoveries.................... .................................................. 188,402 154,702 135,779
------------ ------------ ------------
Net credit losses ............................................................. (379,527) (285,411) (223,763)
------------ ------------ ------------
Reserve for possible credit losses,
end of year ....................................................................... $ 355,959 $ 216,911 $ 162,476
============ ============ ===========
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE F: PREMISES AND EQUIPMENT
Depreciation expense for the years ended December 31, 1999, 1998, and 1997, was
$183.9 million, $172.3 million, and $124.6 million, respectively.
<TABLE>
<CAPTION>
SUMMARY OF PREMISES AND EQUIPMENT
(dollars in thousands)
DECEMBER 31, 1999 1998
<S> <C> <C>
Land.......................................... $ 159,955 $ 148,118
Buildings and improvements.................... 1,429,825 1,323,301
Furniture and equipment....................... 773,533 676,838
---------------- --------------
Total .................................... 2,363,313 2,148,257
Accumulated depreciation and amortization .... (703,867) (530,661)
---------------- --------------
Premises and equipment, net .............. $ 1,659,446 $ 1,617,596
================ ==============
- ------------------------------------------------------------------------------------
</TABLE>
The Corporation leases certain office facilities and equipment under operating
lease agreements that provide for payment of property taxes, insurance, and
maintenance costs. These leases generally include renewal options, with certain
leases providing purchase options. Rental expense for operating leases was $33.0
million, $33.1 million, and $31.3 million, for the years ended December 31,
1999, 1998, and 1997, respectively.
<TABLE>
<CAPTION>
FUTURE MINIMUM RENTAL PAYMENTS UNDER NONCANCELABLE OPERATING LEASES
(dollars in thousands)
<S> <C>
2000............................................... $ 26,174
2001............................................... 18,040
2002............................................... 12,574
2003............................................... 7,111
2004............................................... 4,962
Thereafter......................................... 2,189
---------------
Total minimum lease payments ................. $ 71,050
===============
</TABLE>
NOTE G: SHORT-TERM BORROWINGS
Federal funds purchased and securities sold under repurchase agreements are
overnight borrowings that generally mature within one business day of the
transaction date. Other short-term borrowings consist primarily of federal funds
purchased that mature in more than one business day, short-term bank notes
issued from the global bank note program established by the Bank, short-term
deposit notes issued by MBNA Canada, and other transactions with maturities
greater than one business day but less than one year.
Included in short-term borrowings for December 31, 1999 and 1998, is an
outstanding $275.0 million receivables financing facility entered into during
1998 which was renewed in 1999. This receivables financing facility was used by
the Corporation to fund an acquisition of loan receivables. Loan receivables in
the amount of $417.6 million at December 31, 1999, and $387.4 million at
December 31, 1998, are subject to a lien by the provider of the facility.
The short-term deposit notes issued by MBNA Canada are unconditionally and
irrevocably guaranteed as to payment of principal and interest by the Bank.
<TABLE>
<CAPTION>
SUMMARY OF SHORT-TERM BORROWINGS
(dollars in thousands)
YEAR ENDED DECEMBER 31, 1999 1998 1997
<S> <C> <C> <C>
Federal Funds Purchased and Securities Sold Under Repurchase Agreements
Balance at year end..................................................................... $ 195,000 $ - $ -
Weighted average interest rate at year end.............................................. 6.96% -% -%
Average amount outstanding during the year.............................................. $ 16,832 $ 54,426 $ 16,712
Maximum amount outstanding at any month end............................................. 195,000 410,000 297,000
Weighted average interest rate during the year.......................................... 4.91% 5.66% 5.59%
Other Short-Term Borrowings
Balance at year end..................................................................... $ 844,004 $ 1,231,195 $ 192,623
Weighted average interest rate at year end.............................................. 5.95% 5.13% 7.53%
Average amount outstanding during the year.............................................. $ 647,544 $ 394,076 $ 321,443
Maximum amount outstanding at any month end............................................. 1,007,165 1,231,195 646,529
Weighted average interest rate during the year.......................................... 5.48% 5.83% 5.86%
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
53
<PAGE> 66
- -------------------------------------------------------------------------------
NOTE H: LONG-TERM DEBT AND BANK NOTES
Long-term debt and bank notes consist of borrowings having an original maturity
of one year or more.
<TABLE>
<CAPTION>
SUMMARY OF LONG-TERM DEBT AND BANK NOTES
(dollars in thousands)
DECEMBER 31, 1999 1998
Parent Company
<S> <C> <C> <C>
67/8 % Senior Notes, maturing in 2005................................... $ 99,497 $ 249,226
Fixed-Rate Senior Medium-Term Notes, with a weighted average interest
rate of 6.49% and 6.61%, respectively, maturing in varying amounts
from 2000 through 2004................................................. 553,693 625,604
Floating-Rate Senior Medium-Term Notes, maturing in varying amounts
from 2000 through 2003................................................. 815,739 1,183,146
----------- -----------
Total parent company............................................... 1,468,929 2,057,976
Subsidiaries
Fixed-Rate Bank Notes, with a weighted average interest rate of 6.76%
and 6.80%, respectively, maturing in varying amounts from 2000
through 2005........................................................... 885,689 770,767
Floating-Rate Bank Notes, maturing in varying amounts from 2000
through 2004........................................................... 1,491,823 1,815,244
Fixed-Rate Bilateral Credit Facility, with an interest rate of 7.29%,
maturing in varying amounts in 2000 and 2001........................... 2,784 6,204
Fixed-Rate Bilateral Credit Facility, with an interest rate of
7.2033%, maturing in 2000.............................................. 16,157 16,636
Floating-Rate Bilateral Credit Facility, maturing in 2001 16,157 16,636
Fixed-Rate Syndicated Credit Facility, with an interest rate of
7.645%, maturing in 2001.............................................. 121,178 124,770
Fixed-Rate Medium-Term Deposit Notes, with a weighted average interest
rate of 6.17% and 6.35%, respectively, maturing in varying amounts
from 2001 through 2004................................................. 120,262 65,615
Floating-Rate Medium-Term Deposit Notes, maturing in varying amounts
from 2001 through 2004................................................. 78,931 -
Floating-Rate Euro Medium-Term Notes, maturing in varying amounts in
2002 and 2003.......................................................... 442,145 -
7.25% Subordinated Notes, maturing in 2002.............................. 199,077 198,789
6.75% Subordinated Notes, maturing in 2008.............................. 247,640 247,392
Subordinated Guaranteed Floating-Rate Notes, maturing in 2005........... 54,805 55,772
Guaranteed Preferred Beneficial Interests in Corporation's Junior
Subordinated Deferrable Interest Debentures, series A, with an
interest rate of 8.278%, maturing in 2026.............................. 250,000 250,000
Guaranteed Preferred Beneficial Interests in Corporation's Junior
Subordinated Deferrable Interest Debentures, series B, with an
interest rate equal to 80 basis points above the three-month London
Interbank Offered Rate, maturing in 2027.............................. 277,000 276,921
Guaranteed Preferred Beneficial Interests in Corporation's Junior
Subordinated Deferrable Interest Debentures, series C, with an
interest rate of 8.25%, maturing in 2027............................... 36,303 36,303
----------- -----------
Long-term debt and bank notes...................................... $ 5,708,880 $ 5,939,025
=========== ===========
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
6 7/8% SENIOR NOTES
These notes are direct, unsecured obligations of the Corporation and are not
subordinated to any other indebtedness of the Corporation. Interest on the 67/8%
Senior Notes is payable semiannually. These notes may not be redeemed prior to
their stated maturity.
SENIOR MEDIUM-TERM NOTES
These notes are direct, unsecured obligations of the Corporation and are not
subordinated to any other indebtedness of the Corporation. The Corporation has
$555.0 million of Fixed-Rate Senior Medium-Term Notes outstanding, with rates
ranging from 5.97% to 7.125%. Interest on the Fixed-Rate Senior Medium-Term
Notes is payable semiannually. The Corporation also has $817.0 million of
Floating-Rate Senior Medium-Term Notes outstanding. These Floating-Rate Senior
Medium-Term Notes are priced between 30 basis points and 66 basis points over
the three-month London Interbank Offered Rate (LIBOR). Interest on the
Floating-Rate Senior Medium-Term Notes is payable quarterly. At December 31,
1999, the three-month LIBOR is 6.00%.
BANK NOTES
The Bank Notes are direct, unconditional, unsecured obligations of the Bank,
and are not subordinated to any other obligations of the Bank. The Bank has
$888.2 million outstanding of Fixed-Rate Bank Notes, with rates ranging from
5.96% to 7.76%. Interest is payable semiannually. The Bank also has $1.5 billion
outstanding of Floating-Rate Bank Notes, with rates priced between 15 basis
points and 50 basis points over the three-month LIBOR. Interest is payable
quarterly.
BILATERAL CREDIT FACILITIES
These facilities are direct, unsecured obligations of MBNA Europe, and are not
subordinated to any other obligations of MBNA Europe. At December 31, 1999, MBNA
Europe has fixed-rate facilities totaling Pound Sterling 11.7 million
(approximately $18.9 million) outstanding with interest payable monthly. MBNA
Europe also has a Pound Sterling 10.0 million (approximately $16.2 million)
floating-rate facility outstanding at December 31, 1999. This draw is priced at
17.5 basis points above the three-month Sterling LIBOR and is payable
semiannually. At December 31, 1999, the three-month Sterling LIBOR is 6.08%.
SYNDICATED CREDIT FACILITY
The syndicated credit facility is an unsecured obligation of MBNA Europe and is
not subordinated to any other obligation of MBNA Europe. Interest is payable
quarterly.
MEDIUM-TERM DEPOSIT NOTES
These notes are direct, unconditional, unsecured obligations of MBNA Canada and
are not subordinated to any other obligation of MBNA Canada. At December 31,
1999, MBNA Canada has CAD$175.1 million (approximately $120.5 million)
Fixed-Rate Medium-Term Deposit Notes outstanding with interest payable
semiannually. MBNA Canada also has CAD$115.0 million (approximately $79.2
million) of Floating-Rate Medium-Term Deposit Notes outstanding at December 31,
1999. These Floating-Rate Medium-Term Deposit Notes are priced between 58 basis
points and 73 basis points over the ninety-day Bankers Acceptance Rate and are
payable quarterly. The Medium-Term Deposit Notes are
54
<PAGE> 67
- -------------------------------------------------------------------------------
unconditionally guaranteed as to payment of principal and interest by the Bank,
and are not redeemable prior to their stated maturity. At December 31, 1999, the
ninety-day Bankers Acceptance Rate is 5.10%.
EURO MEDIUM-TERM NOTES
The Euro Medium-Term Notes are unsecured obligations of MBNA Europe. These notes
are unconditionally and irrevocably guaranteed in respect to all payments by the
Bank. MBNA Europe has Pound Sterling 165.0 million (approximately $266.6
million) of Floating-Rate Euro Medium-Term Notes outstanding at December 31,
1999, with interest priced between 37.5 basis points and 55 basis points over
the three-month sterling LIBOR, and EUR165.5 million (approximately $166.2
million) of Floating-Rate Euro Medium-Term Notes outstanding at December 31,
1999, with interest priced between 47 basis points and 55 basis points over the
three-month Euro Interbank Offered Rate (EURIBOR). MBNA Europe also has $10.0
million of Floating-Rate Euro Medium-Term Notes denominated in U.S. dollars
outstanding at December 31, 1999 with interest priced at 45 basis points over
the six-month LIBOR. These Euro Medium-Term Notes were issued during 1999 and
interest is payable quarterly or semiannually depending upon the issuance. At
December 31, 1999, the three-month EURIBOR is 3.34% and the six-month LIBOR is
6.13%.
7.25% SUBORDINATED NOTES
The 7.25% Subordinated Notes are subordinated to the claims of depositors and
other creditors of the Bank, unsecured, and not subject to redemption prior to
maturity. Interest is payable semiannually. The 7.25% Subordinated Notes were
issued by the Bank in 1992 and qualify as Tier 2 Capital, which is included in
Total Capital, under the risk-based capital guidelines for both banks and bank
holding companies.
6.75% SUBORDINATED NOTES
The 6.75% Subordinated Notes are subordinated to the claims of depositors and
other creditors of the Bank, unsecured, and not subject to redemption prior to
maturity. Interest is payable semiannually. The 6.75% Subordinated Notes were
issued by the Bank in 1998 and qualify as Tier 2 Capital, which is included in
Total Capital, under the risk-based capital guidelines for both banks and bank
holding companies.
SUBORDINATED GUARANTEED FLOATING-RATE NOTES
MBNA Europe has Pound Sterling 34.0 million (approximately $54.9 million) of
Subordinated Guaranteed Floating-Rate Notes outstanding. Interest on these notes
is priced between 100 basis points and 145 basis points over the three-month
Sterling LIBOR for the first five years, with a 50 basis point increase for the
last five years. These notes were issued by MBNA Europe in 1995 and are
unsecured. Interest on these notes is payable quarterly or semiannually. The
Subordinated Guaranteed Floating-Rate Notes are redeemable, in whole or in part,
at their principal amount in or after May 2000, at the option of MBNA Europe,
subject, if required, to the prior consent of the Financial Services Authority.
The Subordinated Guaranteed Floating-Rate Notes are unconditionally and
irrevocably guaranteed on a subordinated basis by the Bank. The obligations of
the Bank, under this guarantee, also constitute unsecured obligations,
subordinated to the claims of all senior creditors of the Bank.
GUARANTEED PREFERRED BENEFICIAL INTERESTS IN CORPORATION'S
JUNIOR SUBORDINATED DEFERRABLE INTEREST DEBENTURES
The Corporation, through MBNA Capital A, MBNA Capital B, and MBNA Capital C,
each a statutory business trust created under the laws of the State of Delaware,
issued capital securities and common securities: series A, series B, and series
C, respectively. The series capital securities are presented as "guaranteed
preferred beneficial interests in Corporation's junior subordinated deferrable
interest debentures" in the summary of long-term debt and bank notes. The
Corporation is the owner of all the beneficial ownership interests represented
by the common securities of the trusts. The trusts exist for the sole purpose of
issuing the series capital securities and the series common securities and
investing the proceeds in junior subordinated deferrable interest debentures
issued by the Corporation. For financial reporting purposes, the trusts are
treated as wholly owned subsidiaries of the Corporation.
The junior subordinated deferrable interest debentures are the sole assets of
the trusts, and the payments under the junior subordinated deferrable interest
debentures are the sole revenues of the trusts. Interest on the series capital
securities is payable semiannually or quarterly; however, the Corporation has
the right to defer payment of interest on the junior subordinated deferrable
interest debentures at any time, or from time to time, for a period not
exceeding 10 consecutive semiannual periods or 20 consecutive quarterly periods
depending upon the series. If the payment of interest is deferred on the junior
subordinated deferrable interest debentures, distributions on the series
securities will be deferred and the Corporation also may not be permitted to
declare or pay any cash dividends on the Corporation's capital stock or interest
on debt securities that have equal or less priority than the junior subordinated
deferrable interest debentures.
The series capital securities are subject to mandatory redemption, in whole or
in part, upon repayment of the junior subordinated deferrable interest
debentures at their stated maturity or their earlier redemption. The junior
subordinated deferrable interest debentures are redeemable prior to their stated
maturity at the option of the Corporation, on or after the contractually
specified dates, in whole at any time, or in part from time to time, or prior to
the contractually specified dates, in whole only within 90 days following the
occurrence of certain tax or capital treatment events. The series capital
securities have a preference with respect to cash distributions and amounts
payable on liquidation or redemption over the series common securities.
The obligations of the Corporation under the relevant junior subordinated
deferrable interest debentures, indenture, trust agreement, and guarantee in the
aggregate constitute a full and unconditional guarantee by the Corporation of
all trust obligations under the series capital securities issued by the trusts.
The junior subordinated deferrable interest debentures are unsecured and rank
junior and are subordinate in right of payment to all senior debt obligations of
the Corporation.
These securities qualify as regulatory capital for the Corporation.
55
<PAGE> 68
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MINIMUM ANNUAL MATURITIES OF LONG-TERM DEBT AND BANK NOTES
(dollars in thousands)
MBNA
PARENT CORPORATION AND
COMPANY SUBSIDIARIES
<S> <C> <C>
2000.................................. $ 367,000 $1,033,075
2001.................................. 241,000 939,933
2002.................................. 345,000 1,544,723
2003.................................. 384,000 770,832
2004.................................. 35,000 444,424
- ------------------------------------------------------------------
</TABLE>
Deposit liabilities have priority over the claims of other unsecured creditors
of the Bank, including the holders of obligations, such as bank notes, in the
event of liquidation.
Original issue discount and deferred issuance costs are amortized over the terms
of the related debt issuances.
The Corporation uses interest rate swap agreements to change a portion of
fixed-rate long-term debt and bank notes to floating-rate long-term debt and
bank notes to better match the rate sensitivity of the Corporation's assets. The
Corporation also uses foreign exchange swap agreements to reduce its foreign
currency exchange risk on a portion of long-term debt and bank notes issued by
MBNA Europe.
NOTE I: ASSET SECURITIZATION
Asset securitization involves the sale, generally to a trust, of a pool of loan
receivables, and is accomplished primarily through the public and private
issuance of asset-backed securities. Certificates representing undivided
interests in the trust are sold by the trust to investors, while the remaining
undivided interest is retained by the Corporation. The Corporation includes the
remaining undivided interest in loan receivables and had $8.0 billion and $7.6
billion of such amounts outstanding at December 31, 1999 and 1998, respectively.
The carrying value of these loan receivables approximates fair value. The senior
classes of the asset-backed securities receive a AAA credit rating at the time
of issuance. This AAA credit rating is generally achieved through the sale of
lower-rated subordinated classes of asset-backed securities.
In accordance with Statement of Financial Accounting Standards No. 125,
"Accounting for Transfers and Servicing of Financial Assets and Extinguishments
of Liabilities" ("Statement No. 125"), gains are recognized in securitization
income at the time of initial sale and each subsequent sale of loan receivables
in an asset securitization. The Corporation recognizes the gain from securitized
loans in securitization income on the Corporation's consolidated statements of
income and includes the related receivable in accounts receivable from
securitizations on the consolidated statements of financial condition at the
time of sale. The related receivable represents the contractual right to receive
interest and other cash flows from the trust and is reported at market value
with unrealized gains and losses, net of tax, included as a component of
stockholders' equity. At December 31, 1999 and 1998, the amount of the
receivable was $579.1 million and $497.0 million, respectively. Transaction
costs incurred by the Corporation are immediately recognized as a reduction to
the gain recorded from the asset securitization transaction. Securitization
income also includes the other fees received by the Corporation for the
servicing of securitized loans.
The Corporation uses certain assumptions and estimates in determining the gain
recognized at the time of initial sale and each subsequent sale in accordance
with Statement No. 125. These assumptions and estimates include projections
concerning the annual percentage rates charged to Customers,
charge-off experience, loan repayment rates, the cost of funds, and discount
rates commensurate with the risks involved. Based on these assumptions and
estimates, the incremental net change recognized by the Corporation in
securitization income was a $23.3 million increase in 1999, a $17.9 million
increase in 1998, and a $325.1 million increase in 1997. These assumptions are
reviewed periodically by the Corporation. If these assumptions change, the
related receivable and securitization income would be affected.
Proceeds from securitization transactions were approximately $13.3 billion,
$10.7 billion, and $13.2 billion in 1999, 1998, and 1997, respectively. At
December 31, 1999 and 1998, approximately $53.5 billion and $45.3 billion,
respectively, of investor principal (face value) remained outstanding.
Included in accounts receivable from securitizations in the consolidated
statements of financial condition at December 31, 1999 and 1998, were $417.9
million and $294.8 million, respectively, of receivables subject to a lien by
the providers of the credit enhancement facility for individual securitizations.
The providers of the credit enhancement have no other recourse to the
Corporation. The Corporation does not receive collateral from any party to the
securitization, and the Corporation does not have any risk of
counterparty nonperformance.
NOTE J: EMPLOYEE BENEFIT PLANS
Statement of Financial Accounting Standards No. 132, "Employers' Disclosures
about Pensions and Other Postretirement Benefits" ("Statement No. 132"),
effective for financial statements issued for fiscal years beginning after
December 15, 1997, revises employers' disclosures about pension and other
postretirement benefit plans. It does not change the measurement or recognition
of those plans. The adoption of Statement No. 132 did not have an impact on the
Corporation's consolidated financial statements.
The Corporation has a noncontributory defined benefit pension plan and a
supplemental executive retirement plan ("SERP").
The Corporation increased the discount rate used to value its projected benefit
obligation for both the pension and SERP plans in 1999 to reflect the current
rate environment. The change in assumptions will not have a material impact on
the Corporation's consolidated financial statements for 2000.
In 1998, the Corporation lowered the discount rate used to value its projected
benefit obligation for both the pension and SERP plans to reflect the then
current rate environment. This change in assumption did not have a material
impact on the Corporation's consolidated financial statements for 1999.
The following table illustrates the combined financial information of the two
employee benefit plans.
56
<PAGE> 69
- --------------------------------------------------------------------------------
BENEFIT PLAN FINANCIAL INFORMATION
(dollars in thousands)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1999 1998
- -------------------------------------------------------------------------------------
<S> <C> <C>
CHANGE IN BENEFIT OBLIGATION
Net benefit obligation, beginning of year.......... $ 212,158 $ 157,468
Service cost--benefits earned during the year... 36,481 23,151
Interest cost on projected benefit obligation... 16,554 11,937
Actuarial (gain) loss........................... (60,978) 18,130
Plan amendments................................. 8,747 2,594
Gross benefits paid............................. (2,744) (1,122)
------------ ------------
Net benefit obligation, end of year................ $ 210,218 $ 212,158
============ ============
CHANGE IN PLAN ASSETS
Fair value of plan assets, beginning of year....... $ 139,874 $ 108,737
Actual return on plan assets ................... 31,728 11,242
Employer contributions.......................... 31,429 21,017
Gross benefits paid............................. (2,744) (1,122)
------------ ------------
Fair value of plan assets, end of year............. $ 200,287 $ 139,874
============ ============
Funded status...................................... $ (9,931) $ (72,284)
Unrecognized net actuarial (gain) loss............. (43,448) 36,614
Unrecognized prior service cost.................... 10,112 1,786
Unrecognized net transition obligation............. 3,146 3,491
------------ ------------
Net amount recognized........................... $ (40,121) $ (30,393)
============ ============
AMOUNTS RECOGNIZED IN THE CONSOLIDATED STATEMENTS
OF FINANCIAL CONDITION
Prepaid benefit cost............................... $ 7,137 $ 2,912
Accrued benefit cost............................... (47,258) (33,305)
Additional minimum liability....................... (7,982) (17,895)
Intangible asset and accumulated other
comprehensive income 7,982 17,895
------------ ------------
Net amount recognized........................... $ (40,121) $ (30,393)
============ ============
SIGNIFICANT ACTUARIAL ASSUMPTIONS USED IN
DETERMINING THE PROJECTED BENEFIT OBLIGATION
Discount rate...................................... 8.00% 6.75%
Rate of compensation increase...................... 6.00 6.00
Expected return on plan assets..................... 9.00 9.00
- -------------------------------------------------------------------------------------
</TABLE>
The accumulated benefit obligation in excess of the fair value of SERP plan
assets was $55.2 million at December 31, 1999, and $51.2 million at December 31,
1998. There were no plan assets for the SERP plan at December 31, 1999 and 1998.
PENSION PLAN
The Corporation's noncontributory defined benefit pension plan covers
substantially all people employed by the Corporation in the United States who
meet certain age and service requirements. The benefits are based on years of
service and the person's compensation during the last ten years of employment.
The Corporation's funding policy is to make contributions sufficient to achieve
a target-funded ratio on an accumulated benefit obligation basis between 130%
and 140%, and only tax-deductible contributions may be made. Contributions are
intended to provide not only for benefits earned to date, but also for those
expected to be earned in the future.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
The Corporation's unfunded SERP plan, established in 1991, provides certain
officers with supplemental retirement benefits in excess of limits imposed on
qualified plans by federal tax law.
COMPONENTS OF NET PERIODIC BENEFIT COST
(dollars in thousands)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1999 1998 1997
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost--benefits earned
during the year ................. $ 36,481 $ 23,151 $ 20,692
Interest cost on projected benefit
obligation ...................... 16,554 11,937 10,246
Expected return on plan assets ... (12,929) (10,031) (6,752)
Net amortization and deferral .... 1,051 464 630
-------- -------- --------
Net periodic benefit cost ..... $ 41,157 $ 25,521 $ 24,816
======== ======== ========
- ---------------------------------------------------------------------------------
</TABLE>
OTHER PLANS
The Corporation's foreign bank subsidiaries each have pension plans for their
employees. MBNA Europe has a pension plan that covers substantially all of its
people who meet certain age and service requirements. MBNA Europe contributes 6%
of an eligible person's base salary. In addition, eligible participants may
contribute up to a maximum of 15% of base salary, with the first 6% matched at a
rate of 50% by MBNA Europe. MBNA Canada has a registered retirement savings plan
that covers substantially all of its people who meet certain age and service
requirements. MBNA Canada contributes 5% of an eligible person's base salary. In
addition, eligible participants may contribute up to a maximum of 10% of base
salary, with the first 6% matched at the rate of 50% by MBNA Canada. The
expenses for these plans are charged to other operating expense and were not
material to the Corporation's consolidated financial statements.
401(K) PLUS SAVINGS PLAN
The MBNA Corporation 401(k) Plus Savings Plan ("401(k) Plan") is a defined
contribution plan that is intended to qualify under section 401(k) of the
Internal Revenue Code. The 401(k) Plan covers substantially all people in the
United States who have been employed by the Corporation for one or more years
and have completed at least one thousand hours of service in any one year. For
these people, the Corporation automatically contributes 1% of base salary.
Additionally, eligible participants may make pretax and after-tax contributions,
with contributions up to 6% of base salary matched 50% by the Corporation.
Expense charged to operations for the 401(k) Plan was $16.5 million, $14.8
million, and $12.1 million in 1999, 1998, and 1997, respectively.
POSTRETIREMENT AND POSTEMPLOYMENT BENEFITS
The Corporation and its subsidiaries provide certain health care and life
insurance benefits for certain people upon reaching retirement. Initially, a
plan was established for people aged 45 and older with at least ten years of
service as of December 31, 1993. The plan was closed to future enrollment
effective December 31, 1998. The plan was extended on January 1, 1999, to people
aged 40 and older with at least five years of service. A person must meet the
requirements for early retirement status to be eligible for these benefits. The
Corporation records the estimated cost of benefits provided to its former or
inactive employees on an accrual basis. Expenses charged to other operating
expense were not material to the Corporation's consolidated financial
statements.
57
<PAGE> 70
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NOTE K: STOCK OPTION PLAN
The Corporation's 1997 Long Term Incentive Plan ("1997 Plan") and 1991 Long Term
Incentive Plan ("1991 Plan") authorize the issuance of shares of common stock
pursuant to incentive and nonqualified stock options, and restricted share
awards to officers, directors, key employees, consultants, and advisors of the
Corporation. Beginning in 1997, all stock options and restricted stock awards
were granted from the 1997 Plan.
During 1999, the shareholders approved an amendment to the 1997 Plan. The
amendment to the 1997 Plan authorizes, subject to certain exceptions and
additional limitations, grants of stock options and restricted shares for an
indefinite number of shares of common stock, so long as immediately after the
grants, the sum of the number of outstanding stock options and restricted shares
does not exceed 10% of fully diluted shares outstanding as defined in the
amendment to the 1997 Plan. At December 31, 1999, the amount of shares of common
stock available for future grants under the 1997 Plan was 11.5 million shares.
The maximum number of restricted stock awards that can be granted in
any calendar year is 2.0 million shares, subject to certain exceptions.
During 1998, the shareholders approved an amendment to the 1997 Plan, which
increased the number of shares of the Corporation's Common Stock which may be
issued pursuant to grants made under the 1997 Plan from 24.8 million shares to
32.3 million shares. At December 31, 1998, the amount of shares of common stock
available for future grants under the 1997 Plan was 4.8 million shares.
Stock options are granted with an exercise price that is not less than the fair
market value of the Corporation's Common Stock on the date the option is
granted, and none may be exercised more than ten years from the date of grant.
Stock options granted to selected officers and key employees of the Corporation,
other than performance-based common stock options and other special grants,
generally become exercisable for one-fifth of the common shares subject to the
options each year and continue to become exercisable for up to one-fifth per
year until they are completely exercisable after five years. Those granted to
nonemployee directors are exercisable immediately.
During 1999, there were no shares of performance-based common stock options
granted under the 1997 Plan. In 1998, performance-based common stock options for
1.8 million shares were granted, while 13.4 million shares were granted in 1997.
These stock options become exercisable when the Corporation achieves certain net
income targets, net income and stock price targets, or outstanding managed loan
targets. If these conditions are not achieved, these options then become
exercisable for one day on the day before their termination date.
The Corporation granted 2.0 million stock options in 1999, 2.3 million stock
options in 1998, and 190,000 stock options in 1997 which were immediately
exercisable following the effective date of the grant. Also during 1999, the
Corporation granted 25,000 stock options which become exercisable in February
2000.
SUMMARY OF STOCK OPTION PLANS ACTIVITY
(shares in thousands)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
NUMBER WEIGHTED AVERAGE
OF SHARES EXERCISE PRICE
- ------------------------------------------------------------------------------------
<S> <C> <C>
1999
Options outstanding, beginning of year............ 64,422 $ 10.19
Granted........................................ 9,936 26.81
Exercised...................................... (5,720) 4.88
Canceled....................................... (104) 15.39
-------
Options outstanding, end of year.................. 68,534 13.04
=======
Options exercisable, end of year.................. 38,547
=======
Weighted average fair value of options
granted during the year.......................... $ 9.85
=======
1998
Options outstanding, beginning of year............ 65,261 $ 7.47
Granted........................................ 10,483 22.07
Exercised...................................... (9,821) 4.32
Canceled....................................... (1,501) 13.52
-------
Options outstanding, end of year.................. 64,422 10.19
=======
Options exercisable, end of year.................. 35,770
=======
Weighted average fair value of options
granted during the year.......................... $ 6.99
=======
1997
Options outstanding, beginning of year............ 58,244 $ 5.22
Granted 15,199 14.18
Exercised (8,182) 3.90
Canceled - -
-------
Options outstanding, end of year.................. 65,261 7.47
=======
Options exercisable, end of year.................. 25,955
=======
Weighted average fair value of options
granted during the year.......................... $ 4.91
=======
- ------------------------------------------------------------------------------------
</TABLE>
In 1998, 225,000 stock options which become exercisable in October 2001, and
75,000 stock options which become exercisable in three equal installments
beginning in January 1999 were granted. The Corporation also granted 750,000
stock options during 1997 which are exercisable in July 2001. In 1996, 54,000
stock options were granted subject to shareholder approval of the 1997 Plan and
are included in the Summary of Stock Option Plans Activity in 1997.
Restricted shares were also issued under the 1997 Plan to the Corporation's
senior officers. A total of 2.0 million common shares and 1.5 million common
shares, net of forfeited restricted shares, with an approximate aggregate market
value of $56.6 million and $31.8 million at the time of grant, were issued in
1999 and 1998, respectively. A total of 1.3 million common shares, with an
approximate aggregate market value of $22.1 million at the time of grant, were
issued in 1997. The market value of these restricted shares at the date of grant
is amortized into expense over a period that approximates the restriction
period, generally 10 years. If the restrictions are removed, generally upon
death, disability, or retirement, any remaining unamortized market value of the
restricted shares is expensed. At December 31, 1999, the
58
<PAGE> 71
- --------------------------------------------------------------------------------
SUMMARY OF STOCK OPTIONS OUTSTANDING
(shares in thousands)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
DECEMBER 31, 1999 OPTIONS OUTSTANDING OPTIONS EXERCISABLE
- -------------------------------------------------------------------------------------------------------------------------
Weighted Average
Number Remaining Weighted Average Number Weighted Average
Range of Exercise Prices of Shares Contractual Life Exercise Price of Shares Exercise Price
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 1.00 to $ 4.99 15,735 4.0 YEARS $ 4.25 15,735 $ 4.25
5.00 to 9.99 18,080 5.9 7.19 13,786 6.95
10.00 to 14.99 12,191 7.3 13.13 610 12.62
15.00 to 19.99 2,334 8.0 18.31 261 17.90
20.00 to 24.99 10,368 8.4 22.17 4,713 22.34
25.00 to 30.00 9,826 9.4 26.85 3,442 26.69
------ ------
1.00 to 30.00 68,534 38,547
====== ======
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
unamortized compensation expense related to the restricted stock awards is
$114.6 million.
To the extent stock options are exercised and restricted shares are awarded from
time to time under the Plans, the Board of Directors has approved the purchase,
on the open market or in privately negotiated transactions, of the number of
common shares issued.
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("Statement No. 123"), defines a fair-value-based method of
accounting for an employee stock option or similar equity instrument. However,
it allows an entity to continue to measure compensation cost for those
instruments using the intrinsic-value-based method of accounting prescribed by
APB Opinion No. 25. As permitted by Statement No. 123, the Corporation elected
to retain the intrinsic-value-based method of accounting for stock option grants
in accordance with APB Opinion No. 25. However, certain additional disclosures
are required by Statement No. 123 about stock-based employee compensation
arrangements regardless of the method used to account for them. In accordance
with Statement No. 123, the Black-Scholes option pricing model is one technique
allowed to determine the fair value of options. The model uses different
assumptions that can significantly affect the fair value of the options. The
derived fair value estimates cannot be substantiated by comparison to
independent markets.
The Corporation estimated the fair value of each option grant on the date of
grant. The following weighted average assumptions used in the Black-Scholes
option pricing model for grants in 1999, 1998, and 1997, were dividend yield of
1.25%, 1.59%, and 2.11%, expected volatility of 34.39%, 30.81%, and 30.08%,
risk-free interest rates of 5.73%, 5.44%, and 6.63%, and expected lives of 5.4
years, 5.1 years, and 6.5 years, respectively.
If the fair value of stock option grants determined in accordance with Statement
No. 123 had been included in operating expenses in 1999, 1998, and 1997, the
Corporation's net income, earnings per common share, and earnings per common
share--assuming dilution on a pro forma basis would have been as presented in
the following table. The compensation expense recognized in pro forma net income
for 1999, 1998, and 1997 may not be representative of the effects on pro forma
net income for future years.
PRO FORMA NET INCOME AND EARNINGS PER COMMON SHARE
(dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1999 1998 1997
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET INCOME
As reported................... $ 1,024,423 $ 776,266 $ 622,500
Pro forma..................... 986,547 746,138 608,838
EARNINGS PER COMMON SHARE
As reported................... 1.26 1.01 .80
Pro forma..................... 1.21 .97 .78
EARNINGS PER COMMON SHARE--
ASSUMING DILUTION
As reported................... 1.21 .97 .76
Pro forma..................... 1.16 .93 .75
- ------------------------------------------------------------------------------------
</TABLE>
59
<PAGE> 72
- --------------------------------------------------------------------------------
NOTE L: STOCKHOLDERS' EQUITY
PREFERRED STOCK
The Corporation is authorized to issue 20.0 million shares of preferred stock
with a par value of $.01 per share. The Corporation had 4.5 million shares of
7 1/2% Cumulative Preferred Stock, Series A, outstanding at December 31, 1999
and 1998. The Corporation also had 4.0 million shares of Adjustable Rate
Cumulative Preferred Stock, Series B, outstanding at December 31, 1999 and 1998.
Both of the outstanding series preferred stock have a $25 stated value per
share.
The Corporation repurchased 2.0 million shares of Adjustable Rate Cumulative
Preferred Stock, Series B, during 1997 for $52.5 million. Also, during 1997, the
Corporation, through MBNA Capital C, issued $36.3 million of 8.25% Trust
Originated Preferred Securities (guaranteed preferred beneficial interests in
Corporation's junior subordinated deferrable interest debentures, series C) in
exchange for 1.5 million shares of 7 1/2% Cumulative Preferred Stock, Series A.
Shares of the series preferred stock are not convertible into any other
securities of the Corporation. The series preferred stock will not be entitled
to the benefits of any sinking fund. All preferred shares rank senior to common
shares both as to dividends and liquidation preference, but have no general
voting rights. In the event that the equivalent of six full quarterly dividend
periods are in arrears, the holders of the outstanding shares of the preferred
stock (voting as a single class) will be entitled to vote for the election of
two additional directors to serve until all dividends in arrears have been paid
in full.
Dividends on the Series A Preferred Stock are cumulative from the date of
original issue and are payable quarterly in arrears on January 15, April 15,
July 15, and October 15 of each year. The shares of the Series A Preferred Stock
are redeemable, in whole or in part, solely at the option of the Corporation on
or after January 15, 2001, at a price of $25 per share, plus accrued and unpaid
dividends.
Dividends on the Series B Preferred Stock are cumulative from the date of
original issue and are payable quarterly in arrears on January 15, April 15,
July 15, and October 15 of each year. The dividend rate for any dividend period
will be equal to 99.0% of the highest of the Treasury Bill Rate, the Ten-Year
Constant Maturity Rate, and the Thirty-Year Constant Maturity Rate,
as determined in advance of such dividend period, but not less than 5.5% per
annum or more than 11.5% per annum. The amount of dividends payable with respect
to the Series B Preferred Stock will be adjusted in the event of certain
amendments to the Internal Revenue Code of 1986 ("Tax Code") with respect to the
dividends-received deduction. The shares of the Series B Preferred Stock are
redeemable, in whole or in part, solely at the option of the Corporation on or
after October 15, 2001, at a price of $25 per share, plus accrued and unpaid
dividends. The Series B Preferred Stock may also be redeemed in whole, at the
option of the Corporation, in the event of certain amendments to the Tax Code
with respect to the dividends-received deduction.
The Corporation may, from time to time, acquire series preferred stock in the
open market by tender offer, exchange offer, or otherwise. The Corporation's
decision to make such acquisitions is dependent on many factors, including
market conditions in effect at the time of any contemplated acquisition.
The Board of Directors declared the following dividends for the Corporation's
Series A and Series B Preferred Stock.
PREFERRED STOCK DIVIDEND SUMMARY
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
SERIES A SERIES B
Declaration Payment Dividend Dividend per Dividend Dividend per
Date Date Rate Preferred Share Rate Preferred Share
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
January 10, 2000 April 15, 2000 7.50% $ .46875 6.40% $ .39970
October 7, 1999 January 15, 2000 7.50 .46875 6.01 .37590
July 13, 1999 October 15, 1999 7.50 .46875 6.01 .37560
April 13, 1999 July 15, 1999 7.50 .46875 5.55 .34680
January 15, 1999 April 15, 1999 7.50 .46875 5.50 .34380
October 13, 1998 January 15, 1999 7.50 .46875 5.50 .34380
July 14, 1998 October 15, 1998 7.50 .46875 5.58 .34900
April 14, 1998 July 15, 1998 7.50 .46875 5.85 .36540
January 13, 1998 April 15, 1998 7.50 .46875 5.86 .36600
October 14, 1997 January 15, 1998 7.50 .46875 6.29 .39320
July 15, 1997 October 15, 1997 7.50 .46875 6.66 .41610
April 21, 1997 July 15, 1997 7.50 .46875 6.98 .43622
January 14, 1997 April 15, 1997 7.50 .46875 6.56 .40990
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
60
<PAGE> 73
- --------------------------------------------------------------------------------
COMMON STOCK
On January 10, 2000, the Corporation's Board of Directors declared a dividend of
$.08 per common share, payable April 1, 2000, to stockholders of record as of
March 16, 2000.
In January 1999, the Corporation issued 50 million shares of common stock. The
Corporation used the net proceeds from this offering, $1.2 billion net of
issuance costs, to complete the purchase of the credit card business of PNC, and
for other general corporate purposes.
On July 14, 1998, the Board of Directors approved a three-for-two split of the
Corporation's Common Stock, effected in the form of a dividend, issued October
1, 1998, to stockholders of record as of September 15, 1998. All common share
and per common share data reflect the Corporation's stock splits.
On April 21, 1998, the stockholders of the Corporation approved an amendment to
the Corporation's charter to increase the number of authorized shares of common
stock from 700.0 million shares to 1.5 billion shares. The amendment became
effective April 28, 1998.
NOTE M: CAPITAL ADEQUACY
The Corporation is subject to risk-based capital guidelines adopted by the
Federal Reserve Board for bank holding companies. The Bank is also subject to
similar capital requirements adopted by the Office of the Comptroller of the
Currency. Under these requirements, the federal bank regulatory agencies have
established quantitative measures to ensure that minimum thresholds for Tier 1
Capital, Total Capital, and Leverage ratios are maintained. Failure to meet
minimum capital requirements can initiate certain mandatory, and possible
additional discretionary, actions by the federal bank regulators, that, if
undertaken, could have a direct material effect on the Corporation's and the
Bank's consolidated financial statements. Under the capital adequacy guidelines
and the regulatory framework for prompt corrective action, the Corporation and
the Bank must meet specific capital guidelines that involve quantitative
measures of their assets, liabilities, and certain off-balance-sheet items as
calculated under regulatory accounting practices.
The Corporation's and the Bank's capital amounts and classification are also
subject to qualitative judgments by the federal bank regulators about
components, risk weightings, and other factors. At December 31, 1999, the
Corporation's and the Bank's capital exceeded all minimum regulatory
requirements to which they are subject, and the Bank was "well-capitalized" as
defined under the federal bank regulatory guidelines. The risk-based capital
ratios have been computed in accordance with regulatory accounting practices.
CAPITAL ADEQUACY
(dollars in thousands)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
TO BE WELL-CAPITALIZED
FOR CAPITAL UNDER PROMPT CORRECTIVE
ACTUAL ADEQUACY PURPOSES ACTION PROVISIONS
Amount Ratio Amount Ratio Amount Ratio
-------------------------------------------------------------------------
DECEMBER 31, 1999
Tier 1 Capital (to Risk-Weighted Assets):
<S> <C> <C> <C> <C> <C> <C>
MBNA Corporation.................... $ 4,380,971 14.72% $ 1,190,282 4.00% (a)
MBNA America Bank, N.A. ............ 3,175,442 11.06 1,148,580 4.00 $ 1,722,870 6.00%
Total Capital (to Risk-Weighted Assets):
MBNA Corporation.................... 5,064,201 17.02 2,380,563 8.00 (a)
MBNA America Bank, N.A. ............ 3,858,215 13.44 2,297,160 8.00 2,871,450 10.00
Tier 1 Capital (to Average Assets):
MBNA Corporation.................... 4,380,971 14.90 1,176,244 4.00 (a)
MBNA America Bank, N.A. ............ 3,175,442 11.61 1,094,479 4.00 1,368,099 5.00
DECEMBER 31, 1998
Tier 1 Capital (to Risk-Weighted Assets):
MBNA Corporation.................... 2,829,507 11.44 989,510 4.00 (a)
MBNA America Bank, N.A. ............ 2,625,832 11.69 898,139 4.00 1,347,208 6.00
Total Capital (to Risk-Weighted Assets):
MBNA Corporation.................... 3,454,181 13.96 1,979,021 8.00 (a)
MBNA America Bank, N.A. ............ 3,205,671 14.28 1,796,278 8.00 2,245,347 10.00
Tier 1 Capital (to Average Assets):
MBNA Corporation.................... 2,829,507 11.34 997,628 4.00 (a)
MBNA America Bank, N.A. ............ 2,625,832 11.55 909,112 4.00 1,136,390 5.00
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Not applicable for bank holding companies.
61
<PAGE> 74
- --------------------------------------------------------------------------------
NOTE N: CASH AND DIVIDEND RESTRICTIONS
The Bank is required by the Federal Reserve Bank to maintain cash reserves
against certain categories of average deposit liabilities. During 1999 and 1998,
the average amount of these reserves was $8.8 million and $1.2 million,
respectively, after deducting currency and coin holdings.
The payment of dividends in the future and the amount of such dividends, if any,
will be at the discretion of the Corporation's Board of Directors. The payment
of preferred and common stock dividends by the Corporation may be limited by
certain factors, including regulatory capital requirements, broad enforcement
powers of the federal bank regulatory agencies, and tangible net worth
maintenance requirements under the Corporation's revolving credit facilities.
The payment of common stock dividends may also be limited by the terms of
outstanding preferred stock. If the Corporation has not paid scheduled dividends
on the preferred stock, or declared the dividends and set aside funds for
payment, the Corporation may not declare or pay any cash dividends on the common
stock. In addition, if the Corporation defers interest for consecutive periods
covering 10 semiannual periods or 20 consecutive quarterly periods, depending on
the series, on its guaranteed preferred beneficial interests in Corporation's
junior subordinated deferrable interest debentures, the Corporation may not be
permitted to declare or pay any cash dividends on the Corporation's capital
stock or interest on debt securities that have equal or lower priority than the
junior subordinated deferrable interest debentures.
The Corporation is a legal entity separate and distinct from its banking and
other subsidiaries. The primary source of funds for payment of preferred and
common stock dividends by the Corporation is dividends received from the Bank.
The amount of dividends that a bank may declare in any year is subject to
certain regulatory restrictions. Generally, dividends declared in a given year
by a national bank are limited to its net profit, as defined by regulatory
agencies, for that year, combined with its retained net income for the preceding
two years, less any required transfer to surplus or to a fund for the retirement
of any preferred stock. In addition, a national bank may not pay any dividends
in an amount greater than its undivided profit. Under current regulatory
practice, national banks may pay dividends only out of current operating
earnings. Also, a bank may not declare dividends if such declaration would leave
the bank inadequately capitalized. Therefore, the ability of the Bank to declare
dividends will depend on its future net income and capital requirements. At
December 31, 1999, the amount of retained earnings available for declaration and
payment of dividends from the Bank to the Corporation was $1.6 billion. Payment
of dividends by the Bank to the Corporation, however, can be further limited by
federal bank regulatory agencies.
The Bank's payment of dividends to the Corporation may also be limited by a
tangible net worth requirement under the Bank's revolving credit facility. This
facility was not drawn upon as of December 31, 1999. If this facility had been
drawn upon as of December 31, 1999, the amount of retained earnings available
for declaration of dividends would have been further limited to $426.2 million.
NOTE O: COMPREHENSIVE INCOME
On January 1, 1998, the Corporation adopted Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income" ("Statement No. 130").
Statement No. 130 establishes standards for the reporting and disclosure of
comprehensive income and its components in the financial statements. The
adoption of Statement No. 130 had no impact on the Corporation's consolidated
financial statements. Statement No. 130 requires the impact of foreign currency
translation, unrealized gains or losses on the Corporation's investment
securities available-for-sale and other financial instruments, and changes in
certain minimum benefit plan liabilities, which, prior to adoption, were
reported separately in stockholders' equity, to be included in other
comprehensive
OTHER COMPREHENSIVE INCOME COMPONENTS
(dollars in thousands)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
BEFORE TAX TAX (BENEFIT) NET OF TAX
YEAR ENDED AMOUNT EXPENSE AMOUNT
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
DECEMBER 31, 1999
Foreign currency translation........................................... $ (6,738) $ - $ (6,738)
Net unrealized losses on investment securities available-for-sale
and other financial instruments....................................... (16,164) (5,760) (10,404)
Minimum benefit plan liability adjustment.............................. 7,205 2,630 4,575
----------- ----------- -----------
Other comprehensive income....................................... $ (15,697) $ (3,130) $ (12,567)
=========== =========== ===========
DECEMBER 31, 1998
Foreign currency translation........................................... $ (510) $ (8) $ (502)
Net unrealized losses on investment securities available-for-sale
and other financial instruments....................................... (7,332) (2,709) (4,623)
Minimum benefit plan liability adjustment.............................. (7,205) (2,630) (4,575)
----------- ----------- -----------
Other comprehensive income (15,047) $ (5,347) $ (9,700)
=========== =========== ===========
DECEMBER 31, 1997
Foreign currency translation........................................... $ (4,588) $ 398 $ (4,986)
Net unrealized gains on investment securities available-for-sale
and other financial instruments....................................... 9,570 3,510 6,060
----------- ----------- -----------
Other comprehensive income $ 4,982 $ 3,908 $ 1,074
=========== =========== ===========
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
62
<PAGE> 75
- --------------------------------------------------------------------------------
income. For purposes of comparability, prior years' consolidated financial
statements have been reclassified to conform to the requirements of Statement
No. 130.
NOTE P: RELATED PARTY TRANSACTIONS
The Corporation's directors and executive officers hold credit cards or other
lines of credit issued by the Bank on the same terms prevailing at the time for
those issued to other persons.
NOTE Q: OTHER OPERATING EXPENSE
In March 1998, Statement of Position 98-1, "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use" ("SOP 98-1"), was issued. This
statement, effective for financial statements issued for fiscal years beginning
after December 15, 1998, provides guidance on accounting for the costs of
computer software developed or obtained for internal use. Earlier application
was encouraged. The Corporation adopted SOP 98-1 in 1998. The adoption of SOP
98-1 did not have a material impact on the Corporation's consolidated financial
statements.
OTHER EXPENSE COMPONENT OF OTHER OPERATING EXPENSE
(dollars in thousands)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1999 1998 1997
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
Purchased services........................... $ 312,936 $ 226,773 $ 287,016
Advertising.................................. 211,263 146,896 133,124
Collection................................... 40,692 31,987 27,378
Stationery and supplies...................... 36,779 32,376 30,960
Service bureau............................... 46,080 35,159 31,516
Postage and delivery......................... 280,356 194,321 186,015
Telephone usage.............................. 73,552 60,538 57,647
Loan receivable fraud losses................. 102,604 81,958 64,572
Amortization of intangible assets............ 170,636 54,155 31,290
Computer software............................ 58,987 49,419 46,227
Other ....................................... 174,360 131,859 101,375
----------- ---------- ----------
Total other operating expense................ $ 1,508,245 $1,045,441 $ 997,120
=========== ========== ==========
- -------------------------------------------------------------------------------------
</TABLE>
NOTE R: COMMITMENTS AND CONTINGENCIES
At December 31, 1999, the Corporation had outstanding lines of credit of $399.1
billion committed to its Customers. Of that total commitment, $326.8 billion is
unused. While this amount represents the total available lines of credit to
Customers, the Corporation has not experienced and does not anticipate that all
of its Customers will exercise their entire available line of credit at any
given point in time. The Corporation has the right to reduce or cancel these
available lines of credit at any time.
The Corporation has two one-year revolving credit facilities totaling $75.0
million. These credit facilities were renewed during 1999 with $25.0 million
committed through February 2000 and $50.0 million committed through September
2000. The Corporation may take advances under these facilities subject to
certain conditions, including requirements for tangible net worth. These
facilities may be used for general corporate purposes and were not drawn upon as
of December 31, 1999.
The Bank has a $2.0 billion syndicated revolving credit facility committed
through February 2001. Advances are subject to covenants and conditions
customary in a transaction of this kind. These conditions include requirements
for the Corporation to maintain a minimum level of tangible net worth, in
addition to managed loan receivables 90 days or more past due plus nonaccrual
receivables not to exceed 6% of managed credit card receivables. Should managed
credit card losses equal or exceed 5% for a period of four consecutive quarters,
a ratio of qualifying loan receivables to outstanding borrowings under the
facility of at least 115% will be required in order to draw under this facility.
At December 31, 1999, the minimum tangible net worth requirement for this
facility is $1.8 billion. The facility may be used for general corporate
purposes and was not drawn upon as of December 31, 1999.
MBNA Europe has six bilateral credit facilities, with maturities ranging from
2000 to 2002, totaling Pound Sterling 60.0 million (approximately $96.9 million
at December 31, 1999). MBNA Europe may take advances under the facilities
subject to certain conditions, including requirements for tangible net worth.
The facilities may be used for general corporate purposes. At December 31, 1999,
MBNA Europe had Pound Sterling 30.0 million (approximately $48.5 million)
available to be drawn under the facilities.
In addition, MBNA Europe has a Pound Sterling 300.0 million (approximately
$484.7 million at December 31, 1999) multi-currency syndicated revolving credit
facility committed through October 2000. MBNA Europe may take advances under the
facility subject to certain conditions, including requirements for tangible net
worth, outstanding loan receivables, and account delinquencies. The facility may
be used for general corporate purposes and was not drawn upon as of December 31,
1999.
MBNA Canada has a CAD$300.0 million (approximately $206.5 million at December
31, 1999) multi-currency syndicated revolving credit facility committed through
December 2001 and a CAD$50.0 million (approximately $34.4 million at December
31, 1999) multi-currency credit facility committed through February 2000. MBNA
Canada may take advances under the facilities subject to certain conditions
customary in a transaction of this kind. These facilities may be used for
general corporate purposes and were not drawn upon as of December 31, 1999.
63
<PAGE> 76
- --------------------------------------------------------------------------------
NOTE S: INCOME TAXES
RECONCILIATION OF STATUTORY INCOME TAXES
(dollars in thousands)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1999 1998 1997
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Income before income taxes...................... $ 1,654,964 $ 1,254,065 $ 1,022,108
Statutory tax rate.............................. 35% 35% 35%
----------- ----------- -----------
Income tax at statutory tax rate................ 579,237 438,923 357,738
State taxes, net of federal benefit............. 20,449 17,800 11,182
Other........................................... 30,855 21,076 30,688
----------- ----------- -----------
Total income taxes.......................... $ 630,541 $ 477,799 $ 399,608
=========== =========== ===========
Current income taxes:
U.S. federal.................................. $ 572,571 $ 410,532 $ 324,891
U.S. state and local.......................... 31,459 27,384 17,203
Foreign....................................... 73,115 33,194 16,165
----------- ----------- -----------
Total current income taxes.................. 677,145 471,110 358,259
Deferred income taxes (benefit):
U.S. federal, state, and local................ (48,700) 409 44,479
Foreign....................................... 2,096 6,280 (3,130)
----------- ----------- -----------
Total deferred income taxes (benefits)...... (46,604) 6,680 41,349
----------- ----------- -----------
Total income taxes.......................... $ 630,541 $ 477,799 $ 399,608
=========== =========== ===========
- -------------------------------------------------------------------------------------------------
</TABLE>
Foreign subsidiaries contributed approximately 12.9% in 1999, 7.1% in 1998, and
3.8% in 1997 to consolidated income before income taxes.
No U.S. income taxes have been provided on the accumulated undistributed
earnings of foreign subsidiaries, totaling $198.1 million at December 31, 1999,
which continue to be reinvested. It is not practicable to determine the amount
of any additional U.S. income taxes that might be payable in the event that
these earnings are repatriated.
SUMMARY OF DEFERRED TAXES
(dollars in thousands)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
DECEMBER 31, 1999 1998
- ------------------------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets:
Reserve for possible credit losses................. $ 67,960 $ 61,887
Intangible assets and other similar items.......... 68,077 48,557
Other deferred tax assets.......................... 193,174 143,342
---------- ----------
Total deferred tax assets....................... 329,211 253,786
Valuation allowance................................ - -
---------- ----------
Total deferred tax assets less valuation
allowance...................................... 329,211 253,786
Deferred tax liabilities:
Securitizations and related items.................. (166,346) (137,201)
Other deferred tax liabilities..................... (61,259) (64,098)
---------- ----------
Total deferred tax liabilities.................. (227,605) (201,299)
---------- ----------
Net deferred tax assets......................... $ 101,606 $ 52,487
========== ==========
- ------------------------------------------------------------------------------------
</TABLE>
NOTE T: FOREIGN ACTIVITIES
The Corporation's foreign activities are primarily performed through the Bank's
two foreign bank subsidiaries, MBNA Europe and MBNA Canada. The Bank also has a
foreign branch office in the Grand Cayman Islands, which invests in
interest-earning time deposits and accepts eurodollar deposits. This branch also
participates in the loan receivables securitized by MBNA Europe.
FOREIGN LOAN RECEIVABLES DISTRIBUTION
(dollars in thousands)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
DECEMBER 31, 1999 1998
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
LOANS HELD FOR SECURITIZATION
Credit card ............................................ $ 855,916 $ 442,517
---------- ----------
Total loans held for securitization ................ 855,916 442,517
LOAN PORTFOLIO
Credit card ............................................ 944,183 993,945
Other consumer ......................................... 642,510 52,537
---------- ----------
Total loan portfolio ............................... 1,586,693 1,046,482
---------- ----------
Total loan receivables ............................. $2,442,609 $1,488,999
========== ==========
- ------------------------------------------------------------------------------------------------
</TABLE>
Because certain foreign operations are integrated with many of the Bank's
domestic operations, estimates and assumptions have been made to assign certain
income and expense items between domestic and foreign operations. Amounts are
allocated for interest costs to users of funds, capital invested, income taxes,
and for other items incurred. The provision for possible credit losses is
allocated based on specific charge-off experience and risk characteristics of
the foreign loan receivables.
SELECTED FOREIGN FINANCIAL DATA
(dollars in thousands)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
DECEMBER 31, 1999 1998 1997
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
UNITED KINGDOM
Total assets ................ $ 3,104,940 $ 2,108,273 $ 1,748,997
Total income ................ 696,585 527,884 306,380
Income before income taxes .. 213,137 104,708 37,430
Net income .................. 148,806 72,249 27,099
OTHER FOREIGN
Total assets ................ 1,706,289 2,680,694 1,169,926
Total income ................ 179,257 138,187 36,740
Loss before income taxes .... (44,032) (50,977) (8,544)
Net loss .................... (38,815) (44,875) (7,561)
TOTAL FOREIGN
Total assets ................ 4,811,229 4,788,967 2,918,923
Total income ................ 875,842 666,071 343,120
Income before income taxes .. 169,105 53,731 28,886
Net income .................. 109,991 27,374 19,538
DOMESTIC
Total assets ................ 26,047,903 21,017,293 18,386,590
Total income ................ 5,594,250 4,529,070 4,180,772
Income before income taxes .. 1,485,859 1,200,334 993,222
Net income .................. 914,432 748,892 602,962
MBNA CORPORATION
Total assets ................ 30,859,132 25,806,260 21,305,513
Total income ................ 6,470,092 5,195,141 4,523,892
Income before income taxes .. 1,654,964 1,254,065 1,022,108
Net income .................. 1,024,423 776,266 622,500
- -----------------------------------------------------------------------------------
</TABLE>
64
<PAGE> 77
- --------------------------------------------------------------------------------
NOTE U: SEGMENT REPORTING
In June 1997, Statement of Financial Accounting Standards No. 131, "Disclosures
about Segments of an Enterprise and Related Information" ("Statement No. 131"),
was issued, effective for fiscal years beginning after December 15, 1997.
Statement No. 131 establishes standards for the disclosure of selected
information pertaining to operating segments of a public company in its interim
and annual financial statements. The adoption of Statement No. 131 in 1998 did
not have an impact on the Corporation's consolidated financial statements.
The Corporation derives its income primarily from credit card loans, other
consumer loans, and insurance products. The credit card and other consumer loan
products have similar economic characteristics and, therefore, have been
aggregated into one operating segment. The Corporation's insurance products have
also been aggregated into the one operating segment due to immateriality.
The Corporation allocates resources on a managed basis, and financial
information provided to management reflects the Corporation's results on a
managed basis. Therefore, an adjustment is required to reconcile the managed
financial information to the Corporation's reported financial information in its
consolidated financial statements. This adjustment reclassifies securitization
income into interest income, interchange, credit card and other fees, insurance
income, interest paid to investors, credit losses, and other trust expenses. The
managed results also include the impact of Statement No. 125.
SEGMENT REPORTING
(dollars in thousands)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
TOTAL SECURITIZATION TOTAL
YEAR ENDED MANAGED ADJUSTMENT CONSOLIDATED
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
DECEMBER 31, 1999
Interest income ....................... $ 9,133,754 $ (6,871,483) $ 2,262,271
Interest expense ...................... 3,945,953 (2,617,447) 1,328,506
------------ ------------ ------------
Net interest income ................... 5,187,801 (4,254,036) 933,765
Provision for possible credit losses .. 2,804,410 (2,395,496) 408,914
------------ ------------ ------------
Net interest income after provision
for possible credit losses .......... 2,383,391 (1,858,540) 524,851
Other operating income ................ 2,349,281 1,858,540 4,207,821
Other operating expense ............... 3,077,708 - 3,077,708
------------ ------------ ------------
Income before income taxes ............ 1,654,964 - 1,654,964
Applicable income taxes ............... 630,541 - 630,541
------------ ------------ ------------
Net income ............................ $ 1,024,423 $ - $ 1,024,423
============ ============ ============
Ending loans outstanding .............. $ 72,255,513 $(54,591,804) $ 17,663,709
DECEMBER 31, 1998
Interest income ....................... $ 7,856,703 $ (5,890,531) $ 1,966,172
Interest expense ...................... 3,543,127 (2,319,294) 1,223,833
------------ ------------ ------------
Net interest income ................... 4,313,576 (3,571,237) 742,339
Provision for possible credit losses .. 2,303,166 (1,993,127) 310,039
------------ ------------ ------------
Net interest income after provision
for possible credit losses .......... 2,010,410 (1,578,110) 432,300
Other operating income ................ 1,650,859 1,578,110 3,228,969
Other operating expense ............... 2,407,204 - 2,407,204
------------ ------------ ------------
Income before income taxes ............ 1,254,065 - 1,254,065
Applicable income taxes ............... 477,799 - 477,799
------------ ------------ ------------
Net income ............................ $ 776,266 $ - $ 776,266
============ ============ ============
Ending loans outstanding .............. $ 59,641,106 $(46,172,739) $ 13,468,367
DECEMBER 31, 1997
Interest income ....................... $ 6,401,838 $ (4,690,825) $ 1,711,013
Interest expense ...................... 2,877,851 (1,859,228) 1,018,623
------------ ------------ ------------
Net interest income ................... 3,523,987 (2,831,597) 692,390
Provision for possible credit losses .. 1,749,243 (1,489,203) 260,040
------------ ------------ ------------
Net interest income after provision
for possible credit losses .......... 1,774,744 (1,342,394) 432,350
Other operating income ................ 1,470,485 1,342,394 2,812,879
Other operating expense ............... 2,223,121 - 2,223,121
------------ ------------ ------------
Income before income taxes ............ 1,022,108 - 1,022,108
Applicable income taxes ............... 399,608 - 399,608
------------ ------------ ------------
Net income ............................ $ 622,500 $ - $ 622,500
============ ============ ============
Ending loans outstanding .............. $ 49,379,860 $(38,217,786) $ 11,162,074
- -------------------------------------------------------------------------------------------------
</TABLE>
65
<PAGE> 78
- --------------------------------------------------------------------------------
NOTE V: FAIR VALUE OF FINANCIAL INSTRUMENTS
The following presents the fair value of financial instruments as of December
31, 1999 and 1998, whether or not recognized in the Corporation's consolidated
statements of financial condition, for which it is practicable to estimate that
value. In addition, certain financial instruments and all nonfinancial
instruments are excluded in accordance with generally accepted accounting
principles. In cases where quoted market prices are not available, fair values
are estimated using present value or other valuation techniques. These
techniques are significantly affected by the assumptions used, including the
discount rate and estimates of future cash flows. The derived fair value
estimates cannot be substantiated by comparison to independent market values
and, in many cases, could not be realized in an immediate settlement of the
instrument. Accordingly, the aggregate fair value amounts presented do not
represent the underlying value of the Corporation.
FINANCIAL ASSETS
CASH AND DUE FROM BANKS: Cash and due from banks are carried at an amount that
approximates fair value.
MONEY MARKET INSTRUMENTS: Money market instruments include interest-earning time
deposits in other banks and federal funds sold and securities purchased under
resale agreements. As a result of the short-term nature of these instruments,
the carrying amounts reported in the consolidated statements of financial
condition approximate these assets' fair value.
INVESTMENT SECURITIES: Fair value is based on the market value of the individual
investment security without regard to any premium or discount that may result
from concentrations of ownership of a financial instrument, possible tax
ramifications, or estimated transaction costs. Market value for
investment securities is based on quoted market prices or dealer quotes.
LOANS HELD FOR SECURITIZATION: The carrying value of loans held for
securitization approximates its fair value due to the short-term nature of these
assets.
LOAN PORTFOLIO: The carrying value of the Corporation's loan portfolio
approximates its fair value. The loan portfolio includes variable-rate loans,
with interest rates that approximate current market rates, and fixed-rate loans,
which can be repriced frequently at market rates.
The valuations of loans held for securitization and the loan portfolio do not
include the value that relates to estimated cash flows from new loans generated
from existing Customers over the remaining life of the loan receivables or the
value of established Customer relationships. Accordingly, the fair values of
loans held for securitization and the loan portfolio do not represent the
underlying value of the Corporation's accounts.
ACCRUED INCOME RECEIVABLE: Accrued income receivable includes interest and fee
income earned but not yet received from investment securities, money market
instruments, loan receivables, interest rate swap agreements, and insurance
products. The carrying amount reported in the consolidated statements of
financial condition approximates the fair value of these assets due to their
relatively short-term nature.
ACCOUNTS RECEIVABLE FROM SECURITIZATIONS: The fair value of accounts receivable
from securitizations is determined by discounting the future cash flows from the
securitizations using rates currently available to the Corporation for
instruments with similar terms and remaining maturities.
FINANCIAL LIABILITIES
TOTAL DEPOSITS: The fair value of money market deposit accounts,
noninterest-bearing demand deposits, interest-bearing transaction accounts, and
savings accounts is equal to the amount payable upon demand. The fair value of
time deposits is estimated by discounting the future cash flows of the stated
maturities using estimated rates currently offered for like deposits. The
valuation does not include the benefit that results from the low-cost funding
provided by the various deposit liabilities compared to the cost of borrowing
funds in the market.
SHORT-TERM BORROWINGS: Short-term borrowings include federal funds purchased and
securities sold under repurchase agreements, short-term bank notes, and other
short-term borrowings. The fair
CARRYING VALUES AND ESTIMATED FAIR VALUES OF THE CORPORATION'S FINANCIAL ASSETS
(dollars in thousands)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
DECEMBER 31, 1999 1998
- -------------------------------------------------------------------------------------------------------------------
Carrying Fair Carrying Fair
Value Value Value Value
-----------------------------------------------------------------
<S> <C> <C> <C> <C>
FINANCIAL ASSETS
Cash and due from banks ................... $ 488,386 $ 488,386 $ 382,882 $ 382,882
Money market instruments .................. 1,525,748 1,525,748 3,561,215 3,561,215
Investment securities:
Available-for-sale ...................... 2,752,663 2,752,663 1,663,704 1,663,704
Held-to-maturity ........................ 293,641 264,832 216,020 211,473
Loans held for securitization ............. 9,692,616 9,692,616 1,692,268 1,692,268
Loan portfolio, net of reserve
for possible credit losses .............. 7,615,134 7,615,134 11,559,188 11,559,188
Accrued income receivable ................. 216,867 216,867 193,019 193,019
Accounts receivable from securitizations .. 4,128,046 4,122,000 3,595,556 3,590,000
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
66
<PAGE> 79
- --------------------------------------------------------------------------------
CARRYING VALUES AND ESTIMATED FAIR VALUES OF THE CORPORATION'S FINANCIAL
LIABILITIES
(dollars in thousands)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
DECEMBER 31, 1999 1998
- ----------------------------------------------------------------------------------------------------------
Carrying Fair Carrying Fair
Value Value Value Value
<S> <C> <C> <C> <C>
FINANCIAL LIABILITIES
Total deposits ................... $18,714,753 $18,670,000 $15,407,040 $15,613,000
Short-term borrowings ............ 1,039,004 1,039,004 1,231,195 1,231,195
Long-term debt and bank notes .... 5,708,880 5,663,000 5,939,025 6,054,000
Accrued interest payable ......... 182,990 182,990 153,201 153,201
- ----------------------------------------------------------------------------------------------------------
</TABLE>
value of short-term borrowings approximates the carrying value of these
instruments based upon their short-term nature.
LONG-TERM DEBT AND BANK NOTES: The fair value of primarily all of the
Corporation's long-term debt and bank notes is estimated by discounting the
future cash flows of the stated maturities of the long-term debt and bank notes
using estimated rates currently offered for similar debt obligations. The fair
value of the Corporation's guaranteed preferred beneficial interests in
Corporation's junior subordinated deferrable interest debentures is based upon
its quoted market price.
ACCRUED INTEREST PAYABLE: Accrued interest payable includes interest expensed
but not yet paid for deposits, short-term borrowings, long-term debt and bank
notes, and interest rate swap agreements. The carrying amount approximates the
fair value of these liabilities due to their relatively short-term nature.
NOTE W: OFF-BALANCE-SHEET FINANCIAL INSTRUMENTS
The Corporation uses interest rate swap agreements to change fixed-rate funding
sources to floating-rate funding sources to better match the rate sensitivity of
the Corporation's assets. The Corporation uses forward exchange contracts to
reduce its exposure to foreign currency exchange rate risk primarily related to
activity associated with the Corporation's foreign bank subsidiaries.
The Corporation entered into a foreign exchange swap agreement to facilitate the
issuance of a portion of the Subordinated Guaranteed Floating-Rate Notes by MBNA
Europe and offset this exposure to foreign currency exchange rate risk with
an additional foreign exchange swap agreement. These foreign exchange swap
agreements have no impact on the Corporation's consolidated financial
statements.
MBNA Europe has also entered into foreign exchange swap agreements to offset the
exposure to foreign currency exchange rate risk related to the issuance of
certain Euro Medium-Term Notes denominated in Euro or U.S. dollars during 1999.
The fair value of the Corporation's off-balance-sheet financial instruments is
represented by the estimated unrealized gains or losses as determined by quoted
market prices or dealer quotes. This value generally reflects the estimated
amounts that the Corporation would receive or pay to terminate the instruments
at the reporting date.
At December 31, 1999 and 1998, the Corporation had interest rate swap agreements
with underlying notional amounts of $1.0 billion and $655.0 million,
respectively. These agreements had a net unrealized loss of approximately $31.0
million and a net unrealized gain of $24.0 million at December 31, 1999 and
1998, respectively.
The notional amounts underlying the Corporation's forward exchange contracts at
December 31, 1999 and 1998, were $1.0 billion and $857.1 million, respectively.
These contracts had a net unrealized gain of $7.8 million at December 31, 1999,
and $4.9 million at December 31, 1998.
The notional amounts underlying the Corporation's foreign exchange swap
agreements were $200.7 million at
SUMMARY OF ACTIVITY OF OFF-BALANCE-SHEET FINANCIAL INSTRUMENTS (NOTIONAL
AMOUNTS)
(dollars in thousands)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
INTEREST RATE FORWARD EXCHANGE FOREIGN EXCHANGE
SWAP AGREEMENTS CONTRACTS SWAP AGREEMENTS TOTAL
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1996 .. $ 1,350,000 $ 420,255 $ 40,000 $ 1,810,255
Additions ................... - 2,825,310 - 2,825,310
Maturities .................. (1,000,000) (2,733,440) - (3,733,440)
----------- ----------- ----------- -----------
BALANCE, DECEMBER 31, 1997 .. 350,000 512,125 40,000 902,125
Additions ................... 305,000 3,939,639 - 4,244,639
Maturities .................. - (3,594,633) - (3,594,633)
----------- ----------- ----------- -----------
BALANCE, DECEMBER 31, 1998 .. 655,000 857,131 40,000 1,552,131
Additions ................... 536,303 3,410,572 160,675 4,107,550
Maturities .................. (150,000) (3,226,982) - (3,376,982)
----------- ----------- ----------- -----------
BALANCE, DECEMBER 31, 1999 .. $ 1,041,303 $ 1,040,721 $ 200,675 $ 2,282,699
=========== =========== =========== ===========
</TABLE>
67
<PAGE> 80
- --------------------------------------------------------------------------------
SIGNIFICANT CLASSES OF OFF-BALANCE-SHEET FINANCIAL INSTRUMENTS
(dollars in thousands)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
WEIGHTED AVERAGE
- ------------------------------------------------------------------------------------------------------------------------
Notional Receive Maturity Estimated
Amount Rate (a) Pay Rate (b) in Years Fair Value
----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
DECEMBER 31, 1999
Interest rate swap agreements ............. $ 1,041,303 6.84% 6.30% 11.2
Gross unrealized gains .................. $ -
Gross unrealized losses ................. (31,042)
-----------
Total ................................. $ (31,042)
===========
Forward exchange contracts--pounds sterling 1,027,744 1.62 .1 .2
Gross unrealized gains .................. $ 10,480
Gross unrealized losses ................. (3,335)
-----------
Total ................................. $ 7,145
===========
Forward exchange contracts--Irish punts ... 12,977 1.35 1.28 .1
Gross unrealized gains .................. $ 696
Gross unrealized losses ................. -
-----------
Total ................................. $ 696
===========
Foreign exchange swap agreements .......... 200,675 1.62 1.62 3.6
Gross unrealized gains .................. $ 392
Gross unrealized losses ................. (5,040)
-----------
Total ................................. $ (4,648)
===========
DECEMBER 31, 1998
Interest rate swap agreements ............. 655,000 6.28% 5.22 5.2
Gross unrealized gains .................. $ 24,031
Gross unrealized losses ................. -
-----------
Total ................................. $ 24,031
===========
Forward exchange contracts--pounds sterling 834,686 1.67 1.66 .2
Gross unrealized gains .................. $ 6,462
Gross unrealized losses ................. (1,762)
-----------
Total ................................. $ 4,700
===========
Forward exchange contracts--Irish punts ... 15,162 1.51 1.49 .1
Gross unrealized gains .................. $ 190
Gross unrealized losses ................. -
-----------
Total ................................. $ 190
===========
Forward exchange contracts--US dollars .... 7,283 .60 .60 .1
Gross unrealized gains .................. $ 3
Gross unrealized losses ................. (29)
-----------
Total ................................. $ (26)
===========
Foreign exchange swap agreements .......... 40,000 1.66 1.66 6.4
Gross unrealized gains .................. $ 835
Gross unrealized losses ................. (835)
-----------
Total ................................. $ -
===========
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Weighted average receive rate represents the fixed-rate contracted at the
time the off-balance-sheet financial instruments were entered into.
(b) Weighted average pay rate for the forward exchange contracts represents the
spot rate for the currency the forward exchange contract is denominated in
at December 31, 1999 and 1998, respectively. The pay rate for the interest
rate swap agreements is generally based upon the three-month LIBOR and is
the rate in effect at December 31, 1999 and 1998, respectively.
December 31, 1999, and $40.0 million at December 31, 1998. These contracts had a
net unrealized loss of $4.6 million at December 31, 1999.
Although off-balance-sheet financial instruments do not expose the Corporation
to credit risk equal to the notional amount, the Corporation is exposed to
credit risk if the counterparty fails to perform. This credit risk is measured
as the gross unrealized gain on the financial instrument. The Corporation enters
into off-balance-sheet financial instruments with counterparties who have credit
ratings of investment grade as rated by the major rating agencies.
Under the terms of certain interest rate swap agreements, each party may be
required to pledge certain assets if the market value of the interest rate swap
agreement exceeds an amount set forth in the agreement or in the event of a
change in its credit rating. There were no securities pledged under the terms of
the interest rate swap agreements at December 31, 1999 and 1998.
68
<PAGE> 81
- --------------------------------------------------------------------------------
At December 31, 1999, the Corporation had interest rate swap agreements maturing
in varying amounts from 2002 through 2027. The Corporation's forward exchange
contracts all mature in 2000, and the foreign exchange swap agreements mature in
varying amounts from 2002 through 2005.
EXPECTED MATURITIES OF OFF-BALANCE-SHEET FINANCIAL INSTRUMENTS
(dollars in thousands)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
DECEMBER 31, 1999 WITHIN 1 YEAR 1-5 YEARS OVER 5 YEARS TOTAL
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INTEREST RATE SWAP AGREEMENTS
Notional amount .............. $ - $ 505,000 $ 536,303 $ 1,041,303
Estimated fair value ......... - (9,177) (21,865) (31,042)
FORWARD EXCHANGE CONTRACTS
Notional amount .............. 1,040,721 - - 1,040,721
Estimated fair value ......... 7,841 - - 7,841
FOREIGN EXCHANGE SWAP AGREEMENTS
Notional amount .............. - 160,675 40,000 200,675
Estimated fair value ......... - (4,648) - (4,648)
- -----------------------------------------------------------------------------------------------------------
</TABLE>
NOTE X: PARENT COMPANY FINANCIAL INFORMATION
The Corporation conducts its credit card operations primarily through its wholly
owned subsidiary, MBNA America Bank, N.A. At December 31, 1999, the Bank
constituted 94.0% of the consolidated assets of the Corporation. The parent
company's investment in subsidiaries represents the total equity of all
consolidated subsidiaries, using the equity method of accounting for
investments.
CONDENSED STATEMENTS OF FINANCIAL CONDITION
(dollars in thousands)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
DECEMBER 31, 1999 1998
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Cash and due from banks .................................... $ 5,337 $ 6,928
Interest-earning time deposits due from bank subsidiary .... 735,396 167,213
Notes receivable from non-bank subsidiaries ................ 1,386,424 1,833,384
Investment in subsidiaries:
Bank ..................................................... 3,825,972 2,753,782
Non-bank ................................................. 239,011 225,835
Premises and equipment, net ................................ 87,340 61,081
Accrued income receivable .................................. 17,649 21,907
Other assets ............................................... 132,772 107,229
---------- ----------
Total assets ........................................... $6,429,901 $5,177,359
========== ==========
Liabilities and Stockholders' Equity
Long-term debt ............................................. $1,468,929 $2,057,976
Junior subordinated deferrable interest debentures due to
non-bank subsidiaries .................................... 580,725 580,644
Accrued interest payable ................................... 21,745 27,134
Dividends payable .......................................... 59,205 48,105
Accrued expenses and other liabilities ..................... 99,854 72,465
---------- ----------
Total liabilities ...................................... 2,230,458 2,786,324
Stockholders' equity ....................................... 4,199,443 2,391,035
---------- ----------
Total liabilities and stockholders' equity ............. $6,429,901 $5,177,359
========== ==========
- ----------------------------------------------------------------------------------------------
</TABLE>
69
<PAGE> 82
- --------------------------------------------------------------------------------
CONDENSED STATEMENTS OF INCOME
(dollars in thousands)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1999 1998 1997
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING INCOME
Interest income ........................................... $ 166,782 $ 134,751 $ 100,351
Dividends from subsidiaries:
Bank .................................................... 240,000 194,000 188,000
Non-bank ................................................ 1,270 1,298 4,201
Management fees from subsidiaries ......................... 38,206 32,993 32,507
Other ..................................................... 44 43 23
----------- ---------- ----------
Total operating income ............................... 446,302 363,085 325,082
OPERATING EXPENSE
Interest expense .......................................... 160,229 167,241 120,997
Salaries and employee benefits ............................ 24,083 18,073 16,117
Other ..................................................... 12,553 13,245 12,400
----------- ---------- ----------
Total operating expense .............................. 198,559 149,514 149,514
----------- ---------- ----------
Income before income taxes and equity in undistributed
net income (loss) of subsidiaries ........................ 249,437 164,526 175,568
Applicable income taxes (benefit) ......................... 1,575 (10,466) (6,807)
Equity in undistributed net income (loss) of subsidiaries:
Bank .................................................... 784,731 606,872 450,375
Non-bank ................................................ (6,170) (5,598) (10,250)
----------- ---------- ----------
NET INCOME ................................................ $ 1,024,423 $ 776,266 $ 622,500
=========== ========== ==========
- ----------------------------------------------------------------------------------------------------------
</TABLE>
CONDENSED STATEMENTS OF CASH FLOWS
(dollars in thousands)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1999 1998 1997
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income ................................................ $ 1,024,423 $ 776,266 $ 622,500
Adjustments to reconcile net income to net cash provided by
operating activities:
Equity in undistributed earnings of subsidiaries ........ (776,561) (601,274) (440,125)
(Benefit) provision for deferred income taxes ........... (4,644) 610 (233)
Depreciation and amortization ........................... 19,481 12,924 9,615
Decrease in other operating activities .................. 39,981 38,824 15,974
----------- ---------- ----------
Net cash provided by operating activities ............. 302,680 227,350 207,731
INVESTING ACTIVITIES
Net increase in interest-earning time deposits due from
bank subsidiary .......................................... (568,183) (8,800) (58,238)
Net decrease (increase) in notes receivable from non-bank
subsidiaries ............................................. 446,960 (155,211) (646,457)
Net (purchases) sales of premises and equipment ........... (33,626) 5,741 (29,439)
Net investment in subsidiaries ............................ (321,370) (87,339) (37,701)
----------- ---------- ----------
Net cash used in investing activities ................. (476,219) (245,609) (771,835)
FINANCING ACTIVITIES
Proceeds from issuance of long-term debt .................. - 493,918 679,304
Maturity of long-term debt ................................ (591,000) (80,000) (50,000)
Proceeds from issuance of junior subordinated deferrable
interest debentures due to non-bank subsidiaries ......... - - 286,469
Acquisition and retirement of preferred stock ............. - - (52,483)
Proceeds from issuance of common stock .................... 1,174,086 - -
Proceeds from exercise of stock options and other awards .. 27,932 42,454 31,948
Acquisition and retirement of common stock ................ (211,337) (247,260) (157,446)
Dividends paid ............................................ (227,733) (189,916) (173,729)
----------- ---------- ----------
Net cash provided by financing activities ............. 171,948 19,196 564,063
----------- ---------- ----------
(Decrease Increase in Cash and Cash Equivalents ........... (1,591) 937 (41)
Cash and cash equivalents at beginning of year ............ 6,928 5,991 6,032
----------- ---------- ----------
Cash and cash equivalents at end of year .................. $ 5,337 $ 6,928 $ 5,991
=========== ========== ==========
SUPPLEMENTAL DISCLOSURES
Interest expense paid ..................................... $ 163,785 $ 161,102 $ 111,665
=========== ========== ==========
Income taxes paid ......................................... $ - $ - $ -
----------- ---------- ----------
- ----------------------------------------------------------------------------------------------------------
</TABLE>
70
<PAGE> 83
REPORT OF INDEPENDENT AUDITORS
- --------------------------------------------------------------------------------
Board of Directors and Stockholders
MBNA Corporation
We have audited the accompanying consolidated statements of financial condition
of MBNA Corporation and subsidiaries as of December 31, 1999 and 1998, and the
related consolidated statements of income, changes in stockholders' equity, and
cash flows for each of the three years in the period ended December 31, 1999.
These financial statements are the responsibility of the Corporation's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of MBNA Corporation
and subsidiaries at December 31, 1999 and 1998, and the consolidated results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1999, in conformity with accounting principles generally
accepted in the United States.
/s/ ERNST & YOUNG LLP
Baltimore, Maryland
January 14, 2000
71
<PAGE> 84
QUARTERLY DATA
- --------------------------------------------------------------------------------
(unaudited)
SUMMARY OF CONSOLIDATED QUARTERLY FINANCIAL INFORMATION
(dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
THREE MONTHS ENDED MARCH 31, JUNE 30,
- --------------------------------------------------------------------------------------------------------------------
1999
<S> <C> <C>
Interest income ............................................................... $ 541,348 $ 586,824
Interest expense .............................................................. 314,567 319,763
Net interest income ........................................................... 226,781 267,061
Provision for possible credit losses .......................................... 84,464 129,756
Other operating income ........................................................ 903,730 1,028,532
Other operating expense ....................................................... 745,573 798,823
Income before income taxes .................................................... 300,474 367,014
Net income .................................................................... 185,993 227,182
Net income applicable to common stock ......................................... 182,477 223,655
Earnings per common share ..................................................... .23 .28
Earnings per common share--assuming dilution .................................. .22 .27
Weighted average common shares outstanding (000) .............................. 798,538 801,803
Weighted average common shares outstanding and common stock
equivalents (000) ............................................................ 834,887 838,771
1998
Interest income ............................................................... $ 465,653 $ 458,337
Interest expense .............................................................. 290,080 291,454
Net interest income ........................................................... 175,573 166,883
Provision for possible credit losses .......................................... 88,598 78,542
Other operating income ........................................................ 699,510 765,196
Other operating expense ....................................................... 545,135 575,688
Income before income taxes .................................................... 241,350 277,849
Net income .................................................................... 149,396 171,988
Net income applicable to common stock ......................................... 145,774 168,384
Earnings per common share ..................................................... .19 .22
Earnings per common share--assuming dilution .................................. .18 .21
Weighted average common shares outstanding (000) .............................. 751,871 751,808
Weighted average common shares outstanding and common stock equivalents (000) . 792,247 790,417
- --------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
THREE MONTHS ENDED SEPTEMBER 30, DECEMBER 31,
- ----------------------------------------------------------------------------------------------------------------------
1999
<S> <C> <C>
Interest income ............................................................... $ 544,822 $ 589,277
Interest expense .............................................................. 335,801 358,375
Net interest income ........................................................... 209,021 230,902
Provision for possible credit losses .......................................... 105,020 89,674
Other operating income ........................................................ 1,118,307 1,157,252
Other operating expense ....................................................... 751,413 781,899
Income before income taxes .................................................... 470,895 516,581
Net income .................................................................... 291,484 319,764
Net income applicable to common stock ......................................... 287,859 316,119
Earnings per common share ..................................................... .36 .39
Earnings per common share--assuming dilution .................................. .34 .38
Weighted average common shares outstanding (000) .............................. 801,890 801,804
Weighted average common shares outstanding and common stock
equivalents (000) ............................................................ 838,608 836,038
1998
Interest income ............................................................... $ 515,523 $ 526,659
Interest expense .............................................................. 317,094 325,205
Net interest income ........................................................... 198,429 201,454
Provision for possible credit losses .......................................... 78,569 64,330
Other operating income ........................................................ 831,211 933,052
Other operating expense ....................................................... 601,163 685,218
Income before income taxes .................................................... 349,908 384,958
Net income .................................................................... 216,593 238,289
Net income applicable to common stock ......................................... 213,046 234,770
Earnings per common share ..................................................... .28 .31
Earnings per common share--assuming dilution .................................. .27 .30
Weighted average common shares outstanding (000) .............................. 751,806 751,937
Weighted average common shares outstanding and common stock equivalents (000) . 787,685 787,406
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
72
<PAGE> 85
PREFERRED STOCK PRICE RANGE AND DIVIDENDS
- --------------------------------------------------------------------------------
(unaudited)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
PREFERRED STOCK PRICE RANGE AND DIVIDENDS
DIVIDENDS
DECLARED PER
SERIES A HIGH LOW CLOSE COMMON SHARE
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1999
First quarter ........................... $ 26 7/8 $ 25 9/16 $ 26 1/8 $ .46875
Second quarter .......................... 27 3/8 25 15/16 25 15/16 .46875
Third quarter ........................... 26 3/8 25 25 1/8 .46875
Fourth quarter .......................... 25 1/2 22 25 .46875
1998
First quarter ........................... 27 5/8 26 1/2 26 3/4 .46875
Second quarter .......................... 27 7/16 26 5/8 27 1/16 .46875
Third quarter ........................... 27 26 1/2 26 1/2 .46875
Fourth quarter .......................... 26 1/4 24 25/32 26 .46875
SERIES B
1999
First quarter ........................... 25 5/8 24 3/4 25 .34380
Second quarter .......................... 25 5/8 25 25 3/16 .34680
Third quarter ........................... 25 1/4 24 7/8 24 7/8 .37560
Fourth quarter .......................... 25 3/4 23 9/16 24 1/2 .37590
1998
First quarter ........................... 26 1/16 25 3/16 25 7/8 .36600
Second quarter .......................... 26 1/8 25 3/8 26 1/8 .36540
Third quarter ........................... 26 7/16 25 5/8 25 5/8 .34900
Fourth quarter .......................... 25 1/2 25 25 .34380
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
The Corporation has two series of preferred stock issued and outstanding, both
with a $25 stated value per share. Each series of preferred stock is traded on
the New York Stock Exchange, the Series A Preferred Stock under the symbol
"KRBpfa" and the Series B Preferred Stock under the symbol "KRBpfb."
On January 10, 2000, the Corporation's Board of Directors declared a quarterly
dividend of $.46875 per share on the 71/2% Cumulative Preferred Stock, Series A,
and a quarterly dividend of $.3997 per share on the Adjustable Rate Cumulative
Preferred Stock, Series B. Both dividends are payable April 15, 2000, to
stockholders of record as of March 31, 2000.
73
<PAGE> 86
COMMON STOCK PRICE RANGE AND DIVIDENDS
- --------------------------------------------------------------------------------
(unaudited)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
COMMON STOCK PRICE RANGE AND DIVIDENDS
DIVIDENDS
DECLARED PER
HIGH LOW CLOSE COMMON SHARE
1999
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
First quarter ............................... $ 27 15/16 $ 22 3/16 $ 23 7/8 $ .07
Second quarter .............................. 30 3/4 22 1/2 30 5/8 .07
Third quarter ............................... 32 1/2 22 13/16 22 13/16 .07
Fourth quarter .............................. 29 1/8 20 15/16 27 1/4 .07
1998
First quarter ............................... 25 17 3/16 23 7/8 .06
Second quarter .............................. 25 5/16 20 5/16 22 1/16 .06
Third quarter ............................... 25 1/16 15 11/16 19 1/16 .06
Fourth quarter .............................. 25 3/8 13 3/4 24 13/16 .06
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
The Corporation's Common Stock is traded on the New York Stock Exchange under
the symbol "KRB" and is listed as "MBNA" in newspapers. At January 27, 2000, the
Corporation had 3,079 common stockholders of record. This does not include
beneficial owners for whom Cede & Co. or others act as nominees.
On January 10, 2000, the Corporation's Board of Directors declared a dividend of
$.08 per common share payable April 1, 2000, to stockholders of record as of
March 16, 2000.
74
<PAGE> 87
SENIOR EXECUTIVES (alphabetically)
- --------------------------------------------------------------------------------
CHARLES M. CAWLEY, 59, is president of MBNA Corporation and chief executive
officer of its banking subsidiary, MBNA America Bank, N.A. Mr. Cawley has more
than 36 years' management experience in the financial services industry and was
the senior member of the group that established MBNA in 1982. A graduate of
Georgetown University and a member of its board of directors, Mr. Cawley also
serves on the boards of the Eisenhower Exchange Fellowships, the American
Architectural Foundation, the Marine Corps Law Enforcement Foundation, America's
Promise, and the Owl's Head Transportation Museum. He is chairman of the board
of The Grand Opera House in Wilmington, Delaware, and is on the executive
committee of the boards of the Farnsworth Art Museum and the University of
Delaware. Mr. Cawley is also a member of the board of trustees of St. Benedict's
Preparatory School.
JOHN R. COCHRAN III, 48, is chief marketing officer and oversees all business
development and marketing activities, including sales, marketing, advertising,
regional marketing, telemarketing, and group administration. He is also
responsible for Customer satisfaction, community relations, and external
affairs. Mr. Cochran has 27 years' management experience in the financial
services industry and was a member of the group that established MBNA in 1982. A
graduate of Loyola College (Maryland), Mr. Cochran developed the endorsed
marketing concept that has led to MBNA signing thousands of membership groups
and financial institutions. He also established what is now one of the nation's
largest financial institution telephone sales operations. Mr. Cochran is vice
chairman of the board of trustees of Loyola College and is a member of the board
of visitors of the Delaware Council for Economic Education, and the Delaware
Public Policy Institute.
BRUCE L. HAMMONDS, 51, is chief operating officer and oversees MBNA's credit,
Customer assistance, consumer finance, control, and information services. He is
also responsible for MBNA Europe, MBNA Canada, and MBNA Consumer Services. Mr.
Hammonds has 30 years' management experience in consumer lending and was a
member of the group that established MBNA in 1982. A graduate of the University
of Baltimore, Mr. Hammonds is director of the Delaware State Chamber of
Commerce, the Delaware Housing Partnership, and the Delaware Business
Roundtable. He is on the Board of Trustees of Goldey-Beacom College and is a
member of the College of Business and Economics Visiting Committee at the
University of Delaware.
M. SCOT KAUFMAN, 50, is chief financial officer and oversees MBNA's accounting,
finance, and treasury activities. Mr. Kaufman is also responsible for
administrative services and personnel. Mr. Kaufman joined MBNA in 1985 and has
29 years' experience in the financial services industry. A graduate of the
University of Baltimore with an M.B.A. in finance, Mr. Kaufman has held senior
management positions overseeing a variety of areas within MBNA and supervised
the financial aspects of MBNA's transition to a public company in 1991. Mr.
Kaufman began his career as an internal auditor, later becoming the corporate
auditor, treasurer, and controller. Mr. Kaufman is active in many professional
associations, including the American Institute of CPAs, the Financial Executive
Institute, and the National Association of Accountants. He is also a member of
the Delaware Economic and Financial Advisory Council.
ALFRED LERNER, 66, is chief executive officer of MBNA Corporation and chairman
of its Board of Directors. Mr. Lerner has more than 17 years' management
experience in banking and finance and has served as chairman and chief executive
officer of MBNA Corporation since its initial public offering in 1991. He has
been chairman of the Town and Country Trust since 1993 and was chief executive
officer from 1993 to 1997. He has been chairman and owner of the Cleveland
Browns since October 1998. A graduate of Columbia University and vice chairman
of its board of trustees, Mr. Lerner also is president of the Cleveland Clinic
Foundation and a member of its board of trustees. He is also a trustee of New
York Presbyterian Hospital and Case Western Reserve University, and a member of
the Board of Directors of the Marine Corps Law Enforcement Foundation.
RICHARD K. STRUTHERS, 44, a senior vice chairman, oversees MBNA's international,
insurance, deposit, travel, business card, and portfolio acquisition activities.
Mr. Struthers has 22 years' management experience in consumer lending and was a
member of the group that established MBNA in 1982. He began his financial
services career in 1977 as a manager for a national bank's consumer banking and
credit card division. A graduate of Penn State University and the Retail School
at the University of Virginia, Mr. Struthers has held senior management
positions overseeing most of the major operating divisions of MBNA. He is a
member of the board of directors of Emmaus House and is a member of the board
of visitors of the Penn State Business School.
LANCE L. WEAVER, 45, a senior vice chairman, oversees corporate affairs, law,
industry relations, investor relations, communications, real estate, and the
MBNA Foundation. Mr. Weaver joined MBNA in 1991 and has 25 years' experience in
consumer lending and administration. A graduate of Georgetown University, Mr.
Weaver has had previous experience at two national banks as a vice president
and senior vice president of mortgage lending activities. He is a member of the
United Way of Delaware's Executive Committee and the Georgetown University Board
of Regents. Mr. Weaver serves on the board of Tower Hill School and is vice
chairman of the Business--Public Education Council in Delaware. He also serves
on MasterCard International's Global Board, the Grand Opera House's Executive
Committee, and is a member of the Board of Directors of Christiana Care
Corporation.
75
<PAGE> 88
MBNA CORPORATION
BOARD OF DIRECTORS
--------------------
ALFRED LERNER
Chairman and
Chief Executive Officer
MBNA Corporation
CHARLES M. CAWLEY
President
MBNA Corporation
Chief Executive Officer
MBNA America Bank, N.A.
JAMES H. BERICK, ESQ.
Partner Squire, Sanders & Dempsey L.L.P.
Former Chairman Berick, Pearlman & Mills Co., L.P.A.
BENJAMIN R. CIVILETTI, ESQ.
Chairman
Venable, Baetjer and Howard, LLP
Former Attorney General
of the United States
RANDOLPH D. LERNER, ESQ.
Partner
Securities Advisors, L.P.
STUART L. MARKOWITZ, M.D.
Internist and Managing Partner
Drs. Markowitz, Rosenberg,
Stein & Associates
Clinical Professor
Case Western Reserve University,
College of Medicine
MICHAEL ROSENTHAL, PH.D.
Professor
Columbia University
Former Associate Dean
for Academic Administration
Columbia College
MBNA AMERICA BANK, N.A.
OFFICERS
- --------------------------------------------------------------------------------
EXECUTIVE COMMITTEE
- --------------------------------------------------------------------------------
Gregg Bacchieri
Kenneth F. Boehl
Jules J. Bonavolonta
Charles M. Cawley
John R. Cochran III
William H. Daiger, Jr.
Ronald W. Davies
Shane G. Flynn
Bruce L. Hammonds
M. Scot Kaufman
Charles C. Krulak
Alfred Lerner ex officio
Michael G. Rhodes
John W. Scheflen
Michelle D. Shepherd
David W. Spartin
Richard K. Struthers
Lance L. Weaver
Vernon H.C. Wright
MANAGEMENT COMMITTEE
- --------------------------------------------------------------------------------
Steve Boyden
Jae W. Chung
Robert V. Ciarrocki
Brian D. Dalphon
Douglas R. Denton
Robert J.A. Fraser
Janine D. Marrone
Frank B. McEntee
William P. Morrison
Terri C. Murphy
Patrick J. O'Dwyer
Francis H. Otenasek
Kevin C. Schindler
Diane C. Sievering
April M. Stercula
Kenneth A. Vecchione
Kevin P. Wren
Thomas D. Wren
Terrance R. Flynn
John J. Hewes
OPERATING EXECUTIVES
- --------------------------------------------------------------------------------
Frank Andrews
Sunil F. Antani
Ann L. Balthis
Lisa F. Baughman
Randall J. Black
Elizabeth A. Cahill
John P. Carey
James E. Carrington
Hugh L. Chater
William T. Christie
Michael H. Copley
John A. Corrozi
Richard M. Croswell
Joseph R. Crouse
Patrick Crowfoot
Thomas L. Cuccia
Douglas M. Cummings
Salvatore A. DeAngelo
Joseph A. DePaulo
Joseph A. DeSantis
Robert V. DeSantis
Peter S.P. Dimsey
Theodore Dixon
Michael E. Durroh
K. David Elgena
Gloria G. Eppig
James H. Erskine III
William J. Esposito
William M. Fore
Lee M. Friedman
John M. Gala
Joseph J. Gatti
Peter J. Gatti
Brian F. Gimlett
Helen F. Graham
Mark Green
J. Patrick Gugerty
Bob B. Hallmark
Chairman Emeritus
Hallmark Information
Services
Richard A. Hardin, Sr.
Vaughn C. Hardin
David L. Harris
Douglas O. Hart
Robert J. Hayman
James E. Healy
Elizabeth Hershey-Ross
David M. Hirt
Anne T. Hogan
Thomas W. Horne
Richard G. Huber
Scott A. Hudson
Joseph F. Jaret
James K. Kallstrom
David B. Kedash
Michael D. Keeports
David L. Kot
Kevin L. Kramer
Thomas G. Lackey
Elizabeth B. Lee
Mark Levitt
Craig S. Lewis
Timothy E. Love
Philip Manning
Victor P. Manning
Edward J. Matthews
David H. Maxwell
Kathleen B. McEntee
Frank J. McKelvey III
Charles K. Messick
Charles H. Moloney
Susan D. Morrison
Paul Muller III
Edward H. Murphy
Peter Murray
Al Natali
Matthew H. Neels
Maureen M. O'Brien
Ian O'Doherty
Kenneth R. Pizer
Edward G. Plummer
Gerald P. Plush
Jerald M. Pollard
John C. Richmond
Karen E. Rose
Salvatore J. Rossi, Jr.
James J. Roszkowski
Robin D. Russell
W. Craig Schroeder
Michael S. Schuck
Richard E. Seta
Stephen K. Shock
Maureen Sierocinski
David L. Simms
Richard B. Skinner, Jr.
Brett H. Smith
Timothy P. Staley
Penelope J. Taylor
Thomas G. Thomaides
James D. Thornton
Tracey L. Tibbs
Thomas D. Veale
William W. Wagner
Steven P. Walczak
Howard C. Wallace
Todd T. Weaver
Charles F. Wheatley
Robert J. Wolf
76
<PAGE> 89
SUBSIDIARIES OF MBNA CORPORATION
- --------------------------------------------------------------------------------
MBNA AMERICA BANK, N.A.
The principal subsidiary of MBNA Corporation, MBNA America, a national bank with
$72.0 billion in managed loans, is the largest independent credit card lender in
the world. It also provides retail deposit, consumer loan, and insurance
products. MBNA America is the recognized industry leader in affinity marketing,
with endorsements from thousands of membership organizations and financial
institutions.
SUBSIDIARIES OF MBNA AMERICA BANK, N.A.
- --------------------------------------------------------------------------------
MBNA INTERNATIONAL BANK LIMITED (MBNA EUROPE)
MBNA issues credit cards in the United Kingdom and the Republic of Ireland. MBNA
Europe is headquartered in Chester, England, with a business development office
in London and sales offices in Dublin, Ireland, and Edinburgh, Scotland.
MBNA CANADA BANK (MBNA CANADA)
MBNA issues credit cards in Canada. MBNA Canada began marketing in early 1998
and is headquartered in Ottawa, Ontario, with a business development office in
Montreal, Quebec.
MBNA INSURANCE SERVICES
MBNA Insurance Services markets and services credit-related Life and Disability,
personal Property & Casualty, and Life & Health insurance.
MBNA MARKETING SYSTEMS, INC.
MBNA has state-of-the-art telephone sales facilities to support account
acquisition and maintains offices in Delaware, Florida, Maine, Maryland, New
Hampshire, Ohio, Pennsylvania, and Texas. In addition to credit cards, MBNA
Marketing Systems cross-sells consumer loan, deposit, and insurance products.
MBNA CONSUMER SERVICES, INC.
(subsidiary of MBNA Corporation)
MBNA Consumer Services, Inc., is licensed to provide home equity loans in 42
states and the District of Columbia.
MBNA HALLMARK INFORMATION SERVICES, INC.
MBNA Hallmark Information Services, Inc., headquartered in Dallas, Texas,
provides information technology support and services to MBNA America Bank, N.A.,
and its affiliates.
INDEPENDENT AUDITORS
- --------------------------------------------------------------------------------
Ernst & Young LLP
CORPORATE REGISTRARS AND TRANSFER AGENTS
- --------------------------------------------------------------------------------
National City Bank (common stock)
The Bank of New York (preferred stock)
PRINCIPAL FINANCIAL CONTACT
- --------------------------------------------------------------------------------
For further information about MBNA Corporation or its subsidiaries, please
contact:
David W. Spartin Steve Boyden
Vice Chairman Director, Investor Relations
MBNA Corporation MBNA Corporation
Wilmington, DE 19884-0141 Wilmington, DE 19884-0131
(800) 362-6255 (800) 362-6255
(302) 456-8588 (302) 432-1480
Internet address: www.mbna.com
COMMON STOCK
- --------------------------------------------------------------------------------
Listed on New York Stock Exchange
Stock Symbol KRB
[RECYCLE PAPER LOGO] This annual report was printed on paper recycled from
MBNA offices.
<PAGE> 90
[MBNA CORPORATION LOGO]
- --------------------------------------------------------------------------------
[PHOTO] automobile
ATTENTION TO DETAIL
DRIVES EVERYTHING WE DO.
- --------------------------------------------------------------------------------
SUCCESS IS NEVER FINAL.
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF MBNA CORPORATION
<TABLE>
<CAPTION>
Name Incorporated
- ---- ------------
<S> <C>
MBNA America Bank, N.A. United States
MBNA International Bank Limited* United Kingdom
MBNA Canada Bank* Canada
</TABLE>
*A subsidiary of MBNA America Bank, N.A.
<PAGE> 1
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the following Registration
Statements of MBNA Corporation, and in the related Prospectuses, of our report
dated January 14, 2000, with respect to the consolidated financial statements of
MBNA Corporation, included in the 1999 Annual Report to Stockholders of MBNA
Corporation and incorporated by reference in this Annual Report (Form 10-K) for
the year ended December 31, 1999:
Number 33-41936 on Form S-8 dated July 22, 1991
Number 33-41895 on Form S-8 dated July 24, 1991
Number 33-50498 on Form S-3 (as amended by Post-Effective
Amendment No. 1) dated August 28, 1992
Number 33-71640 on Form S-8 dated November 15, 1993
Number 33-76278 on Form S-3 (as amended by Amendment No. 1) dated
April 8, 1994
Number 33-95438 on Form S-8 dated August 4, 1993
Number 33-95600 on Form S-3 (as amended by Pre-Effective
Amendment No. 1) dated September 1, 1995
Number 333-17187 on Form S-3 dated December 3, 1996
Number 333-15721 on form S-3 (as amended by Amendment No. 2) dated
December 10, 1996
Number 333-21181 on Form S-4 (as amended by Amendment No. 1)
dated February 25, 1997
Number 333-06824 on Form S-8 dated April 22, 1997
Number 333-47179 on Form S-3 dated April 6, 1998
Number 333-74919 on Form S-3 dated March 24, 1999
Number 333-79987 on Form S-8 dated June 4, 1999
Baltimore, Maryland
March 17, 2000
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MBNA
CORPORATION'S FORM 10-K FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1999 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 488,386
<INT-BEARING-DEPOSITS> 1,525,748
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 2,752,663
<INVESTMENTS-CARRYING> 293,641
<INVESTMENTS-MARKET> 264,832
<LOANS> 17,663,709<F1>
<ALLOWANCE> 355,959
<TOTAL-ASSETS> 30,859,132
<DEPOSITS> 18,714,753
<SHORT-TERM> 1,039,004
<LIABILITIES-OTHER> 1,197,052
<LONG-TERM> 5,708,880
0
86
<COMMON> 8,018
<OTHER-SE> 4,191,339
<TOTAL-LIABILITIES-AND-EQUITY> 30,859,132
<INTEREST-LOAN> 1,959,368<F1>
<INTEREST-INVEST> 135,405
<INTEREST-OTHER> 167,498
<INTEREST-TOTAL> 2,262,271
<INTEREST-DEPOSIT> 919,426
<INTEREST-EXPENSE> 1,328,506
<INTEREST-INCOME-NET> 933,765
<LOAN-LOSSES> 408,914
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 3,077,708
<INCOME-PRETAX> 1,654,964
<INCOME-PRE-EXTRAORDINARY> 1,654,964
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,024,423
<EPS-BASIC> 1.26
<EPS-DILUTED> 1.21
<YIELD-ACTUAL> 11.20<F2>
<LOANS-NON> 12,245<F3>
<LOANS-PAST> 138,531<F3>
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 153,082<F3>
<ALLOWANCE-OPEN> 216,911
<CHARGE-OFFS> 567,929
<RECOVERIES> 188,402
<ALLOWANCE-CLOSE> 355,959
<ALLOWANCE-DOMESTIC> 339,439
<ALLOWANCE-FOREIGN> 16,520
<ALLOWANCE-UNALLOCATED> 0
<FN>
<F1>Includes loans held for securitization.
<F2>On a fully taxable equivalent basis.
<F3>Excludes loans held for securitization.
</FN>
</TABLE>
